12:37 PM EDT

Richard Neal, D-MA 2nd

Mr. NEAL of Massachusetts. Mr. Speaker, I do offer some acknowledgement of the constraints that we find ourselves within today on the House floor, and I think there's some accuracy as to what Mr. McCrery had to say. However, there is another very important point, and that is, that the issues were vetted at the committee level and there was ample opportunity and a full and vigorous debate ensued in the Ways and Means Committee in which every opinion was welcomed.

With that, I would like to yield 2 minutes to the gentleman from Michigan (Mr. Levin).

12:38 PM EDT

Sander Levin, D-MI 12th

Mr. LEVIN. I rise in strong support.

There has been some bipartisanship that has motored this legislation, and I hope it won't break down today.

The crisis in housing needs the attention and the support of everybody. It needs much more than tea and sympathy, it needs legislation. Recently I met with mayors and managers from the 12th District, in Macomb County and southeast Oakland. And they all talked about the plight of the homeowner, the plight of the communities when houses are shut down. We have to act. And I pay tribute, all of us should, to the Committee on Financial Services.

And let me say just a word about the tax provisions. They would provide credit to first-time homebuyers. Essential. It would improve access to low-income housing. Essential. It would allow families to deduct property taxes through the standard deduction. It's a good experiment. It should have been done earlier. And it also would allow Federal home loan banks to help relieve pressure on credit markets.

I read the Statement of Administrative Policy that said it was risky and it was an expansion of the purpose of the banks, and I think it's incorrect in both respects. So I just want to close with the sense of urgency that I think all of us feel. Mr. Bernanke said that if markets were simply allowed to follow their own course, it could ``destabilize communities, reduce the property values of nearby homes and lower municipal tax revenues.''

What more do we need to impel us to act than the flight of families, the plight of communities, and the plight of municipalities? Let's vote on a bipartisan bill. Let's vote for this bill.

12:40 PM EDT

Tom Reynolds, R-NY 26th

Mr. REYNOLDS. Mr. Speaker, it is now my pleasure to yield 3 minutes to the distinguished senior member of the Republican side of Ways and Means, WALLY HERGER of California.

12:41 PM EDT

Wally Herger, R-CA 2nd

Mr. HERGER. Mr. Speaker, I'm troubled by the housing catch-all bill before the House of Representatives today from a commonsense, pro-American taxpayer position.

The bill would enable the already troubled FHA to take on an additional $300 million in distressed mortgage liabilities, loans that have a good chance of going into default. This effectively transfers risk from those holding bad loans to those taxpayers who made prudent decisions in the first place.

More than nine out of 10 mortgage holders make payments on time. They would now be on the hook for the bad mortgage debt, as will renters saving for a first-time home and those who own their own homes outright. This bill sends the signal that there are no real consequences for poor lending or borrowing practices, and encourages more of the same behavior that led us here in the first place.

Further, to offset some of the tax giveaways in the bill, the Democrat majority proposes billions of dollars in what amounts to a retroactive tax increase on American employers with operations in foreign markets. What our economy really needs is tax policies that foster greater, not less, competitiveness for the U.S. employers.

Finally, it is truly disappointing that the Democrat majority has chosen to bring this bill up in a lock down, unamendable manner. I urge my colleagues to reject this measure.

12:43 PM EDT

Bill Pascrell Jr., D-NJ 8th

Mr. PASCRELL. Mr. Speaker, you can't have it both ways. You can't say that this is an emergency and we've got to get something done, and then in the other breath say let's go through the technical procedures. They're contradictory.

This bill was vetted. And housing inventories in our communities continue to increase and home prices continue to decline. We need to incentivize Americans to reenter the housing market. It affects so much of our economy. I think this amendment, this bill takes giant leaps towards accomplishing this goal. I applaud Mr. Rangel for his efforts and the 12 Members from the distinguished opposition who joined.

There is an array of good work here, but in particular I'm heartened that included within is a tax benefit for most first-time homebuyers. This is a truly meaningful incentive, and one that will pull out a large swath of people from the sidelines and back into the market, having a ripple effect throughout the rest of the economy. After all, without bold action to spur housing market activity, inventories across the country may continue to grow, placing downward pressure on home prices and wiping

out equity that so many Americans have worked so hard to build.

