House oversight committee to hear testimony from TARP watchdog
Tuesday, January 25, 2011; 8:33 PM
Rep. Darrell E. Issa (R-Calif.) on Wednesday will use his first hearing as chairman of the House Committee on Oversight and Government Reform to take a critical look at the Obama administration's bank bailouts and its efforts to help homeowners avoid foreclosure.
On tap is a warning from a federal watchdog that "we are running the risk of repeating the same mistakes that resulted in the American people footing the bill for the largest bailout in American history," Issa said Tuesday in a statement ahead of the hearing.
The star witness will be Neil Barofsky, special inspector general for the Troubled Assets Relief Program, or TARP, which was central to the government's effort to contain the financial crisis and has since become politically radioactive with many voters.
In prepared testimony, Barofsky credits TARP with averting a catastrophic financial collapse, and says the bailout is costing much less than originally feared.
But he faults the government for reinforcing a mentality that encourages the largest financial institutions to take reckless risks and gives them unfair advantages over smaller competitors.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, adopted last year, was supposed to put an end to institutions becoming "too big to fail," but whether it succeeds will depend heavily on the judgment of regulators, Barofsky says.
He also says that part of the administration's effort to save borrowers from foreclosure - the Home Affordable Modification Program, known as HAMP - "continues to fall dramatically short of any meaningful standard of success." The program is meant to encourage mortgage lenders to renegotiate payment terms.
In prepared testimony, Assistant Treasury Secretary Timothy Massad says TARP helped bring the economy "back from the brink" and that the government is unwinding it "far faster than anyone ever thought possible."
As for HAMP, Massad says it "has helped hundreds of thousands of struggling families stay in their homes," but was "not meant to prevent all foreclosures."