Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. I can affirm that. As the gentleman knows, the Treasury Department is in agreement with this, and we should be clear, this is one of the things that this House and the Senate added to the bill, the authority to buy equity. It is not simply buying up the assets, it is to buy equity, and to buy equity in a way that the Federal Government will able to benefit if there is an appreciation. I thank the gentleman for this important clarification. He is absolutely right. In implementing the powers provided for in the Emergency Economic Stabilization Act of 2008, it is the intent of Congress that Treasury should use Troubled Asset Relief Program (TARP) resources to fund capital infusion and asset purchase approaches alone or in conjunction with each other to enable financial institutions to begin providing credit again, and to do so in ways that minimize the burden on taxpayers and have maximum economic recovery impact. Where the legislation speaks of ``assets'', that term is intended to include capital instruments of an institution such as common and preferred stock, subordinated and senior debt, and equity rights. Also, it is the intent of this legislation that TARP resources should be used in coordination with regulatory agencies and their responsibilities under prompt- corrective-action and least-cost resolution statutes.

Mr. FRANK of Massachusetts. If the gentleman would yield back to me briefly, I thank him very much. He has been working hard on this, and has also not just professed this in general, but has made some specific suggestions. Of the four points, two will take separate legislation, and I will work with the gentleman because I am in agreement with him on them, in concept. Two of them, however, are, I believe, able to be accomplished in this bill. I have spoken to the Secretary of the Treasury and, I believe, working together with the gentleman, we can make sure. Let me just say specifically. Asset managers to support loan modifications will be very important for this success. The bill encourages the Treasury to consider the FDIC, which has been superlative in this regard, to play this role. Also, Treasury, under this bill, can buy virtually any mortgage asset, and we direct them to coordinate with the other agencies, like Fannie Mae and Freddie Mac and the Federal Home Loan Banks, and to maximize modifications through the program we just adopted.

Mr. FRANK of Massachusetts. I will yield myself 15 seconds to say that the gentleman can tell his brother-in-law, Hank Aaron, he hit .500 today, and that's pretty good in any league.

Mr. FRANK of Massachusetts. Will the gentleman yield?

Mr. FRANK of Massachusetts. I yield the gentleman 30 additional seconds. We will expect the Secretary to use both direct assets and design--to provide special considerations for assets where HOPE for Homeowners or other programs have been used. In other words, we are directing the Treasurer to use his authority to maximize, exactly as the gentleman has proposed. We will continue to press the Secretary, and I believe we don't have to press too hard. He is ready to do this. And we will work with the gentleman on the other issues.

Mr. FRANK of Massachusetts. Madam Speaker, I ask unanimous consent that all Members have 5 legislative days within which to revise and extend their remarks on this legislation and add extraneous material thereon.

Mr. FRANK of Massachusetts. Madam Speaker, pursuant to House Resolution 1525, I call up from the Speaker's table the bill (H.R. 1424) to amend section 712 of the Employee Retirement Income Security Act of 1974, section 2705 of the Public Health Service Act, and section 9812 of the Internal Revenue Code of 1986 to require equity in the provision of mental health and substance-related disorder benefits under group health plans, and offer the motion at the desk.

