Personnel Are Policy: Biden Administration

The Biden administration keeps proving that personnel are policy. Biden himself is a kind of empty vessel into which different wings of the Democratic party pour their will, yielding a strange brew of appointments both great and terrible. 1/ pic.twitter.com/7tVwBoCrcd

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

If you'd like an essay-formatted version of this thread to read or share, here's a link to it on https://t.co/iSBh8sqXw0, my surveillance-free, ad-free, tracker-free blog:https://t.co/kNtpyoL3tK 2/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

On the one hand, you have progressive appointments like #JonathanKanter at @JusticeATR and @linakhanFTC at the @FTC, leaders who are determined to challenge and curb corporate power:https://t.co/bC3yMHnxbp 3/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

On the other hand, you have appointees like @secretarypete, who fill their own staff with status quo counsel, and then let those timid corporate apologists run the show, leaving the substantial enforcement powers of a powerful agency to gather dust:https://t.co/9uHDqme9nE 4/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

While anti-corporate Dems drive the administration's competition agenda, the corporate wing has near-total dominance over finance (with notable exceptions, e.g. @chopracfpb). 5/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

I'm thinking here of Trump's #JeromePowell, a bloodletting monster happy to shovel workers into their bosses' crushers all day long:https://t.co/nkt39TSi1j 6/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Corporate Dems continue to flex their muscle. A seat has just opened up on the @federalreserve Board. The @WSJ is pretty sure the seat is going to #JaniceEberly. https://t.co/hwnWid8SKH 7/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

She's corporate ghoul who helped #Obama Treasury Secretary #TimothyGeithner steal Americans' houses on behalf of the bankers who destroyed the world economy in 2008: 8/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

A quick refresher: Obama inherited the #GreatFinancialCrisis, a massive global asset crash that followed from a decade of real-estate and derivatives deregulation. 9/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

The world's largest banks issued mortgages they knew would fail, and then placing massive bets on "#CollateralizedDebtObligations" that were supposed to offset the risk. 10/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

The banks gambled trillions, nearly destroyed the world's economy, and then blamed it all on reckless borrowers - mortgage holders who had been mis-sold predatory mortgages. 11/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

These were designed to trigger defaults thanks to low "teaser rates" that later "ballooned" into monthly payments the banks knew the borrowers couldn't afford.

Geithner was Obama's go-to guy for the #GFC. 12/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

It was under his leadership that billions were handed out to the banks to bail them out and keep them solvent during the crisis - and it was also under his leadership that bank execs were able to pay themselves millions in bonuses using that public money. 13/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

When the banks were in trouble, Geithner leapt into action. When the banks' *customers* faced crises, he was MIA - especially during the #foreclosure epidemic that followed, as the banks stole our homes out from under us, often forging the paperwork. 14/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

No bank was seriously punished for this policy.

Back to Janice Eberly, who served as Geithner's assistant secretary of the Treasury for economic policy - his hatchet-woman, in other words. 15/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Now, sometimes people in senior government roles stick around because they disagree with their bosses and want to mitigate the harm of their bosses' policies.

That's not why Eberly took the job. 16/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

In 2014, she and Arvind Krishnamurthy wrote "Efficient Credit Policies in a Housing Debt Crisis" for @BrookingsInst, explaining why Geithner had it right all along - bailing out the banks and leaving homeowners in foreclosure is "efficient":https://t.co/giLMERZxev 17/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Writing in @TheProspect, @MaxMoranHi from the @revolvingdoorDC breaks down "Efficient Credit," explaining how Eberly's stated views should disqualify her from sitting on the Fed board, especially as we teeter on the brink of a deep financial crisis:https://t.co/pMxbHY4shq 18/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

The first thing you need to understand here is #HAMP, the #HomeAffordableModificationProgram, which received the $100b Congress allocated to help homeowners whose mortgages were "underwater" - that is, whose houses were worth less than they owed for them. 19/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

That money could have gone to "principal reduction" - that is, to paying off part of your loan. If you owned $350,000 on a house that was now worth $300,000, the Feds could give the bank $50k and you wouldn't be underwater anymore. 20/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

The FDIC proposed just this, in a plan that would have required homeowners to pay back the US government if the price of their homes rebounded. 21/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

If you want to keep Americans in their homes, principal reduction is a straightforward and reliable approach. But banks hated this - so Geithner wouldn't do it. 22/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Banks don't like principal reduction because it means that they'll lose out on future payments: reducing your principal by $50k now means that the banks won't get hundreds of thousands of dollars over the 30 years of your mortgage. 23/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Using the money for principal reduction would have meant the banks' balance sheets would have looked a little worse - which, as Moran points out, is a perfectly fair outcome for banks that had just come close to destroying the world economy. 24/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Of course, many of these underwater borrowers were destined to lose their houses and would never make those payments. 25/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

But Geithner didn't do principal reduction. Instead, he did HAMP, which was just a way to temporarily lower borrowers' monthly payments so they could stay in their homes. 26/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Geithner sold Obama on this plan, convincing him to renege on his election promise to support a "cramdown" on the banks, which would have saved homeowners:https://t.co/TGmfWLL5z2 27/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

HAMP was full of the kinds of complex requirements and paperwork that the professional managerial class love, rules that made it almost impossible for homeowners to invoke HAMP and improve their payments. 28/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Meanwhile, the banks got "investor incentive payments" that let them take in public money even as they foreclosed on the public:https://t.co/GvVMaogSAF

HAMP was a disaster. 29/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Almost no one managed to use it, and even among the lucky few who did manage to do so, many were tricked into foreclosure. https://t.co/okcvfKgDzD 30/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

This is the policy that Eberly and Krishnamurthy defend in their paper: rather than reducing debt, just temporarily restructure mortgage payments. 31/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

