[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
H.R. 3068, TARP FOR MAIN
STREET ACT OF 2009
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JULY 9, 2009
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-54
HOUSE COMMITTEE ON FINANCIAL SERVICES
U.S. GOVERNMENT PRINTING OFFICE
53-235 WASHINGTON : 2009
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BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
C O N T E N T S
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Page
Hearing held on:
July 9, 2009................................................. 1
Appendix:
July 9, 2009................................................. 31
WITNESSES
Thursday, July 9, 2009
Apeseche, Frank, Chief Executive Officer, Berkshire Property
Advisors and The Berkshire Group, on behalf of The National
Multi Housing Council and the National Apartment Association... 18
Apgar, Hon. William C., Senior Advisor to the Secretary for
Mortgage Finance, U.S. Department of Housing and Urban
Development.................................................... 9
Calabria, Mark A., Ph.D., Director, Financial Regulation Studies,
Cato Institute................................................. 13
Crowley, Sheila, MSW, Ph.D., President, National Low Income
Housing Coalition.............................................. 15
Engel, Gary T., Director, Financial Management and Assurance,
U.S. Government Accountability Office.......................... 12
Hudson, Brian A., Sr., Executive Director & CEO, Pennsylvania
Housing Finance Agency......................................... 19
Silvers, Damon A., Associate General Counsel, AFL-CIO............ 21
Warren, Chris, Chief of Regional Development, City of Cleveland,
Office of the Mayor............................................ 23
APPENDIX
Prepared statements:
Bachmann, Hon. Michele....................................... 32
Apeseche, Frank.............................................. 33
Apgar, Hon. William C........................................ 43
Calabria, Mark A............................................. 48
Crowley, Sheila.............................................. 51
Engel, Gary T................................................ 61
Hudson, Brian A., Sr......................................... 74
Silvers, Damon A............................................. 79
Warren, Chris................................................ 83
Additional Material Submitted for the Record
Crowley, Sheila:
``What We Mean By Housing: An Open Letter to Congress and the
Administration,'' dated April 2009......................... 92
Engel, Gary:
Written responses to questions submitted by Chairman Frank
and Representative Neugebauer.............................. 123
Written statement of The Partnership to Preserve Affordable
Housing........................................................ 126
H.R. 3068, TARP FOR MAIN
STREET ACT OF 2009
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Thursday, July 9, 2009
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:02 a.m., in
room 2128, Rayburn House Office Building, Hon. Barney Frank
[chairman of the committee] presiding.
Members present: Representatives Frank, Kanjorski, Waters,
Maloney, Gutierrez, Velazquez, Watt, Ackerman, Sherman, Meeks,
Moore of Kansas, Capuano, Hinojosa, Clay, McCarthy of New York,
Baca, Lynch, Miller of North Carolina, Scott, Green, Cleaver,
Bean, Moore of Wisconsin, Hodes, Ellison, Klein, Wilson,
Perlmutter, Donnelly, Foster, Carson, Speier, Childers,
Minnick, Adler, Kilroy, Driehaus, Kosmas, Grayson, Himes,
Peters, Maffei; Bachus, Castle, Royce, Biggert, Hensarling,
Garrett, Barrett, Neugebauer, Bachmann, Marchant, McCarthy of
California, Posey, Jenkins, Paulsen, and Lance.
The Chairman. We are about to start the hearing.
People over on the left, there is a three-way conversation
going on. Please take it outside. If you are not here for the
hearing, please leave. Let's have people be seated. There are
plenty of seats.
I am hurrying because we have, unfortunately, a lot of
votes coming up, so I want to get this started. We will have
the members' opening statements. We may get through the
Administration. And I apologize, but we may have to do our
opening statements, take off for about an hour, and come back.
I apologize, but that is the nature of our business.
So I will begin with my opening statement.
This is a hearing on H.R. 3068. We are receiving in
repayments from the TARP--there were actually three revenue
streams.
Let's have people leave. If you are leaving, leave. Close
the doors.
The bulk of it, of course, is principal repayment. And, I
have to say, for those who have counted the whole $700 billion
advanced under the TARP, or authorized under the TARP, as lost,
the facts obviously are clearly to the contrary. Of $200
billion advanced to banks since this program began, $68 billion
has already been repaid in less than a year in principal.
There are warrants that are still unredeemed that will be a
revenue source. And there is a source of interest and dividends
and some warrants which by now amount to about $6.5 billion.
This is a bill that would expend that $6.5 billion to deal with
the ongoing foreclosure and mortgage problems we still have and
to fund an item that has been frequently supported by the House
in the past couple of years, the National Affordable Housing
Trust Fund.
The National Affordable Housing Trust Fund is very
important because I believe there was a preference for
homeownership over rental housing, and for lower-income people,
that was a contributing factor to the crisis we are in. We did
too much in pushing people into homeownership when they were in
lower-income brackets and we did not do nearly enough in terms
of rental housing.
Beyond that, the great bulk of the money goes to dealing
with the ongoing foreclosure crisis. We have a program that was
supported by the Congress in two separate bills, signed last
year by President Bush and this year by President Obama as part
of overall bills, which provide money--pardon me, but this
microphone does not appear to be on. And I apologize. I will
try to keep that in mind.
The program is one where money is provided to communities
to buy up property that is foreclosed. Property that is
foreclosed, residential property, goes from being a tax payer
to a tax eater. It is a serious problem for municipalities,
and, as we know, foreclosures are not randomly geographically
distributed. They become serious problems for particular
neighborhoods.
This is a very successful program, broadly supported by
local officials, to give them funds with which they can buy up
the foreclosed property, take a blight off their rolls, not
have to send out their police and their fire, already overtaxed
by the need for layoffs, unfortunately, by budget crises, and
put them to more productive use.
It also begins a new program. We clearly face a new wave of
foreclosures, not because there were problems with the initial
mortgage, but because people who took out mortgages,
conventional mortgages overwhelmingly, have lost their jobs.
In 1994, this House passed a bill that was authored by our
former chairman, Mr. Gonzalez, who peers at us from over my
right shoulder, to provide loans, not grants, but loans to
mortgage holders who would face the loss of homes because they
have lost their jobs. That never passed the Senate. And there
is, of course, a lot of that going around.
But it now seems to me an appropriate thing to do because a
new wave of foreclosures will be tragic not just for the
individuals who will lose their homes because they lost their
jobs through no fault of their own at a time of great
unemployment, but it will add to the downward pressure on
housing and housing assets that contribute to this crisis.
And it is not the role of this committee or this Congress
or anybody else to try to artificially prop up housing prices.
But to the extent that we can prevent another artificial drop
that comes because people who had good mortgages and were in
good standing now have lost their jobs in unprecedented numbers
for recent times, we should step in.
So that is what this bill does. It is an effort to prevent
bad situations from getting worse in ways that will add to the
economic crisis that we now face.
And I recognize the gentleman from Alabama for 4 minutes.
Mr. Bachus. Thank you, Mr. Chairman.
Mr. Chairman, I oppose this legislation for several
reasons.
I will start with the Constitution. Article I, section 9,
of the Constitution requires that all drawdowns of the general
fund of the Treasury must go through the appropriations
process. However, this bill circumvents the appropriations
process by sending funds directly from the general fund of the
Treasury to the Housing Trust Fund. And that is $6.2 billion.
According to the minority staff on the Senate Committee on
Budget, the Federal Government has pledged more than $9.7
trillion to address our economic credit crisis, including
billions for foreclosure mitigation initiatives. For instance,
the Treasury has committed $75 billion for loan modification
and foreclosure prevention. Instead of using the TARP dividends
to offset these obligations, Chairman Frank's bill spends them.
It also increases the Federal debt. Any new Federal
commitment would come on top of our existing $10.9 trillion
national debt and an estimated 2009 budget deficit of $1.8
trillion, despite the fact that dividend provisions in TARP
were intended to make taxpayers whole from any bailout
committed. This bill obviously flies in the face of that
commitment.
Today, soaring deficits are the biggest threat to financial
stability, economic recovery, and job growth. Vice President
Biden acknowledged that the Administration had misread the
economy. But the solution of the Administration is more deficit
spending, including potentially another multi-billion-dollar
government stimulus, a new $1.5 trillion government-run health
care plan, and now the chairman's new legislation to divert
$6.2 billion from TARP to finance an Affordable Housing Trust
Fund.
Most disturbingly, this legislation transfers $1.5 billion
to the Neighborhood Stabilization Program, which could be
accessed by ACORN, a community group notorious for its efforts
to commit voter fraud. Ironically, this approach also
undermines the flexibility that Treasury Secretary Geithner
indicated is necessary for the Treasury to carry out TARP's
authorized legislation.
In a June 30th letter, this last week, Secretary Geithner
said, ``We believe it is critical that the Treasury maintain
full flexibility to strengthen our financial system, promote
the flow of credit, and permit a rapid response to unforeseen
economic threats.'' Yet, here we consider legislation that
undermines that flexibility.
Mr. Chairman, one of the best things we can do to stabilize
the credit markets and promote long-term economic growth is to
restore fiscal discipline and stop the reckless government
spending. Just this week, Morgan Stanley's chief economist
characterized our trillion-dollar-a-year deficits as
``America's fiscal train wreck'' and offered this dire warning:
``Soaring debt will force up real interest rates, reducing
credit and productivity and boosting debt service. Not only
will these factors steadily lower our standard of living, but
they imperil our economic and financial stability.''
