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Lawmakers Blast Handling of Bailout
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Paulson said that he is "dedicated to implementing" proposals to ease foreclosures that would "protect the taxpayer and work well." But he said that TARP was not the best vehicle for that, as it is best used for bolstering the overall financial system rather than individual homeowners.
Bair, on the other hand, recommended that $24 billion of the bailout funds be used to help people avoid foreclosure. She warned that the government is "clearly falling behind the curve" as foreclosures mount and said it is "essential" for the Treasury to offer loan guarantees and credit to keep people in their homes.
Bair told the panel that federal programs to help struggling homeowners are inadequate and estimated that as many as 5 million homes would be foreclosed on over the next two years if help was not extended.
Paulson said he has not ruled out using bailout money to mitigate foreclosures, although he has reservations about the idea. Bernanke, however, called Bair's proposal a "very promising approach."
Paulson deflected calls to use the financial package to bolster troubled automakers.
"The TARP was aimed at the financial system," Paulson said. "I think it would be not a good thing. It would be something to be avoided, having one of the auto companies fail." But, he said, "I don't see this as the purpose of the TARP."
Noting that Paulson told Congress that he would use the money to buy troubled mortgage assets, but then reversed course and has used it to pump capital into banks, Ackerman called it "the second-largest bait-and-switch scheme that history has ever seen, second only to the reasons given to us to vote for the invasion of Iraq."
Paulson did definitively exclude one group from any government money. A group of plumbers had proposed applying for TARP money, said Rep. Jeb Hensarling (R-Tex.), because they plan to refurbish foreclosed properties.
"We got very broad authorities and powers," Paulson said. "But we certainly are not going to give money to plumbing contractors."
"The 15 minutes of fame for the plumbing industry appears to have ended," Frank said.
