[Congressional Record Volume 155, Number 12 (Wednesday, January 21, 2009)]
[Extensions of Remarks]
[Pages E115-E116]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               TARP REFORM AND ACCOUNTABILITY ACT OF 2009

                                 ______
                                 

                               speech of

                        HON. SHEILA JACKSON-LEE

                                of texas

                    in the house of representatives

                      Wednesday, January 14, 2009

  Ms. JACKSON-LEE of Texas. Madam Speaker, I rise today in strong 
support of H.R. 384, the Troubled Assets Relief Program (TARP) Reform 
and Accountability Act of 2009. This bill will amend the TARP 
provisions of the Emergency Economic Stabilization Act of 2008, EESA, 
to strengthen accountability, close loopholes, increase transparency, 
and most importantly, require the Treasury Department to take 
significant steps on foreclosure mitigation.
  Madam Speaker, I was particularly pleased to work with Chairman Frank 
and his staff on significant portions of the Manager's amendment to 
this legislation which ensures that small and minority businesses along 
with local, community, and private banks gain fair and equitable access 
to the TARP funds.
  It's been 3 months since the Treasury started disbursing TARP funds. 
Just in time perhaps for a lot of big banks, however smaller banks have 
been locked out so far. A lot of small banks certainly are in need of 
relief as the real estate crisis continues to unfold and hundreds have 
already applied.
  According to recent reports, the Treasury Department has yet to issue 
``the necessary guidelines for about 3,000 additional private banks. 
Most of them are set up as partnerships, with no more than 100 
shareholders. They are not able to issue preferred shares to the 
government in exchange for capital injections, as other banks can.'' 
While Treasury officials state they are ``working on a solution,'' for 
these private banks time is of the essence.
  The Treasury Department has handed out more than $155 billion to 77 
banks. Of that sum, $115 billion has gone to the eight largest banks. 
Community banks hold 11 percent of the industry's total assets and play 
a vital role in small business and agriculture lending. Community banks 
provide 29 percent of small commercial and industrial loans, 40 percent 
of small commercial real estate loans and 77 percent of small 
agricultural production loans.
  This Manager's amendment requires that the Treasury Department act 
promptly to permit smaller community financial institutions and 
specifically private banks that have been shut out so far in 
participating on the same terms as the large financial institutions 
that have already received funds.
  This is a major change for millions of Americans who bank in private 
banks and who deserve the same access to needed capital. Small 
businesses are the backbone of our Nation, and unfortunately, they have 
not been afforded the opportunity that large financial institutions 
have received to TARP funds and loans. Small businesses represent more 
than the American dream--they represent the American economy. Small 
businesses account for 95 percent of all employers, create half of our 
gross domestic product, and provide three out of four new jobs in this 
country. Small business growth means economic growth for the Nation. We 
cannot stabilize and revitalize our economy without ensuring the 
inclusion and participation of the small business segment of our 
economy. With the ever worsening economic crisis, we must ensure in 
this legislation that small and minority businesses and community banks 
are afforded an opportunity to benefit from this important legislation. 
I am very pleased that the Manager's amendment will affect this change.
  In Section 107, the Manager's amendment creates an Office of Minority 
and Women Inclusion, which will be responsible for developing and 
implementing standards and procedures to ensure the inclusion and 
utilization of minority and women-owned businesses. These businesses 
will include financial institutions, investment banking firms, mortgage 
banking firms, broker-dealers, accountants, and consultants.
  Furthermore, the inclusion of these businesses should be at all 
levels, including procurement, insurance, and all types of contracts 
such as the issuance or guarantee of debt, equity, or mortgage-related 
securities. This office will also be responsible for diversity in the 
management, employment, and business activities of the TARP, including 
the management of mortgage and securities portfolios, making of equity 
investments, the sale and servicing of mortgage loans, and the 
implementation its affordable housing programs and initiatives.
  Section 107 also calls for the Secretary of the Treasury to report to 
Congress in 180 days detailed information describing the actions taken 
by the Office of Minority and Women Inclusion, which will include a 
statement of the total amounts provided under TARP to small, minority, 
and women-owned businesses. The Manager's amendment in Section 404 also 
has clarifying language ensuring that the Secretary has authority to 
support the availability of small business loans and loans to minority 
and disadvantaged businesses.
  This will be critical to ensuring that small and minority businesses 
have access to loans, financing, and purchase of asset-backed 
securities directly through the Treasury Department or the Federal 
Reserve.
  H.R. 384 reforms TARP by increasing oversight, reporting, monitoring 
and accountability. It requires any existing or future institution that 
receives funding under TARP to provide no less than quarterly public 
reporting on its use of TARP funding. Any insured depository 
institution that receives funding under TARP is required to report 
quarterly on the amount of any increased lending (or reduction in 
decrease of lending) and related activity attributable to such 
financial assistance.
  In connection with any new receipt of TARP funds, Treasury is also 
required to reach an agreement with the institution, and its primary 
Federal regulator on how the funds are to be used and benchmarks the 
institution is required to meet so as to advance the purposes of the 
Act to strengthen the soundness of the financial system and the 
availability of credit to the economy. In addition, a recipient 
institution's primary Federal regulator must specifically examine use 
of funds and compliance

[[Page E116]]

with any program requirements, including executive compensation and any 
specific agreement terms.
  Madam Speaker, I am pleased that this legislation has strong 
requirements regarding executive compensation. For any new receipt of 
TARP funds (except those by small financial institutions), this 
legislation applies the most stringent non-tax executive compensation 
restrictions from EESA across the board including:
  1. Requiring Treasury to prohibit incentives that encourage excessive 
risks,
  2. Providing for claw-back of compensation received based on 
materially inaccurate statements; and
   3. Prohibits all golden parachute payment for the duration of the 
investment.
  Included in this legislation is a requirement of government board 
representation by authorizing Treasury to have an observer at board or 
board committee meetings of recipient institutions. This legislation 
changes to structure and authority of TARP board--the Financial 
Stability Oversight Board is expanded to include the chairman of the 
FDIC and two additional members who are not currently Federal 
employees, who shall be appointed by the President and subject to 
Senate confirmation. The board will have the authority to overturn 
policy decisions of the Treasury Secretary by a \2/3\ vote.

