Systematic Foreclosure Prevention and Mortgage Modification Act

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, the parliamentary situation must be understood. Last year, when we responded to the urgent pleas of the Bush administration to authorize the $700 billion deployment of Federal funds to unstick the credit markets, we resisted their insistence that all the money be made available rapidly, and at least said that they would have the right to spend the first half, but after having spent the first half, would have to notify Congress of any intent to spend the second half, and that we would have 15 days in which to consider, under expedited procedures, resolutions to disapprove that.

As the Bush administration began to administer this program, many of us became very unhappy, in particular, we felt that they had repudiated commitments they had given to us to use a significant part of the fund to diminish foreclosures.

We also thought it was a mistake to provide infusions of capital to banks without any requirements as to what was done with that capital. The infusion of capital was not, in itself, a bad idea, but doing it in a way without conditions was in error.

Because of the dissatisfaction with that and some other aspects, we made it clear, many of us, to the Secretary of the Treasury that any requests to free up the second 350 would be voted down by the Congress, possibly by a sufficient majority to override a veto. The Secretary of the Treasury, therefore, withheld using any of those funds.

We now have a new administration coming in, and many of us believe that the new administration should have the opportunity to spend, lend, deploy the 350. The main argument against it is very simple; because the Bush administration messed this up, we must not allow the Obama administration to do it.

People talk about this program, the TARP, it is called, the Troubled Asset Relief Program, and they impute to it a personality. It becomes, in some of the rhetoric, a living organism. We can't trust the TARP. The TARP was bad.

Well, the TARP is not an organism. It has no mind; it has no spirit. It is a set of policy tools. And at the outset, the argument that because the Bush administration used those tools in ways that we disagree with, we should deny them to the Obama administration goes much too far.

If I were to follow the principle that where the Bush administration did things badly, I would deny the Obama administration the chance to do them, we would not have a State Department because I don't like the Bush administration's foreign policy on the whole. But I do not think we should therefore deprive the new President of the chance to do it.

Instead, what we do, and here's where the parliamentary situation comes in. We have a vote coming under the bill that we passed last year on resolutions of disapproval in the Senate and the House, and they cannot be stopped, thanks to the way we wrote this, by the Rules Committee, by a filibuster or by anything else. Prior to that vote, many us believe we, in the House, should make clear what conditions we would want to impose on this if it does go forward.

Now, I believe the Obama administration will do this better than the Bush administration, but I want to go more than simply believing that. I think it is important that we pass this bill that makes clear what we believe should be in it, and hope that it passes the Senate, but even if it does not get taken up there for a while, and we've had long delays, have the administration commit to it.

Now, I'm somewhat bemused by my colleagues on the other side of the aisle. Trying to follow their path on this whole program has made me dizzy. Last year they were, at various points, ardently for it, then against it, then for it again. They were for it in the end only with a condition that had to be added to it involving insurance, which the Secretary of the Treasury of their administration said he did not think made any sense and he did not plan to include it.

The leadership, I sympathize on the other side. They've got a membership that they have found hard sometimes to work with, and that has led the leadership to go, in my judgment, in the last year, from obstruction to irrelevance to self-delusion. First they said, let's not do anything. Then they absented themselves from negotiations involving the White House and the Treasury, the Senate Republicans and Democrats and ourselves. They just weren't there, and they wouldn't tell us what they thought. Then finally they felt they had to do something, so they said they would support the bill on condition that it include this insurance plan which the Secretary of the Treasury has made very clear to people he intended to ignore. That gave enough of them enough comfort to vote for the bill.

Now, we found that leaders on the other side who supported this when it was for the Bush administration, now want to deny it to the Obama administration because they correctly realized that the Bush administration did not do it well.

I know that quoting the Bible is in vogue in some circles. I'm not the best exegete, but I will say there is an analogy, you were told, I think, not to visit the sins of the father on the son, or maybe you're told that you should. I'll be honest and say I don't quite remember.

But I certainly do know that when you are dealing with important matters of public policy and tools that you give a President, visiting the sins of one administration on that administration which is not only coming after it, but repudiated it politically would be a great mistake.

