Congress Struggles With
An Avalanche of Foreclosures
Aug. 24, 2007 (EIRNS)The following report was issued yesterday 2007 by the Lyndon LaRouche Political Action Committee (LPAC).
Politicians are panicking over the prospect that anger is boiling over in the population over current and coming home foreclosures. Although Lyndon LaRouche alone has proposed a means to protect the homeowners and save the banks, but not bail out the speculators behind the bubble, many proposals to respond to the crisis are before the Congress, ranging from extremely weak to outright dangerous.
In an August 22 release, Senator Charles E. Schumer, chairman of the Joint Economic Committee and the Senate Banking Subcommittee on Housing, in letters to Federal Reserve Chair Bernanke, Treasury Secretary Paulson, Administrator of National Banks Dugan, and others in the subprime mortgage business, stressed that simply providing liquidity to the credit markets, as the Fed has been doing, does not address the fundamental problems of the mortgage markets. "It is essential that the Federal agencies overseeing the financial markets use their influence over the major market players to encourage them to engage in a major effort to modify or refinance the loans that have a high probability of defaulting, so that the upcoming wave of foreclosures...can be abated."
House Financial Services Committee chairman Barney Frank (D-MA) and Rep. Gary Miller (R-CA) on August 17th urged the U.S. Senate to raise the conforming loan limit for Fannie Mae and Freddie Mac. "In the current housing crisis, it is clear that we must immediately provide additional mortgage liquidity in all areas of the country, including high-cost areas." In May the House passed HR 1427, the Federal Housing Finance Reform Act of 2007 by an overwhelming bipartisan vote. The bill will overhaul the regulatory oversight of the government sponsored enterprises (GSE) of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, and will create a new, independent regulator with broad powers analogous to current banking regulators. The bill creates an off-budget and non-taxpayer-financed affordable housing fund, dedicating hundreds of millions of dollars for the construction, maintenance and preservation of affordable housing in the Gulf Coast, the first year, and billions of dollars over the next five years for affordable housing nationwide.
New York Senator Hillary Clinton has issued a plan that will be introduced when Congress returns in September, that intends to help reduce foreclosures by establishing a $1 billion fund to assist state programs help at-risk borrowers avoid foreclosure. State programs could help make single mortgage payments, help renegotiate loan terms, or simply provide financial counseling. Her plan would also expand Fannie Mae's and Freddie Mac's goals, helping larger numbers of at-risk homeowners, and helping arrange payment forbearance and loan restructurings.
Meanwhile Sen. John Edwards is proposing another bank bailout, with a "large Home Rescue Fund," through which a government agency will take over inflated mortgages from banks and mortgage lenders.