This bill adds $6.2 billion to that deficit. As
institutions begin to pay back their TARP assistance, we need
to end the bailouts and return that money to the taxpayers,
thereby reducing the deficit.
Republican members of the committee, including the
gentleman from Texas, Mr. Hensarling, and the gentleman from
California, Mr. McCarthy, have introduced legislation to do
that. I urge the members of this committee to support that
legislation, not this legislation--$6.2 billion added to the
deficit.
I am very interested in hearing the witnesses' perspectives
on this legislation. Thank you, Mr. Chairman. And I yield back
the balance of my time.
The Chairman. The gentlewoman from California is recognized
for 3 minutes.
Ms. Waters. Thank you very much, Chairman Frank, for
arranging this hearing on the TARP for Main Street Act of 2009,
which we, along with Representatives Cardoza and Velazquez,
introduced at the end of June. I believe this legislation
represents an important step towards ensuring our economic
stability.
Let me just say, Mr. Frank, that I have been very, very
concerned that the foreclosure problem is larger than we
thought it was, and that RealtyTrac data indicates that
foreclosure filings were reported on more than 320,000
properties in May. They also report that, at the end of May,
there were over 460,000 properties that have completed the
foreclosure process and are now real estate owned. So, no
matter how you measure it, the foreclosure problem far exceeds
current resources.
I am very pleased about your leadership on this legislation
for the three areas that will now be supported. Additional
money for Neighborhood Stabilization--as you know, this is a
program that I worked very hard to establish and get funding
for, to assist communities in mitigating the negative impacts
of foreclosed and abandoned housing.
And I am very pleased that cities around the country are
taking advantage of this program. They are so pleased that they
are able to clean up their neighborhoods and to rehabilitate
these homes and put them back on the market. It is a real way
by which to help not only our cities but families get back into
housing.
And of course the Housing Trust Fund that you, Mr.
Chairman, have been in the leadership of, because we do need to
expand housing opportunities. People are homeless,
increasingly, because of this economic crisis. And we have
people standing in line for assistance and for opportunities.
The Housing Trust Fund will help to expand our ability to
create new housing.
And, of course, the most innovative portion of this, the
Emergency Homeowner Relief Fund. And this is very important
because, despite everything that we have done, there are people
who are losing their jobs, and they need some help. And, with
this fund, we will be able to help them stay in their homes and
pay those mortgages with a creative arrangement that will allow
them to pay back once they get re-employed.
So I thank you, Mr. Chairman, and I yield back the balance
of my time.
The Chairman. The gentleman from California, Mr. Royce, is
not here, so we will go to the gentlewoman from Illinois, Mrs.
Biggert.
Mrs. Biggert. Thank you, Mr. Chairman.
The Chairman. A minute-and-a-half, because we have one
more--
Mrs. Biggert. You know, I think we should rename the bill
under discussion today, call it, ``Another Bailout Paid for by
Main Street.''
Who is Main Street? If you could drive down any Main Street
in my district, you will see the storefronts of family-owned
small businesses such as a hardware store, a bakery, and a shoe
repair shop, and the block behind Main Street are family homes.
These Americans pay taxes, and over 90 percent of them are
paying their mortgages and paying them on time. They can't
afford another big-government, big-spending bill--so that the
Federal Government can build more housing? Our families and
home builders can't sell the housing on the market right now.
And bailout programs are not making money, and if they do it
should help put our fiscal house in order.
Our budget deficit could reach $1.8 trillion this year. Our
current national debt is $10.9 trillion. And who is loaning us
this money? China holds 25 percent of U.S. Treasury securities,
and Japan holds over 20 percent.
Spend, spend, spend. Who pays for it? During these tough
economic times, when credit is less available, the family
budget is tight, and small businesses are making tough
decisions to keep their employees in a job, they simply can't
afford more Washington spending. We can't afford to lose more
jobs, we can't afford to tax to death the American family, and
we can't afford another bailout bill or a free-for-all housing
spending bill.
I yield back.
The Chairman. The gentleman from Texas. The time will be
the same, but the membership is different, in terms of numbers.
So the gentleman from Texas is recognized for 1 minute.
Mr. Hensarling. Thank you, Mr. Chairman.
``TARP for Main Street'' is an ironic title for this
hearing, since 95 percent of Main Street either rents their
homes, own them outright, or are current on their mortgages,
which means that 95 percent of Main Street taxpayers are being
forced to bail out the other 5 percent, many of whom acted
irresponsibly.
TARP was established as emergency legislation to stabilize
our financial markets. Regardless of what good may have been
achieved last October, the program has since morphed into a
$700 billion revolving bailout slush fund.
And what do we have to show for the current TARP in this
Administration's failed economic policies? 9.5 percent
unemployment, the greatest in a quarter of a century; 2.6
million jobs lost since February alone; and trillions of debt
for our children to repay, debt the likes of which we haven't
seen since World War II.
Section 103 of the TARP legislation lists as the first
consideration for the Secretary of Treasury, ``protecting the
interests of taxpayers by maximizing overall returns and
minimizing the impact on the national debt.'' The taxpayer
wants his money back. Washington led him to believe that he
would get his money back. What a cruel hoax it is to take it
from him now.
It is not time to recycle TARP; it is time to terminate
TARP. It is time to quit borrowing money from the Chinese and
sending the bill to our children and grandchildren.
I yield back the balance of my time.
The Chairman. The gentleman from Illinois is recognized for
3 minutes.
Mr. Gutierrez. I would like to thank Chairman Frank for
calling this hearing to discuss the TARP for Main Street Act of
2009. I think it is vital for both our economy and our
communities that we find ways to reinvest, repay TARP funds
into our local neighborhoods.
I supported, along with the chairman, the TARP money,
primarily to unfreeze our credit markets and get capital
flowing on Main Street. But, under no circumstance, do I want
the money held up in the vaults of Wall Street firms. I am
pleased this committee is shifting its focus away. We have had
hearings in my subcommittee where we know that banks aren't
lending people money that we hoped would become unfrozen
because of the TARP money. But we also have heard very
innovative ways that TARP money is being used to stimulate our
economy.
To that end, using TARP dividends to finance the
redevelopment of abandoned and foreclosed homes, as the
chairman's bill proposes, is an excellent step. However, we
must also consider expanding the scope of this idea to assist
our local businesses and nonprofits.
Mr. Chairman, while I support your legislation, I would
like to see the committee take a lead in pushing TARP funds
that are returned to Wall Street banks to be set aside for the
funding of CDFI loans and SBA loans, to make them directly to
people out of private lenders' hands. These simple steps would
allow TARP funds to directly reach those businesses which help
create jobs and help keep people in their homes.
Another way to increase it is to do this--I mean, in my
home State of Illinois, 49 percent of the workforce is employed
by small businesses. Without a vibrant small-business
community, this recession will continue to linger. Investing
TARP funds resources in small businesses and nonprofits is one
of the fastest routes, I believe, to economic recovery.
I do not regret my vote. Sometimes it would have been
probably a little easier to have said ``no'' to the TARP money
and then watched the consequences to our economy and to our
financial structures had we not responded. But that would have
been irresponsible.
So, Chairman Frank, I want to thank you again for showing
leadership and ingenuity in these ideas, and I look forward to
working with you on them.
The Chairman. I thank the gentleman. And I think many of us
look back to the days when we thought the TARP was what you
used to cover the infield when it rained, but we are beyond
that.
The gentleman from New Jersey, Mr. Garrett, for 1 minute.
Mr. Garrett. Thank you, Mr. Chairman.
You know, there seems to be a competition here by the
Democrats, and especially in this committee, as to who can come
up with the most outlandish way to spend taxpayers' dollars and
to do it, as the ranking member said, maybe outside the
Constitution and outside the regular appropriation process.
You know, the current proposal is to take the TARP program
and to turn it into something of a Madoff-like Ponzi scheme. It
goes something like this. They assume that because a portion of
the $700 billion TARP programs turns out a return, they call it
a profit. This, despite the fact, you know, the CBO says the
majority of the money, the $700 billion, is still outstanding,
and the CBO says that the majority will most likely result in a
loss. They still consider it a profit and say they want to
spend it on their pet projects.
Now, the lady from California said that she had misread the
housing situation. The Vice President said the Administration
misread the unemployment and the economic situation. I would
suggest the other side of the aisle has misread the American
public, who is tired of all the bailouts, tired of all the big
spending. And the simple solution that they are really looking
for from this committee and from Congress is to return these
dollars to the American taxpayers, to the Treasury, pay down
the debt, and not one more big spending program.
The Chairman. The gentleman from Texas, Mr. Marchant, is
next for 1 minute.
Mr. Marchant. Thank you, Mr. Chairman.
Mr. Chairman, one of the main reasons why I was concerned
about the TARP vote back in October was the fact that I did not
see in the bill any provision for the TARP money to ever be
paid back to the Treasury. In fact, it was my impression, when
the vote was passed, that the money would go back into general
Treasury, and my fear at that time was that it would just be
spent for general programs.
I think the disagreement that I have on this particular
proposal is that it is, in my opinion, the first step towards
spending the money outside of the appropriations process and
spending the money on new programs. The people in my district,
I think, expect this money to be paid back to the Treasury. And
I think my fears have been realized, in that it looks like our
plan is to spend the money.
