Kohl today urged Treasury Secretary Henry Paulson to consider doing something to help distressed homeowners, perhaps give consideration to a proposal by the Federal Deposit Insurance Corporation to help them refinance into more affordable mortgages. Now that $250 billion has already been used to purchase preferred stock in healthy financial institutions, donchaknow, and God knows how much has gone to insurance giant AIG (none of which have used a nickel, pictured here for reference only, for the purposes promised) "to mitigate foreclosures or help homeowners refinance their mortgages as property values plummet."
Dear Secretary Paulson,
Recently, Congress learned about the progress of the Treasury Department’s implementation of the Emergency Economic Stability Act of 2008 and the usage of the authorized funds. The Treasury has spent $250 billion to purchase preferred stock in healthy financial institutions and an additional $40 billion to AIG. However, none of the funds have been used to mitigate foreclosures or help homeowners refinance into more affordable mortgages -- the area many experts and economists deem the heart of the financial crisis.
The goal of the legislation was to stabilize our financial markets, free up credit and help homeowners avoid foreclosure. Not only did the law authorize the Capital Purchase program, which you have fully utilized, but it allows the purchase of troubled mortgages. The foreclosure crisis’ negative impact on our economy is dramatically visible and evident. FDIC Chairwoman Sheila Bair has warned that the country will see another wave of foreclosures in the next two years if no action is taken, resulting in an additional 5 million homes lost. Wisconsin has already seen record foreclosures and home values drop by 5.3%. Residents in my home state, along with the rest of the country, will not be able to weather another deluge of foreclosures.
It is time we start addressing the root of the problem afflicting our financial markets and not just its symptoms. I urge you to consider the proposal by the FDIC to help distressed homeowners refinance into more affordable mortgages. The FDIC model has worked for loans when it took over IndyMac Bancorp this past July. The proposal will allow families to stay in their homes and decrease potential foreclosures. Chairwoman Bair estimates this will cost approximately $25 billion and can easily be taken from the bailout money allocated to the Treasury Department. Most people would rather see the government spend $25 billion to help struggling homeowners instead of letting them lose an estimated $164 billion in home equity and life savings.