Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. He says that Ronald Reagan didn't like the spending of the Congress during his administration. Of course, for 6 of those 8 years he had a Republican Senate, but the point is, if he didn't like it, he exercised great self-restraint because he never vetoed one of those spending bills that he apparently didn't like.

Mr. FRANK of Massachusetts. The gentleman should proceed because I will be closing for us, and I am the last speaker.

Mr. FRANK of Massachusetts. I yield 2 minutes to one of the Members who has been most active in trying to deal with this foreclosure problem that other Members think we should ignore. He is the gentleman from Maryland (Mr. Cummings).

Mr. FRANK of Massachusetts. I yield 2 minutes to one of the most active advocates of trying to have effective foreclosure relief. She is the gentlewoman from Maryland (Ms. Edwards).

Mr. FRANK of Massachusetts. I yield the gentleman an additional 30 seconds.

Mr. FRANK of Massachusetts. Mr. Chairman, first I'll yield myself 30 seconds to answer the question. What do we tell the person making mortgage payments why we are trying to help reduce foreclosures? And the major reason is that it is the improvident granting of these loans and the failure of many of these loans to pay off that is the single biggest cause of the financial crisis we're in. And a wide range of economists agree that until we reduce the rate of foreclosures which are embedded in so many securities that were, without regulation, scattered around the economic landscape, we will not be able to undo the economic problem we're in. So foreclosure diminution is part of our economic recovery plan. It also, of course, hurts property values in general. I now yield 1 minute to a very active member of our committee, the gentleman from Colorado (Mr. Perlmutter).

Mr. FRANK of Massachusetts. Mr. Chairman, it becomes clear that for many in the minority this is an opportunity to punish Barack Obama for the mistakes made by George Bush. The gentleman says we should have a plan. In fact, what they are objecting to is the plan. Here is where we differ: They have said, the gentleman who just spoke, the ranking member of the full committee, ``Let's ask the President to tell us what he plans to do.'' We want to do it the opposite way. We want to pass this bill to tell the President what we think should be done. Now, it doesn't get specific as to institutions. It shouldn't. We don't pick institutions here. We empower them and direct them, in some cases, to deal with the whole economy and with classes of institutions. There is no selection here by Congress of this or that company or even line of business. Secondly, the gentleman closed by saying why should the majority respond to the foreclosure issue. And the answer is that the foreclosure issue hurts everybody in this country. It reduces property values too radically. It reduces the capacity of institutions that have these assets that are held. It hurts pension funds. It hurts a whole range of people. It hurts people's 401(k)s. The whole society has suffered from this improvidence. And I would note again, in 2007, the majority in the House, when we became the majority, voted to ban these loans from being made whether the fault was on the part of the borrower or the lender. The gentleman from New Jersey and others condemned that, said we were interfering unduly with the market. He said the market would take care of it. Well, the market hasn't taken care of it. The market has plummeted. This bill does what Members say they want, and I guess they won't take ``yes'' for an answer. It says this is what the House believes should be in the plan. And no, it does not look like it's going to pass the Senate now, although Members on the other side rarely think that's a reason for us not to act. But if we pass this and the President was to disappoint us--and I don't expect him to; I have a great deal of confidence in him--and not carry this out, the bill will be alive in the Senate and will be available as an instrument to do it. Beyond that, here's the difference. We passed a law, and George Bush ignored the law, as he often does. There will be a great contrast between a President who ignored the law and a President who agrees with us to abide with what the House asked him to do.

Mr. FRANK of Massachusetts. If the gentlewoman would yield.

Mr. FRANK of Massachusetts. She's absolutely right. I appreciate her calling this to our attention. We have amended the bill to take into account these private banks, many of which serve lower-income communities and are themselves people of experience in this area. As I said yesterday when the question came up about mutuals, the form of ownership should not be determinative here. Whether or not they are performing a valid function in the economy and whether or not they can use these funds responsibly is all that should cover. So we did amend the bill at the gentlewoman's request in that manner.

Mr. FRANK of Massachusetts. I yield the gentlewoman 30 seconds.

Mr. FRANK of Massachusetts. If the gentlewoman would yield.