The Chairman. The gentleman from California, Mr. Royce, is
again recognized.
Mr. Royce. Thank you, Mr. Chairman.
You know, let's start with a basic premise here. The TARP
is not profitable. We had to go out and borrow that money, plus
the interest. We have forgotten about the interest that we are
paying on that borrowed money. There are no TARP profits. We
have spent $643 billion; we have gotten back $70 billion. That
is a $573 billion hole.
There is no new money to spend. The dividends should be
used to pay down the enormous national debt with interest that
is accruing. And they should not be recycled, they should not
be churned. Pay down the debt. It is the only fiscally
responsible thing to do.
A couple of other points here. This obviously would violate
Article I, section 9, of the Constitution, requiring that all
drawdowns of the general fund going through Treasury must go
through the appropriations process. That would be circumvented
here.
And, lastly, the proposed $1.5 billion transfer of funds to
Neighborhood Stabilization Programs would be accessible by
ACORN. And ACORN, frankly, is notorious for its efforts to
commit voter fraud.
So you increase the Federal debt, you worsen the problem in
terms of already having too much supply in terms of housing on
the market, so you have a continued depreciation in home
prices. Building new apartments, which this fund would do for
affordable housing, would further decrease the value of
existing homes, potentially leading to even more defaults and
foreclosures.
The Chairman. The gentleman from California, Mr. McCarthy,
for 1 minute.
Mr. McCarthy. Thank you, Mr. Chairman.
Mr. Chairman, I oppose this legislation. I believe that any
funds repaid to the government from the TARP program should go
to pay down our immense debt, which is projected to double in 5
years and triple in 10 years. In fact, this Administration will
compile more debt than all the 43 previous Administrations
combined. That is from the creation of this country, to the
World Wars, to the Depression, to Hurricane Katrina, to Iraq,
the building of the highway system, and so on.
That is why I have introduced legislation to have repaid
TARP funds go down to pay the debt, to help relieve our
children and grandchildren of the burden of the crushing debt.
The government borrowed the money to pay for the TARP program
when it began, so we need to repay them first, rather than
establishing a revolving line of credit for Washington
bureaucrats and politicians.
And I yield back.
The Chairman. We have 1 minute remaining. I am going to
yield to myself.
First of all, there has been a total misreading of the
Constitution. There was no Appropriations Committee when the
Constitution was adopted. Somebody's history is fairly
deficient. What it says is, no expenditure, except by
appropriation, made by law. That meant a statute. This has
already been litigated. Apparently, members here have never
heard of the Highway Trust Fund, which spends a lot of money
without going through the Appropriations Committee.
So the notion that the founders of the Constitution, bright
as they were, anticipated the existence of the Appropriations
Committee, and therefore said everything had to go through the
appropriations process, is historical nonsense. And, of course,
members here have voted consistently for spending money outside
the appropriations process--for example, the Highway Trust
Fund.
Second, as to ACORN, it is true that under the Bush
Administration, ACORN consistently received over a million
dollars a year to no objection from my colleagues. Apparently
there was no partisanship there. It was okay for the Bush
Administration to give ACORN a total of $8 billion during its
presidency. I am not aware of how much they have gotten under
the NSP. I am not aware they got any. I would think, given the
mighty obsession from little acorns that grow, if they had
gotten a nickel we would have heard about it. And if they had
registered a voter on a vacant property, we probably would have
heard about that.
But this ACORN thing, let's be clear, this is not the Bush
Administration, and the pattern of millions of dollars to
ACORN, in my experience, has not yet been repeated. And, again,
I would urge members to look at a little history when they look
at the Constitution; know, when the Constitution was drafted,
the founders who wrote the Constitution did not have Dave Obey
in mind.
With that--
Mr. Bachus. Mr. Chairman?
The Chairman. The gentleman's time has expired. I used an
equal amount of time.
Mr. Bachus. Oh, that was your opening.
The Chairman. That was my last minute.
We will begin now. We will start our witness statements. I
hope we can get through them. I apologize, but we will have to
go vote.
Let's begin with Mr. Apgar.
STATEMENT OF THE HONORABLE WILLIAM C. APGAR, SENIOR ADVISOR TO
THE SECRETARY FOR MORTGAGE FINANCE, U.S. DEPARTMENT OF HOUSING
AND URBAN DEVELOPMENT
Mr. Apgar. Chairman Frank, Ranking Member Bachus, and
members of the committee, thank you for the opportunity to talk
today on H.R. 3068, the TARP for Main Street program.
My name is William Apgar, and I serve as a Senior Advisor
for Mortgage Finance for HUD Secretary Shaun Donovan. In this
capacity, I have worked closely on the development and
implementation of the Obama Administration's Homeowner
Affordability and Stability Plan, as well as other initiatives.
Working together, Congress and the Administration have
undertaken a number of initiatives designed to prevent
foreclosures and mitigate the impact of foreclosures and
abandoned properties on local neighborhoods and the broader
economy. Yet the magnitude and evolving nature of the
foreclosure crisis has necessitated the development and use of
innovative tools.
Congress has provided additional legislative authority on a
number of occasions, most notably to improve the initial HOPE
for Homeowners Program, provide FHA with additional tools to
mitigate foreclosures, and increase the flexibility under the
Neighborhood Stabilization Program. HUD is pleased that the
Financial Services Committee is once again examining a range of
options for responding to the housing crisis.
We believe the goals of H.R. 3068 are commendable, as the
proposed legislation attempts to help borrowers and communities
in need of assistance. HUD stands ready to work with you and
others in Congress to build upon these objectives, as we seek
to refine the Administration's overall response to the current
foreclosure crisis.
I want to talk about each of the four main elements of the
bill in turn.
First, the Neighborhood Stabilization Program. We applaud
Chairman Frank and other sponsors for recognizing the magnitude
of the foreclosure problem and the need to continue to mitigate
foreclosure.
Last week, Secretary Donovan witnessed firsthand the
devastation that concentrated foreclosures can wreak on
formerly stable, middle-class communities when he toured hard-
hit areas in Nevada, California, and Alabama. Secretary Donovan
has challenged HUD to do all we can to work with Congress and
the Administration to ensure that the nearly $6 billion
appropriated to date for the NSP program is deployed quickly
and used wisely and well.
Emergency mortgage relief is the second important
component. HUD would like to commend the committee for placing
a spotlight on the negative impacts that rising unemployment
can have on the ongoing foreclosure crisis. The centerpiece of
the Obama Administration's Making Home Affordable Program
offers significant relief to at-risk borrowers by reducing
mortgage-related payments to 31 percent of monthly income.
Unfortunately, many individuals who have lost their jobs or
experienced a significant drop in income generally do not have
the income sufficient to qualify for the program. Once again,
HUD looks forward to working with the committee to better
understand the approach on these issues taken in this bill and
to forge a series of programmatic options that can help
unemployed workers get the mortgage assistance they need.
The third component is for troubled multi-family
properties. Over the last year, while the spotlight has been on
single-family home mortgage foreclosures, there is mounting
evidence of a pending multi-family crisis, as well. As in the
single-family market, investors and individuals, enabled by
loosening underwriting standards, purchased multi-family
properties at sales prices that were not supportable by
existing income from the property. As the real estate market
has cooled off, these owners are finding that they are
underwater, with outstanding mortgages greater than the value
of the properties that they own, and unable to pay both
maintenance and debt services.
Numerous analyst reports indicate that these loans are
increasingly falling behind in their debt service payments.
More troubling, however, is that once these loans reach
maturity, borrowers will be unable to repay the mortgages and
will not be able to qualify for refinancing.
Equally problematic is that many of the loans are held on
individual bank balance sheets, including many smaller regional
and community banks, and, hence, the turmoil in this sector
threatens to undermine the safety and soundness of many of the
smaller community and regional banks.
In short, we are now seeing the early signs of a looming
multi-family foreclosure crisis, a crisis that could have
significant negative impacts on the economy, as well as on
families living in these multi-family properties and who will
likely experience worsening housing conditions.
Recognizing this impending crisis, HUD has already taken
action. For example, Secretary Donovan has led the
Administration review of potential means to expand access to
bond financing to assist State and local housing finance
agencies continuing to pursue the important financing role to
expand both affordable homeownership and rental housing
opportunities.
HUD has also created an internal task force to develop
better understanding of the emerging crisis, reached out to
Treasury and the Federal Housing Finance Agency to explore new
approaches to confront this situation, and is now completing a
top-to-bottom review of HUD's own multi-family initiatives.
Building on these efforts, HUD looks forward to working
with the committee to explore various options for stabilizing
the multi-family housing sector.
Finally, the capitalization of the Housing Trust Fund.
Foreclosure is adding to the already overwhelming need for
affordable rental housing. Many individuals who lose their
homes to foreclosure lack housing alternatives and often become
at risk for homelessness. An estimated 12 million renters and
homeowner households now pay more than 50 percent of their
annual incomes for housing. Families with this high a rent
burden not only tend to reside in marginal dwelling units, but
also may have difficulty affording necessities such as food,
clothing, transportation, and medical care.
