His critics say that departing Treasury Secretary Timothy Geithner's legacy will be forever tainted by a failure to help stem the housing crisis. But Geithner contends that there just wasn't much more he could do.
"Even with more money and broader authority, I don't believe that you would have had a dramatically different outcome," Geithner told The Wall Street Journal in a recent interview. "It just was not possible."
The Obama administration's housing programs have not met their own expectations, helping fewer people than promised and resulting in re-defaults for many. Some housing experts say this is largely because the government did not pursue mass principal reductions, which would have reduced the burden placed on underwater homeowners by the crisis.
Standing in the way of such a move was FHFA head Ed DeMarco, who could have pursued principal reductions on mortgages held or guaranteed by Fannie Mae and Freddie Mac. But the Obama administration refused to replace DeMarco, despite calls for his resignation, and Geithner contends that principal reduction did not make sense anyway. (The Obama administration also did not try to force banks to pursue principal reductions.)
"We didn't have $500 billion or three-quarters of a trillion dollars to provide principal reduction to the American homeowner, and doing so would have been a very inefficient way to help the economy, and really unfair in many ways," Geithner told the WSJ. "We also didn't have the legal power to compel."
The housing market remained depressed for years after the financial crisis and only now is starting to recover. Roughly 8 million households have lost their homes to foreclosure since the housing crisis began, according to Yale economist John Geanakoplos, and some economists blame the housing crisis for holding back the broader economy. Geithner will step down on January 25.
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