Yesterday, the Wonk Room noted Treasury Secretary Henry Paulson’s reversal in regards to the aim of the $700 billion Troubled Assets Relief Program (TARP). Today, the Domestic Policy Subcommittee of the House Oversight Committee — chaired by Rep. Dennis Kucinich (D-OH) — held a hearing to find out whether TARP is being used to prevent home foreclosures, “as Congress intended.”
Kucinich questioned Interim Assistant Secretary for Financial Stability Neel Kashkari — who is charged with administering the $700 billion — as to why the Treasury has not focused more on helping homeowners facing foreclosure. When Kashkari replied that the Treasury Secretary is “passionate” about helping homeowners, Kucinich asked “He is? Where? What country?” Watch it:
Kucinich was absolutely right to be skeptical. As Andrew Jakabovics explained, Paulson “yesterday made it absolutely clear that he had no intention of using the authority granted to him by Congress” to stem foreclosures. “The message was clear to homeowners facing foreclosure and their neighbors watching the value of their homes plummet — drop dead,” wrote Jakabovics.
It’s not as if legitimate plans to help homeowners don’t exist. Today, Federal Deposit Insurance Corp. Chairman Sheila Bair released a plan that could “prevent 1.5 million foreclosures in the next year by offering financial incentives to companies that agree to sharply reduce monthly payments on mortgage loans. ”
The estimated cost of this program is $24.4 billion, a drop in the bucket relative to the entire $700 billion program. Treasury and the White House, though, have made it clear that they are not interested.
In testimony before the subcommittee, Center for American Progress Action Fund Senior Fellow Michael Barr explained what Treasury needs to do to aid homeowners:
Under Section 109 of the [Emergency Economic Stabilization Act], the Treasury secretary is authorized to ‘use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.’ Under Section 101 of the act, the secretary is authorized to ‘make and fund commitments to purchase’ troubled assets, including home mortgage loans. These authorities can be deployed now to help homeowners and stabilize our markets.
As Jakabovics wrote, “The solution is simple: Focus on the mortgages. Gain access to home mortgages and restructure them. Now.”