HUD's effort to increase the supply of affordable housing
received a big boost last year with the authorization of the
Housing Trust Fund in the Housing and Economic Recovery Act of
2008. The Housing Trust Fund represents a bipartisan enactment
of perhaps the most significant new Federal housing production
program since the creation of the Home Investment Partnership
Program in 1990.
Originally authorized with a dedicated funding stream from
assessments of Fannie Mae and Freddie Mac, the financing
difficulties these entities have encountered have eliminated
this revenue stream. In response, the Administration included a
billion dollars to fund the initial capitalization of the trust
fund in this year's Fiscal Year 2010 HUD budget request, now
being considered by the Senate and House Appropriations
Committees.
Given the uncertainty over the level of funding and the
severity of the affordable housing crisis, HUD welcomes further
discussion with Congress to identify the best method to secure
funding needed to make the trust fund a reality.
Once again, and in conclusion, I would like to thank you
for the opportunity to participate in today's hearing and
commend the committee for proposing enhanced efforts to address
the growing foreclosure crisis. I want to reiterate HUD's
willingness to work with the committee to achieve the
objectives highlighted in this bill as we seek to improve the
Nation's overall response to the housing crisis and address the
continued need to expand access to decent and affordable
housing for all Americans.
Thank you for your consideration.
[The prepared statement of Mr. Apgar can be found on page
43 of the appendix.]
The Chairman. Thank you, Mr. Apgar.
Mr. Engel, my apologies, but we are going to break now. I
don't want your statement to be rushed. It is the nature of our
business. We will be back probably in about an hour.
I will apologize because I have an important meeting
involving part of my district that I have to be at in the
Senate. I will be back shortly after that. One of my colleagues
will be presiding. We will get to Mr. Engel's testimony and
into the questioning.
The other witnesses, this is an important issue, we have
all day, so we hope to see you. Get some lunch and do whatever
else, and we will see you later.
We are in recess.
[recess]
The Chairman. Let me get your attention with another
apology.
A very important subcommittee hearing is scheduled at 1:30.
We have a very jammed calendar. I am, therefore, going to have
to postpone the second panel until a further time. I apologize,
but--well, let me think about this. We may--no, I think what we
will do--I take it back. Let me consult with the minority.
With concurrence, we won't do that. But when we reconvene,
we will have the second panel testify and we will deal with it
as one panel. We are going to have to break at about 1:30. So,
as soon as Mr. Engel is through, we will get the other
witnesses to testify, and then we will question them all as one
panel.
If Mr. Apgar and Mr. Engel have to leave, they can do that,
but then we will be through by 1:30. So we will reconvene, and
we will ask all the witnesses on the second panel to join the
first set of witnesses, and they will all testify together.
[recess]
The Chairman. We have your statements for the record. We
will ask questions.
Mr. Engel, you have been very gracious, and let's begin
with you.
STATEMENT OF GARY T. ENGEL, DIRECTOR, FINANCIAL MANAGEMENT AND
ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Engel. Thank you. I am pleased to be here today to
discuss the status of participants' dividend payments and
repurchases of preferred stock and warrants in connection with
the Troubled Asset Relief Program, commonly referred to as
TARP.
According to Treasury's records, since the inception of
TARP and through June 30, 2009, Treasury had received
approximately $6.7 billion in dividend payments on preferred
stock acquired through various programs such as the Capital
Purchase Program and the Targeted Investment Program.
Treasury's agreements under these programs entitled it to
receive dividend payments on varying terms and at varying
rates. For example, publicly held institutions participating in
the Capital Purchase Program pay quarterly dividends at a rate
of 5 percent per year for the first 5 years. After the first 5
years, the preferred shares pay quarterly dividends at a rate
of 9 percent per year.
Importantly, the dividend payments to Treasury are
contingent on each institution declaring dividends. Dividend
payments received, other than for the Asset Guarantee Program,
are deposited into the general fund of the U.S. Treasury. The
dividend payments received for the Asset Guarantee Program,
which totaled about $108 million, are deposited into the
Troubled Asset Insurance Financing Fund to fulfill obligations
of certain guarantees. Dividend payments to Treasury from
participants other than for the Asset Guarantee Program are not
to be used to reduce the outstanding balance under the almost
$700 billion TARP limit.
According to Treasury records, from March 21, 2009, through
June 30, 2009, 17 Capital Purchase Program participants had not
declared or paid dividends of approximately $6.6 million.
Treasury officials told us that, of these 17 institutions, 13
informed Treasury that State or Federal banking regulations or
policies restricted them from declaring dividends, one
indicated concerns about its profitability, and three did not
provide a reason for not declaring dividends.
Under the standard terms of the program, after 6
nonpayments of dividends by a participating institution,
Treasury and other holders of preferred stock equivalent to
Treasury's can exercise their right to appoint two members to
the board of directors for that institution.
As permitted by the Act as amended, participants may at any
time repurchase or buy back their preferred stock and warrants
issued to Treasury under the Capital Purchase Program. This is
subject to consultation with the participant's primary Federal
banking regulator. According to Treasury records, as of June
30, 2009, 32 institutions had repurchased their preferred stock
from Treasury, for a total of about $70.1 billion, including 10
of the largest bank holding companies that are participating in
the program. Funds received from the repurchase of preferred
stock are deposited into the general fund of the U.S. Treasury
and reduce the outstanding balance under the TARP limit.
After all the preferred stock is repurchased, the financial
institution may repurchase all or part of its warrants held by
Treasury. According to Treasury records, as of June 30th, 11 of
the 32 financial institutions that had repurchased their
preferred stock had also repurchased their warrants, and three
others had repurchased their warrant preferred stock at an
aggregate cost of about $20.3 million.
As of June 30, 2009, none of the 10 largest bank holding
companies that had repurchased their preferred stock had
repurchased their warrants. Like the dividend payments, any
amounts received from the repurchase of warrants are deposited
in the general fund of the U.S. Treasury and are not to be used
to reduce the outstanding balance under the TARP limit.
Certain financial institutions that had repurchased their
preferred stock had informed Treasury that they did not plan to
repurchase their warrants. For these institutions, Treasury may
attempt to sell the warrants in the financial markets.
According to Treasury officials, Treasury had not yet, as of
June 30, 2009, liquidated any Capital Purchase Program warrants
in the financial markets.
Treasury has received billions of dollars from TARP
participants from dividend payments and repurchases of
participants' preferred stock and warrants. Treasury has also
continued to disburse funds. As of June 30, 2009, Treasury had
disbursed almost $339 billion of TARP funds. In addition, as of
that date, Treasury's projected use of TARP funds totaled about
$643 billion, without taking into account any repayments.
Mr. Chairman, this concludes my oral statement. I would be
pleased to respond to any questions.
[The prepared statement of Mr. Engel can be found on page
61 of the appendix.]
The Chairman. Thank you, Mr. Engel.
Let me say to all the panelists that any material you have
will be submitted in full.
Mr. Calabria has to leave and go talk to the Judiciary
Committee. And they are always in need of instruction, so we
will go to you now so you can do that.
STATEMENT OF MARK A. CALABRIA, PH.D., DIRECTOR, FINANCIAL
REGULATION STUDIES, CATO INSTITUTE
Mr. Calabria. Thank you, Mr. Chairman. I appreciate that.
And I will be testifying there on mortgage modifications, which
I know is a topic that this committee is interested in as well.
I want to thank you and thank all of the members of the
committee for the invitation to appear today.
The first part of my testimony is that, despite the
repayment of TARP funds from a number of banks and the receipt
of over $6.2 billion in dividends from TARP institutions, the
TARP overall has not been profitable. CBO's most recent
estimate is that the overall subsidy of the cost of the TARP
will be $356 billion. This is $356 billion lost to the taxpayer
that will not be recovered.
In addition to the $356 billion in losses from the TARP, we
are also likely to see between $200 billion and $300 billion
absolute losses from the bailouts of Fannie Mae and Freddie
Mac. We may also see losses in the tens of billions from the
Federal Reserve's mortgage-backed securities purchase program.
So we are ultimately likely to see taxpayer losses from the
bailouts approach $700 billion.
While any dividends received will only make a small dent in
these losses, diverting these dividends for purposes other than
offsetting TARP losses will leave a deeper hole for the
taxpayer. If, however, Congress chooses to use TARP dividends
or any other funds to support the housing market, I believe
Congress should focus on stimulating the demand side of the
housing market rather than the supply side.
The fundamental problem facing our Nation's housing market
is an oversupply of housing rather than a lack of housing. The
Nation's oversupply of housing is documented in the Census
Bureau's housing vacancy survey. The Census reports a national
rental vacancy rate for the first quarter of 2009 at 10.1
percent. This is only slightly below the record rate of 10.4
percent and is almost 40 percent higher than the average rental
vacancy rate for the last 50 years of 7.2 percent.
The record vacancy rates are not an issue of specific
geographic areas, but are found almost everywhere throughout
the country. The highest vacancy rates and also the areas
seeing the largest increases in rental vacancy rates are in our
Nation's central cities. All the increases over the last year
can be attributed largely to the increase in central-city
vacancies. Vacancies in suburban and rural areas, while near
historic highs, have moderated over the last year and remain
below those of the central cities.
I raise this fact because of the way it relates to our
tendency of Federal housing production programs to concentrate
new production and rehabilitation in central cities, and I
think that is something that needs to be very much considered
with any production program going forward.