Now, the last point I would make is again to emphasize. This vote that we will take on this bill does not free up the money. It does not free up the money. It does not mean the money should be spent. It will mean, after we have dealt with the amendment process, that if the money is spent, we want it spent in this way. There will be a separate vote on whether or not it should be spent.

Now as I understand, I realize that my Republican colleagues in the leadership, on the whole, intend now to repudiate their support for this retroactively, but it comes too late. Punishing the Obama administration, denying the incoming administration the opportunity to deploy these resources, particularly after they have agreed, as I believe they will, very explicitly with what the House thinks should be included, would be a great mistake.

And the last point I would make is this. If we do not pass this bill today, and I believe that, in a subsequent and independent decision, agree to release the $350 billion, we will make no progress in what is the single biggest economic problem we've been facing, namely, the foreclosure crisis, which has been the cause of so much else.

There has been very little done in the foreclosure crisis. We have tried. We

passed a bill. It didn't work very well. The one chance we have to bring relief to a substantial number of people facing foreclosure and, importantly, undo the economic harm that does for the country, because foreclosures don't just hurt the person who's losing the property. They have been a central cause of our economic problem, widely agreed upon by a wide range of economists.

Passing this bill, and then in a subsequent vote, unrelated, but independent, but as part of a package, freeing up the second $350 billion, subject to the conditions we put today, is the only way Members will have to see that foreclosure diminution becomes a reality.

So I hope this bill is passed. More importantly, next week, I hope that if it is passed, we will then defeat the motion of disapproval.

I reserve the balance of my time.

Mr. Chairman, I yield 2 minutes to the gentlewoman from Wisconsin (Ms. Moore), a member of the committee.

If the gentlewoman would yield, in title IV of the bill, we list some high-priority items where we expect these funds to be deployed, and we say that, if they are not deployed, we have to get an explanation in writing as to why that wasn't possible. In general, aid to municipal finance and housing, as part of that, is clearly included.

Mr. Chairman, California has been one of the epicenters of this foreclosure crisis, and the delegation has worked very closely together. One of those leading that effort is the gentlewoman from California (Mrs. Tauscher). I yield her 2\1/2\ minutes.

If the gentlewoman would yield, I completely agree with that statement.

As she knows, because she was a major part of this, there is an amendment included in the manager's amendment that was authored by herself and by her colleague from California, Mr. Cardoza, whose eloquence on behalf of the people facing foreclosure cannot fail to move anyone who listens to him. That says it beyond the current foreclosure relief that will be in this bill, and it will be the only foreclosure relief we will get if this money isn't made available. We are mandating that a further study be made to help people who might be facing foreclosure in the future and to deal with the broader aspects of the problem.

So I thank the united efforts of the people of California, the Members from California, for helping improve this bill. I give them my commitment that, as chairman of the committee, I will be working with them to go further.

Mr. Chairman, time is limited so I want to give myself 30 seconds to rebut the inaccuracies we've just heard.

First of all, the gentleman said we've closed the process. I have no idea what he is talking about. I suspect he does not either. This is a very open process. We solicited amendments. A number of amendments were offered, a number of amendments from both parties will be made in order, a number of amendments from both parties have already been accepted in the manager's amendment.

The accusation that this is closed is just wildly off base. It has been a very open process, and I would say a majority of the amendments that have been offered made sense, and we've agreed to them. And to say it is a one-person bill, in fact we have opened it up.

Now, Members who did not offer amendments--I will acknowledge. If you didn't offer an amendment, Mr. Chairman, it wasn't put in the bill. But this bill has been open, and the rule tomorrow will make that clear.

I now yield 2\1/2\ minutes to the gentleman from New Jersey (Mr. Pascrell) who's had a lot of input in this bill, which I guess makes it still a one-man bill.

If the gentleman would yield, absolutely.

I believe that the difference in the way the TARP will be administered in the new administration and the last administration will be very glaring, and frankly, I think that one of the motivations on some of my Republican colleagues to kill this now is that they fear the contrasts that will be presented between the very responsible and effective administration of this by the new administration and the inappropriate way of the last administration.

Mr. Chairman, I yield the gentleman 30 additional seconds, and ask him to yield to me.

