Rep. Barney Frank of Massachusetts, who is also the chairman of the House Financial Services Committee, is threatening to put on hold the release of the remainder of the $700 billion funds for the Troubled Asset Relief Program (TARP). He is urging the administration to use part of the funds for mortgage modification programs to stop foreclosures.
Rep. Frank and some other representatives from several sectors are frustrated over the administration’s lack of action to stop foreclosures. They are pushing for mortgage modifications and for credit to start flowing again from banks.
The U.S. Treasury Department has already allocated $335 billion from this fund for investing in troubled banks and bailing out insurance giant AIG. Treasury Secretary Henry Paulson is giving indications that they will once again make use of the remaining $350 billion.
The TARP was intended to stabilize the financial market, get credit moving once again, and alleviate the economy. Rep. Frank, several legislators, and various sectors were frustrated that none of the funds was going for bailout programs for homeowners in trouble of losing homes to foreclosures.
This lack of significant aid to homeowners to help them in their battle against foreclosures has undermined the overall efforts of the government to stabilize the financial crisis and is losing confidence from the public.
Lawmakers are discussing plans to subsidize rental housing, make amendments in lending laws and practices and overhaul mortgage related regulations. These plans will take action after President-elect Barack Obama takes his seat in the Oval Office. Legislators will also push for regulations to the amount of loans that can be issued by financial firms at Wall Street.
The Treasury Department has defended its use of the $700 billion fund in trying to stabilize the financial system. They pointed out that further collapse of the financial market would lead to more foreclosures. The U.S. government has already tracked 2.25 million foreclosures towards the close of 2008, which is more than twice previous levels.
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