Even in parts of the country with traditionally tight
rental markets, such as California, while they remain tighter
than the Nation overall, have seen significant increases in
rental vacancy rates over the last year. Interestingly, those
States with the lowest vacancy rates--Vermont and Wyoming--are
concentrated in rural areas, those very areas where our
production programs have been least effective, in my opinion.
Our production programs also tend to build almost
exclusively multi-family properties, as would be the case of a
production-focused trust fund. However, over two-thirds of
vacant rental units are current in multi-family properties.
This fact isn't simply the result of older units based in older
urban areas. For instance, the rental vacancy rate for units
constructed in the 2000's is almost twice that of units
constructed in the 1990's.
Despite an almost 1 million increase in rental households
associated with the meltdown of our mortgage markets, the
overall number of vacant rental units has actually increased by
over 400,000. Currently, there are over 4.1 million vacant
rental units in this country. The glut in our housing markets
is not simply one of single-family units intended for
homeownership, but also one of recently constructed multi-
family units.
I recognize that was a considerable amount of data, so, to
summarize, my main point was that, if we are going to subsidize
additional housing, it should really be focused on stimulating
demand.
The most obvious method of doing so would be additional
rental vouchers. I am concerned that additional production
actually runs the risk of adding to supply, which would put
downward pressure on house, particularly condo, prices, which
could actually have the reverse effect of increasing mortgage
defaults. Additional production could also increase multi-
family mortgage defaults.
In addition to directing any additional housing assistance
only at tenant-based subsidies, I would also encourage Congress
to re-examine the feasibility of redirecting current unit-based
subsidies which are not already committed to specific housing
units toward increased vouchers. Such a move would help
increase the demand for rental housing while also providing
much-needed assistance to the recently unemployed, many who are
renters and probably would prefer to stay in the unit they are
in.
A final concern I would have with H.R. 3068 is the
precedent it sets for redirecting TARP funds and its potential
to erode the checks and balances that come with the
appropriations process. Once the line has been crossed to
redirect TARP dividends to non-TARP uses, I am concerned that
it will only be a matter of time before TARP repayments start
to be redirected. So, while H.R. 3068 represents just over $6
billion, it could easily become the first step in a process
that results in hundreds of billions being diverted. I think
such would leave the taxpayer with a much bigger hole to fill.
So I would strongly urge any additional housing subsidies,
trust fund or otherwise, to be subject to either appropriations
or PAYGO.
Once again, I thank you for this opportunity and appreciate
your attention.
[The prepared statement of Dr. Calabria can be found on
page 48 of the appendix.]
The Chairman. We will now go to Sheila Crowley, who is the
president of the National Low Income Housing Coalition.
SHEILA CROWLEY, MSW, PH.D., PRESIDENT, NATIONAL LOW INCOME
HOUSING COALITION
Ms. Crowley. Thank you, Chairman Frank, and members of the
committee. I am glad to have the opportunity to testify today
on H.R. 3068, the TARP for Main Street Act of 2009, and
specifically on section 2 that designates a billion dollars
from dividends paid by financial institutions that receive TARP
funds to the National Housing Trust Fund.
It was almost 2 years ago that this committee held a
hearing on H.R. 2895, the National Affordable Housing and Trust
Fund Act of 2007, that was introduced by Chairman Frank with
eight Democratic and eight Republican cosponsors. The bill
passed the House in October of that year by a vote of 264-148.
With similar bipartisan success in the Senate, President Bush
signed the Housing and Economic Recovery Act on July 30, 2008,
that included the National Housing Trust Fund. This victory was
not possible without the championship of you, Mr. Chairman, and
we thank you.
The original proposal for the National Housing Trust Fund
was developed in the 1990's, under the leadership of the
founder of the National Low Income Housing Coalition, the late
Cushing Dolbeare. And I would like to acknowledge the presence
here today of Louis Dolbeare, who was married to Cushing and
who remains a very strong supporter of the Coalition and of the
trust fund.
The National Housing Trust Fund is intended to produce,
preserve, and rehabilitate rental homes that are affordable for
extremely low- and very-low-income households. HUD will
distribute funds to States based on the need for rental homes
affordable for this income group. States will make grants to
qualifying public nonprofit and for-profit entities that
produce and operate the rental homes. All the funds must
benefit households with incomes at or below 50 percent of the
area median, and 75 percent of the funds must benefit
households who are extremely low income, or at 30 percent of
the area median income.
The goal that we have set is to build or preserve 1.5
million rental homes over the next 10 years, and HUD is now
completing the interim regulations for the trust fund for
implementation this fall. But before the trust fund can be
implemented, it must be capitalized.
A key feature of the National Housing Trust Fund is its
reliance on dedicated sources of revenue, not discretionary
appropriations. Contributions from Fannie and Freddie were
designated as the first funding source for the trust fund, but
they have obviously been suspended in light of the financial
difficulties of the companies. We are confident that someday
they will be restored, but it is important to know that Fannie
and Freddie were never intended to be the sole sources of
revenue, and the legislation actually allows Congress to direct
any appropriations, transfers, or credits that it may choose to
into the National Housing Trust Fund.
So, use of TARP dividends for the National Housing Trust
Fund is a welcome proposal, from our perspective. And, as you
just heard, Treasury has received approximately $6.2 billion in
TARP dividend payments as of mid-June. And we certainly
recommend that the committee claim all current and future
dividends that the TARP program yields for ``Main Street''
purposes, including the National Housing Trust Fund.
The longstanding shortage of rental homes that are
affordable to the lowest-income households in the United States
is well-documented. The recession has only made the problem
worse. But some people assert, like my colleague Mark Calabria,
that because we have an excess supply of housing now, housing
production is not necessary and, he says, unwise. This analysis
does not account for the mismatch between housing supply and
housing need, which is causing both high housing vacancy rates
and growing housing cost burdens.
A new analysis of the American Housing Survey shows that
the number of rental units in the United States actually
increased by 3.5 percent between 2005 and 2007. The number of
units affordable to households with incomes over 50 percent of
the area median income grew by 16 percent. For households with
incomes over 100 percent of the area median income, the number
of units grew by 34 percent. However, for units affordable to
households with incomes at 50 percent of the area median income
or less--that is the folks who would be served by the National
Housing Trust Fund--the number of units actually fell by 7
percent, for a loss of 1.5 million homes. That was between 2005
and 2007.
The ultimate consequence of this particular part of the
failure of our housing market is that some people will have no
home at all. The New York Times reports this week about the
surge in homelessness now that school is out. Earlier this
year, when the unemployment rate was expected to reach just 9
percent, we were able to predict that 800,000 new people would
become homeless. And we now know, of course, that the
unemployment rate is going to go higher.
So, in the absence of new resources to expand the supply of
homes that people who are elderly, disabled, employed in the
low-wage workforce, or out of work altogether can afford, we
will see a growth in homelessness that rivals or exceeds the
recession in the early 1990's. We made the mistake then of
thinking that it was a temporary shelter problem that we could
solve by building shelters, not permanent housing. We should
not make that mistake again.
In closing, more than 1,000 organizations across the
country have signed an open letter to Congress and the
Administration urging greater balance in our approach to the
mortgage crisis by also attending to the housing shortage for
the lowest-income people. I ask, Mr. Chairman, that this letter
be entered for the record, and that we will make copies
available to all the members.
TARP for Main Street will help achieve this balance that we
are seeking, and I urge the committee to move forward with
this. Thank you for the opportunity to testify.
[The prepared statement of Dr. Crowley can be found on page
51 of the appendix.]
The Chairman. Thank you. And, as I said, everything will be
made a part of the record.
And next--if I mispronounce the name, I apologize--Mr.
Frank Apeseche, who is chief executive officer of the Berkshire
Property Advisors Group, here for the National Multi Housing
Council.
Mr. Apeseche, please go ahead.
STATEMENT OF FRANK APESECHE, CHIEF EXECUTIVE OFFICER, BERKSHIRE
PROPERTY ADVISORS AND THE BERKSHIRE GROUP, ON BEHALF OF THE
NATIONAL MULTI HOUSING COUNCIL AND THE NATIONAL APARTMENT
ASSOCIATION
Mr. Apeseche. Thank you, Chairman Frank, and distinguished
members of the committee.
I am chief executive officer of Berkshire Property
Advisors, based in Boston. We are a fully integrated multi-
family investor owner and operator. We currently operate more
than 26,000 units throughout the United States and have an
employee base of 800 personnel servicing our assets.
I am testifying on behalf of the National Multi Housing
Council and the National Apartment Association. Both represent
the Nation's leading firms participating in the multi-family
housing rental industry.
First, I would like to say that we fully support the
Federal efforts to help preserve the Nation's supply of
affordable housing and to provide liquidity to the apartment
sector. And we thank you for taking such important steps in the
right direction.
As the committee begins its debate on provisions of H.R.
3068, I would like to take the opportunity to offer some key
recommendations in order to keep the legislation focused where
we believe it is most needed. We have five significant
recommendations for section 5 of the legislation.
First, we encourage any program to support the following
three items. The first item we recommend is that this program
should not compete with or crowd out private-sector investors
but, instead, direct investment capital to areas currently not
appropriately served by private investors, and to support and
preserve the properties developed using low-income housing tax
credits or other public subsidies which have limited cash flow
and have exhausted operating and repair reserves, especially if
they have material deferred maintenance or are in poor
condition.