Absolutely. This is a necessary component of our efforts to keep the American automobile manufacturers from going under. We give this authority--we reassert this authority to Treasury, and we intend to be very, very insistent that they use it.

Mr. Chairman, I yield the gentleman 10 additional seconds.

He is absolutely right, and once again, we underlined this authority and we intend to be very insistent that it be used.

Mr. Chairman, I yield 2\1/2\ minutes to one of our freshman Members, a man with great experience in municipal government, the gentleman from Virginia (Mr. Connolly).

If the gentleman would yield, yes, I very much agree.

I think one of the most sympathetic victims of this financial crisis has been the municipalities. The capacity to finance what's necessary for the quality of the life of their constituents has been impaired by factors well beyond their control. And the gentleman is absolutely right that we have an obligation to try to come to their aid which this bill would mandate be done.

Would the gentleman yield?

I am in complete agreement, and while that would be beyond the scope of this, as the gentleman knows--I know he's not suggesting we do it here--I guarantee we will be having hearings later this year on the proposal.

My own view is that some form of insurance would be there.

The most unjustified risk premium being paid in America is by those municipalities that issue particularly full faith and credit general obligation bonds.

I welcome the gentleman as someone with the municipal government experience that he's most recently had, and I look forward to drawing on that experience as we help correct this situation.

Mr. Chairman, I yield 2 minutes to one of the most energetic and informed members of the committee, the gentleman from Georgia (Mr. Scott).

Well, Mr. Chairman, I am tempted to defend George Bush against the charge that he is un-American at this point because this was his program, but I'll defer that until later.

I yield 2 minutes to the gentleman from Missouri (Mr. Clay).

If the gentleman would yield, obviously we aren't doing anything for any one company--the gentleman wasn't suggesting that we were--there are other companies. And yes, unsecured paper should be covered. Obviously we don't expect any investment by Treasury to be made irresponsibly; they have to check to make sure that it's a good investment. But ruling out the unsecured, no, that was not our intention. In fact, under the underlying bill, which we do not change, the Secretary has the authority fully to respond to that sort of situation.

Mr. Chairman, I yield 2 minutes to another freshman member of the committee, the gentleman from Connecticut (Mr. Himes).

If the gentleman will yield, Mr. Chairman, he's absolutely correct. The form of ownership should have no relevance to the decision here.

If the gentleman would yield, he understates my view when he says they should be encouraged. I believe I will be glad to join with him in insisting that they do that. And, frankly, we don't want any form to be disfavored and certainly not the mutual form, which has a great deal in terms of our history to commend it. So the gentleman is absolutely right, and I think on this one we can be pretty certain that, particularly if the House gives the kind of endorsement to it that I suspect that it will, we'll be able to accomplish that.

If the gentleman would yield, that's right. And I would say some of my colleagues understandably wanted to put very severe restrictions on the recipient institutions, and we put restrictions on them. But we don't want to be so restrictive that we drive out private capital. This will only work if the public capital leverages and unlocks and reassures private capital.

Mr. Chairman, not being a person who holds grudges, I yield 2 minutes to someone who left our committee, the gentleman from New York (Mr. Crowley).

If the gentleman would yield, he is absolutely correct. We think that it is a very important use of it. It's one of those things that was not done sufficiently previously, and we are convinced it will be done with this House's taking the lead in the future.

If the gentleman will yield, yes, he's correct. What we, in fact, say here is that nothing should be advanced to a bank without an agreement in advance as to how it should be used. Now, we would expect a great bulk of the funds, the agreement would say, be re-lent, but that's not the exclusive purpose. There are other valid purposes. What this bill says, however, is that that would have to be clear up front as one of the permitted purposes, and we do believe that this Treasury Department, given that, yes, they would accept that as a very valid use.

Mr. Chairman, I will now yield 3 minutes to one of the leaders in this House on the important issue of foreclosure, the gentlewoman from California (Ms. Waters).

Mr. Chairman, I move that the Committee do now rise.

Mr. Chairman, I would like to thank the gentleman from Alabama for yielding a few minutes to me.

It's a tremendous honor to be able to sit on the Financial Services Committee. It's been the center of the universe the last 2 years dealing with this crisis that's very real that is impacting not only individuals but businesses, people who are looking at the loss of their life savings, loss of their greatest capital asset: their home. We know that this is a strong reality. But we also realize the magnitude of the tremendous amount of taxpayer resources that have been devoted to this effort.

