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Funny Business
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TARP "Gamble": What Does Vegas Think About It?
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I'm in Las Vegas today where that panel is checking in with the public on whether TARP is having any impact. If you wanted to pick one town to provide feedback on how well the Treasury Department is gambling $330 billion (so far), why not ask Las Vegas? But who in this town can determine if, say, the $25 billion given to Wells Fargo [WFC
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] or the $45 billion to Citigroup [C
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] is working?
Actually the real reason the panel may be here is to try to prove TARP is NOT working. After all, it's asking the opinions of struggling homeowners. If you want to go find public outrage, come to Nevada, the state with the highest foreclosure rate in the nation.
The panel has prepared "ten tough questions" for Treasury about TARP, including one on whether the program has helped reduce foreclosures. I've read its first report, and it sounds like the panel has already determined the answer.
First, it writes that "it is unclear what effect" Treasury's HOPE NOW program to help distressed homeowners has had in reducing foreclosures. The report also asks why foreclosure relief wasn't a condition in giving taxpayer money to banks. And as for reports that Treasury may consider 30-year mortgage rates of 4.5 percent for home buyers through Fannie Mae[FNM
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] and Freddie Mac [FRE
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] , this "does not appear to offer any help to already distressed homeowners."
The panel wants Treasury to explain how this lower interest rate could reduce foreclosures. "Is there a substantial body of potential homeowners who could take advantage of these low rates, but who did not purchase homes on easy credit during the mortgage bubble? Will lower rates create a large enough pool of new home buyers to lead to a general increase in home prices?" It goes on to ask if lowering rates will matter when home prices keep falling, people can't re-fi because they're underwater, and Americans are just too worried to spend money on anything. In other words, how does Treasury connect the dots between the lower interest rate proposal and reduced foreclosures?
That is not a question to be answered today in this hearing. But the point of the hearing may be to gather more ammo to press Treasury for changes, and to show that Congress cares. The oversight panel even posted this outreach video on YouTube to let you know "we are going to find a way to make your voice heard." Really?
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