Obama Reaffirms Promise of Helping Foreclosure-Hit Homeowners and Small Businesses

by Peter Vernon on Foreclosure Help

As President-elect Barack Obama waits for the response of Congress to his request for the release of the remaining $350 billion of the Troubled Asset Relief Program fund approved in 2008, he reaffirmed his election campaign promise of using a big portion of the fund to help homeowners avoid foreclosure and help small business owners save their operations.

The formal request for the funds was sent to Congress after Obama called President George Bush to advise Congress to release the funds. Congress could reject the request within 15 days, but the sitting president could veto the rejection. The veto could only be overturned by a two-thirds vote of both the Senate and House.

Congress has been disappointed with the way the first $350 billion was spent by the Bush administration. Instead of using the funds to acquire mortgage-backed securities and help solve the foreclosure crisis, Bush’s Treasury Secretary Henry Paulson purchased shares of large financial institutions to prop up their capital base. Paulson argued that his action was meant to stabilize the financial sector so that it could continue lending to communities. Most of the recipient banks however have not started lending the money and have not done anything to help solve the foreclosure crisis.

In response to Obama’s request for the TARP funds, House Financial Services Committee Chairman Barney Frank said that the funds could be released under certain conditions. Frank said that one of the conditions would be the use of at least $40 billion to modify mortgage loans and help foreclosure-troubled homeowners.

It is expected that another of the conditions would be the systematic monitoring of recipient banks and organizations on how they are fulfilling one of the original aims of TARP, which is to help avert further foreclosures.

Some Republicans indicated they would oppose the release of the money, but leading Democrats Harry Reid and Nancy Pelosi expressed their willingness to help Obama have access to the funds without delay.