Initially we were told by the Treasury Secretary that in effect a financial Armageddon would ensue if this body did not, in fact, pass a bailout of gargantuan proportions. We were told $700 billion is what the Treasury Secretary would need to have in order to offer an effective front to stave off, in essence, the four horsemen of the apocalypse for our financial markets.

We've seen a tremendous roller coaster occur in 2008 regarding our financial markets. For the first $350 billion, the first tranche going forward, what have we seen? This week in the Financial Services Committee, we had testimony before our committee from the administration. Questions were asked: Where has the first $350 billion gone? Who are the recipients of the first $350 billion? What did the money get spent on? What were the answers that we received? What is the effectiveness of that money? Did the American taxpayer receive value for $350 billion that's already been expended?

Mr. Chairman, not only did we not receive answers to those questions, we didn't receive answers to the very basic question of what will the next administration do with this next request for $350 billion? We don't have a full accounting of that either. And what is the reason? Again, Mr. Chairman, we're told to do just exactly what we were told with the last $350 billion: Trust me. Trust me. That didn't work so well for us last time. We were rushed into this. There wasn't oversight. There weren't strings attached. Once again with the next $350 billion, this Congress is being told that we will have to go out and borrow $350 billion because the American people need to know we don't have $350 billion in the bank right now, or like my father-in-law says to my mother-in-law, ``Elma, I have to go to the backyard and shake the money tree to get the money out.'' There isn't money there in the bank. We have to go and borrow money that we don't have. And who pays that back? It's the American taxpayer. I think, Mr. Chairman, we need to have some very basic answers to our questions before we go forward with this extraordinary request.

We are being forced to vote without details on how this $350 billion will be spent, but the trouble is we haven't held even a single hearing on the merits or the necessity of releasing the second tranche because the House is proceeding as though the decision has already been made to release the second $350 billion without holding any substantial debate on whether or not such a release is the appropriate step for stabilizing the financial markets and getting these markets moving again.

Congress handed the Treasury Secretary a $700 billion blank check. Let's just be clear about that. The original bailout was passed, and we were told that the $700 billion was essentially a big number. It was picked out of thin air, but it was needed to calm the markets. Now, I think most Americans

would be appalled to learn that that was the truth. But we also need to recognize the United States Treasury doesn't even have to spend every penny of that money. Many experts, even Secretary Paulson himself, stated that was the case.

But here we are again and the House is moving forward with a preemptive decision that jumps ahead of this very fundamental question, and it's this: Is it even necessary to release the second tranche for the state of our financial markets?

We remain unconvinced, many of us, that the case hasn't even been made that it is. This bill is attempting to make sweeping changes to the way that TARP must operate. I would agree with my colleagues on both sides of the aisle that TARP has very serious flaws, many of which were predicted by many of us on both sides of the aisle, and we should look at ways to address the flaws.

But Congress should not be forced to rush to vote on this bill the way that we are being forced to rush on it today. Congress was rushed into this gargantuan decision, and we need to take the time to be deliberative.

Mr. Chairman, I think I heard the distinguished chairman voicing some frustration with this current administration on how the TARP program was put together. I think a lot of Members who voted for this program, including the chairman, have had second thoughts because we hastily gave the authority to the administration with no plan and, more importantly, with no exit strategy.

I would remind the chairman that the incoming new Secretary, should he be confirmed and move through some issues that he may have, was at that table when designing the TARP program. So, if we're passing out blame, there may be a lot of places to pass out blame, but here is the most important thing:

Everybody who voted for that has been having second thoughts because, quite honestly, the money didn't get spent like it was represented it was going to get spent. There have been some intended consequences, but there have also been some unintended consequences of the money we passed out, because we started picking winners and losers. Any time the government starts picking winners and losers we're going to get in trouble.

The issue is what to do with this next $350 billion. Everybody kind of thought we were going to have some say-so over this next $350 billion, but in fact, we're not. This bill may pass in this House. It will never become law. The Senate has already said they will not take this bill up. So what should we be doing?

