Obama is planning to “shame” the big banks who are not agreeing to modify mortgages.
This is a repeat of Bernanke’s play book … scold the giant banks for failing to lend, but then give them a pat on the back and a wink.
As Robert Reich points out:
Shame? If we’ve learned anything over the last year, it’s that Wall Street has none. Eight months ago Wall Street lobbyist beat back a proposal to give bankruptcy judges the right to amend mortgages in order to pressure lenders to reduce principle owed, just like Wall Street lobbyists are now beating back tough regulations to prevent the Street from causing another meltdown. Goldman Sachs, attempting to preempt a firestorm of public outrage when it dispenses its $17 billion of bonuses, is setting up a crudely conceived $500 million PR program to help Main Street.
Shame won’t work. Only political muscle and courage will.
Moreover, Dean Baker points out that modifying mortgages will help the too big to fails a lot more than the homeowners themselves.