Why Government Programs Failed

The Obama administration’s initial foreclosure-prevention programs, launched in early 2009, were intended to help 7 million to 9 million people. So far, they’ve aided about 2 million, and not all of those are out of foreclosure danger.


Programs begun later have also faltered. One intended to help at least 500,000 has helped just a few hundred a year after its launch. Another initiative to extend $1 billion to help the jobless or underemployed avoid foreclosure ended in September, obligating less than half of its funds. The unused money went back to the U.S. Treasury.

As of Nov. 30, the government had spent just $2.8 billion of the $46 billion it had declared in 2009 that it would spend to help resolve the housing crisis, the Treasury Department says. More has been committed, but ultimately a only fraction will be spent, according to the non-partisan Congressional Budget Office.

Since 2009 approximately 2.5 million homes have been lost to foreclosure. An additional 4 million are in the foreclosure process or seriously delinquent, while housing and unemployment issues continue.

Every program that was proposed to help troubled homeowners has fallen short or failed outright. Not even one has been successful. I've yet to see any efforts to help the unemployed find employment. The administration has somehow created a way in which large corporations realize that they can be more profitable with fewer blue collar employees.

The administration’s programs were destined for failure by design flaws, their reliance on a mortgage industry overwhelmed by a historic collapse in home prices, and a brutal extended housing downturn. Nor could they overcome the interests of mortgage investors unwilling to surrender profits and mortgage servicers with greater financial incentives to foreclose on loans than to modify them..

"There was nowhere near the effort to help Main Street as there was to help the banks,” says former senator Ted Kaufman, D-Del., who chaired a congressional oversight panel that oversaw $475 billion in Troubled Asset Relief Program (TARP) funds. Most of that went to banks and the auto industry.

Shaun Donovan, secretary of Housing and Urban Development, said in a recent interview that some administration programs “haven’t reached as many people as we originally targeted.”

Those shortfalls are glaringly evident.