Mr. FRANK of Massachusetts. Madam Speaker, I yield myself such time as I may consume. Madam Speaker, we have limited time here, and I want to explain to the Members that I will be devoting most of my time to colloquy with Members who have serious concerns about this bill. I believe this bill has a great deal more in it in a number of areas, including in particular avoiding foreclosures, than people have recognized. I at this point will insert into the Record under General Leave a letter from the American Banker, in which Sheila Bair, who is one of the best regulators we have ever had, who has been using her authority over the mortgages she inherited through the IndyMac failure to really provide foreclosure relief, and she says in this: ``The provision would allow the Treasury Department to provide credit guarantees and enhancements on whole loans.'' Ms. Bair said in an interview Thursday, ``They can have so much bigger bang for their buck.'' She asked us to put this in. We put it in. It may be obscure, but it in and of itself will lead to a great deal of help for people with mortgages. What I will be doing, Madam Speaker, during this debate is yielding time for colloquies to Members who are seeking clarification of points in the bill, many of them involving what is very powerful language, although not everything we would have liked, to mitigate foreclosures. I will say that I have spoken to the people at the Department of Treasury, including yesterday morning the Secretary himself, and I will be making commitments today about how we believe this bill will be interpreted, and I will be making no commitments that I have not explained to the Treasury, that the staff of the Financial Services Committee which has done such wonderful work has not discussed with the Treasury. So we will be, as I said, working with Members to clarify some parts of this bill because I do not think it is fully appreciated that it has a good deal more in it for the foreclosure issue and some other issues than has been recognized. [From American Banker, Oct. 3, 2008] Bair: How to Get More Bang for Bailout Buck (By Rob Blackwell) Washington.--Of all the provisions in the bill designed to stabilize the financial markets, one of its most potent is not getting enough attention, according to Federal Deposit Insurance Corp. Chairman Sheila Bair. The provision would allow the Treasury Department to provide credit guarantees and enhancements on whole loans. If it were used, it would allow the government to increase modifications and stabilize home prices at a much smaller cost than buying the loans themselves, Ms. Bair said in an interview Thursday. ``They can have so much bigger bang for their buck,'' she said. ``You don't have an initial cash outlay, you can leave them in the private sector, you can do the servicing in the private sector, and you can condition them on some type of modification protocol, which would get the mortgages restructured faster.'' The provision, a single sentence in the 451-page bill, has attracted little attention from analysts and industry representatives. Instead, they have focused on the crux of the bill, which would allow the Treasury to buy and hold up to $700 billion of troubled assets. The bill would give the Treasury secretary the power to ``use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.'' How that would work remains unclear. In theory, the Treasury could guarantee certain types of loans--option adjustable-rate mortgages, for example--and require lenders that want to use the insurance to engage in loan modifications first. If the reworked loan performed, the government would never be involved, but if the loan later defaulted, the government would take a certain amount of the loss. Though she is supportive of the $700 billion buyout facility, Ms. Bair said the provision, added at the behest of the FDIC, could provide a critical alternative. ``It will be another tool they have in their toolkit, and it will be cheaper,'' she said. ``You can provide credit support to $100 billion worth of mortgages with no up-front cash outlay. The exposure would be less than buying those mortgages directly.'' During her two-year tenure, the FDIC has moved from the background to the forefront of the housing crisis. In the past week alone it has handled the largest failure of all time--the $309 billion-asset Washington Mutual Inc.--with no cost to the government. It also invoked the systemic risk exception for the first time in the agency's history to facilitate a deal to sell most of Wachovia Corp. to Citigroup Inc. Ms. Bair said regulators had no choice but to use the exception, which was created in 1991 and required the approval of the Federal Reserve Board and the Treasury. ``We all felt that preventive action was needed,'' she said. ``It was a potential failure, driven primarily by market confidence issues.'' Ms. Bair has also been working to help pass the bailout bill. After the House unexpectedly defeated the legislation Monday, lawmakers scrambled for provisions to bring more Republicans on board. The most notable addition would increase deposit insurance to $250,000 per depositor per institution. That provision would reassure nervous depositors that the banking system is stable, Ms. Bair said, and it gets to the heart of the problem: a lack of confidence among consumers, bankers, and businesses. ``Raising the deposit insurance limit to $250,000 is designed to address that problem of public confidence,'' she said. ``Expanding that safety net for a period of time, I think, will help with the Main Street depositor and also provide help for banks.'' The coverage hike would take effect immediately and would expire Dec. 31, 2009. The bill explicitly says banks should not face a premium hike as a result. Analysts argue that Congress would have to make the higher limit permanent. Ms. Bair would not take a position, except to say the FDIC should have the power to raise premiums if the increase becomes permanent. ``It's a question for Congress,'' she said. ``It could be destabilizing if they lift it in 2009, but the trade-off would be that banks would have to start paying premiums.'' Overall, she said, she hopes the legislation will help ease fears among financial institutions, some of which have become worried about lending to each other. ``There is a confidence issue,'' Ms. Bair said. ``Originally, liquidity issues were tied to capital adequacy. Now I think liquidity issues are tied to just uncertainty. . . . We are asking Main Street to have confidence in the banking system. Well, I would ask the banks to have confidence in the banking system and lend to each other.'' She said a freeze on credit is only making the situation worse. ``We acknowledge that some individual banks have challenges, but overall they still have strong capital, and they've built up their loan loss reserves,'' she said. ``We shouldn't be freezing up and panicking.'' Though some have argued the bailout bill does not go to the heart of the issue, Ms. Bair was unequivocal in saying she thought the buyout facility would help the situation. ``The reason for the liquidity issue is you have an asset on the balance sheet where the cash flow suggests one valuation, but if you have to sell it, you will be taking a steep loss because the market is seizing up,'' she said. ``So we will be providing a vehicle for moving those assets off balance sheet for a price other than a rock-bottom distressed price. We are capable of letting the government hold the asset for a while before it's sold which will help ease downward pressure on asset valuations. It absolutely should help.'' But she acknowledged some concern that the legislation did not do enough to help struggling borrowers. Ms. Bair was at the forefront last year in warning that lenders and servicers needed to systematically lock in low, starter rates so that borrowers could continue making their mortgage payments on time. More defaults would lead to increased foreclosures, which would cause further deterioration in the housing market. Few took her advice, and the housing market continued to sink. If more lenders had modified loans, she said the situation would still be bad, but not as dramatic. ``We were going to have these problems no matter what, but I do think it would be less of an impact,'' she said. But Ms. Bair said she did not understand why Congress is not doing more to assist borrowers in the bailout legislation. Lawmakers debated forcing more servicers to engage in systematic modifications, but ultimately did not do so. ``I don't understand it,'' she said. ``The borrowers here that are losing their houses have been this politically powerless group. From the get go, politically, for whatever reason, they were put in a category of they got over their head and were an unsympathetic group to deal with. That is not the case with all of them.''

