Frank promises speedy bailout overhaul
His bill, which would dedicate $50 billion for reducing foreclosures, could be up for a House vote next week.
NEW YORK (Fortune) -- House Financial Services Chairman Barney Frank promised to move quickly on a bill that promises $50 billion of foreclosure relief and toughens terms on companies getting taxpayer money.
Frank, D-Mass., said in a Capitol Hill press briefing that he and other congressional leaders have been working closely with the incoming Obama administration on plans to shift the focus of the government's $700 billion financial bailout.
Frank said in a statement Friday that his legislation, due to be introduced this afternoon, "will strengthen accountability, close loopholes, increase transparency and require Treasury to take significant steps on foreclosure mitigation."
Frank said he expects to hold hearings on the bill Tuesday and said a House vote could come Wednesday or Thursday.
According to Frank's statement, the plan calls for the Treasury secretary to develop a plan to reduce foreclosures by March 15, and to spend at least $50 billion on that plan starting April 1. Frank told reporters Friday afternoon that the foreclosure relief could range between $40 billion and $100 billion.
Frank's plan comes as President-elect Barack Obama and his economic team consider new spending priorities for the Troubled Asset Relief Program, or TARP.
Transition team aides told CNN Friday that the new plan would dedicate some funds to helping homeowners avoid foreclosures and could include programs to help cash-strapped municipalities, small businesses and consumers.
When Congress approved the bailout in October, it gave the Treasury Department access to half the money. The Treasury Department has not asked Congress to release the other half of the money, and Congress has not acted to release it.
Since TARP's creation, Treasury has spent $267 billion to stabilize the economy, spending the lion's share through purchases of preferred stock in financial institutions.
But members of Congress haven't been happy with how Treasury Secretary Henry Paulson has spent the money, and a panel appointed by Congress has raised questions about Treasury's oversight of the program.
Frank said Friday that Paulson's refusal to spend TARP funds on foreclosure relief was "inexplicable." He said he was pleased that the Obama administration "understands there is much unhappiness in the country and in the public" with the spending decisions made by the Bush administration.
The developments come on a day when the Labor Department said the U.S. lost 524,000 jobs last month. The economy shed nearly 2.6 million jobs in 2008, making it the worst year for job losses since 1945.
Frank, a strong advocate of more help for homeowners, said in a statement that Friday's dour report shows the need for stronger government support for the economy.
"What we are seeing is an increasing downward plunge of employment and it is now beyond rational debate that we need a significant infusion of public funds to work with the private sector so that we can restore economic growth," Frank said. "I believe this will require both a large fiscal recovery plan and the release of the second $350 billion of the TARP, provided that we can agree on appropriate measures to govern the allocation of those funds."
Aware of congressional concerns, the Obama team, including Treasury Secretary nominee Timothy Geithner, is considering a number of ways to alter TARP. Among ideas under consideration:
- Allowing bailout money to be used to help some homeowners facing foreclosure.
- Freeing up the credit markets for loans to people, local governments and small businesses.
- Having the government take more stake in financial firms by putting more money into them. In exchange, there would be greater limits on CEO compensation and more taxpayer protections.
- Consider creating a new bureau within Treasury for the bailout. Its goal would be to ensure greater oversight and better management.
The economic team has not yet decided when to urge Congress to release the additional funds, but it could happen before Obama's inauguration.
Among other things, the Frank plan would force companies receiving TARP funds to account for how they use the money. By purchasing preferred stock in banks, Paulson sought to strengthen the banking system and enable banks to lend money into the economy.
But economic activity has slowed sharply in recent months, and the Treasury's failure to present an accounting of how the banks were using taxpayer funds has been a subject of much criticism in Congress.
"Treasury shall require any existing or future institution that receives funding under TARP to provide no less than quarterly public reporting on its use of the funding," Frank said in the statement.
Frank said he will release the text of the legislation when it's complete. He said he would like to have the bill passed, but said he would settle for a promise from the Obama administration to apply the principles contained in the bill.
Frank added that the bill applies the standards enforced on the auto companies that applied last month for TARP funds on all applicants.