The Mechanics of Failure

Much of HAMP’s inadequacies can be traced to the program’s mechanics. Under the law, Treasury worked with loan servicers and encouraged them to modify loans, rather than providing direct benefits to underwater homeowners.

In order to qualify, struggling homeowners had to fill out forms detailing the history of their mortgage payments, asset ownership, employment, and other indicators of financial hardship. If the loan servicer — a completely separate entity from the bank that originated the mortgage — accepted the application, borrowers would then receive a “trial modification” for three months.

The putative purpose of the trial period was to allow homeowners to demonstrate their ability to meet their monthly payments under the new terms. In practice, however, many loan servicers used it to extract a few months of additional payments before foreclosing. Even if borrowers lasted through the trial period and received permanent loan modifications, one missed or incomplete payment would trigger a “re-default” and their removal from HAMP.

HAMP beneficiaries found themselves in a double bind: they had to show financial hardship while simultaneously proving they could keep making their mortgage payments.

And banks and loan servicers had no reason to cut them any slack. Banks had minimal financial incentives to adjust mortgage conditions, and the federal government imposed negligible consequences for foreclosing on qualified borrowers. The loan servicing industry makes its money on fees, even on foreclosure sales, so quick foreclosure was often more profitable than letting people stay in their homes.

SIGTARP, the agency tasked with oversight of the bank bailout package, including HAMP, issued repeated warnings about these troubling dynamics. They cited patterns of egregious misconduct among banks and loan servicers, from unjustifiably denying applicants to wrongfully foreclosing on borrowers.

But HAMP persisted without serious changes, often stiffing the homeowners it was supposed to be helping.

Over the life of the program, almost 6 million homeowners applied for mortgage modification. Over 70 percent were rejected outright, meaning only 1.7 million secured a temporary modification. Just 1.2 million people survived the trial period to receive permanent modifications, and only about 890,000 were able to keep up their modified mortgage payments to remain in HAMP. Of the $75 billion set aside for the program in 2009, Treasury only spent about $10 billion before HAMP closed down in late 2016.

Faced with a rolling foreclosure crisis that decimated the social fabric and undercut the post-recession recovery, this was all Obama’s Treasury Department had to show for itself.

Material Benefits, Mass Politics

Some of the Obama administration’s shortcomings can be chalked up to the effective and unyielding obstruction of the Republican Party. But as journalist David Dayen reminds us, HAMP was implemented and designed by the executive branch. Congress had already authorized the $75 billion as part of the bailout package; the money was just sitting in a Treasury account waiting to be spent.

Dayen attributes HAMP’S failures to Democrats’ tendency to put Wall Street profits ahead of workers. And the alliance between the financial industry and the upper echelons of the Democratic Party, particularly in places like the Treasury Department, are a big part of the story.

But HAMP’s deficiencies should also be understood as a reflection of a more fundamental political failure: that of technocratic liberalism. This political ideology — currently dominant within the Democratic Party — embraces policies whose benefits are complex, means-tested, and often delivered through tax credits or the private sector. For the past several decades, technocratic liberalism has demonstrated its inability to solidify a mass electoral base by enacting policies that improve the lives of rank-and-file constituencies.

This should be Politics 101 — when a party gains power, it uses that power to pass programs that visibly benefit its base in order to shore up their loyalty, as well as to attract potential new voters. The US Constitution makes this more difficult, with its over-abundance of veto points. So do gridlock and gerrymandering.

But delivering tangible gains to workers and the poor remains the linchpin of any viable left politics. People need health care, housing, education, child care. They need something to vote for. They need to see what they get when they vote.

Our potential base is larger and poorer than the Right’s, meaning that the promise of material largesse is one of our most potent political assets. Republicans are intensely aware of this, as evidenced by the racist ravings about “Obamaphones” and “the 47 percent” of Americans dependent on government handouts.

Some liberals, meanwhile, are wary of being tarnished as dispensers of goodies. They worry that big government programs spark racialized right-wing backlash. But history shows backlash can materialize no matter what the Democrats do. The only way to ward off conservative assault is to deliver benefits to ordinary people, then build a politics around defending and expanding those benefits.

Just look at HAMP. Obama wasn’t punished for handing out too much government aid — he was punished for failing to deal with the most devastating foreclosure crisis in modern American history. Aggressive, well-publicized, direct mortgage relief in the first two years of the Obama administration would have gone a long way toward stemming — or at least mitigating — the Republican wave of 2010 and beyond. It could have been one piece in a broader social-democratic program that lifted people out of the economic doldrums and transformed the economy. Instead the administration constructed a program shrouded in complexity, whose success was mostly dependent on the caprices of the private sector.

