At the House Financial Services Committee hearing on Tuesday, Treasury Secretary Henry M. Paulson was rebuked by Democrats when he refused to budge on his department’s decision to use the $700 billion Troubled Asset Relief Program (TARP) funding on investments that would stabilize the financial system and not on anti-foreclosure spending.
Paulson insisted that the TARP plan was established primarily to prevent the collapse of the country’s financial system and was not meant to be used as an economic rescue package.
In their frustration, the Democrats bombarded Paulson with accusations of unfairly leaving individual homeowners out in the cold while warmly offering $290 billion to the big insurance companies and banks. He was also accused of baiting the lawmakers for bill approval and then ignoring their foreclosure concerns after the bill had their signatures.
Committee Chairman Barney Frank, a Massachusetts Democrat, was especially furious with Paulson. Frank took him to task by referring to a four-page document that lists the provisions of the original TARP bill. He asserted that the bill was full of authorization to Paulson to enable him to spend money to reduce foreclosures.
But Paulson was insistent. He stated that TARP should be invested and not spent.
In contrast to Paulson’s statements, Sheila Bair, head of the Federal Deposit Insurance Corporation, asserted that the nation could be plunged into a disarray of five million foreclosure homes over the next couple of years if the federal government did not do anything for the distressed borrowers.
The FDIC plan requires the Treasury to spend about $24 billion from the TARP program to help mortgage banks refinance the mortgage loans of homeowners in danger of foreclosure.
Paulson was not only censured about his stand on foreclosures; he was also denounced for his refusal to allocate money from TARP to help revive the ailing automobile industry.
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Written by Alex Rolim.