Mr. FRANK of Massachusetts. I yield 1\1/2\ minutes to the gentleman from Virginia (Mr. Moran) for the purpose of a colloquy.

Mr. FRANK of Massachusetts. Madam Speaker, I yield to the gentleman from Illinois (Mr. Davis) for the purpose of making a unanimous consent request. (Mr. DAVIS of Illinois asked and was given permission to revise and extend his remarks.)

Mr. FRANK of Massachusetts. Madam Speaker, ever mindful of the danger that George Bush will lead us down the road to socialism, we will be monitoring this very closely. I now yield 1 minute to the gentleman from Georgia (Mr. Marshall).

Mr. FRANK of Massachusetts. I now yield 2 minutes to the gentleman from Michigan (Mr. Dingell), the chairman of the Commerce Committee, very knowledgeable in these subjects.

Mr. FRANK of Massachusetts. If the gentleman will yield, yes, it is. And I believe, as he and I have discussed, that the danger to the purchase of automobiles is one of the great ones that we face here, and it is an important reason for moving this bill. Yes, I very much agree with what he just said.

Mr. FRANK of Massachusetts. If the gentleman would yield, I would say absolutely, because this is one which would have a double positive effect: It would help with the credit crisis, and it would help one of our most important industries in the United States from facing difficulties.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Madam Speaker, on November 23rd, the congregation of the Myrtle Baptist Church, joined by many of the citizens of Newton, and indeed of the greater Boston area, will pay a bittersweet tribute to the Reverend Howard Haywood, commemorating the exemplary service he has provided to that congregation--and to the community at large--for more than two decades. Reverend Haywood took over as pastor of the Myrtle Baptist Church in 1985. His formal role ended in July of this year, and the many people that he served, comforted and inspired are gathering to honor him. At a time when questions of the appropriateness of the size of compensation have been an important topic in this House, I think it worthy of noting that Reverend Haywood took no compensation at all for the extraordinary work that he has done. Under his leadership, the Myrtle Baptist Church has become a source of help for people from all generations and walks of life. In the terrible aftermath of Katrina, when the Federal Government failed so many people, under the Reverend Haywood's leadership the Myrtle Baptist Church did an extraordinary amount to provide the assistance that people needed. From this relatively small congregation, two truck loads of food, clothing and gifts were dispatched and noncongregate students from the surrounding colleges were so inspired by this that they joined the effort. While Howard Haywood's works are truly impressive, the greatest gift he has given all of us is the example of a man of considerable talent dedicating that talent to bettering the lives of others and providing a wonderful example of religion and religious service at its best. Madam Speaker, I am glad to hold out to the Nation the example of Howard Haywood, and I look forward to participating in the event in which I and many others will tell him how much we appreciate his work.

Mr. FRANK of Massachusetts

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

Mr. FRANK of Massachusetts. I yield 2 minutes to the gentleman from Oregon (Mr. Blumenauer).

Mr. FRANK of Massachusetts. Will the gentleman yield?

Mr. FRANK of Massachusetts. I think the gentleman makes a very good point. It's not anything obviously that we would legislate. I know he knows better than most, and he's not asking for that. But it is something I will join him in urging on the Federal Reserve. The community banks are the innocent victims overwhelmingly of this. They were regulated. They didn't make subprime loans. By the way, they were the ones covered by CRA. The bad loans were made by the institutions not covered by the Community Reinvestment Act. But the gentleman is right. These banks play a vital function that will be even more vital as other sources dry up, and I will work with him to try to get that kind of relief.

Mr. FRANK of Massachusetts. If the gentleman would yield, he is absolutely correct. By the way, one of the points in the original bill the Treasury Secretary gave us inappropriately freed him from a number of judicial restraints. We have restored those, and we have taken away no existing legal right whatsoever in this bill.

Mr. FRANK of Massachusetts. Madam Speaker, there's been reference in this debate to very good provisions that help community banks and others that are tax provisions. I now want to recognize for 3 minutes the author of those, the chairman of the Committee on Ways and Means, the gentleman from New York (Mr. Rangel). (Mr. RANGEL asked and was given permission to revise and extend his remarks.)

Mr. FRANK of Massachusetts. I yield 2 minutes to the gentlewoman from California (Ms. Lee).

Mr. FRANK of Massachusetts. Madam Speaker, one of the most valuable members of the Finance subcommittee, the gentlewoman from New York (Mrs. McCarthy), is recognized for 2 minutes.

Mr. FRANK of Massachusetts. Madam Speaker, I now yield 4 minutes to the very able Chair of our Capital Markets Subcommittee, a man who has played a very important role in our trying to stabilize this situation, the gentleman from Pennsylvania (Mr. Kanjorski).

Mr. FRANK of Massachusetts. Madam Speaker, I yield myself 15 seconds. On page 58 the gentleman was right to object to the provision in the original bill sent to us by the Secretary exempting him from judicial review. We have disexempted him. If Members will look at page 58, he is now subject to appropriate judicial review. I now yield 2 minutes to the gentleman from Minnesota.