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Paulson and Bair's Dueling Foreclosure Strategies

Posted by: Chris Palmeri on November 18, 2008

Treasury Secretary Henry Paulson and FDIC Chairwoman Shelia Bair battled it out on Capitol Hill today over competing plans for the $700 billion Troubled Asset Relief Plan funds.

House of Representatives Financial Services Committee Chairman Barney Frank (D. Mass.) bashed Paulson for shifting his plan for the bailout funds, investing the money in healthy banks rather than buying the troubled mortgages he originally said he would. “The fundamental policy issue is our disappointment that funds are not being used to supplement mortgage foreclosure reduction,” Frank said.

Bair, meanwhile, told lawmakers the money should be used to prevent foreclosures. Her plan is to use some of the money to encourage banks to renegotiate loans by guaranteging that lenders get some money back if the loans later fail. Bair says her plan could prevent 1.5 million foreclosures.

Federal Reserve Chairman Ben Bernanke said he supports Bair’s approach. Paulson defended his strategy saying the direct investments were needed to shore up the financial system and the best way to support housing prices is for banks to now use that federal money to provide low cost loans.

Reader Comments


November 19, 2008 4:33 AM

For all of you who can't decide, it makes no difference which plan goes into effect. Both Paulson and Bair should be arrested. These two unelected dictators have fundamentally changed the form of American government and the US economy. Under Paulson and Bair, the American government prints money and buys controlling shares of private banks, financial institutions, and the largest domestic insurance company. Only old communist Soviet Union and People's Republic of China nationalize and seize private property on this scale. The America under the US Constitution that we once knew now no longer exists. Welcome to the People's Republic of North America! Without firing a single shot, several unelected people have staged a coup d'etat taking over the America's financial system and indirectly controlling the government and its people. From this day on forward, they will rob you blind and enslave you until you drop dead. American life is now the new Gulag. These self annointed dictators have exceeded all enumerated powers of the US Constitution. Nowhere in the US Constitution or Federal statutes authorize any Federal governmental agency to take-over private banks, and nationalize the largest insurance company and several financial institutions. The American people should remember that in the 1930's the German had to make some difficult choices. Ultimately, their fear of economic collapse lead to the ascent of the Fuhrer. Today in America, the choice is not between Paulson's or Bair's, but whether we as a people of this land will defend our Constitutional form of government as our founding fathers had ratified.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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