Capitol Hill Takes On The Housing Credit Crunch
Wednesday, September 05, 2007JEFF YASTINE: The housing credit crunch took center stage on Capitol Hill today. Senate Banking Committee Chairman Chris Dodd proposed legislation to reform mortgage lending practices and lawmakers in the House dove into the issue of rising defaults on sub-prime loans and the spill over in financial markets. Stephanie Dhue reports.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Regulators told the House Financial Services Committee that overall the banking system is sound, but it will take time for the turmoil in the credit markets to settle down. Comptroller of the currency John Dugan says risky loans from 2005 and 2006 are just beginning to reset.
JOHN DUGAN, COMPTROLLER OF THE CURRENCY: You will see that this quarter coming up, you're going to see more resets extending all through next year. And that's the period I think that we're all concerned about seeing an increase in foreclosures that we're trying to get our arms around.
DHUE: As mortgage defaults soar, lending standards tighten and credit markets nearly seize up. Democrats and Republicans are sparring over how to respond. Committee Chairman Barney Frank says the situation has led to a loss of investor confidence that regulators must now face.
REP. BARNEY FRANK, CHAIRMAN, HOUSE FINANCIAL SERVICES COMMITTEE: Sensible and intelligent regulation worked better in the mortgage market than a lack of regulation and part of our job is to see if we can extend that sensible regulation -- not overdoing it, but regulating.
DHUE: Ranking Republican Spencer Bachus says it would be a mistake to overreact.
REP. SPENCER BACHUS (R) AL: We should not rush out and change a market that is working and working well and has brought home ownership to historic highs. We should not panic.
DHUE: On Friday, the president called for the Treasury Department to review what went wrong in the mortgage market in order to fix the problem. Treasury Under Secretary Robert Steel said today a blueprint of structural reforms to make regulation more effective will be released early next year.
ROBERT STEEL, UNDER SECRETARY FOR DOMESTIC FINANCE, TREASURY: Our goal is to look at this afresh and focus on the issues and I don't think that that means less investor protection or less consumer protection; it means having the right lens on these issues.
DHUE: But lawmakers are just getting started. More hearings are scheduled for later this month and legislation is already drafted to reform sub-prime lending practices, strengthen protections for borrowers and restore market confidence. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
