Yesterday, the House Financial Services Committee held a hearing on oversight of the implementation of the EESA and of government lending and insurance facilities. The Committee heard from three sets of witnesses:
- Panel 1
- Panel 2
- Steve Bartlett - President and Chief Executive Officer, Financial Services Roundtable
- Edward L. Yingling - President and Chief Executive Officer, American Bankers Association
- Cynthia Blankenship - Vice Chairman and Chief Operating Officer, Bank of the West on behalf of The Independent Community Bankers of America
- D. Cameron Findlay - Executive Vice President and General Counsel, Aon Corporation on behalf of The Council of Insurance Agents & Brokers
- Panel 3
- Alan S. Blinder - Gordon S. Rentschler Memorial Professor of Economics and Co-Director of the Center for Economic Policy Studies, Princeton University (and former Vice Chair of the Federal Reserve)
- Martin S. Feldstein - George F. Baker Professor of Economics, Harvard University and President Emeritus, National Bureau of Economic Research, Inc. (and a former Chairman of the Council of Economic Advisers)
During his opening remarks, Chairman Barney Frank heavily criticized the implementation of the TARP program. Frank argued that the funds allocated by Congress last month should be used to provide foreclosure mitigation, rather than restricting them to direct capital infusions into troubled banks. This criticism was repeated by many members of the committee.
Members of the committee lauded the efforts of Chairman Sheila Bair and the FDIC in modifying mortgages in the FDIC’s role as receiver for IndyMac Bank and cited it as an example of the types of foreclosure mitigation efforts that they would like to see implemented under TARP. When pressed, Chairman Bernanke expressed support for expansion of the FDIC’s program, but noted that the program could be improved.
Several lawmakers also argued that Chairman Bernanke should support bailing out ailing automakers, after having supported the bailing out of banks.
The second panel also criticized the implementation of the TARP program. Edward Yingling, President of the American Bankers Association, admitted that the program bolstered confidence in financial markets, but has been a source of frustration and uncertainty to many banks. He criticized the rapid changes to the terms of the program, the application process and eligibility standards and claimed that these changes have eroded the initial gains in re-establishing confidence in banks. The rest of the second panel largely agreed with Yingling’s remarks.
The third panel consisted of two very well-respected academic economists, who provided a bleak prognosis for the U.S. economy in the next year.
Following the hearing, Chairman Frank expressed his confidence that the current administration would eventually implement a TARP-funded foreclosure mitigation program.
Today, the House Financial Services Committee is holding a hearing about whether to extend TARP to the domestic auto industry. On Monday, bills to do just that were introduced in the House and Senate.