House Committee Considers TARP Reinvestment

The House Finance Services Committee today heard testimony on HR 3068, the TARP for Main Street Act of 2009. The bill, by the committee’s chairman Barney Frank, D-Mass., reinvests $6.5bn of Troubled Asset Relief Funds to housing and homeownership efforts. It allocates $1bn to build affordable housing, $1.5bn for the US Department of Housing and Urban Development (HUD) to distribute to state and local government for the redevelopment of abandoned and foreclosed homes, $2bn in “emergency mortgage relief,” and $2bn to HUD to stabilize multi-family properties that are in default or foreclosure or have recently been foreclosed, to help tenants stay in multi-family dwellings. The funds would come from funds generated by TARP investments. The US Treasury Department disbursed $399bn of the total $700bn TARP funds as of June 30, according to prepared remarks by Gary Engel, director of financial management and assurance at the US Government Accountability Office. Engel noted the Treasury has received approximately $6.7bn in dividend payments on preferred stock acquired through the Capital Purchase Program. It also received back $70.1bn from 32 institutions that repurchased stock. Proponents of HR 3068 see these funds as an opportunity to invest in housing across the US. William Apgar, senior advisor for mortgage finance to HUD secretary Shaun Donovan, voiced his support for the bill in prepared remarks. In particular, HUD supports the funds the bill puts in the hands of state and local governments to rehabilitate foreclosed properties through the Neighborhood Stabilization Program. “Communities in every corner of the US are suffering from the impact of high rates of foreclosure and abandoned property,” Apgar said. “Many homeowners are facing foreclosure because they can no longer afford the payments on their homes either because their monthly payments have increased dramatically or they have lost employment.” But the bill is drawing criticism from across the aisle. Rep. Spencer Bachus, R-Ala., in a statement on the bill, criticizes the $1.5bn that would go toward the Neighborhood Stabilization Program, which he says could be accessed by the community group ACORN. Bachus, ranking member on the House Financial Services Committee, said the group is “notorious” for its efforts to commit voter fraud and more funds available to the group would undermine the administration’s efforts for transparency and flexibility o the Treasury Department to strengthen the financial system. “One of the best things we can do to stabilize the credit markets and promote long-term economic growth is to restore fiscal discipline and stop the reckless government spending,” he said. “As institutions begin to pay back their TARP assistance, we need to end the bailouts and return that money to the taxpayers thereby reducing the deficit.” Write to Diana Golobay.