Democrats rap Paulson on housing
WASHINGTON - Treasury Secretary Henry Paulson yesterday said the unfolding housing crisis poses a significant risk to the economy and called for Congress and private mortgage companies to move more quickly to help.
But Democrats in Congress said it was the Bush administration that is moving too slowly.
They said the latest proposals from Paulson fell far short of what is needed to deal with the prospect of as many as 2 million families losing their homes over the next two years as their adjustable-rate mortgages reset to much higher monthly payments.
In a speech at Georgetown University, Paulson said the financial industry should provide immediate help for homeowners trying to refinance to more affordable mortgages.
He also called for an overhaul of laws and regulations governing mortgage lending to halt abusive practices that contributed to the current crisis.
"Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding, and I view it as the most significant current risk to our economy," Paulson said in his most somber assessment of the crisis to date. "The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth."
On Monday, the nation's three biggest banks announced the creation of a fund with up to $100 billion in resources to buy troubled assets such as mortgage-backed securities. Treasury Department officials participated in the behind-the-scenes discussions that led to creation of the fund, but no government resources have been pledged to the effort.
Democrats, who are pushing for a bigger government role in resolving the crisis, believe if the administration does not act more forcefully the mounting foreclosures could become a major issue in next year's presidential campaign.
"Millions of American homeowners are getting crunched by ticking-time-bomb mortgages and they have yet to see their government take the necessary action," said Senator Robert Menendez, Democrat of New Jersey.
"It seems that every bold action this administration has taken has been to soften the blow for investors."
Senator Charles Schumer, Democrat of New York, said that since Aug. 21 when Paulson said he believed the mortgage problems would sort themselves out, there have been an additional 400,000 home foreclosure filings.
Also yesterday, the Mortgage Bankers Association meeting in Boston predicted the nation's more than $2 trillion home mortgage business won't halt its current slide anytime soon, with mortgage originations expected to fall 18 percent next year and decline another 6 percent in 2009.
