March 29, 2022

The TARP bailout was a widely contentious policy with $700 billion in funds allocated to help save the U.S. economy. Of this, $45.6 billion was allotted to help homeowners avoid foreclosure. While the U.S. Treasury states that 7 million Americans received assistance with their mortgages through the Affordable® (MHA) and the Hardest Hit Fund® (HHF), many still lost their homes—notably lower socioeconomic and minority communities who received less aid. These programs meant to help homeowners were severely lacking, greatly underfunded, and needed more money allocated to them. While this is generally acknowledged, fewer than a quarter of homeowners who needed funding received it.

Only 18 out of 50 U.S. states participated in the Affordable® (MHA) and the Hardest Hit Fund® (HHF). This fact alone shows that in more than half of the states, homeowners who needed financial aid did not receive any. This is an issue because aid should be equally distributed. Furthermore, of the 18 states that used MHA funding, more than half of homeowner applications were denied on average.

Taking a step back, the figure of $45.6 billion is only about 6% of the TARP fund. Only 6% was allocated to help homeowners and those hardest hit. Meanwhile, the majority of the other funds went to the auto industry and banks. The average yearly bonuses at some of the large banks that were bailed out were $600,000—much more than most workers’ annual salaries. Homeowners were hit hard and received little support during the 2008 crisis, and this stark contrast between the help given to homeowners and the financial industry raises a critical question: Why weren’t homeowners helped while banks were saved? In a 2017 citizens’ report on TARP, a passage states: “Homeowners continue to face ongoing economic challenges including negative equity and underemployment in hardest-hit states in the wake of the financial crisis.” This report admits that, even seven years after the crisis ended, homeowners are still struggling.

The reason that more than half of the Affordable® (MHA) and Hardest Hit Fund® (HHF) requests were denied was because people didn’t qualify and due to slow processing. The fact that many didn’t qualify suggests there were strict criteria due to limited funds. To sum it up, of the $700 billion allocated to deal with the financial crash of 2008 under TARP, only around 6% went to help homeowners. These homeowners were in trouble because banks gave them loans they should not have (bad banking practices). Even though banks supposedly take on the risk and downside of giving out loans—arguing they should be compensated well for it—they were saved for their bad decisions while homeowners were devastated. Only in 18 states did homeowners receive some financial support, and on average, under half of these requests were approved. If homeowners in less than half of the U.S. received funding, and less than half of these requests were met, then fewer than a quarter of homeowners who needed financial support actually received it. It’s unclear exactly how much lower than a quarter this number is because population densities differ across states, but some states with large cities were excluded from funding, and there were more states without funding than with it, which may offset lower population densities in the unfunded states.

Sources

U.S. Department of the Treasury, Troubled Assets Relief Program, Housing, Making Home Affordable https://home.treasury.gov/data/troubled-assets-relief-program/housing/mha

U.S. Department of the Treasury, Troubled Assets Relief Program, Housing, Making Home Affordable  https://home.treasury.gov/sites/default/files/initiatives/financial-stability/reports/Documents/Q3%202019%20Aggregate%20Report.pdf

U.S. Department of the Treasury, Troubled Assets Relief Program, Key Facts https://home.treasury.gov/data/troubled-assets-relief-program/housing

U.S. Department of the Treasury, Troubled Asset Relief Program, Reports, HAMP Application Activity by Servicer

https://home.treasury.gov/data/troubled-assets-relief-program/reports/hamp-servicer

Michael Hudson, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy (Counterpunch Kindle Edition, 2015), “Chapter 13,” para. 34

U.S. Department of the Treasury, Citizens Report, Office of Financial Stability, Fiscal year 2017 https://home.treasury.gov/sites/default/files/initiatives/financial-stability/reports/Documents/FY2017%20OFS%20Citizens%20Report.pdf

U.S. Department of the Treasury, HAMP Application Activity by Servicer, as of 2012