Second, we would like to see an appropriate definition of
mortgage loan default and at-risk properties. We believe it is
critical to appropriately define what constitutes a mortgage
default that would trigger any government assistance, because
government action prior to a well-defined economic default
would not only interfere with contractual obligations between
the borrower and mortgage lender but would also create future
uncertainty and concern about the sanctimony of the legal
transaction process.
We recommend here only multi-family properties that are in
economic default be eligible for government assistance.
Economic default should be defined as mortgage payments
delinquency of 90 days beyond applicable notice and cure
periods. And government intervention in any economic default
situation should be limited to actions to support and stabilize
the property by providing capital for necessary repairs or to
fund maintenance reserves. In addition, it should, in all
circumstances, be undertaken in consultation with the lender
and property owner.
It is also important to define at-risk properties, too,
since the term ``at-risk'' can be broadly interpreted or even
misconstrued. We believe that it is prudent for at-risk to
specifically be linked to material deferred maintenance and
physical distress as evidenced by significant structural
problems, system integrity failures, and health and safety
issues.
Third, the multi-family housing industry does not, under
any circumstances, support the transfer or taking of a property
without the consent of both the property owner and lender.
Privately contracted property assignments, assumptions, and
transfers are significantly negotiated arm-length provisions of
any mortgage contract and have economic value. If such
provisions are countermanded through government intervention,
this action could have profound, unpredicted negative impact on
both multi-family capital and investment market stability. It
can also have profound negative impact on investors' reliance
that future property ownership rights will be respected.
Fourth, we support assistance to Federal Government-
financed, sponsored, or assisted multi-family properties.
However, we support a more tailored assistance to properties
financed without government ownership or sponsorship.
Here, we recommend that the government assistance should be
kept to borrowers and lenders who participated in reasonable
underwritings and financing. We do not believe that borrowers
and lenders who took undue risks upfront should be rewarded by
government assistance at this time. We specifically recommend
that assistance eligibility here be limited to those properties
with originating loan-to-value ratios at or below 80 percent,
debt service coverage at or above 1.2 times, and current
deferred maintenance at or below $2,000 per unit.
Lastly, we enthusiastically support active government
response to mortgage refinance needs. Here, we urge the
committee to use its resources to add liquidity to the
refinance markets. We support the use of government funds to
provide insurance to lenders who will extend current loans for
periods of 12 to 36 months, allowing the cash flows of
properties to recover as the economy does.
Thank you very much for your time. I appreciate the
opportunity to represent the multi-family industry before the
committee and look forward to any questions.
[The prepared statement of Mr. Apeseche can be found on
page 33 of the appendix.]
The Chairman. Thank you, Mr. Apeseche.
Next, we have Mr. Brian Hudson, who is the executive
director of the Pennsylvania Housing Finance Agency.
And I should tell you that, some months ago, Representative
Fattah talked proudly about the program, and more recently,
Representative Schwartz mentioned it. And we were guided, to
some extent, by the successful work you have been doing in
Pennsylvania.
Please go ahead.
STATEMENT OF BRIAN A. HUDSON, SR., EXECUTIVE DIRECTOR & CEO,
PENNSYLVANIA HOUSING FINANCE AGENCY
Mr. Hudson. Thank you, Mr. Chairman, and members of the
committee, for the opportunity to talk to you today on behalf
of the Pennsylvania Housing Finance Agency on H.R. 3068, the
TARP for Main Street Act of 2009.
I also wanted to recognize members of the Pennsylvania
delegation who are members of your committee, Congressman Paul
Kanjorski and Congressman Tim Gerlach.
Mr. Chairman, thank you for your early and persistent
efforts to revive with Federal help the struggling municipal
bond market. Your legislative initiatives, including the
previous Troubled Asset Relief Program bill, and your appeals
to the Administration over the last several months have
succeeded in focusing critical attention on the needs of the
municipal bond market and particularly the tax-exempt housing
bond market.
Because of your encouragement, the Administration is now on
the verge of announcing a plan to support State and local
housing finance agencies' affordable housing lending by
purchasing HFA housing bonds and providing liquidity to support
HFA variable rate debt. With this assistance, HFAs will finally
be able to put our housing bond resources to work to produce
hundreds of thousands of affordable housing, sustainable homes,
and jobs, as well as tax revenues, in support of our Nation's
economic recovery.
We understand that the Administration's HFA initiatives as
currently conceived do not rely on TARP resources. However,
since the HFA plan has not been finalized, we urge you to leave
open the possibility of committing TARP resources to it, should
that become necessary to the plan's successful implementation.
Mr. Chairman, we would also like to thank you for your
leadership in creating the Housing Trust Fund and for
dedicating through this legislation TARP funds to its initial
capitalization. My agency and my fellow State agencies are
eager to help address with these new resources housing needs as
we struggle to meet existing resources, particularly those of
extremely low-income families.
Finally, we are pleased that your new TARP legislation
reauthorized and allocates funding to the Emergency Mortgage
Relief Program. As you consider the optimal design of this
program, we urge you to look at PHFA's Homeowners' Emergency
Mortgage Assistance Program, HEMAP, as a model. We also
encourage you to consider making HFAs eligible for direct
funding under this program so that a program such as HEMAP may
benefit and be replicated around the country,
Senator Casey was successful in getting an amendment
accepted in the Senate during deliberations on Neighborhood
Stabilization Program funding as reauthorized in the American
Recovery and Rehabilitation Act of 2009. Mr. Casey's amendment
would have allowed the use of NSP funds for foreclosure
prevention activities, such as HEMAP, in the Commonwealth.
Opening up the NSP for these type of activities may be another
option to stem the tide of foreclosures as a result of
temporary economic conditions.
Pennsylvania's Act 91 of 1983 authorized PHFA to develop
HEMAP to help certain homeowners in danger of losing their
homes to foreclosure. Pennsylvania created this program to
address the large number of foreclosures, particularly in the
southwestern part of the State as a result of the downturn in
the steel industry early economic recession in the 1980's.
HEMAP has been very successful. It has saved almost 43,000
homes from foreclosure by providing $442 million in loans to
at-risk homeowners. Over 20,000 loans have been repaid in full,
and HEMAP has received over $246 million in principal and
interest repayment from homeowners. They are structured as
loans, not grants. These repayments are recycled into HEMAP
loans assisting additional Pennsylvanians.
State appropriation has totaled $225 million. The average
HEMAP loan to a distressed homeowner is $10,500, much less than
the $35,000 it costs to complete most foreclosure actions.
Additionally, it is estimated that average foreclosure costs do
not consider the impact of foreclosures on families,
neighborhoods, and communities. HEMAP prevents mortgage
foreclosures only from defaults caused by circumstances beyond
a homeowner's control. It provides loans to bring delinquent
mortgage payments current, and may also provide continuing help
with mortgage payments. Total assistance under the current
environment cannot exceed 36 months.
Unlike programs that have been created by other States and
other structures to address unsound or predatory lending, HEMAP
is focused on helping homeowners who are facing a short-term
financial setback. The number one reason for a HEMAP
applicant's delinquency under the HEMAP is loss of a job. The
second reason is illness. In all instances, there has been a
reasonable likelihood that a homeowner will be able to resume
making his mortgage payment without State help, since HEMAP
assistance is temporary.
In the current economic environment of unemployment at 9.5
percent and the State over 7, HEMAP would be a great
complement-like program with other Federal initiatives. With
over 25 years of experience, PHFA has refined the operation of
this primarily unemployment driven program. Lenders in the
Commonwealth are some of its most ardent supporters because of
the seamless nature of this operation. These results have led
Harvard University to directly recognize HEMAP as a top
innovation in American government.
A number of States have developed HEMAP-like programs.
Delaware has DMAP; North Carolina has a pilot; Tennessee is
exploring it also. With creative legislation and creative
language and ending current TARP legislation to allow States
the flexibility to operate a model like HEMAP, we think that
would help many homeowners across the Nation.
I have provided more explicit details on our programs, and
I would be more than happy to answer any questions that the
committee would have. And, again, thank you for the invitation.
I look forward to working with you.
[The prepared statement of Mr. Hudson can be found on page
74 of the appendix.]
The Chairman. Thank you.
Next, we have Mr. Damon Silvers, who is associate general
counsel of the AFL-CIO and, relevant today, a member of the
oversight board of the Troubled Asset Relief Program.
Mr. Silvers?
STATEMENT OF DAMON A. SILVERS, ASSOCIATE GENERAL COUNSEL, AFL-
CIO
Mr. Silvers. Thank you, Chairman Frank. It is a pleasure to
be here with you this afternoon.
As you mentioned, in addition to serving at the AFL-CIO, I
am Deputy Chair of the Congressional Oversight Panel. I have
the honor of serving with Congressman Hensarling of this
committee in that capacity. My testimony today, however,
reflects my views and those of the AFL-CIO.
The Chairman. And not Mr. Hensarling.
Mr. Silvers. I believe he speaks for himself. Nor is it the
view of the panel, its staff, or its Chair.
Let me begin by saying that there is an urgent need to help
American families address the financial crisis. We can no
longer continue the pretense that simply putting money in at
the top of this financial system is going to achieve very much
unless we stabilize the other end of the system, the household
balance sheets.
