Housing Update: Barney Frank and James Lockhart (former head of FHFA) on Fannie Freddie Bailouts

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James Lockhart (Dubyahs head of FHFA) of all people calls for principal reductions on CNBC this morning and Barney Frank D-MA said it will not happen..Through the Looking Glass…

James Lockhart, former head of the Federal Housing Agency, told CNBC Tuesday that he wants more generous mortgage modifications, including principal payment reductions.

…Although the latest Case-Shiller Index indicates the housing market has been improving for the last five months, there could be another spike in foreclosures, said Lockhart. While banks and investors have already marked down mortgages on their books, he said, that benefit has not yet been passed onto homeowners….

…“We still haven’t seen the falloff in foreclosures,” he said. “All the solutions have been on the income-side, and people’s balance sheets are suffering. It’s coming to the point where I think we really have to consider much more aggressive [loan modifications and] at looking at reducing principals.”

Lockhart also expects strategic defaults will start to occur more frequently. “You look at the bankruptcy numbers; the stigma is not there anymore,” he said….

Rep. Kucinich D-OH has called for an investigation into what looks to everyone like a backdoor TARP...

…Representative Dennis Kucinich, an Ohio Democrat who was an early opponent of Obama in the 2008 presidential race, thinks the move is backdoor way to help banks, and a congressional subcommittee he leads is investigating the Treasury’s decision to cover unlimited losses at the housing finance companies.

“This new authority must be used responsibly and for the benefit of American families,” Kucinich said. It “cannot be used simply to purchase toxic assets at inflated prices, thus transferring the losses to the U. S. taxpayers and acting as a backdoor TARP.”

That’s exactly what Treasury is doing, says Dean Baker, co-director of the Center for Economic Policy Research in Washington. “This looks like the original TARP,” Baker said, referring to $700 billion financial rescue fund, known officially as the Troubled Asset Relief Program.

Waxman and Issa also ‘concerned’

…Kucinich is not the only one on Capitol Hill up in arms. House Energy and Commerce Committee Chairman Henry Waxman, a California Democrat, said he doesn’t like the idea of a “blank check” for Fannie and Freddie.

And Darrell Issa, the top Republican on the House Oversight and Government Reform Committee, called it “a continuation of the bailout policies that have mortgaged away the future solvency of our country.”…

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January 5, 2010. Tags: , , , , , , , , , , , , , , . Politics.

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