Lawmakers are complaining that the Bush administration is ignoring the will of Congress and slighting homeowners on the verge of foreclosure.
Congress blasts shifts in financial bailout plan
WASHINGTON // Lawmakers are complaining that the Bush administration is ignoring the will of Congress and slighting homeowners on the verge of foreclosure in its latest approach to spending US$700 billion (Dh2.5bn) in economic rescue money. "It's very clear that Treasury cannot and will not make the effort to keep people in their homes," said the Republican Darrell Issa, the top Republican on the House Oversight and Government Reform subcommittee on domestic policy.
In the sole hearing on Capitol Hill yesterday, Mr Issa and others took turns pressing Neel Kashkari, the Treasury's interim head of the US$700bn bailout package. Dennis Kucinich, the Democratic chairman of the panel, said the Treasury Department had "abdicated its responsibility" to prevent home foreclosures. He said the change in implementing the bailout announced by the Treasury Secretary Henry Paulson this week "breaks with congressional intent, contradicts public assurances previously made by Treasury and leaves the federal government without an adequate mechanism to stem the tide of home foreclosures".
Congressional dissatisfaction is especially significant because Congress can block release of the second half of the rescue money, US$350 billion, or put new conditions on its use. In addition to directing more money to distressed homeowners, Democrats are pushing for inclusion of funds to help the auto industry. Mr Paulson, citing the worsening credit crunch, said this week that Treasury no longer planned to buy up troubled mortgage assets, but was instead looking into ways to shore up credit-card, auto-loan and other non-bank businesses.
Mr Kashkari defended the shift, saying "both banks and non-banks may need more capital given their troubled asset holdings, continued high rates of foreclosures, and stagnant global economic conditions". He also said that restoring stability to the overall financial system was the best way to help homeowners. If the government spent all US$700bn buying up mortgage loans, it would still reach only about 3 million of the 55 million mortgage loans in the country, he said.
Mr Kashkari also cooled to proposals by the Federal Deposit Insurance Corp. (FDIC) to provide US$24bn in federal aid to companies lowering mortgage payments. The goal of the rescue plan was to make investments that eventually bring returns to the federal government, he said. The FDIC proposal "at the end of the day is a spending proposal" with no chance of getting the money back. Mr Kucinich and others also expressed concern that the bailout money was being used indirectly to fund the payment of bonuses, compensation and dividends by financial firms.
Similar concerns were expressed at a Senate Banking Committee hearing on Thursday where the Democratic committee chairman, Senator Chris Dodd, stressed that "hoarding capital and acquiring healthy banks are not ... reasons why Congress authorised $700 billion in emergency funding". The US President George W Bush yesterday named a federal prosecutor to be a Treasury-based special inspector general to oversee the rescue plan and monitor how the money is spent.
The House Speaker Nancy Pelosi and Senate Majority leader Harry Reid announced yesterday the appointment of three members to the congressional oversight panel for the bailout programme. Ms Pelosi appointed Richard H Neiman, Superintendent of Banks in New York, while Mr Reid appointed Elizabeth Warren of Harvard Law School. Ms Pelosi and Mr Reid jointly appointed Damon Silvers, the associate general counsel for the AFL-CIO union.