The House Committee on Financial Services held a hearing on “Oversight of Implementation of the Emergency Economic Stabilization Act of 2008 and of Government Lending and Insurance Facilities; Impact on Economy and Credit Availability” on Tuesday in which they questioned Secretary of Treasury Henry Paulson, Federal Reserve Board Chairman Ben Bernanke and Federal Deposit Insurance Corporation Chairman Sheila Bair.

“At this point, public confidence in what we have done so far is lower than anyone would have wanted it to be,” said Chairman Barney Frank (D-MA), “it is essential that we do something to use some of the TARP’s (Troubled Asset Relief Program) funds” to stop the tide of foreclosures in the country. Chairman Frank and other Democrats were critical of how Secretary Paulson had decided to use some of the $700 billion bailout money to buy preferred stocks in banks rather than buy “toxic assets” for which Congress initially called for.

Paulson defended his position by arguing that the best way to save the credit market was by injecting cash directly into banks. “It is very, very important to stay with the purpose of the TARP,” said Paulson. “This is all about protecting the financial system, avoiding collapse, and recovery.”

The Senate Committee on Banking, Housing and Urban Affairs held a hearing today on “Oversight of the Emergency Economic Stabilization Act: Examining Financial Institution Use of Funding Under the Capital Purchase Program.”

Committee Chairman Christopher Dodd (D-Conn.) voiced his concerns over how the money for the $700 billion Emergency Economic Stabilization Act (EESA) was being used.

“The acceptance of public funding carries with it a public obligation,” said Dodd. “One cannot benefit from taxpayer support in all its many forms and assume that one has no duty to serve that same taxpayer.”

Dodd expected lenders who received some of the $700 billion to preserve homeownership. “The foreclosure crisis is the root cause of the larger financial crisis…Until we solve the foreclosure problem, we will not have any hope of solving larger economic problems.”

The Senator was critical of lenders who had received public funds and used the money to buy other financial firms or give their executives benefits rather than give out loans. “Credit is the lifeblood of the economy…Lenders have a duty to use these funds to make affordable loans to credit-worthy borrowers on reasonable terms,” said Dodd. “If they do not, then in my view they are acting outside the clear intent of the statute and should reform their actions immediately,” he concluded.

Sen. Chuck Schumer (D-N.Y.) says that while it isn’t fair for the taxpayers to bare the cost of corportations’ mishaps, it’s the only way out of our hole. (1:12)

 

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