[Time: 12:45]

We don't want more homes to be in that situation. We prove nothing. There is a place for the Federal Government, therefore, in this terrible situation that has occurred and developed over the last year.

This bill, when passed, will allow middle class families to receive a tax benefit that is equivalent to an interest-free loan of $7,000 towards the purchase of their first home. It will also allow existing homeowners who claim the standard deduction to an additional standard deduction for property taxes, up to $700 for a married couple filing jointly.

When we first addressed this issue in the Ways and Means Committee, the National Association of Realtors found that our legislation would generate about 1 million sales----

12:45 PM EDT

Bill Pascrell Jr., D-NJ 8th

Mr. PASCRELL. The National Association of Realtors found that our legislation would generate about 1 million sales to first-time homebuyers and stimulate nearly $130 billion in increased economic activity. You tell me that that's not worth it in this economy.

Studies have shown that this will help reduce housing inventory by 900,000 homes, which will, in turn, stabilize prices.

This is a wise and necessary course to take. Because of this we also salute Chairman Rangel's leadership. I hope all my colleagues will enthusiastically support this proposal. It's good for America.

12:46 PM EDT

Allyson Y. Schwartz, D-PA 13th

Ms. SCHWARTZ. Mr. Speaker, I want to thank Chairman Rangel and Chairman Frank for acting so swiftly and wisely to stem the tide of foreclosures and address the sagging home values that are hurting families and communities across our Nation.

By addressing a whole range of issues, from the continuing foreclosure [Page: H3285]

crisis to the new and existing homes that are sitting vacant and further depressing the housing market, this package represents a significant step toward stabilizing the economy and restoring consumer confidence.

I am very proud of the portion of this package that came through the Committee on Ways and Means, particularly a timely, targeted, and well-designed first-time homebuyers credit; a new Federal tax deduction to help families meet rising State property taxes; and expansion of the ability of cities and States to raise capital for infrastructure improvements by partnering with the Federal Home Loan Banks.

In particular, I am pleased that the package includes a provision that I championed, along with my Republican colleague Jon Porter, which would enable State housing finance agencies to raise capital through tax-exempt mortgage revenue bonds and use these additional funds to help at-risk borrowers refinance their subprime loans, access mortgages at fair rates, and enable families to meet their financial obligations and stay in their homes. This provision will work hand in hand with the

Federal Housing Agency reforms that have come out of Chairman Frank's committee and will allow States to play a role in addressing the needs of their local communities.

As Federal Reserve Chairman Ben Bernanke put it, `` ..... doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers, it is in everyone's interest.''

It is in everyone's interest that we overcome this crisis in the housing market, that we work to stabilize the economy, and we work to maintain and build our competitive edge in the global economy. The proposal before us is a comprehensive approach to this challenge, and I hope that it will be supported by all.

12:49 PM EDT

Tom Reynolds, R-NY 26th

Mr. REYNOLDS. Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, as the debate continues from the Ways and Means portion of the housing bill, I believe the ranking member has set very clear remarks on where many of us find ourselves with this debate today.

Chairman Rangel and Ranking Member McCrery have a superb working relationship, and they have set the tenor of what has been hard work on both sides of the aisle and bipartisan compromise and consensus to craft some good legislation that has passed this body and has become law. And as I manage this portion for the minority and look across to my colleague from Massachusetts, he and I also share in commonsense solutions to strengthen America and to resolve some of the problems

and challenges that are there. And this bill is not an exception to that. We worked at the spirit of request of both the Chair and ranking member to reach compromise and consensus to improve the Ways and Means jurisdiction on housing.

And I look at it with sadness in two parts. One, as a realtor who looks at the industry, knowing across the country that we face challenges, and the statistics that Ranking Member McCrery outlined, 680,000 fewer starts, a reduction in high percentages of what the industry is about, seeing what the drag has been on our country's growth. And we need to work through good, solid solutions that need a hearing process that involve the Congress, particularly this body, in a debate of solution.

And when we look at the entire complexity of this bill, not only as a Ways and Means member, not only as someone who understands the housing world, but also as a former member of the Rules Committee, I know that the Members of this body were trampled on based on the decision of taking an energy bill and making the housing provisions, one of the challenges of the country today, short-circuited as an amendment to circumvent debate, amendments, recommittals, and substitutes that would be afforded

the minority in any other instance.

