James Pethokoukis, whose work I have not followed, but appears to have a fair amount of respect from the blogs that I read, is reporting that a number of sources in the Obama administration saying that the GSEs (Fannie Mae and Freddie Mac), will, at taxpayer expense, engage in a massive program of principal reduction to underwater homeowners:

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. ……

The motivation, apparently, is electoral politics:

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. …

If you go to the article, and I suggest that you do, because I am just relying on my gut, you also see that investment bankers are talking to their clients to insurance themselves against such a possibility.

I take the statements of investment bankers with a grain of salt. Their job is to make people buy and sell securities, since they profit each time.

That being said, here is my take:

• HAMP is an abject failure, because, once again, Barack Obama, as well as Tweedle Dum and Tweedle Dumber (Geithner and Summers) decided that banks were their “partners”, and they just needed some incentives and no oversight.
• Additionally, the abject failure of HAMP is not beginning to hit the news, which might lead to damage control.
• Obama is concerned about losses in November.
• Notwithstanding what the teabaggers say, Obama is NOT a socialist, he is very much a corporatist, and the idea of this sort of massive government bailout to ordinary people is an anathema to him. He honestly does not want the government to be that activist.
• Obama is, and remains, terrified of Republican accusations of socialism.

So, it ain’t gonna happen. We may see something to fix HAMP, my suggestion would be bankers arrested and made to do the perp walk, but it will be something relatively minor.

Devaluing the dollar, as Roosevelt did, or massive debt forgiveness is simply not in the cards.

Heck, he can’t even bring himself to bring back bankruptcy cramdown for home mortgages.