Top banking regulators testify Tuesday on TARP
Nov. 17, 2008 – The heads of Treasury, the Federal Reserve Board and FDIC are slated to testify before a House Financial Services Committee hearing Tuesday on Emergency Economic Stabilization Act operations and related activities aimed at easing the economic downturn.
The hearing is expected to look at the Troubled Assets Relief Program and federal lending and insurance facilities established to support the liquidity, credit and equity markets. With FDIC Chairman Sheila Bair on the first panel, the committee will likely hear more about Bair’s proposal to use some of the funds in TARP for mortgage modifications.
That approach is not supported by Treasury Secretary Henry Paulson, who also said last week that TARP likely will not be used to purchase illiquid, mortgage-related assets from financial institutions but focus more on capital infusions in banks and, possibly, non-mortgage asset purchases from securitizers.
On Friday, Treasury Interim Assistant Secretary for Financial Stability Neel Kashkari defended Treasury’s change in policy, asserting that it will do more to help a broader swath of the economy than mortgage asset purchases. Lawmakers, including House Financial Services Chairman Barney Frank, D-Mass., have criticized the move because the underlying statute’s focus on mortgages was a key selling point for the measure.
NAFCU and NCUA have urged both Treasury and lawmakers on the importance of ensuring that part of the $700 billion allotted to TARP be used to buy up mortgage assets. NAFCU President Fred Becker said the law was explicit in directing that funds be used for this purpose.
Tuesday’s hearing has three panels of witnesses. In addition to Bair, Paulson and Fed Chairman Ben Bernanke, the committee will hear from the Financial Services Roundtable, banking and insurance representatives and economists Alan Blinder and Martin Feldstein.