For that reason, the AFL-CIO strongly supports H.R. 3068,
the TARP for Main Street Act of 2009. And we want to
congratulate you, Mr. Chairman, for your leadership in moving
this bill forward at this time.
In March, the Obama Administration announced its intention
to devote significant TARP resources to assisting families
facing foreclosure. In our March report, the Congressional
Oversight Panel was supportive of this effort but noted that it
had limitations, particularly around situations where
homeowners' mortgages were deeply underwater and where
unemployed families were facing foreclosure.
It is now very clear today that what began as a foreclosure
crisis driven by falling real estate values and exploitative
mortgage products is now being very significantly compounded by
accelerating rates of unemployment.
As was mentioned by the prior witness, the official
national rate of unemployment is now 9.5 percent, with higher
rates in many States. Estimates of real rates of effective
underemployment are now well into the teens in many States. And
even more troubling projections by the International Monetary
Fund and the OECD for the U.S. economy are for rates going
significantly higher than current levels and remaining over 10
percent through next year. Most recently, the OECD's June
economic outlook shows that the United States has added 6
million unemployed people since December of 2000 and projects
unemployment at the end of 2010 to be 10.1 percent.
Yesterday, the mortgage insurer PMI Group cited rising
unemployment as the leading cause of a projected continued rise
in home foreclosures. The result, according to PMI, is a likely
continuing fall in housing prices in the majority of U.S.
cities driven by unemployment-related foreclosures through the
first quarter of 2011.
Rapidly rising unemployment and its consequences for the
quality of bank assets, particularly home mortgages,
substantially threaten what progress has been made in
stabilizing our financial system. In these circumstances, the
AFL-CIO believes there is an urgent need to pursue all paths
necessary to halt both the rising tide of unemployment and
consequent home foreclosures, including a second, more job-
targeted stimulus, the restoration of the ability of homeowners
in bankruptcy to get relief from mortgage debt, and a more
vigorous effort to restructure bank balance sheets to avoid the
zombification of our major financial institutions.
H.R. 3068, though, is an immediate step that could help
this rapidly deteriorating situation, using resources already
allocated to the TARP program. While the AFL-CIO believes the
scale of funding for the bill could be larger, there are
competing and serious concerns that Treasury should continue to
have enough headroom in the TARP to act should an acute crisis
develop in the near term.
Substantively, in addition to providing $2 billion in
funding for emergency relief to the unemployed, H.R. 3068 would
provide $1 billion in funding to assist State and local
government in redeveloping abandoned and foreclosed homes, $1
billion for the Housing Trust Fund, and $2 billion in the
multi-family sector. These provisions are targeted toward clear
needs with broad economic impact, particularly the aid to
unemployed and the moneys targeted toward rehabilitating
foreclosed and abandoned properties.
H.R. 3068 will not end our economic crisis or halt the
broader foreclosure epidemic, but it will help the unemployed
stay in their homes and deliver help to those communities most
affected by the foreclosure crisis. The AFL-CIO urges this
committee to move the bill forward.
I thank you for the opportunity to appear this morning and
look forward to working with the committee to address this
crisis.
[The prepared statement of Mr. Silvers can be found on page
79 of the appendix.]
The Chairman. And our final witness is Mr. Chris Warren,
who is chief of regional development for the city of Cleveland.
Mr. Warren?
STATEMENT OF CHRIS WARREN, CHIEF OF REGIONAL DEVELOPMENT, CITY
OF CLEVELAND, OFFICE OF THE MAYOR
Mr. Warren. Thank you, Mr. Chairman, and members of the
committee.
It is not hyperbole to say that the subprime mortgage
crisis has hit Cleveland with the force of a natural disaster.
Call it ``Hurricane Greed'': 24,000 residential foreclosures
since 2005, 70 percent attributable to subprime loans; an
overwhelming concentration of those foreclosures in inner-city
neighborhoods; over 10,000 vacant, distressed residential
structures; $35 million spent by our City since 2006 to
eliminate life-threatening nuisances. This is demolition, this
is weed cutting, this is pulling out tires, this is dealing
with abandoned properties.
Mr. Chairman, the predatory practices of unregulated
mortgage brokers and originators was made possible by complex
investment schemes hatched by giant companies. The most active
participants in this subprime fiasco that has hit Cleveland are
among the highest recipients of TARP. And I have provided a
chart of that in my written testimony. Six institutions alone
have accounted for 40 percent of the foreclosure-related
sheriff sale filings in Cleveland since 2005. All, except
Deutsche Bank, have received TARP investments. Their total TARP
take--$96 billion.
Mr. Chairman, Cleveland's response to the unnatural
disaster in our City is predicated on three principles.
Collaboration: To devise an act on a common strategy, we
have brought together under one umbrella our city, our county,
suburbs, court system, our housing authority, community
organizations, counseling agencies, foundations, and a newly
formed countywide land bank. A $74 million application for
Neighborhood Stabilization II funds, in fact, will be submitted
to HUD next week by a consortium comprised of these entities.
Principle two: gaining control of abandoned property.
Earlier this year, our Ohio general assembly enacted
legislation establishing the Cuyahoga County Land Bank. The
land bank has the statutory powers and recurring revenues
needed to acquire, responsibly maintain, and position for
redevelopment thousands of mortgage- and tax-foreclosed
properties.
Principle three: intensely targeted resources. Last year,
we launched what we called the Opportunity Homes Program in six
Cleveland neighborhoods. Over 3 years, through this program, we
will acquire, rehabilitate, and sell 450 homes; demolish 300
condemned structures; convert 600 vacant lots into useful
public assets; and provide foreclosure counseling to 450 at-
risk homeowners. Funds made possible through a $25 million NSP
I grant to Cleveland and hopefully a successful NSP II
application will allow expansion of this approach to 14 more
neighborhoods, including five in inner-ring suburbs.
Mr. Chairman, without question, passage of the TARP for
Main Street Act will advance our efforts that I just described.
On behalf of Mayor Jackson, I thank you for your leadership.
I have included in my written testimony recommendations for
technical improvements to the Neighborhood Stabilization Act.
But, in closing, I want to also bring to your attention two
troubling recent phenomenons in our City.
First, financial institutions are unloading unsalvageable
REO properties in bulk sales to out-of-town, faceless
investors. This sounds familiar. The City is put in the
position often of proceeding with demolitions of these
properties with little chance of recovering our costs. TARP
recipients need to be held to strict standards with respect to
disposition of uninhabitable condemned properties.
And we are seeing walkaway foreclosures. This practice
involves the decision by creditors to forgo sheriff sales
because, we suspect, they determine the cost of abating--
The Chairman. Your time is up, Mr. Warren.
Mr. Warren. --the nuisances in our communities are in
excess of liquidation values. This needs to be dealt with by
this legislation.
[The prepared statement of Mr. Warren can be found on page
83 of the appendix.]
The Chairman. Thank you.
I am going to try to--we have a hearing coming up. I am not
going to ask questions.
I just want to be sure, Mr. Apeseche, nothing in this
legislation tries to take property over the objection of the
owner. There is nothing like that on the table. You were
concerned about it. There is nothing there that would do it.
Mr. Apeseche. The current wording of the legislation, you
are absolutely correct.
The Chairman. Well, okay. It is not going to get any--don't
worry about it.
I will go to Mr. Green.
Mr. Green. Thank you, Mr. Chairman. And I will be as brief
as you have been. I will just make a couple of points.
It has been my observation that all persons on this
committee are persons of good will, but we do have different
points of view. And, in my brief tenure on the committee, I
have noticed that some of the things that we would like to do
to be of assistance--the Affordable Housing Trust Fund, for
example--in good times, this was a bad time to do it; and in
bad times, it is not a good time to do it. It appears that
there will never be a time that is a good time for an
Affordable Housing Trust Fund.
And this is not to demean any of my colleagues. It is just
that we have different points of view about the role of
government, especially when people are at risk by way of
unnatural disasters. I will borrow that term, if I may.
I would also want to observe that I am a bootstrap guy. I
think folk ought to pull themselves up by their bootstraps. But
I find it very hard for many people to do this when they don't
have bootstraps. I think that what we are trying to do is
afford people bootstraps so that they can help themselves.
The language is pretty explicit. We are talking about
people who have lost their jobs due to no fault of their own,
due to economic circumstances, and they are being foreclosed
on. What do we do? Do we continue to allow the foreclosure rate
to escalate? Do we continue to have people placed out of their
homes on the streets? Or do we, as responsible agents and
trustees of the government, take affirmative, positive action
to assist people? That is my position.
I don't, in any way, find fault with my friends who have a
different position. I just find that those of us who believe
that this is the right thing to do have to have the courage to
do the right thing. This is a moment of courage in this
country, and those of us who are in leadership and in positions
of responsibility, we have to have the courage to act now.
We may not have the chance to act in such a responsible way
again in our lifetimes, and I think that we have to take
advantage, not of a bad circumstance, but advantage of an
opportunity to be our brothers' and our sisters' keepers and to
afford people who really are trying the opportunity to succeed.
Finally, I would say that, Mr. Chairman, this is a great
piece of legislation. I will be supporting the legislation. I
think that it is timely, it is targeted, and it impacts the
people who need it the most.
I yield back the balance of my time.
The Chairman. The gentleman from Texas, Mr. Neugebauer.
