Rep. Miller: No New TARP for Banks Hurt by Foreclosure Crisis

Rep. Brad Miller (D-N.C.) tells The Washington Post that there will be no new bank bailout if financial companies suffer serious losses due to the recent foreclosure fraud scandal.

It’s kind of easy to take pleasure in all this and think the banks are being hoisted on their own petard, but it’s all bad for the economy for the mortgage market to be in such turmoil, to not know whether the right to foreclose will be enforceable. It’s a great deal of uncertainty and makes it much harder for private investors to get back into the mortgage market. It will probably make home buyers more uncertain because there’ll be a lot of mortgage holders who are not going to be paying their mortgages or be foreclosed upon.

I don’t think any member of Congress has been more critical of the Obama administration to do more about foreclosures. I introduced the cram-down legislation, I’ve written pieces saying TARP funds should be used to buy mortgages and modify them. I’ve been very vocal that the housing sector is an enormous part of our ongoing financial pain. But this does not accomplish the solution to the mortgage problem. It’s hard even to see how it ends. But I’ve got to think it creates more uncertainty about the health of the banks. [Treasury] Secretary [Timothy] Geithner testified before the Financial Services Committee a few weeks ago and I asked him whether this legislation had been taken into account in the stress tests, and he said he wasn’t sure. At the least, we now have resolution authority that we can take out for a spin.

But there are increasing worries that the scale of the scandal and the fallout on the financial markets might impact the stability of the financial system, necessitating some form of government intervention.