Rep. Gregory Meeks (D-N.Y.) says dealing with the housing crisis is vital because it shows that the government wants to help all people. (1:03)

 

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Rep. Barney Frank (D-Mass.), Chairman of the House Financial Services Committee, said he has seen “encouraging signs,” in efforts to reduce foreclosures in the U.S. During a Financial Services Committee hearing today, Frank said it would be very important to the economy to reduce foreclosures and to use the rescue plan to put money into the economy.

Chairman Frank stated that taxpayer dollars wouldn’t be used to help others “pay their mortgages,” believing there was “zero likelihood” that that would happen. Frank also felt that decisions on the housing crisis are “unmakeable” in government currently, adding, “Someone has got to have the authority to make a decision.”

Rep. Spencer Bachus (R-Ala.) said that while the U.S. should work to reduce foreclosures, “We need to be careful to prevent all foreclosures.” Bachus stated, “If a homeowner is under water, if the house is worth substantially less than the mortgage, it is predictable that many are going to walk away from their obligation. In fact, we are seeing a good percentage of foreclosures in which the homeowner is under water and they are walking away.” He added, “I don’t see any practical way of preventing that.”

While Bachus agreed that the government could not allow an economic collapse, he asked “Where does it stop?” Bachus did praise government’s intervention in the crisis to this point, saying “So far, we’ve made a terrible situation better,” but advocated the need for an “exit strategy.”

Rep. Paul Kanjorsky (D-Pa.) made a reference to homeowners, saying that it was important to “keep them afloat.” He added that current foreclosure rates have “decimated some communities.”

According to Rep. Randy Neugebauer (R-Texas), it is important not to “encourage borrower behavior that is not appropriate.” He did think that if dialogue between borrowers and lenders is encouraged, “there will be some effort” to keep people in their homes.

Benjamin Allensworth, Senior Legal Counsel for the Managed Funds Association, said “the wave of foreclosures has placed downward pressure on home prices, which in turn has eroded home equity and consumer confidence in the mortgage market.” He advocated “effective mortgage modifications over foreclosure whenever possible.”

Thomas Deutsch, Deputy Executive Director of the American Securitization Forum, felt that government assistance in the crisis is vital and while mortgage lenders have made efforts to prevent “avoidable foreclosures,” “Macro economic forces bearing down on an already troubled housing market are simply too strong for private sector loan modification alone to counteract the nationwide increase in mortgage defaults and foreclosures.” Deutsch felt the housing crisis could not be resolved without government assistance.

The campaign of Senator John McCain (R-Ariz.) says they have an answer to the current housing crisis. This answer comes in the form of the “American Homeownership Resurgence Plan”. Doug Holtz-Eakin, McCain-Palin 2008 senior policy adviser, held a teleconference to outline this new plan. Holtz-Eakin said the plan would provide direct help to home owners, allowing them to stay in their homes and avoid foreclosures that would damage he property values in their neighborhoods. The plan would also provide to the housing market lower interest rates, around five percent.

Holtz-Eakin said, “Starting with the home owner and moving up, you accomplish some of the objectives of the financial stabilization plan that we’ve seen come out of congress and proposed by the administration in recent weeks. Senator McCain believes this is exactly the right kind of policy, providing direct help to homeowners, at the same time supporting the financial markets and keeping them from further damaging the availability of credit to mainstream America, one of the real threats to the economy at this time.” Funding for the initiative would come from authorities, including the $300 billion worth of refinance capacity provided by the Federal Housing Administration (FHA) and the $700 billion provided by the Treasury Department to Congress.

Even though the FHA and the Treasury Department already have the authority pursue this plan, the McCain campaign believes stabilizing the housing markets haven’t really been publicly targeted, and were originally only geared to help four-hundred or five-hundred thousand homeowners. The new plan proposes to aid homeowners on a larger-scale than the FHA and Treasury Department have planned, and therefore be a more effective supplement to the housing crisis response.

When the housing market is down, the “whole economy gets hurt,” said Rep. Barney Frank (D-Mass.)in a hearing today. The Financial Services Committee met to discuss the problems and possible solutions to the current housing market.

Frank added that the federal government’s feelings are not only of sympathy to those in foreclosure. He said that some people have committed to mortgage policies out of their price range.

Rep. Jeb Hensarling (R-Texas) said that the United States needs to “preserve the paycheck” of its homeowners. Hensarling continued by stating that no one would want to be a seller in this market.

Sheila Blair, Chairman of the Federal Deposit Insurance Cooperation, said the current housing market is due to a “complex set of interrelated causes.” She said the housing market in the United States had the most severe drop of the past 60 years.

Brian Montgomery, Chairman of the Board of the new “Hope for Homeowners Program,” said that the program is slated to be ready to open on Oct. 1 of this year. He said the goals of the program are to help improve homeowners’ chances of refinancing their loans, mitigating monetary losses for both buyers and sellers of mortgages, and to reduce the number of foreclosures nationally.

