krebscycle

This is the from the department of duhsplaining. Professors Mian and Sufi are upset at the Obama administration

The two men — economics professors who are part of a new  generation of scholars whose work relies on enormous data sets — argue in a new book, “House of Debt,” out this month, that the government misunderstood the deepest recession since the 1930s. They are particularly critical of Timothy  Geithner, the former Treasury secretary, and Ben Bernanke, the former Federal Reserve chairman, for focusing on preserving the financial system without addressing what the authors regard as the underlying and more important problem of excessive household debt. They say the recovery remains painfully sluggish as a result.

Mian and Sufi’s analysis of credit card data showed that during the bubble, irresponsible loans from banks, presumably many of these based on bubble level real-estate valuations, fueled consumer spending. After the collapse, these same consumers, heavily in debt, spend less. Well, that’s a shocker! As in many of these stories, the first step is surprise and dismay at the obvious, and the second step involves a magical unicorn understanding of the political process.

What were Geithner and Bernanke supposed to do about debt? Tell lenders to write it down? No authority. Get Congress to pass a law forcing lenders to write down debt? Ha! Get the GSE’s to write down those mortgages they control? Great idea, but the director of the FHA, Ed DeMarco refused and because the Senate must approve FHA director, President Obama was able to replace him only in January 2014!

In fact, Geithner and Bernanke did a lot to reduce public debt burden, within constraints. For profit student loans were stopped – causing Nebraska Senator Ben Nelson to try to sabotage health reform. The auto industry was bailed out, letting millions of people keep jobs! TARP money was funneled into not for profit community loan programs. Fed rates were kept low,  allowing millions to escape from high interest loans and variable rate mortgages. The stimulus bill and the extensions for UI put money in the hands of consumers. The health care law reduced health care costs, putting money back in the hands of consumers.  What they didn’t do is make a magical debt unicorn appear.