Foreclosure Rescue Plan Has Potential Of Triggering Animosities Between The Two Parties

September 22nd, 2008 | Tags: Foreclosure

The foreclosure rescue plan by Paulson has the potential to trigger off animosity between the two major parties – the Democrats and Republicans.

The Democrats in the Congress wants to use the $700 billion sanctioned for the foreclosure plan by the Bush government to put a curb on the pay packets of the financial company executives and push ahead with infrastructure spending to contain foreclosures. This is setting the stage for a showdown between the two groups.

The Republicans are reluctant to add further taxes to the proposal of Paulson. The Paulson plan will allow the administration to spend 50% more than the annual budget of the Pentagon for buying the bad mortgages debts of the banks. Mitch McConnel the senate minority leader remarked cryptically that the proposal is simple and clear; it should remain so. He stressed that considering the situation of the foreclosure related housing crisis one should not indulge in partisan politics to push through “pet projects”.

Meanwhile both sides have been blamed for delaying urgent measures. New York Democrat stated that without this measure the country could slide into depression. Jennifer Duffy of Cook Political Report said, “They should be feeling the fire”. Postponing action would further complicate matters.

The Democrats in the senate including Nancy Pelosi the speaker assured of quick action. As yet nobody has objected to the sweeping and unprecedented powers stopping courts from reviewing the steps taken by the Treasury.

The package presented by Paulson seemed to present a solid foundation for stabilizing the markets swiftly. But questions remain about protecting taxpayers and house owners. During the last few weeks the government has taken over the steering of Fannie Mae, Freddie Mac and American International Group. It is watching the rocking boat of Lehman Brothers also. Lawyers have already started working on the details of the Paulson proposal. Steve Adamson of House Financial Services explained that right now they were writing language into the Treasury proposal that will beef up taxpayer protection.

The Democrats are for lowering the pay packets of the executives of the companies the government is thinking of buying. Also including in the plan for containing foreclosures is to look into the loan modification powers of FHA, FDIC and the two mortgage giants Fannie Mae and Freddie Mac. More accountability is the call of the hour so that the sub-prime mortgage meltdown is not allowed to happen again ever.