Congresswoman Maxine Waters (D-Calif.) asks FBI Director Robert Mueller about allegations that homeowners whose houses have been foreclosed upon will be challenged at the polling place. Waters says she “never dreamed that foreclosure would bring us even this additional problem.” The comment came in an FBI oversight hearing before the House Judiciary Committee. (1:01)

 

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Multiple Congressmen expressed frustration at the inefficacy of FBI oversight as currently carried out by the House Judiciary Committee in a hearing today. FBI Director Robert Mueller was the sole witness. Chairman John Conyers (D-Mich.) opened the session complaining in an exasperated tone that the committee had not yet received a response to a September 5 letter asking about “the FBI’s anthrax investigation, disturbing revelations about the Bureau’s improper collection of information on reporters, the FBI’s approach to this country’s mortgage fraud crisis, and the expanded investigative and intelligence gathering powers resulting from the proposed Attorney General Guidelines concerning the FBI’s domestic operations.”

Conyers and other congressmen elaborated in questions about why they wanted the Attorney General Guidelines (set to be made public in a few weeks), which Mueller said were still under review but which would unify the FBI’s standards for starting investigations over different types of investigations. For example, the standards for when to open a criminal investigation are different from those used for national security investigations, and it is hoped that the new guidelines would make standards easier to follow. Congressman Artur Davis (D-Ala.), a former assistant U.S. Attorney, questioned Mueller about whether the new standards for opening an investigation would be lower than the standards police use for when they are allowed to stop and question a person (set out in the Terry v. Ohio Supreme Court decision of 1968). Mueller resisted the comparison, but Davis pointed out that the investigative activities carried out by the FBI are similar to those used by police. Mueller finally admitted that the standard has a lower threshold, so investigations could be opened without having reasonable suspicion based on “specific and articulable facts” that a person has committed, is committing, or is about to commit a crime.

Congressman Bill Delahunt (D-Mass.) expressed frustration at the committee’s policy of allowing each congressman only 5 minutes for asking questions; “this format doesn’t work,” he said, pointing out that it was impossible to get deep into any issue in that time. He suggested the FBI could have experts in particular areas come testify, and on a more frequent basis than Director Mueller does. Mueller responded by saying that the committee will always be frustrated regardless of administration, as answers to questions must be vetted before being sent back. He also offered to come up to the hill at any time for briefings or discussions.

Congresswoman Maxine Waters (D-Calif.) asked Director Mueller about allegations that voters will be challenged at polling places if their homes have been foreclosed on. Mueller said he had not heard about that particular plan. He said the Department of Justice Civil Rights Division would investigate any such issue, though Mueller was unable to name the head of that division without the help of an aide. Mueller promised to follow up on making sure the Civil Rights Division knew about the problem, and Chairman Conyers assured Waters that Civil Rights Division head Grace Chung Becker would be testifying before the committee soon.

At a Domestic Policy Subcommittee of the House Oversight and Government Reform Committee hearing on the impact of the subprime mortgage crisis on neighborhoods, Maryland Councilmember Nancy Floreen says that the market has “preyed upon people who cannot afford the situations in which they’ve been led.”  She also says that the crisis has disproportionately affected minority communities, and said that blacks in Maryland are three times more likely than whites to receive a subprime loan, and Latinos are twice as likely as whites. (0:36)

 

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The Domestic Policy Subcommittee of the House Oversight and Government Reform Committee held a hearing on “Neighborhoods: The Blameless Victims of the Subprime Mortgage Crisis” to discuss the more widespread repercussions of foreclosures and vacant properties within concentrated areas, as opposed to effects on individual families and the economy.
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At the Housing Crisis and Lessons for Monetary Policy discussion hosted by the Brookings Institution, Economic Counselor and Director of the International Monetary Fund Simon Johnson predicts a “minor contraction” for the U.S. economy this year, followed by a “slow recovery” next year. He also talks about the spillover effects of the U.S. housing market into other nations, and predicts a decline in global growth projection. (0:43)

 

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At a discussion on the Housing Crisis and Lessons for Monetary Policy at the Brookings Institute today, International Monetary Fund Economic Counselor and Director Simon Johnson predicted a “mild contraction” in the U.S. economy this year followed by a “relatively slow recovery” next year. Johnson discussed the link between housing and mortgage finance and said that the link between monetary policy and housing is stronger because of recent governmental intervention in the current crisis.

IMF Senior Economist Roberto Cardarelli said that over the last four quarters, residential investment has contributed 56% to the decline in U.S. GDP, “and by that standard, we are very much in a recession environment in the United States.” Cardarelli said another cause for concern is the impact of housing prices on the decline in consumption, which further stunts economic growth. He also emphasized that inflation rates need to change in order to stabilize inflation and minimize loss.