As Path Clears for TARP Funds, Congress Considers Frank Legislation

(Update 1 reflects breaking action by the Senate. Update 2 clarifies the ‘Frank Legislation’ is still pending consideration.) The House of Representatives voted 275 to 152 in approval of a measure that would set conditions on the release of the remaining $350 billion reserved for the Troubled Asset Relief Program, including a minimum $50 billion reserved for modifying mortgages. The provision was part of a bill sponsored by Barney Frank, D-Mass., which calls for increased oversight on the distribution and use of TARP funds as well as limits on executive compensation and a detailed explanation of the Treasury Department‘s authority to intercede for automakers. The House has also proposed a number of amendments to tweak the so-called ‘Frank legislation.’ An amendment introduced by Doris Matsui, D-Calif., would require that the mortgage industry enforce a temporary “time out” on foreclosure, according to a MarketWatch bulletin. Scott Garrett, R-N.J., spoke out in opposition to the amendment, saying it would put upward pressure on the recently-lowered mortgage rates. No precedent exists for the effect such a nation-wide foreclosure moratorium would have on the industry — not to mention the national economy. The amendment was approved by a voice vote, according to MarketWatch. Other amendments discussed included a requirement that the Federal Reserve Bank of New York publicly disclose details surrounding the use of Federal funds to buy $500 billion in illiquid mortgage-backed securities, and a separate legislation seeking to modify the Hope for Homeowners program, which Michele Bachman, R-Minn., called “an enormous waste of time, money and resources.” As the Senate considers the Frank-sponsored legislation, it also voted 52 to 42 late Thursday against the disapproval legislation proposed Tuesday by Senator David Vitter, R-La. The proposed bill would have barred the release of the remaining TARP funds. It was authored by Vitter in a motion that appeared to be the culmination of a vocal history on the subject of TARP. “When I publicly opposed the first bailout back in September, I did so because I was concerned that it would lead us down a slippery slope and encourage further bailouts. By now, it is clear that it has,” Vitter said in a media statement on his Web site Monday. The Senate’s decision to vote against this legislation effectively paves the road for the passage of the Frank legislation. The only force that might attempt to hinder the passing the TARP revision legislation are the few vocal consumer groups left speaking out against it — and against even the release of the remaining $350 billion — although they have little bearing on whether the funds will reach Treasury hands. The Council for Citizens Against Government Waste (CCAGW) Thursday afternoon expressed “strong opposition” to the release of the second $350 billion, in a press release asking Congress to “shut your TARP.” CCAGW president Tom Schatz, speaking on behalf of the CCAGW, said regardless of the allegedly tougher oversight measures, the group opposes the release of additional TARP money, as they said the nation already faces a $1.2 trillion deficit. “TARP was an atrocious gamble in the first place and the taxpayers ended up on the wrong side of that bet,” Schatz said. “Taxpayers were promised clear results and tough oversight of that money. Instead, Treasury and the recipient banks have been allowed to keep taxpayers in the dark…and now Congress wants more.” Kelly Curran contributed to this report. Write to Diana Golobay at [email protected] and write to Kelly Curran at [email protected].