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Treasury Draws Criticism from Leaders on Capitol Hill

November 14, 2008 at 6:10 PM EST
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During Friday's Congressional hearing about changes to the focus of the $700 billion federal bailout, lawmakers in both parties criticized the latest modifications by Treasury. Judy Woodruff wraps up the latest.
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JIM LEHRER: Now the first of our economic stories. Tough words at today’s House hearing on how the rescue’s going. Judy Woodruff has our report.

JUDY WOODRUFF: It was the only hearing on Capitol Hill today, and it was full of fireworks. The subject: whether the government’s $700 billion rescue plan was doing enough to help struggling homeowners facing foreclosure.

NEEL KASHKARI, assistant secretary of the Treasury: Thank you, Chairman Kucinich.

JUDY WOODRUFF: The lead witness, Treasury’s Neel Kashkari, the man in charge of implementing the plan. From the beginning, it was a rough reception from both sides of the aisle of the House subcommittee.

Members said they were unhappy about the administration’s decision to change the focus of the rescue plan from buying toxic assets to injecting capital directly into banks and other institutions.

Republican Darrell Issa of California.

REP. DARRELL ISSA (R-Calif.): It was disingenuous in the way that the administration came to us with a crisis which ultimately could not have been a crisis as described because the money has not, in any way, shape or form, been used as it was asked for.

JUDY WOODRUFF: But Kashkari defended the decision in his opening statement and said it was working.

NEEL KASHKARI: We have taken actions with the following three critical objectives: No. 1, stabilizing the financial markets; No. 2, supporting the housing market by avoiding preventable foreclosures and increasing mortgage finance; and, [No.] 3, to protect the taxpayers.

We have acted quickly and in coordination with the Federal Reserve, the FDIC, and our colleagues around the world to help stabilize the global financial system, and it is clear that our coordinated actions are having an impact.

Questioning the federal plan

JUDY WOODRUFF: Democrat Dennis Kucinich of Ohio, chair of the subcommittee, said Treasury's efforts favored banks over homeowners and contradicted the intent of the bailout legislation, often referred to as TARP.

REP. DENNIS KUCINICH (D-Ohio): Hello? Are we in a different universe here? The same situation prevails today, and yet your testimony acts as though, well, you know, we're just merrily skipping along our way here.

We've got millions of people threatened with losing their homes. And the underlying problem is that banks are now increasing their interest rates in order to get more customers.

And why won't Treasury act swiftly and forcefully to maximize assistance to homeowners under TARP and play a significant role in modification of home loans at risk of imminent default? Why not?

NEEL KASHKARI: Congressman, I'm glad you're raising this, because I personally have spent most of the past year-and-a-half focused on ways to try to reach and help homeowners. That's been my primary focus within Treasury. And it's...

REP. DENNIS KUCINICH: Well, hasn't the secretary listened to you? Is he -- I mean, do you feel frustrated that your position isn't being vindicated?

NEEL KASHKARI: Congressman, the secretary is passionate about this, as well. And permit me, please...

REP. DENNIS KUCINICH: Passionate about what?

NEEL KASHKARI: Helping homeowners, Congressman.

REP. DENNIS KUCINICH: He is? Where? What country?

NEEL KASHKARI: We are -- Congressman, we are using all the tools available to the federal government to get at the credit crisis and try to help homeowners.

Working 'around the clock'

JUDY WOODRUFF: Democrat Elijah Cummings of Maryland said people in his district are hurting and don't understand how the government's plan will help them.

REP. ELIJAH CUMMINGS (D-Md.): They're going to ask the question. They're going to say, "Well, we heard about the Citigroup thing, where I've got to be three months behind before I can get help."

And we heard that guy, Kashkari. We know he's in charge of the $700 billion. What can he tell me today? I do not want a handout; I just want a hand. I want to pay my mortgage. I just need a little help.

NEEL KASHKARI: I appreciate and share your perspective. Let me say two things, please.

One, the legislation that we asked for, we asked for it to try to stabilize and prevent a complete financial collapse of our financial system, and that was not to help Wall Street. That was to help every American. Please, sir...

REP. ELIJAH CUMMINGS: But let me tell you: When we gave them money, when we gave the banks money, they still weren't loaning any money.

NEEL KASHKARI: First of all, we allocated $250 billion for banks of all sizes across the country, and just about half the money is out the door today. I think we're going to approve another 20 banks today, large and small, across the country.

Potentially thousands of banks are applying, and it's going to take a few months to process the thousands of transactions to get the money out the door. So we're working as fast as we can. We're working around the clock to process all of these to get the money in our community banks.

REP. BRIAN BILBRAY (R-Calif.): I saw the bailout of Freddie and Fannie come up.

Frustrations on both sides

JUDY WOODRUFF: Brian Bilbray, another California Republican, expressed concern that a bailout that began with mortgage giants Fannie Mae and Freddie Mac seemed to have no end in sight.

REP. BRIAN BILBRAY: The administration's only talking about how we're going to spend the taxpayers' money, not about how we're going to avoid it.

And this is one of those things, as a father, if one of my children came in and said, "Dad, I'm deep in debt. I need you to bail me out." The first thing I'd do is not write a check. It'd be ask for the credit cards.

And we're not even asking for the credit cards. We're not asking for the reforms. We're basically just, again, writing a lot of checks.

NEEL KASHKARI: Well, Congressman, I share your frustration. Our energy is focused on stabilizing the financial system, but there are profound regulatory and structural questions that we as a country have to ask and answer in the near future, what to do with Fannie and Freddie, what role the government should play in mortgage finance going forward.

You know, we're all frustrated by how many actions we've had to take. We don't want to do these kind of action, but we've needed to, to stabilize the system.

REP. DENNIS KUCINICH: Thank you again, Mr. Kashkari, for your presence, sir.

JUDY WOODRUFF: Another round of hearings on the rescue plan is expected as early as next week.