Truemors
The Treasury Department seems unsatisfied with The Federal Deposit Insurance Corporation’s $ 24.4 billion plan to modify mortgage loans in an effort to stem the foreclosure crisis. Instead, Treasury Interim Assistant Secretary Neil Kashkari told panel members of the U.S. House of Representatives Oversight and Government Reform System last Friday that the Department is still aggressively considering other alternatives to solve the nationwide problem.
The FDIC scheme which expects to help 2.2 million troubled homeowners with aid coming from the Congress-approved $700-billion rescue plan gathered strong support from U.S. lawmakers and private lenders.
However, Kashkari says that the system was more stable and stronger since they had implemented steps taken by U.S. policy-makers and their overseas counterparts to alleviate the global credit crisis. He also pointed out three critical areas which the Treasury was prioritizing:
- increase anti-foreclosureefforts
- support the asset-backed securitization market critical to consumer finance
- strengthen the capital base of the financial system
Lawmakers, on the other hand, are not happy about the so-called aggressive measures of the Treasury to prevent foreclosures. Reacting to Kashkari’s announcement, Rep. Dennis Kucinich pronounced that the Department was handing over the responsibility to inadequate government measures and the private sector instead of acting on the crisis themselves.
Kashkari’s pronouncement was in defense of the Treasury’s decision to focus on bank recapitalization. At a news conference last Wednesday, Treasury Secretary Henry Paulson emphasized that the Treasury was obligated to facing foreclosure.
However, he deemed it inappropriate to spend the bailout money on FDIC’s proposal. He added that it would break conventions of the rescue scheme if they directly spent the money to aid borrowers.
Both Federal Reserve Chairman Ben Bernanke and Paulson and agree that the decision to invest on banks was the best response to increasing foreclosures.
By Cassiano Travareli
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