And as I look at this and the frustration I heard in the ranking member's message of what is being trampled on on rights of the minority to make presentations, quite frankly, maybe some majority Members on amendments, recommittal, and substitute, I find it disturbing that this is the beginning of strong trends of kind of a less than reasonable approach to advance legislation through this body.

And in the final thoughts, as we look at the predicament we're in on procedural processes here and maybe the fact that we could have made this bill even better, I must share with my colleagues that there is a clear veto message on this legislation as it leaves the House and it will unlikely be the solution of the land.

So with that, Mr. Speaker, I reserve the balance of my time.

12:52 PM EDT

Richard Neal, D-MA 2nd

Mr. NEAL of Massachusetts. Mr. Speaker, just briefly in reference to my friend Mr. Reynolds' comments, the constraints that we are operating on today, as he criticizes them, are entirely legitimate; but they are institutional problems, as opposed to just the will of the majority.

I was asking a Member of the minority last evening, ``Is it possible to be an aggrieved Member of the majority?'' In these instances I think you can be an aggrieved Member of the majority.

But I want to emphasize a very important point: This legislation received overwhelming support from the minority in the committee, and I think based upon news accounts this morning that there was some conflict in two major dailies as to whether or not the administration would, in fact, veto this legislation, but I can't overstate enough this simple point: There was ample opportunity for the minority to participate in the debate at the Ways and Means Committee; and, in fact, they succeeded in

amending the legislation that has come to the floor today, and every voice was heard.

Mr. Speaker, with that I would like to yield 3 minutes to the distinguished gentlewoman from Nevada (Ms. Berkley).

12:54 PM EDT

Shelley Berkley, D-NV 1st

Ms. BERKLEY. I thank the gentleman from Massachusetts for yielding. And I would like to particularly thank Chairman Rangel and Chairman Frank for their extraordinary efforts on behalf of the American people.

Mr. Speaker, this amendment and the overall housing package we are considering today will help millions of Americans and significantly improve the economic situation in my State of Nevada. In recent years the vibrant economy and rapid growth in my district of Las Vegas combined to make the city appear immune to economic downturn. This foreclosure crisis has shown that this is no longer the case.

Nevada has had the highest statewide foreclosure rate for well over a year. The surge in foreclosures has led to huge inventories of unsold homes. This, in turn, has led to massive layoffs of the construction industry and other housing-related fields. Nevada, which has been a land of economic opportunity, the fastest-growing State in the Nation, now has an unemployment rate of 5.8 percent, which is, I'm sorry to say, well above the national average.

This amendment takes several steps that will help both current and prospective homeowners as well as increase affordable housing opportunities. Current homeowners will be helped by the creation of a standard deduction for property taxes, which will lower Federal taxes for taxpayers who don't itemize and by freeing up funds to refinance certain subprime loans. The tax credit for first-time homebuyers creates a great incentive to get families into properties that are currently sitting vacant due

to foreclosure or that have been sitting on the market for long periods of time due to excess unsold inventory. The bill also takes steps to increase affordable rental housing, another critical need in Las Vegas.

I'm hopeful that the combined efforts of this amendment and other provisions of the package will be to alleviate the current housing crisis and help turn our Nation's economy around. I proudly support the intent and the substance of this legislation. I urge adoption.

And I must say I think it's insulting to the American people when they hear that there are Members on the other side of the aisle that support the bill, support the intent, but are voting against it because they didn't get a procedural motion to vote on.

Let's do what's best for the American people and stop this ridiculous infighting that nobody out there cares about. They care about staying in their homes. They care about protecting their families. And, quite frankly, they don't give a hoot whether somebody has a motion to recommit to vote on.

12:56 PM EDT

Tom Reynolds, R-NY 26th

Mr. REYNOLDS. Mr. Speaker, I would like to yield 5 minutes to the [Page: H3286]

gentleman from Texas (Mr. Brady), a distinguished member of the Ways and Means Committee and a leading expert on this issue.