Well, on both sides of the aisle, what we should be doing here is coming back and doing an autopsy on how we spent the first $350 billion, what the results of that have been, and should we even look at or consider the additional $350 billion.

The American people are not very happy about this. We are passing out money carte blanche. We have relegated the constitutional responsibility of this House by just giving the administration, whether it's this current administration or the new administration, $700 billion and saying, Do the best you can. I don't think anybody thinks that's a very good plan.

In fact, the chairman has, in most cases, been very open and has had markups and has had a vetting of legislation. Quite honestly, I'm very disappointed. Quite honestly, in this case, this is one person's bill. Although this bill will not become law, one person is going to determine where the next $350 billion is going to go.

What we ought to be doing is having hearings. In the past, the chairman has had hearings--bringing people in here and asking them to account for the money that has been given them. Also, talk about what is the best way to do that.

Now, I did not vote for it, and I want to be clear about this. I voted against it twice. Some people voted for and against it. The chairman said we weren't clear. I'm very clear as to how I voted on it. I voted against it because I have a real problem of, cart blanche, giving people $700 billion of the American taxpayers' money with no plan.

More particularly, no accountability. We have not seen any particular reports. We have a gentleman from Texas who sits on an oversight board. He's openly said he's not sure exactly what's going on because the amount of information he's receiving is in question. That bothers me. It should bother the American people. It should bother Members on both sides of the aisle that we are not doing the people's business.

The way we do this right, if we're serious about doing this right, is we stop this process. We put it on hold, we ask the new administration to step forward with a plan, we get Members on both sides of the aisle to look at that plan, we vote, we offer amendments, we open that process so that when we go back home, we can say, ``You know what? We think we did what was in the best interest of the American people.''

But when you close the process, when you try to change the original intent of TARP, which was to use American taxpayers' resources to loan to or to guarantee and with the hopes of getting back--in fact, even people were talking about we may even make money on this. But many of the provisions, unfortunately, of this bill aren't intended to get any return on the taxpayers' money, particularly then we're moving away from an asset program to an entitlement program, and it deserves better consideration.

I urge Members not to vote for this bill.

I want to thank the gentleman from Alabama for his stellar leadership on this issue.

Well, Mr. Chairman, here we are, another $350 billion, $350 billion. Now, I don't want to overstate the obvious, but Mr. Chairman, that's money that we don't have.

In addition to that, the process points that have been made I think are incredibly important. We haven't had any appropriate committee work. We've had a discussion, but there hasn't been the hearings devoted specifically to this bill. There hasn't been a markup. We haven't had the opportunity in committee to amend this bill, to have Member input. Members haven't had the opportunity to provide input into the development of the legislation. The mere fact that there are 70 amendments filed with the Rules Committee, 50 of them from Democrats, clearly demonstrates that Members on both sides of the aisle have concerns about this legislation and ideas that they would like to share.

We've seen bailout after bailout after bailout, yet our constituents have felt no relief. We cannot, in good conscience, allow the government to dig deeper into their pockets and spend their money without giving their elected Representatives the opportunity to be heard.

Fundamentally, Mr. Chairman, we're talking about examining a vital role. What's the vital issue that says a lot about what we believe our government role ought to be? We're being asked to entrust Treasury with the authority to spend an additional $350 billion, a huge sum of money, and allowing them to take on additional risk to the taxpayers by pursuing modifications that have not yet proven to be a wise investment.

Now, we can all agree that the oversight of the initial TARP program has been wanting, there's no doubt about that; that's evidenced by the fact that Treasury completely shifted the original purpose of the program without consultation or consequence. Treasury has failed to answer basic questions, they have struggled to track the billions of taxpayer dollars, and they seem to have no way to measure the success of this program.

When Secretary Paulson initially approached Congress with an urgent request for funding and broad authority to stabilize the economy, a representative from the Treasury admitted that they were arbitrarily picking a number. In fact, when we asked a senior member at the Treasury Department how did they arrive at $700 billion, do you know what they said, Mr. Chairman? They said, ``We needed a really big number.'' Well, that's not terribly encouraging as to how to arrive at the amount of taxpayer money that they are putting at risk.

