Today, Treasury Secretary Henry Paulson appeared before the House Financial Services Committee — alongside Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair — to explain his implementation of the $700 billion Troubled Assets Relief Program (TARP).
During the hearing, Congress voiced its displeasure with Paulson. Rep. Gary Ackerman (D-NY) told Paulson, “you seem to be flying a $700 billion plane by the seat of your pants.” Both Rep. Barney Frank (D-MA) and Rep. Maxine Waters (D-CA) chastised Paulson for not providing aid to homeowners, even though he could under the TARP legislation. Watch a compilation:
Paulson defended himself by saying, “The purpose of the financial rescue legislation was to stabilize our financial system and to strengthen it. It is not a panacea for all our economic difficulties.” But the TARP legislation does have clear language allowing the Treasury to facilitate home loan modification; Paulson has just shown no inclination to do so.
Underscoring the extent of the housing crisis, currently “one in 11 mortgages is delinquent or in foreclosure”:
In the second quarter of 2008, the share of mortgages that were delinquent reached 6.4%, and the share of mortgages that were in foreclosure hit 2.7%. The share of new mortgages going into foreclosure continues to new record highs, with 1.1% in the second quarter.
In her testimony, Bair said that “more than 4.4 million non-GSE mortgages are estimated to become delinquent” by the end of 2009. Paulson, though, has proposed buying up just about everything but mortgages, including credit card debt. But as Andrew Jakabovics explained, “it is certainly questionable to promote increased lending for credit cards. Outstanding revolving consumer debt is approaching a trillion dollars. Encouraging further household indebtedness is hardly responsible.”
Bair has put forth a plan that — for $24.4. billion — could prevent 1.5 million foreclosures, which Bernanke called a “very promising approach.” If Paulson would come around as well, then some of the bailout funds might actually be directed at the root cause of the financial crisis.