Congress Blames Treasury as Foreclosures Mount
BOSTON - A congressional banking
leader Tuesday blew hot air and blame at the U.S. treasury secretary
about the ongoing home foreclosure crisis, but neither made a
commitment to help stressed homeowners.
Congress is officially
out of session, except for this week, and has no plan to address the
looming problem of foreclosures until it returns in January, when
Pres.-elect Barack Obama takes office.
Congress would have full authority to do so.
Rep. Barney Frank, chair of the House Financial Services Committee,
told Treasury Secretary Henry Paulson that he should address the
foreclosure problem and direct money from a special 700-billion-dollar
fund to homeowners in trouble.
'It is essential that we do something, that we use some of the [funds] toward foreclosure reduction,' Frank said.
a lame-duck secretary who will leave in January when Pres.-elect Obama
appoints a new secretary, said he knows how he is going to spend the
remaining funds, and foreclosure assistance and an auto industry
bailout is not part of his plan.
Congress has been apprised of
Paulson's spending, has vast authority over it, and could have directed
him to intervene on behalf of homeowners.
Congress handed the
700 billion dollars to Paulson on Oct. 3, after Paulson said the
emergency money was urgently needed to prevent a wholesale collapse of
the U.S. banking system and economy. The U.S. public was highly
critical of the plan, and called Congress by the thousands, but
legislators, led by Frank and other Democrat leaders, authorised the
Without help, five million U.S. homes will be lost to
foreclosure in the next two years, according to the Federal Deposit
Insurance Corporation. Two million have already been foreclosed on.
member Maxine Waters expressed anger that she helped win votes for the
700 billion dollars, which she said she thought would be spent on
'I worked very hard to pass this
[bailout] legislation. I was looked at with suspicion when I sold this
to the Congressional Black Caucus. I am disappointed you have just
divorced yourself from dealing with foreclosures,' Waters told Paulson.
formerly of Goldman Sachs, has spent the funds directly on financial
firms, and spent hundreds of millions to hire financial firms to
disperse the money, and track it.
'We are turning the corner. We
have stabilised the system and prevented a collapse. We have a lot of
work ahead. It's a lot of work to get the markets going again,' Paulson
Paulson has given 125 billion dollars in cash to nine of
Wall Street's largest firms, in exchange for limited stock, and 148
billion dollars so far to other smaller banks.
Paulson, took it upon yourself to ignore the authority and direction
that Congress gave you. I couldn't believe it when I heard that you
abandoned the foreclosure effort,' Waters said.
to spend up to 350 billion dollars before he leaves office, and said
the remainder will be directed to credit card companies, and businesses
that make auto and education loans.
None will go toward foreclosure assistance or the auto industry, he said.
feel a great responsibility to stick with the purpose of the [fund], to
stabilise and strengthen the financial system. Auto companies fall
outside that purpose,' Paulson said.
'Why are foreclosures still
increasing, in light of the 700 billion dollars spent at taxpayers'
expense?' Rep. Nydia Velazquez asked Paulson.
'It's hard to
imagine we're not going to have a large number of foreclosures when you
look at what we've gone through, and the shoddy lending practices,'
Sheila Bair, chairwoman of the Federal Deposit
Insurance Corporation, has a plan in hand to help homeowners, and told
Frank and Paulson she needs 24 billion dollars to get it started. It
appears homeowners may have to wait until January for Congress or the
Treasury to consider funding it.
None of the powerful congressional leaders nor Paulson has stepped forward to propose funding for it.
Frank told Paulson that he should address the foreclosure problem.
fundamental policy issue is our disappointment that funds are not being
used out of the 700 billion dollars to supplement mortgage foreclosure
reduction,' Frank said.
Waters expressed frustration that
Paulson has refused so far to fund Bair's plan, and said it is badly
needed. Mortgage holders are not voluntarily trying to re-negotiate
their unfair loans, she said.
Waters' office is trying to help 26 homeowners to re-negotiate lower interest rates on unfair loans.
is absolutely ridiculous. One of the banks is Wells Fargo. I've had to
go all the way to the chairman. I stay on the line for one hour just
trying to get to a servicer. Then when you talk to the servicer, they
don't even know enough to evaluate the incomes of the owners,' she said.
foreclosures are at the centre of the financial meltdown, and unless
stemmed, will continue to drag down the U.S. and global economy,
economists told the panel.
'Stopping the financial crisis and
getting credit flowing again requires ending the spiral of mortgage
foreclosures and the expectation of very deep further house price
declines,' said Martin Feldstein, of Harvard University.
Alan Blinder, an economist at Princeton University, painted a bleak picture of the next year.
'The hope that we might avoid a serious recession is now gone,' he said.
said that if the U.S. takes aggressive action by spending billions on
infrastructure and other projects, the country may be able to hold
unemployment at 8 percent. It currently stands at 6.5 percent.