(Zero Hedge) Contrary to popular perception, not all of the money approved as part of the federal government’s emergency effort to save the American financial system in the fall of 2008 went to the big banks. Some of it – nearly $10 billion, all told – went to support the government’s “hardest hit” program, meant to help forestall foreclosures in 18 states.
And unsurprisingly, nearly a decade after the program was signed into law, government investigators are finding that much of this money was squandered by state governments. Money initially earmarked to help troubled homeowners struggling with underwater mortgages was instead spent on demolitions meant to boost prices of surrounding homes and help ward off crime in city neighborhoods. Except the money was often squandered by state governments, disproportionately robbing poor citizens in cities like Detroit of a program meant to save them from homelessness.
As the Detroit Metro Times reports, Detroit’s decade-long wave of tax and mortgage foreclosures has wiped out large swaths of the city’s neighborhoods as Wayne County continues to seize thousands of occupied homes a year. The city’s neediest homeowners were supposed to receive federal assistance to save their homes as part of the Treasury Department’s seven-year-old Hardest Hit Fund. But the State of Michigan squandered its money by adopting unnecessarily stringent requirements — according to a scathing audit issued in January by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).
In 2010, Michigan originally received nearly $500 million to provide loans to eligible homeowners who were facing tax or mortgage foreclosure. But the program, called Step Forward Michigan, rejected funding for about 5,000 Detroiters, while assisting more than 2,000 homeowners who earned at least $70,000 a year. That number eventually swelled to $761 million, and of that amount, half was committed to demolitions…