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The Future of TARP

Yesterday, we learned that the Senate approved the use of the second half of $700-billion financial service sector bailout funds.  They did so on the assumption that the Obama administration will know how to use these funds better than Bush Administration has.  There's even been a lot of talk around Washington that President-elect Obama's Treasury Secretary nominee, Timothy Geithner, is the only one who could figure this out. He apparently has had problems remember to pay his taxes, but the Senate appears ready to believe that he has the right stuff to get the financial service sector back in gear.

Let's hope all this trust is well-placed.  But given the mismanagement of the first half of funds and the lack of any evidence that releasing the second tranche is an appropriate step for stabilizing our financial markets and getting the markets moving again, I'm not overly optimistic.

While the Senate can release the funds without House approval, the House is currently in the process of putting in place certain new requirements and regulations regarding the application and monitoring of the new funds. As part of that process, I introduced yesterday an amendment to H.R. 384, the TARP Reform and Accountability Act.  My amendment would keep in place taxpayer protections passed as part of the HOPE for Homeowners program, which was meant to address the foreclosure problem even before the TARP was enacted.

When Congress passed the HOPE for Homeowners program last year, I was concerned that the taxpayer protections were weak, at best.  But, at least there was something there to protect the taxpayers who were footing the $300 billion bill.  But, now, Congress is considering H.R. 384, which would strip those provisions entirely in order to spur more participation in the program.  At this time, only 13 families have been helped.

The taxpayer protection provisions include requiring program participants to pay premiums that are used to sustain the program. H.R. 384 completely eliminates the upfront premiums and gives the FHA the authority to waive annual premiums as it sees fit. This taxpayer protection has been regularly touted by supporters of HOPE for Homeowners as a critical taxpayer safeguard.

Another important taxpayer protection stripped by H.R. 384, but secured by my amendment would ensure that taxpayers receive a home equity appreciation share as payment for their investment through HOPE for Homeowners. If homeowners who receive assistance through the program benefit from rising home values, they shouldn't be able to make a profit without paying back the taxpayers who lent them a helping hand to keep their homes in the first place.

Not surprisingly, the amendment was defeated on a nearly party-line vote. I guess it's just another example of the Democrats' “commitment to protect middle-class taxpayers."


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