Mr. FRANK of Massachusetts. Would the gentleman yield to me the remaining few seconds?

Mr. FRANK of Massachusetts. I yield myself an additional 30 seconds. So just to be clear, whether or not there should be Federal programs as advocated by FDIC Chair Bair, Secretary of HUD Preston and many others, whether or not there should be Federal programs to reduce foreclosure, is a very defining difference between most of us on this side and most on the other side; although there are many on the Republican side who do agree with us that we should try to abate foreclosures, not just as a matter of compassion, but as central to solving our economic problem. I now yield 2 minutes to the gentlewoman from Texas (Ms. Jackson- Lee). (Ms. JACKSON-LEE of Texas asked and was given permission to revise and extend her remarks.)

Mr. FRANK of Massachusetts. I just want to say the gentleman said his amendment was noncontroversial, but noncontroversial doesn't mean unimportant. It is a very thoughtful amendment. It will greatly advance things, and I appreciate his offering it.

Mr. FRANK of Massachusetts. I was told that the gentleman's time had expired. I have a right to close. I waived that because I was told that the gentleman had consumed 5 minutes when I asked. I thought that was all there was on the amendment.

Mr. FRANK of Massachusetts. I will yield myself 1 minute. The gentleman from New Jersey has built that castle in the air because I corrected his flat error. He said President-elect Obama asked for it. He did not. I said that President Bush asked for it at the request of President-elect Obama. How my correcting his error became distancing myself from the new President is beyond me. In fact, President Bush's administration did want the second $350 billion. The gentleman is wrong in saying they didn't. Secretary Paulson was deterred from doing that, however, because we told him that we were sufficiently disappointed in the way it had been administered and that if he asked for it we would probably reject it, and that only if he came to some agreement with the new President and the Congress could that go forward. So those are the facts. Yes, the outgoing administration wanted it. They withheld because they were told they wouldn't get it unless they had cooperation, and then the two administrations jointly did that. There is no distancing when I make that point. In fact, the central point here about the TARP is this: We believe quite to the opposite that we are distancing ourselves from Mr. Obama. We believe that because Bush used this badly is no reason to give Obama not a chance to use it well. I now yield 2 minutes to the gentleman from Kansas (Mr. Moore).

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Because I was confused before by the Rules Committee report misprint, what's the amendment that's not going to be offered that was to be offered by whom?

Mr. FRANK of Massachusetts. But amendment No. 6 as printed now, as we understand it, is the one that would strike aid to the automobile industry. So we understand that will not be offered?

Mr. FRANK of Massachusetts. Parliamentary inquiry. Is that the one that would have stricken the aid for the automobile industry?