  Madam Speaker, the Act provides that the second $350 billion is 
conditioned on the use of up to $100 billion, but no less than $40 
billion, for foreclosure mitigation, with plan required by March 15, 
2009. By that date, the Secretary shall develop, subject to TARP Board 
approval, a comprehensive plan to prevent and mitigate foreclosures on 
residential mortgages. The Secretary shall begin committing TARP funds 
to implement the plan no later than April 1, 2009. The Secretary must 
certify to Congress by May 15, 2009, if he has not committed more than 
the required minimum $40 billion.
  The foreclosure mitigation plans must apply only to owner-occupied 
residences and shall leverage private capital to the maximum extent 
possible consistent with maximizing prevention of foreclosures. 
Treasury must use some combination of the following program 
alternatives:
  1. Guarantee program for qualifying loan modifications under a 
systematic plan, which may be delegated to the FDIC or other contractor
  2. Bringing costs of Hope for Homeowner loans down (beyond mandatory 
changes in Title V below), either through coverage of fees, purchasing 
H4H mortgages to ensure affordable rates, or both
  3. Program for loans to pay down second lien mortgages that are 
impeding a loan modification subject to any writedown by existing 
lender Treasury may require
  4. Servicer incentives/assistance--payments to servicers in 
connection with implementation of qualifying loan modifications
  5. Purchase of whole loans for the purpose of modifying or 
refinancing the loans (with authorization to delegate to FDIC)
  In consultation with the FDIC and HUD and with the approval of the 
board, Treasury may determine that modifications to an initial plan are 
necessary to achieve the purposes of this act or that modifications to 
component programs of the plan are necessary to maximize prevention of 
foreclosure and minimize costs to the taxpayers.
  A safe harbor from liability is provided to servicers who engage in 
loan modifications, regardless of any provisions in a servicing 
agreement, so long as the servicer acts in a manner consistent with the 
duty established in the Homeowner Emergency Relief Act, maximize the 
net present value, NPV, of pooled mortgages to all investors as a 
whole; engage in loan modifications for mortgages that are in default 
or for which default is reasonably foreseeable; the property is owner-
occupied; the anticipated recovery on the mod would exceed, on an NPV 
basis, the anticipated recovery through foreclosure.
  This bill requires persons who bring suit unsuccessfully against 
servicers for engaging in loan modifications under the Act to pay the 
servicers' court costs and legal fees. It also requires Servicers who 
modify loans under the safe harbor to regularly report to the Treasury 
on the extent, scope and results of the servicer's modification 
activities.
  In addition to the above requirements, an Oversight Panel is required 
to report to Congress by July 1 on the actions taken by Treasury on 
foreclosure mitigation and the impact and effectiveness of the actions 
in minimizing foreclosures and minimizing costs to the taxpayers.
  H.R. 384 clarifies and confirms Treasury authorization to provide 
assistance to automobile manufacturers under the TARP. With respect to 
the assistance already provided to the domestic automobile industry, 
includes conditions of the House auto bill, including long-term 
restructuring requirements.
  There is further clarification on:
  Treasury's authority to provide support to the financing arms of 
automakers for financing activities is clarified to ensure that they 
can continue to provide needed credit, including through dealer and 
other financing of consumer and business auto and other vehicle loans 
and dealer floor loans.
  Treasury's authority to establish facilities to support the 
availability of consumer loans, such as student loans, and auto and 
other vehicle loans. Such support may include the purchase of asset-
backed securities, directly or through the Federal Reserve.
  Treasury's authority to provide support for commercial real estate 
loans and mortgage-backed securities.
  Treasury's authority to provide support to issuers of municipal 
securities, including through the direct purchase of municipal 
securities or the provision of credit enhancements in connection with 
any Federal Reserve facility to finance the purchase of municipal 
securities.
  In addition, more reforms are enunciated for Homeowners in Title V. 
The Home Buyer Stimulus provisions require Treasury to develop a 
program, outside of the TARP, to stimulate demand for home purchases 
and clear inventory of properties, including through ensuring the 
availability of affordable mortgage rates for qualified home buyers.
  In developing such a program Treasury may take into consideration 
impact on areas with the highest inventories of foreclosed properties. 
The programs will be executed through the purchase of mortgages and MBS 
using funding under HERA. Treasury will provide mechanisms to ensure 
availability of such reduced rate loans through financial institutions 
that act as either originators or as portfolio lenders.
  Under this provision, Treasury has to make affordable rates available 
under this program available in connection with Hope for Homeowner 
refinancing program.
  This legislation will give a permanent increase in FDIC and NCUA 
Deposit Insurance Limits, it makes permanent the increase in deposit 
insurance coverage for banks and credit unions to $250,000, which was 
enacted temporarily as part of the Emergency Economic Stabilization Act 
and is scheduled to sunset on December 31, 2009, and includes an 
inflation adjustment provision for future coverage.
  Finally, I applaud Chairman Frank and the Committee on Financial 
Services for their hard work on this important piece of legislation. In 
this economic climate it is critical for us to remember that while we 
need to assist our financial institutions, we cannot do this without 
implementing reforms to protect Americans' hard-earned money.
  Madam Speaker, I strongly urge my colleagues to join me in support of 
this important legislation.

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