The rest of Obama’s presidency suffered from similar political shortcomings. His two major acts of social spending, the 2009 stimulus bill and the Affordable Care Act, were clear improvements on the status quo. But their complexity and their use of hidden tax credits limited the number of Americans who could easily identify how either had directly helped their families.

It’s telling that the most direct and least complex elements of the Affordable Care Act are the ones producing the most opposition to the GOP’s repeal attempts. Congressional Republicans continue to squirm when confronted by constituents asking whether “repeal and replace” will kick young adults off their parents’ insurance, take away the Medicaid expansion from millions of people, or allow insurance companies to discriminate based on pre-existing conditions.

Simple, direct benefits produce political constituencies with a knowledge of and an interest in defending those policies.

The Lineages of Technocratic Liberalism

Contemporary technocratic liberalism is part of a longer tradition of “good government” liberalism.

In the late nineteenth and early twentieth century, middle-class reformers looked with scorn at the state of urban politics. Political machines like New York’s Tammany Hall dominated, using both legal and illegal influence over municipal funds and job positions to funnel resources toward working-class constituencies who would, in turn, mobilize votes for the machine. Good government liberals, seeing this form of politics as corrupt and immoral, worked to clean it up. They instituted a number of ballot and election reforms that decreased the power of party machines at both the local and national level.

These reforms also had the effect, however, of undermining working-class participation in the political system. Political machines integrated immigrants and workers into public life, giving them a degree of power in the civic sphere that they didn’t have otherwise. It was an imperfect, often corrupt system — certainly no paragon of working-class socialist politics. But good-government liberals swept it away with little regard for the working-class people it helped. 

Their class bias extended to political rhetoric. Insofar as good government liberals championed reforms, they did so by appealing to people’s civic identity and vision of a well-ordered society, rather than their class interests. To do otherwise, after all, would be debased, a lower form of politics. 

This strain of politics persisted through the twentieth century, including during the high points of American liberalism. But over the last few decades, and in the context of a Democratic Party whose structural links to the financial and technology sectors have never been stronger, liberal technocracy has taken on a particularly insidious form.

The twenty-first century wonk — that archetype of technocratic liberalism — fetishizes the minute details of policy for their own sake. He sees policy complexity as a strength rather than a weakness. In the wonks’ Excel-oriented worldview, navigating the complex maze of tax credits, ACA exchanges, and HAMP applications is treated as an exciting adventure, or at least the price the public must pay for its welfare state.

Technocratic liberals yearn for a Sorkin-esque fantasy world in which politics plays out as a rational debate between competing policies, with the best policy prevailing through the logic of its superior design. But their pursuit of this political model — the unholy hybrid of think tank and debating society — has fundamentally weakened the social foundations of the Democratic coalition.

The glib liberal dismissal of Sanders-style social democracy as “free ponies” not only insults the millions of Americans for whom lack of health care is a life-or-death situation. It also betrays an underlying belief that appealing to voters with direct material benefits exists somewhere on the spectrum between political sleight of hand and outright vote-buying.

While we shouldn’t try to resurrect the model of a Gilded Age political machine, we must also reject the idea that giving people stuff is a bad thing. In fact, it’s the material basis of mass politics.

Leaving Behind Technocratic Liberalism

In order to navigate a socialist or even a progressive path out of the current crisis, liberal technocracy must be jettisoned. It can no longer reproduce a base capable of fulfilling even its sparse promise of winning presidential elections and implementing modest but durable reforms.

This is not an academic debate, nor is it an attempt to score cheap political points at the expense of centrist Democrats. The spectacular collapse of technocratic liberalism in the Global North has created a vacuum, and the forces of the ethno-nationalist right have moved decisively to fill it.

We have a profound historical duty to reverse the global reaction unfolding around us. But we won’t succeed unless we learn from the mistakes of recent decades.

Solidarity doesn’t burst, Athena-like, from the minds of the enlightened. It is actively produced, both through political struggle and through policies that materially unify the working classes. Medicare for All, free college tuition, free child care, direct debt relief, a massive green jobs measure — these are the kind of broad, easy-to-understand social programs that can build a progressive majority against Trumpism.

Obama left money on the table during the foreclosure crisis, when mortgage relief was the correct call on social, economic, and political grounds. Going forward we need to champion clear, direct government benefits, not technocratic nostrums that nudge banks and insurance companies into “doing the right thing.”

The renewal of a mass protest culture on the American left, buoyed by swelling membership in a variety of left organizations, has the potential to reorient US politics for a generation. Complex technocratic fixes and managed expectations cannot begin to capture the frantic political energy of our moment.