Paulson takes heat from House Dems
Treasury Secretary Henry Paulson got an earful from members of the House Financial Services Committee over management of the $700 billion bailout and his refusal to act on foreclosures. Steve Henn has more.
Treasury Secretary Henry Paulson testifies before the House Financial Services Committee on Nov. 18, 2008. (Karen Bleier/AFP/Getty Images)
More on The Economy, Wall Street, Politics, Fed. Budget/Govt. Spending, America's Financial Crisis
TEXT OF STORY
Kai Ryssdal: It's been about six weeks since Congress passed the financial industry's big bailout. In that time, though, pretty much everything we were told about the way it was going to work has been thrown out the window. Today almost half the money's already been spoken for. It's been spent buying stakes in banks and in AIG, the big and bottomless insurance company. Nothing has gone to buy up bad mortgages or stem the rising tide of foreclosures. Marketplace's Steve Henn reports Treasury Secretary Hank Paulson got an earful about that this morning.Steve Henn: Hank Paulson had a rough day defending his $700 billion bailout.
Barney Frank: Mr. Chairman -- I'm sorry. Mr. Secretary, we don't have a lot of time.
Congressman Barney Frank and others repeatedly interrupted Paulson and berated the Treasury Secretary for sidestepping questions about the Troubled Asset Relief Program, aka the TARP. They're angry that Paulson has refused to put money on the table to slow foreclosures.
Hank Paulson: The prudent course at this time is to conserve the remaining funds available from the TARP.
Paulson says as banks start lending again, that should slow foreclosures. And voluntary bank programs should help. But Barney Frank wants more.
Frank: We understand that there are other activities going on. I don't accept them as a substitute for using the authority that we very specifically and carefully wrote into the TARP and that was essential for it getting passed.
Frank likes a plan proposed by Sheila Bair, chairman of the FDIC, who sat just feet away from the embattled Treasury Secretary. Bair's proposed using $24 billion from the bailout to renegotiate $1.5 million [of] troubled loans.
Sheila Bair: Eligible borrowers would get lower interest rates and in some cases longer loan terms and principle forbearance to make their monthly payments affordable.
The Feds would share administrative costs and any losses if borrowers defaulted again. Bair believes her plan would stabilize housing prices by stopping unnecessary foreclosures.
Bair: If this program can keep home prices from falling by just 3 percentage points less than would otherwise be the case, over one half a trillion dollars would remain in homeowners' pockets.
But turning these ideas into reality will probably have to wait until president-elect Obama takes office.
In Washington, I'm Steve Henn for Marketplace.
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