Mr. FRANK of Massachusetts. The proposal that the gentlewoman singled out to object to is a recommendation from Mr. Preston, the Bush administration Secretary of HUD. Members have pointed out that the Hope for Homeowners Program has not worked, and we are disappointed. It hasn't worked because, I think, we have tightened it up excessively. What we are trying to do here is relax it. Part of the impetus for this came from the secretary of HUD and the commissioner of the FHA, Mr. Montgomery, two Bush appointees. In an article of December 17 from the Washington Post, which I will submit for the Record, Secretary Preston said that we have made this much too implicated and much too restrictive. He singled out, as one of the provisions that was objectionable, the provision the gentlewoman from Minnesota just talked about. It's the secretary of HUD who told us to drop that if we wanted to make it workable. How do you do that, Preston said? That was legislated. The article says it becomes more difficult to get people to refinance. So we have on the one hand Republicans correctly pointing out that our effort for Hope for Homeowners failed, but we don't want that to be a permanent failure. We want to improve it. Now when we put in the improvements, some of which were recommended by the secretary of HUD, we were told that that's going to be too generous. So this is kind of like the question that you were asked who do you like better, your mother or your father? There is no right answer. Should the program be very tough, should it be very relaxed? Whatever we do, people are going to oppose it. That's because, and there is--and I go back to 2007 when we voted on the subprime bill. I go back to the Wall Street Journal editorial at that time and this morning. There are people who do not want us to respond to the foreclosure crisis. Now, responding it to it will be uneven because it's a messy problem. But people who voted in 2007 against banning irresponsible subprime loans, I am not surprised that they don't want us to be effective right now. And I am not surprised--I am a little surprised that they would single out our effort to act on a recommendation of Secretary Preston to correct this. [From the Washington Post, Dec. 17, 2008] HUD Chief Calls Aid on Mortgages a Failure (By Dina ElBoghdady) Secretary of Housing and Urban Development Steve Preston said the centerpiece of the federal government's effort to help struggling homeowners has been a failure and he's blaming Congress. The three-year program was supposed to help 400,000 borrowers avoid foreclosure. But it has attracted only 312 applications since its October launch because it is too expensive and onerous for lenders and borrowers alike, Preston said in an interview. ``What most people don't understand is that this program was designed to the detail by Congress,'' Preston said. ``Congress dotted the i's and crossed the t's for us, and unfortunately it has made this program tough to use.'' The criticism comes as Congress prepares to weigh in with further plans to help distressed borrowers facing foreclosures, which are at the root of the financial meltdown. This week, House Speaker Nancy Pelosi (D-Calif.) demanded that the Treasury Department use some of the money from the $700 billion emergency rescue package to help at- risk homeowners. One of several federal and state foreclosure prevention initiatives facing difficulties, HUD's Hope for Homeowners program has been especially hamstrung. For instance, a program launched by the Federal Deposit Insurance Corp. on behalf of IndyMac Bank customers has modified more than 3,500 mortgages in two months of operation. Rep. Barney Frank (D-Mass.), who helped steer the HUD program through Congress, said some of the federal bailout money should be used to revamp it. Frank acknowledged the initiative has its problems, but he blamed them on the Bush administration. ``That's partly their fault,'' said Frank, chairman of the House Financial Services Committee. ``The administration was critical of the program and kept putting pressure on us to make it cheaper and more restrictive. . . . If it hadn't been for the Bush administration's opposition, we would have written it in a better way in the first place.'' The goal of the program, run by the Federal Housing Administration, was to allow borrowers who owe more than their homes are worth to refinance into more affordable 30- year fixed-rate mortgages insured by the government. But part of the problem is that the program's success hinges on the lenders' willingness to participate. Congress originally allowed the FHA to insure new loans for only 90 percent of a home's value. With home prices plunging, borrowers who have little or no equity in their homes and cannot otherwise come up with the remaining 10 percent qualify only if the lender forgives this balance. Lenders balked. Late last month, Congress granted HUD permission to increase the amount that's insured and the department decided to guarantee up to 96.5 percent of the value of new loans. Preston in the interview praised that change. But its impact remains unclear. ``Getting the lenders to agree . . . has been our biggest challenge,'' said Peyton Herbert, director of foreclosure services at HomeFree USA, a housing counseling firm in Hyattsville. ``They want dollar for dollar what's owed on that loan or something close to it. That's the fly in the ointment.'' The list of impediments goes on. Borrowers who participate in the program must pay hefty fees and high interest rates, and they must split any increased value with the federal government when the home is sold. ``You're paying a premium to borrow the money already, and that ought to be enough,'' said John Taylor, chief executive of the National Community Reinvestment Coalition. ``To me this falls into the category of, we want your firstborn.'' A further hindrance: The mortgage payment must exceed 31 percent of a borrower's income as of March, which does not help people who have since fallen into trouble. Add to that the fact that borrowers must also provide two- years of financial records and sign a statement that they did not give false or misleading information on their original loan application and the bar gets even higher. It becomes even more difficult to attract borrowers who took out loans without verifying their income. ``How do you do that?'' Preston said. ``That was legislated.'' For all those reasons, FHA Commissioner Brian Montgomery said he got an earful from agitated lenders, housing counselors and real estate agents at a seminar last month in Atlanta designed to educate housing professionals about the Hope for Homeowners program. ``What we thought would be a civil and cordial exchange with the several hundred people gathered turned into an almost rock-throwing episode,'' Montgomery said. He said Capitol Hill lawmakers were hampered by a philosophical divide within their ranks when they cobbled the program together and that led to a compromise that made little sense. ``There were two philosophies on the Hill: Let's throw the barn door open and help as many people as we can regardless of the reasons. Or we need to make them pay because they should have known what they were doing,'' Montgomery said. ``They found some middle philosophical ground, but that philosophical middle ground made [the program] unworkable.'' Montgomery complained that any minor adjustment to the program must be passed through an oversight board, which further slows the FHA's response time. Frank called Montgomery's assessment of Congress's handling of the legislation ``dishonest.'' As for oversight, he said the board is made up of Bush appointees. ``Shame on them if that's the problem.'' Frank acknowledged, however, that concessions had to be made to make the program palatable to the American public. This is why borrowers who take part in it must share any gains from appreciation in home values with the government. ``You're not going to get a program approved that helps people refinance loans on their homes and then allows them to turn around the following year and make a profit on that home,'' Frank said. Frank provided a letter he wrote to Treasury Secretary Henry M. Paulson Jr. in late November urging him to use the bailout money Congress approved for rescuing the financial markets to reduce the upfront and annual fees, because these are reducing use of the Hope for Homeowners program. In another letter to Paulson, Preston, Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila C. Bair, Frank made a few more suggestions and praised HUD's decision to increase the proportion of loans that the FHA can insure to 96.5 percent from 90 percent. But yesterday, he said the FHA's leadership in these trying times has been a ``disappointment.'' Montgomery said Frank's ire at his agency is misdirected. ``Barney Frank may have a beef with some of the Republicans,'' he said, ``but he shouldn't have a beef with us.'' I would ask how much time is remaining on our side.