12:57 PM EDT

Kevin Brady, R-TX 8th

Mr. BRADY of Texas. Thank you, Mr. Reynolds, for your leadership on our economic issues here in Congress.

Mr. Speaker, a principle that is before us today is that Congress should not be bailing out speculators, lenders, or investors who have behaved irresponsibly.

If you bought a home that is too big for you, that you couldn't afford from the get-go, or you were betting that property values would go up in your region, that's tough.

If you lent money without income or means of those who were borrowing it, or you preyed, you preyed on people who didn't know better and then churned their loan repeatedly, that's tough. If you purchased securities without determining if the loans underlying them were sound, that is your problem. That is not the taxpayers', that is not your next-door neighbor's problem.

We do have a role in Congress and it is this, to address this issue: One, we should make sure that there is available, affordable credit for creditworthy borrowers. We need to make sure that we prevent this from occurring again. And we need to punish, aggressively punish, the bad actors who have infected our entire American economy.

The proposal we have before us today is well intentioned, clearly. I think Republicans and Democrats agree on the need to help where we can. It is well intentioned. It is not particularly effective. I have my doubts that it will help much at all. It is too little, too slow, too unfocused. It is, as you would imagine, a typical Washington reaction.

For example, a provision to allow States to have more authority for low income housing. Nothing wrong with that. In fact, we need more of that. That housing likely, knowing the process that works here, in the State of Texas and others, it will probably be 3 years before anyone moves into housing of that caliber. Way too late for this problem.

The property tax deduction for seniors who don't itemize, you always want to help people with their property taxes. But is a retired person really going to take $350 and buy a new home or buy a foreclosed home in their neighborhood? Not likely.

Even the tax credit for first-time homebuyers, a part that, I think, the philosophy of which I really like. But this no-interest loan is structured so low, $7,500, it won't allow them to buy a home. There are not many $75,000 homes on the market. If it's only a 5 percent down payment, there are, truthfully, not very many $150,000 homes that are in the areas of America that actually have massive foreclosures. Those tend to be either in the depressed areas or in the high-value States where a lot

of people did bet on rising property values.

[Time: 13:00]

So I like the philosophy of it. I don't think it will help much. Thankfully it won't hurt. It won't hurt. There are good things in this bill. The FHA modernization and the reform of Fannie Mae and Freddie Mac I think are exactly appropriate.

But if our goal is to make sure we have available credit for creditworthy borrowers, I think this bill is a poor alternative to the Hope Alliance, which is moving faster and more effectively today and covering more than 90 percent of those who have mortgages and could have problems, or has already worked with 1.4 million families who need help moving them into new loans or moderating the loan they have today. And they are doing that without taxpayers underwriting any potential loss. That is,

I think, the approach that works best and is already proven to work.

I will finish with this. I have said that there is nothing patently offensive in the amendment from Ways and Means. In fact, again, I think it is well intentioned. But in the underlying bill by Chairman Frank, there is something that is especially offensive.

I come from Texas. Our region was destroyed in Hurricane Rita, a hurricane that was stronger than Hurricane Katrina. We lost 70,000 homes that were damaged or destroyed. We lost more than $1 billion of our timber industry, our main crop. We still have 10 percent of our families who haven't moved back to southeast Texas because they don't have housing. Yet in Chairman Frank's underlying bill, he creates an affordable housing fund and dedicates $500 million to Louisiana and Mississippi

to help rebuild housing in those areas. And yet for the same hurricane, and Hurricane Rita, in the communities that actually took in the Katrina families as they fled that hurricane, and then those same families have their own roofs torn off in southeast Texas, this bill says, ``Drop dead. Forget it. We are going to help those who are on this side of the hurricane.''

1:02 PM EDT

Kevin Brady, R-TX 8th

Mr. BRADY of Texas. But to those who not only took in those of Katrina, to those communities that opened their hearts, their churches and their homes and have their own community destroyed, this government and this Congress is saying, ``Forget it. We are going to divide this hurricane along State lines. You can drop dead. No help for you in housing. No help for you in apartments. No help for you, period. None. Zero for the victims of Hurricane Rita in Texas.''

This Congress ought to be ashamed of itself.

1:03 PM EDT

Richard Neal, D-MA 2nd

Mr. NEAL of Massachusetts. Mr. