Paulson and Bernanke shut-out homeowners and the Big 3 at House Financial hearing on $700 Billion Bailout

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At this morning's House Financial Services hearing, US Treasury Secretary, Henry Paulson, and Federal Reserve Chairman, Ben Bernanke, distanced themselves from committing any of the $700 Billion Bailout to purchase delinquent mortgages that used to be known as "troubled assets".

Instead, Paulson now states that the purpose of TARP (the Troubled Asset Relief Program), is "for funding and preserving the system, to keep it from collapsing and helping it to recover." The "system" that Paulson is preserving, does not include Main St. USA or the Big 3 US automakers. Paulson touted the benefits of new capital infusion into the "system", which is comprised of Wall Street financial institutions, major banks and global financial markets.

The House Financial Services Committee members were furious, curious and betrayed by Paulson's 180 degree turn in his assessments of the many types of US markets and their absence from Paulson's "system". When asked by Congressman Jeb Hensarling (R-TX) to define a "financial institution", Paulson said, "I can't Congressman. We have a very broad definition. The Auto Companies fall outside of that purpose." Obviously so, now, do toxic mortgage originators. Touche Henry.

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A shaky and nervous Bernanke admitted that "more should be done" to help homeowners facing foreclosure; however, he fretted about the risk to the US Treasury if it were to guarantee 50% of a home's value during the loan modification process. He went on to say that "Hope Now has been a failure." Hope Now is a HUD program intended to prevent consumer foreclosures.

Neither Paulson or Bernanke had a plan to help homeowners facing imminent foreclosure.

At least Federal Deposit Insurance Corporation Chairman, Sheila Bair, saved face for federal regulators. Bair confidently presented the logical and simple steps of a cooperative mortgage loan modification program between mortgage lender IndyMac and the FDIC. However, only 30,000 of 60,000 delinquent homeowners were able to meet income requirements and qualify for a formal proposal from the first rounds of this $24 Billion program. So far, only a few thousand homeowners have accepted the terms of a new mortgage loan via the FDIC-IndyMac initiative. The program is in its infancy and is not yet available nationally.

Caveat Emptor.......except for Goldman Sachs, Bank of America, AIG, Citigroup, Charles Schwab, etc.

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