Mr. Neugebauer. Thank you, Mr. Chairman. And I will try to
be brief, as well.
Mr. Engel, is it your understanding that the two different
TARP tranches were intended to be a program to inject and/or
lend capital or loan money to entities with the intention of
getting that money back?
Mr. Engel. The TARP program was intended to put capital out
into the financial markets. I am not sure there was an
understanding that we would get every dollar back.
Mr. Neugebauer. But, obviously, the scoring was such that
you wouldn't get all the money back. Is that correct?
Mr. Engel. One of the programs, the Making Home Affordable
Program, the way that is structured currently is a direct
disbursement program. They haven't disbursed any money yet, but
once they do, that is a direct disbursement out. So, there will
be no money coming back for that particular program at all.
Mr. Neugebauer. But if I could just get an answer. Was it,
by and large, the intent of the original legislation to get
most of that money back for the taxpayers?
Mr. Engel. I am not sure I can respond to that.
Mr. Neugebauer. Well, obviously you haven't yet.
Mr. Engel. I would have to get back to you for the record
on that.
Mr. Neugebauer. So, on $700 billion, do you know what the
interest at prevailing rates would be on that on an annual
basis?
Mr. Engel. You mean the borrowing rate by Treasury?
Mr. Neugebauer. Yes.
Mr. Engel. I am not sure what the current borrowing rate
is. It is not real high.
Mr. Neugebauer. For a 30-year right now, I think it is
around 4 percent. Is that correct?
Mr. Engel. We haven't borrowed the whole $700 billion.
Mr. Neugebauer. But, at some point in time, we will. That
is $28 billion a year, if I am not mistaken. So it would be
premature to call the dividends that we have received up to
this point a profit, would you say?
Mr. Engel. We haven't looked at it from a profit-loss
standpoint. The dividends are intended to go into the general
fund and then to be used to basically bring down the debt.
Mr. Neugebauer. To bring down the debt. And so, but if you
haven't even paid the interest yet, it is a little difficult to
bring down the debt, right?
Mr. Engel. Yes.
Mr. Neugebauer. And so, what is the current estimate of
the--if the full $700 billion is disbursed, what is the
expected potential return to the taxpayers?
Mr. Engel. That hasn't been determined yet. The Office of
Financial Stability, which is responsible for accounting for
the activities, will be developing their models and things to
be able to do that as part of their financial statements. But
right now there is no estimate of what that would be.
Mr. Neugebauer. And based on your understanding of the
original legislation that was passed, is it allowable to use
any of the dividends for the purposes under this bill?
Mr. Engel. Under the bill, the money for the dividends are
to go into the general fund to be used to pay down the debt.
Mr. Neugebauer. But if this legislation were not to pass,
could you fund money for these purposes?
Mr. Engel. Without the legislation, no. That money is to be
used to go into the general fund to pay down the debt.
Mr. Neugebauer. So you don't have--are you familiar with
the money that we put into the auto industry?
Mr. Engel. Somewhat, yes.
Mr. Neugebauer. And how much of that money have the
American taxpayers put in so far for that?
Mr. Engel. You mean, what has come back?
Mr. Neugebauer. Well, none of it has come back. But, I
mean, how much money have we put in?
Mr. Engel. It has been announced as an $80 billion program,
but disbursed so far is about $54 billion.
Mr. Neugebauer. And do we think we are going to get all
that back?
Mr. Engel. It is hard to determine at this point how much
of that would be recouped. For example, in the Chrysler
situation, we have equity shares, and it would probably be
dependent upon what we would get back in selling those equity
shares. There is a possibility we would not recoup all that we
have put in.
Mr. Neugebauer. Both on the Chrysler and the GM?
Mr. Engel. The GM is just now going through the
restructuring process. But if it had a similar type situation,
it would be dependent upon what we are able to get by selling
those shares of equity that we received.
Mr. Neugebauer. But you would not characterize the $6.5
billion as a profit to the American taxpayers at this point?
Mr. Engel. Not at this point.
Mr. Neugebauer. Thank you.
I yield back.
The Chairman. The gentleman from Missouri, Mr. Cleaver.
We are going to try and do two more, and then we do have to
relinquish this for the 1:30 hearing on the Fed. So Mr. Cleaver
and Mr. Hensarling, and we will have to cut it to that. I
apologize.
Mr. Cleaver. Very briefly, do any of you believe that H.R.
3068 represents a poor or improper use of TARP funds? And, if
so, why?
That does it. I have no other questions, Mr. Chairman.
The Chairman. All right. The record should show that no one
responded. The record is not very good at charades.
The gentleman from Texas, Mr. Hensarling.
Mr. Hensarling. Thank you, Mr. Chairman.
And let me welcome my fellow member of the Congressional
Oversight Panel and thank him for his service to his country on
that panel.
I would like to also acknowledge the comments of my
colleague from Texas, who--my respect for him is only equaled
by my disagreement with him on a number of public policy
matters, although I certainly respect his views.
I have heard a number of panelists today speak of the
housing crisis, which we all acknowledge. I am somewhat
disappointed, though. I don't believe, perhaps with one
exception, did I hear any mention of the debt crisis.
I think, I trust, the panel is aware that recently Congress
passed a budget that will triple the national debt in the next
10 years, create more national debt in the next 10 years than
in the previous 220 years. The Federal deficit has increased
tenfold in just the last 2 years. We are presently borrowing 46
cents on the dollar, principally from the Chinese. We are
sending the bill to our children and grandchildren, who either:
one, cannot vote; or, two, have yet to be born.
A number of economists believe that one of the great drags
on our economic recovery today is this debt overhang. And so I
am troubled by the underlying legislation that finally,
finally, the taxpayer sees a little money coming back that
potentially could be used for either taxpayer relief or to pay
off the deficit, and, instead, it is going right out the door.
So my question is, number one, does anybody on the panel
acknowledge the debt crisis? And, if so, do you see any link to
the housing crisis to it?
I would be happy to hear any comments from anybody on the
panel. Mr. Hudson?
Mr. Hudson. Yes, that is one of the reasons why I advocated
for HEMAP as a loan program. It has been a model that existed
since 1983, funded by the Commonwealth legislature. The State
has set aside $225 million; it has gotten repaid $246 million,
in terms of repaying. They are actually appropriations. It is
set up as a loan. It is meant to be repaid. The fund has lent
$442 million under that fund, and not to be a grant, but
actually a loan to be repaid.
Mr. Hensarling. Now, Mr. Hudson, as I understand your
testimony, apparently the Pennsylvania Homeowners' Emergency
Mortgage Assistance Program, you loan to people who ``have a
reasonable likelihood that the homeowner will be able to resume
making the mortgage payment without State help,'' is what you
said in your testimony. Correct?
Mr. Hudson. Resume their payment within 36 months in the
current environment without continuing assistance, correct.
Mr. Hensarling. Then do you believe that government should
only provide assistance, then, to those who have a demonstrated
ability to repay their mortgages without further government
assistance? Is that the conclusion I should draw from your
testimony?
Mr. Hudson. Well, it is designed as temporary assistance,
given that we now have a high unemployment rate at 9.5 percent
in the Nation, and for our Commonwealth it is over 7 percent.
Yes, it is temporary assistance, that they should show the
prospect of getting back on their feet, get the jobs, and be
paired with the other programs that are designed to create
those jobs.
Mr. Hensarling. As I look at a number of the programs of
this Congress and the Administration, I don't see that they are
working particularly well. For example, congressionally
authorized programs for foreclosure mitigation and for housing:
The Neighborhood Stabilization Program costs $5.8 billion,
although no money has been spent on eligible activities.
Stimulus homelessness prevention programs, $1.5 billion.
National foreclosure mitigation counseling, HOPE for
Homeowners, up to $300 billion authorized. Supposedly we were
going to see 400,000 homeowners being helped. As of June 15th,
945 applications, one loan has closed. Administration programs,
making homes affordable, $75 billion, $50 billion from TARP.
FHA Secure, 4,000 loans financed.
What I see is either a bunch of programs that don't seem to
work or a bunch of programs that still have money in the
pipeline. Now, the latest data I see is that foreclosure rates
are still increasing.
So why do we want to put money into a failed agenda? Why
have you concluded that somehow these programs, if we simply
give them more money, are going to work?
Anybody who cares to take that one?
The Chairman. We don't have much time.
Mr. Hensarling. Well, there may not be an answer to that
one, Mr. Chairman.
I will tell you what, Mr. Chairman. I see the red light has
come on. I will yield back the balance of my time.
The Chairman. I thank the witnesses.
We have to give this over to a hearing that is very
important on the Federal Reserve. We will be continuing this.
And I will ask the GAO--I have some differences with the
estimate of borrowing costs that my colleague Mr. Neugebauer
gave, so we are going to be asking the GAO to give us the
figures on the borrowing costs for the TARP.
Obviously, the whole $700 billion hasn't been borrowed
because it hasn't been disbursed. It is not all on the 30-year
bonds, etc. But rather than debate that, I would ask them for
what the figures are. I believe they are far less than was
indicated. Mr. Neugebauer thinks they are that, perhaps. We are
going to ask that we get those figures.
The hearing is adjourned.
[Whereupon, at 1:36 p.m., the hearing was adjourned.]
A P P E N D I X
July 9, 2009
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