Foreclosure Prevention Measure Contradiction

April 16th, 2008 | Tags: Foreclosure Crisis

Last Wednesday a Democrat Congressman said that the Bush government was coming out with a bold plan to tackle the worsening foreclosure crisis. Republican senator, Barney Frank, echoed the sentiments by saying that White House was willing to talk about a federal backed deal to save some of the thousands of house loans threatened with foreclosures. But soon after the U.S Treasury Department denied such steps. There seems to be a back and forth ball game going on between Frank who is chairperson of the House of Representative Financial Services Committee and the White House. It points to the political constraints in funding the ambitious plan of getting more federal insurance aid of about $300 billion for refinancing some of the mortgages.

Frank went on to add that there are some signs that the talks will soon materialize. He was addressing a meeting in the town hall in Boston regarding bad banking practices. He qualified by saying that the Treasury is willing to talk. As the foreclosure crisis threatened to derail the US financial framework in Wall Street treasury officials seem to be more amenable to talks.

Frank has plans for expanding the guarantees of Federal Housing Administration (FHA) to lessen the number of Americans exposed to risks from foreclosures. He disclosed his plans on 13th March but since then there has been stiff political resistance. Michele Davis, the spokesperson of the Treasury said that the government is not willing to haggle over the plans of Frank. She was quite categorical that while they were willing to give a patient hearing to the ideas of the chairperson they were not ready to negotiate on it.

Meanwhile two US house financing bodies of weight won the approval of the government to inject $200 billion more into the messy mortgage markets of the country – this being the latest step to avoid recession. The Feds have pledged $400 billion but the Democrats want more bold action. The ship is sinking and all hands must be on deck, commented David Watt a currency expert.

Freddie Mac and Fannie Mae will be further raising their levels and buy up mortgages but even this has not had the desired effect of calming market. Dow Jones lost almost all the gains of 420 points made a day earlier and went down to 293 points. But hope is there. The Federal Home Loan Bank system may be allowed to double its mortgage holdings.