There have been no indications that the last tranche of funding is needed, indeed, to further stabilize the economy. There have been no emergency meetings to explain why this money is necessary and how it would be used effectively to justify this release. In fact, just a few days ago Mr. Kashkari described our financial system as ``fundamentally more stable'' than when we began.

Ultimately we have seen, through the failures of the TARP program and the Hope for Homeowners Program, that the government isn't the solution to all of our problems. Again, we've seen bailout after bailout, but there doesn't yet seem to be any relief for constituents and taxpayers. It's because of the hasty passage of the TARP program in the first place that we're now in the position to consider sweeping changes to the program.

The regular democratic process in order would ensure that all Members of Congress can make their voice heard on this very important issue. To say that there isn't time to have a markup is not only disingenuous, Mr. Chairman, it simply is not true. We should take the time necessary to ensure that we are truly acting in the best interests of the American people. Perhaps if we had taken the time to allow for markup and evaluation initially, we would not be in the situation that we find ourselves now.

Rather than entrenching our government with $350 billion of additional debt, I think it's time that we start considering positive solutions that embrace American values, American principles, and American solutions, none of which appear in the underlying bill.

Although I recognize the chairman of the committee's points that this literally is not the appropriation, I rise in opposition to the bill, but I do want to speak out against this whole process of what we are trying to do with the bailout, not only this time but the time before. It is a system that has brought this country to its knees, and I think we haven't recognized what the cause has been, and therefore, we're not looking at this problem in the proper manner in order to solve the problem.

There has been a lot of money involved and a lot of money spent. There have been appropriations that we've made here in the Congress as well as the trillions of dollars the Federal Reserve has used to try to bail out the financial industry, and nothing seems to be working.

I think it's mainly because we haven't recognized nor have we admitted that excessive spending can cause financial problems. Excessive debt can cause some problems. Inflation--that is, the creation of new money and credit out of thin air--can cause a lot of problems, and we've been doing it for decades. It was predictable. It was not a surprise that we got ourselves into a financial mess because of a system that is deeply flawed.

So what do we have? What have we been doing now for the last 6 months to a year?

We have been spending more. We have been running up debt like we've never run up debt before, and we're printing money like we never have before. We think that is going to solve the problem. That literally has been the cause: too much spending, too much borrowing and too much inflation.

I do want to address the subject more specifically about moral hazard and why the system was so deeply flawed. That is, when a Federal Reserve system and a central bank create easy money and easy credit and they have interest rates lower than they should be, businesspeople do the wrong things. They make mistakes. It's called malinvestments, and we've been doing it for a long time. It causes financial bubbles, and they have to be corrected.

Actually, the recession is therapy for all of the mistakes, but the mistakes come, basically, from a Federal Reserve system that's causing too many people to make mistakes. It causes savers to make mistakes. Interest rates are lower than they should be, so they don't save. In capitalism, capital comes from savings, but for decades now, capital has come from the printing press, and nobody has saved.

That contributes to what we call ``moral hazard'' as well as the system of the Fannie Mae and Freddie Mac system. It always had a line of credit. It never had to use it, but the assumption was, if we ever got into any trouble, the Treasury would be there, and the Federal Reserve would back them up. That existed for a long time, causing specifically the housing bubble to develop.

Then we subsidized the insurance. The government-subsidized insurance program further promoted the principle of moral hazard--people doing things, spending money and investing in the incorrect way.

Then with the assumption that we're all going to be bailed out, which we're endorsing by bailing everybody out, people say, ``Well, no sweat because, if there is a mistake, the government will come to our rescue.'' That's part of the system of the FDIC. Now, nobody can conceive of the notion that we could live without an FDIC, but the truth is that a private FDIC would never permit this massive malinvestment. There would be regulations done in the marketplace, and there would not be this distortion that we've ended up with.

So this bill actually makes it permanent that the insurance will be $250,000 per depositor. Now you say, on the short run, that's pretty good because that conveys confidence to the system because at least we know that our deposits are secure. This is true. It helps in the short run, and generally, this is the way we work here. We always say, On the short run, this is going to be a benefit. On the short run, the bailout will help. On the short run, we will do ``this.'' Actually, on the short run, there is a great deal of harm that's done. As a matter of fact, today, the long run is here.