Government saved economy, housing market, Geithner tells oversight panel
Treasury Secretary Timothy Geithner told a congressional panel on Thursday that the administration basically saved an economy and housing market on the brink of collapse, and he defended a federal foreclosure prevention program that has fallen far short of its original goals.
In prepared testimony before the bipartisan Congressional Oversight Panel, he recapped the administration's overall push to get the economy and the housing sector back on track by immediately moving to recapitalize the banking system, free up money for consumer lending and stabilize the worst housing market since the Great Depression.
Earlier this week, the congressional panel released a report concluding that the administration's Home Affordable Modification Program is on pace to prevent 700,000 to 800,000 foreclosures instead of the 3 million to 4 million as originally predicted.
Geithner praised the program for providing a framework that the lending industry has adopted, "helping catalyze the market to provide millions of loan modifications." The loan modification program, together with a Federal Reserve program that helped drive down interest rates, "helped put a floor under housing prices, helped bring stability to house prices nationally on average, and have given a chance to millions of Americans, a chance to stay in their homes," Geithner said.
But some panel members criticized the administration for putting the banking industry ahead of troubled homeowners.
For those struggling to hold onto their homes, "it is cold comfort to these individuals that the big financial institutions aided by [the government bail out of banks] and other government programs have near record earnings," said tax lawyer J. Mark McWatters, one of the panel members.
Another panel member, Richard H. Neiman, said that while the administration did prevent a "depression-like crisis ... many people simply feel their lives have not gotten better." Neiman, New York's superintendent of banks, also urged Geithner to hold the lenders more accountable for loan modifications they do outside the government program, which Geithner acknowledged far outpace the modifications done within the federal program.
In response to questioning by the panel, Geithner said that while he feels the current issues on faulty foreclosure practices pose "serious challenges to the system," he does not believe there will be any need for another government bailout.
He said the multi-agency group investigating problems in the foreclosure process hopes to report on its findings in the first quarter of 2011 and give recommendations so that "the people that were disadvantaged by the mess are provided with some relief" and "to make sure we fix the system for the future."
| December 16, 2010; 11:15 AM ET
Categories: Congress, Housing, U.S. Economy
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