Rep. Frank blames others besides mortgage lenders

Rep. Frank says there are many different people at fault for the current housing disaster. (0:23)

Housing market hit is worst in years

When the housing market is down, the "whole economy gets hurt," said Rep. Barney Frank (D-Mass.)in a hearing today. The Financial Services Committee met to discuss the problems and possible solutions to the current housing market.

Frank added that the federal government's feelings are not only of sympathy to those in foreclosure. He said that some people have committed to mortgage policies out of their price range.

Rep. Jeb Hensarling (R-Texas) said that the United States needs to "preserve the paycheck" of its homeowners. Hensarling continued by stating that no one would want to be a seller in this market.

Sheila Blair, Chairman of the Federal Deposit Insurance Cooperation, said the current housing market is due to a "complex set of interrelated causes." She said the housing market in the United States had the most severe drop of the past 60 years.

Brian Montgomery, Chairman of the Board of the new "Hope for Homeowners Program," said that the program is slated to be ready to open on Oct. 1 of this year. He said the goals of the program are to help improve homeowners' chances of refinancing their loans, mitigating monetary losses for both buyers and sellers of mortgages, and to reduce the number of foreclosures nationally.

Congress fearful of financial collapse

The House Financial Services Committee held a hearing on “Financial Market Regulatory Restructuring,” focusing on the risks large banking firms pose on the entire financial system. The Committee discussed what Congress could do to quell those risks and increase systemic strength, as the recent collapse of Bear Stearns stimulated fear of instability in the financial system. Chairman Barney Frank (D-Mass.), said there needs to be a regulatory authority of the financial system. He said he is optimistic of an international agreement to increase regulation.

Treasury Secretary Henry Paulsen testified that the regulatory system is indeed outdated and that some failed financial institutions can have systemic effects. He said that markets are seldom perfect and that it will be difficult to make policy changes quickly. But he said that progress is being made. Federal Reserve Board Chairman Ben Bernanke said that his department has plenty of tools to address threats to systemic stability, leaving decisions to make regulatory changes ultimately up to Congress, but legislation may be needed in the long term to increase oversight of large firms.

Billions from Bush to Bank

A Bush administration proposal aimed at expanding cleaner technology in developing countries was discussed by the Domestic and International Monetary Policy, Trade, and Technology Subcommittee. Speakers agreed that developing states are inclined to turn to inexpensive, polluting forms of technology in an effort to increase GDP and improve the national standard of living.

President Bush’s plan calls for a two billion dollar contribution from the United States to the World Bank. An additional eight billion dollars would come from other developed countries. Funding would then be distributed through the World Bank, a decision met with skepticism by Brent Blackwelder of Friends of the Earth. Blackwelder said that the World Bank has a history of allocating funds for damaging projects and that there is “no confidence” that the bank has changes its policies.

Jacob Wersman, , program director of the World Resources Institute's Institutions and Governance Program, said that the United States was at last taking the lead in issues pertaining to global climate control, adding that the Clean Technology Fund has potential to also reform the United States’s energy sector.

Rep. Ron Paul (R-Texas) expressed discomfort with the monetary price of instituting the program, a discomfort that Rep. Barney Frank (D-Mass.) pointed out challenges a policy formed by Paul’s own party. In reference to government spending, Paul said that the United States “will have to wake up and be responsible.” Frank said that, though he supports the initiative, the Clean Technology Fund would likely be cut ahead of other government projects.

House Financial Services Committee hearing on HUD

At the House Financial Services Committee Full committee hearing on the Housing and Urban Development Department's (HUD) FY2009 Budget, Chairman Barney Frank (D-MA) said the proposed Budget is seriously inadequate, and the cutbacks are "distressing." At the city level, there is the sub-prime crisis and foreclosures. Frank said the funding of the war in Iraq has caused substantial deductions and cuts in other areas, which results in a under funding of Urban initiatives. He said he expresses "deep unhappiness: in the cutting of money to the cities. He said it is an uncompassionate example of public policy.

Congressman Spencer Bachus (R-AL) said in recent years the house market has fueled the economy, and that nearly 70% of adults own their own homes. A sharp rise in foreclosures have made lenders reevaluate the lending process, Bachus said, and many Americans struggle to make payments. It doesn't seem fair, Bachus said, to shift the responsibility from home owners to everyday taxpayers, just because the house values are going down.

HUD Secretary Alphonso Jackson said Congress should allow the FHA some flexibility in setting premiums, so they can offer "safe" refinance options. He said he believes that FHA Secure has proven already that it is extremely valuable, and setting FHA home loan limits would provide availability to help more people. Last year, 96% who completed HUD's program avoided foreclosure.

A large part of the Budget, Jackson said, is for low-income rental housing. They have been making strives to help the chronic homeless, and the proposed Budget seeks to increase the homeless program. Also, nine hundred and eighty vouchers would be able to be used with the Veteran's Administration to help homeless vets.