It’s no secret that some powerful Democrats are none too pleased that the Bush administration has refused to use the $700 billion Wall Street rescue to help struggling homeowners facing foreclosure. Yesterday, Senate Banking Committee Chairman Sen. Chris Dodd (D-Conn.) floated a possible remedy, suggesting that any Detroit bailout coming down the pipe might also force lenders “to get much more aggressive about attacking the foreclosure crisis.”
From Dodd’s opening statement during a panel hearing on Detroit:
In my view, if we’re going to insist on reforms by the auto industry as a condition of receiving federal funding, we ought to do the same for the financial companies. For that reason, I will do all I can to insist that any auto company bill also place tough conditions on any loans to financial firms, including provisions that require tax dollars to be used for responsible practices like lending that requires lenders to get much more aggressive about attacking the foreclosure crisis that is still at the root cause of the larger financial crisis and that prohibits executives from paying themselves obscene sums while they are essentially receiving a welfare check from the American taxpayer.
Half of the $700 billion Wall Street bailout has already been allocated for Treasury to spend wherever it pleases. But in order to tap the second $350 billion, the administration must first get approval from Congress — creating a good deal of leverage for Congress to make some demands. Even Republicans are starting to question the effectiveness and integrity of the White House program as the money continues going out, but the banks still won’t lend.
As Bloomberg points out this morning, there’s a new twist on this saga: Sheila Bair, head of the FDIC, has long pushed for a program tapping bailout funds to help homeowners directly, putting her at odds with the officials responsible for managing the bailout spending. That, of course, includes Tim Geithner, the head of New York’s Federal Reserve Bank who President-elect Obama recently named to be his Treasury secretary next year.
If Bloomberg is right, and Geithner really wants to run her out of office because she “isn’t a team player,” the immediate question is: What will be the response of Dodd and other Democrats on Capitol Hill who support Bair in her help-for-homeowners’ stance — including House Financial Services Committee Chairman Barney Frank (D-Mass.)?
Could this be the start of the first rift between Democratic leaders in Congress and the incoming Obama administration? Or will Obama, who has supported greater help for those facing foreclosure, rein in his newly appointed financial guru?
Only time will tell.
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