The Bush administration will now dance to a new tune in an effort to stem foreclosures, says Democrat and Rep. Barney Frank.
Frank says that the Bush administration will place the Troubled Asset Relief Program (TARP) fund for foreclosure modification programs. This was following the harsh criticism Treasury Department Secretary Henry Paulson got from lawmakers at a Congressional hearing last Monday in the Capitol. Paulson was heavily criticized for not using the $700 billion rescue fund for more aggressive measures to stem the housing problem.
Frank, the Chairman of the House of Representatives Financial Services Committee, disclosed the information to reporters after an almost two-hour meeting with Federal Reserve Chairman Ben Bernanke, the Treasury Secretary and other leading house democrats. Frank feels confident that the Bush administration, in consultation with the team of Barack Obama, will now save the money for the incoming administration for foreclosure modification.
Ways and Means Committee Chairman Charles Rangel says that he got the same impression after the Congressional hearing. Frank also says that legislation was unnecessary since the current administration will not direct them.
The Treasury Department’s anti-foreclosure scheme recapitalizes money on lenders. In return, the Department gets a dividend from the banks. Though Paulson has termed the current program as an investment to stabilize the financial system, many lawmakers see it as a lousy investment since it would only help Fannie Mae and Freddie Mac borrowers.
Instead, lawmakers, with good reason, wanted a more expansive program which would prevent more foreclosures and help more homeowners. The Federal Deposit Corporation’s $24.4 billion proposal was one such anti-foreclosure program; however, Paulson dismissed this.
So far, around $290 billion of the first $350 billion from the rescue fund has been used by the current foreclosure program. Paulson wants the remaining money to be reserved for Obama’s administration, which will take office on January 20 next year.
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