Mr. FRANK of Massachusetts. How much time on the other side?

Mr. FRANK of Massachusetts. I thank the gentleman. It is a very important amendment. The suggestion by the gentleman from New Jersey that if this had been put forward by a Member in September it would have been rejected has no basis. A number of Members did put forward changes at that point which we accepted. I think the reason this did not come forward is this: This is here because it is tied into the TARP. I should say that this is as much as can be done, and I commend the gentleman for his initiative. We need to do much more with the Federal Reserve. Last September, the Federal Reserve and the Treasury came to us, congressional leadership, the leadership of the committees, and said the Federal Reserve is going to give $80 billion to AIG. I asked Mr. Bernanke if he had $80 billion. He said, ``I have $800 billion.'' We had not previously focused on a statute from the thirties that gives the Fed of the ability to lend money it has control of to any entity where he thinks it is sufficiently collateralized. That has much moved since September, only since September. We were very shortly out of session. That is why in early February we will have a hearing in which we will ask the Fed to account for all of this. Now, we are able to do this here because part of the Fed's program is collateralized to some extent or capitalized by the TARP so we have a hook there. The reason this wasn't offered in the fall, my guess is that nobody at that point anticipated that the Fed would be in conjunction with the TARP capitalizing this. By the way, I also accept the compliment about this process. We have been told that we were doing this too quickly, exactly as we did too quickly last time. But the fact this amendment is before us contradicts that. A large number of amendments have been put forward, because this has been in discussion in the House for some time. So we could have done it in September. Nobody anticipated at that point, at least we did not, the extent to which the Fed would mushroom in this case. My guess is they didn't either, that they had a more optimistic view of the economy. At any rate, this does a good job of giving us this information where there is a linkage between the Federal Reserve and TARP money. But that is not enough. The gentleman has done the most that we can do in this bill. Beginning in February we will start having hearings, and I do believe, yes, we have to examine the enormous grant of power given to the Federal Reserve under this statute from the Depression. It has been very rarely used. It was used I think in one of the financial crises of the nineties. This is a phenomenon that really grew. So Members will understand, when the Federal Reserve granted $29 billion to the creditors of Bear Stearns, we thought that was a lot of money at the time. It turns out to have been a rounding error in what they are doing. So, yes, it is time for us now that they have mushroomed this, and I don't say this critically, we have to look into it.

Mr. FRANK of Massachusetts. Will the gentleman yield?

Mr. FRANK of Massachusetts. Then I would yield my remaining time to the gentlewoman from California, who has been the House leader in fighting foreclosures.

Mr. FRANK of Massachusetts. Parliamentary inquiry, Mr. Chairman.