One reason they defend this: it's cheaper, and Congress didn't allocate enough money to help everyone who needed principal reduction. 32/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

But, as Moran points out, Geithner's anemic response to the crisis caused Congress to claw back $225b of the money allocated to deal with it - enough to do $50k principal reductions for 4.5m households. Under Geithner, HAMP only spent $10b. 33/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

But of course, the US government didn't *need* to pay the banks off to do principal reduction. They could simply order the banks to take a loss. That's how lending usually works: lenders who originate bad loans have to eat them - they don't get made whole by Uncle Sucker. 34/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

But when Eberly was working for Geithner, "federal officials convinced themselves this was impossible." 35/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Rather than hold banks to account for their reckless speculation, Geithner announced that he was going to "foam the runway" for the banks, pureeing Americans' homes to make the foam. 36/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

But Eberly's tenure coincided with the banks' rebound - by the time she went to work for Geithner, they were rolling in dough, posting massive profits. 37/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

As @ryanlcooper put it, "If you force them to eat a bunch of foreclosure losses, maybe a few hundred billion over several years, it probably wouldn’t have been that bad."https://t.co/4CZB89QyXh 38/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Moran nails it here:

> When a bad loan is made, it is both prudent and fair for the lender to bear the most responsibility. They are supposed to be wise stewards of their own capital. 39/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

> Instead, ordinary homeowners who did the least of any actor to cause the financial crisis ended up eating the losses.

Eberly and Krishnamurthy claimed that Geithner's policy would be efficient, and that it wouldn't lead to mass foreclosures. 40/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

As neoclassical economists love to do, they "proved" this using elaborate mathematical models. And, also in the grand neoclassical tradition, they didn't bother to check whether their model was correct. 41/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

To quote Ely Devons: "If economists wished to study the horse, they wouldn’t go and look at horses. They’d sit in their studies and say to themselves, ‘What would I do if I were a horse?’"https://t.co/6jrAft9hge 42/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Here's what Eberly and Krishnamurthy missed: the choice to foreclose wasn't being made by the lenders, they were being made by the #MortgageServicer. 43/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

These are a kind of consequence-free middleman who made more money by foreclosing on homeowners, even if the lenders lost more money over the long term:https://t.co/GLUq1BfTSj 44/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Eberly and Krishnamurthy barely mention the existence of servicers, but another researcher was keenly aware of them: a law prof named @repkatiePorter, who delved into the servicers' role in foreclosure in a report for the California AG:https://t.co/HUJ66FrAqI 45/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Porter identified the servicers' "dual track" approach to distressed mortgage borrowers: on the one hand, they slow-walked HARP-based changes to payments, and on the other hand, they raced to foreclose on those borrowers who were waiting for their payments to reset. 46/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

The servicers' hunger to throw people out of their homes knew no bounds: they set up massive #RoboSigning boiler-rooms. 47/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

They paid low-waged employees to forge deed to plug the paperwork holes created by the high-speed, unregulated speculation on mortgages that precipitated the Great Financial Crisis:https://t.co/xx21IzJs44 48/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Eberly knew about robo-signing, she knew about servicers, she knew about foreclosures. It was her job to know. But she still wrote her paper defending Geithner's runway-foaming and all those ruined lives: 49/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

> Principal reduction can be helpful, but it is a less efficient use of government resources, since it back-loads payments to households that cannot borrow against these future resources to support consumption today... 50/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

> and also because it is most helpful in reducing strategic default, rather than payment-distress-induced default,

This is just #MeansTesting by another name, a fetish for separating the "deserving poor" from "moochers" (AKA "strategic defaulters"). 51/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

The PMC *loves* means-testing, but only for poor people. As Moran points out, rich people like Trump use strategic defaults all the time:https://t.co/7QBIfKv1Vo 52/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Elite economists and finance ghouls convinced themselves that helping people stay in their homes would enable crooked "strategic defaulting" but there's no evidence for this - rather, it was a fairy tale that justified mass foreclosure:https://t.co/da62aMFLM8 53/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Eberly helped throw millions of Americans into the street in order to reward reckless banks, already wildly profitable banks, with even more profit. And far from regretting this, she went on to write elaborate justifications for the cruel policies she helped administer. 54/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

The historian #MichaelHudson describes #debt and #DebtCancellation as a key determinant of whether a given civilization survives. In every venture, producers have to borrow capital from lenders - farmers, for example, must borrow to pay for seed and fertilizer and labor. 55/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

When the ventures are successful, the borrowers pay back the lenders.

But not every venture can succeed. There will always be blights, droughts, fires and other risks that can't be fully mitigated. When failure occurs, borrowers can't pay back creditors. 56/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

If you farm long enough, you'll eventually lose a crop, and have to roll over your debts next year. Eventually, you'll owe so much that you can't even make the interest payments. 57/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

In the absence of some structured, periodic debt cancellation - such as the Bronze Age tradition of #jubilee - creditors eventually end up controlling the work of the entire productive sector. 58/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

When that happens, your society stops producing what everyone needs, and instead just makes the things that rich people want:https://t.co/jx8EPFnowy 59/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

A civilization can't survive if all of its farmers are growing ornamental flowers for rich creditors' villas instead of stable crops. It can't survive if every productive worker is stuck in a dead-end job or a dead-end place because of medical or student debt. 60/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Personnel are policy. Eberly has explained, in excruciating detail, exactly what policy she favors - policy that rewards reckless speculation by incinerating the life chances of everyday Americans. 61/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023

Appointing her to the Federal Reserve board would be a giant Fuck You from the Biden admin to every person who got their home stolen by a bank. 62/

— Cory Doctorow (@pluralistic@mamot.fr) (@doctorow) March 6, 2023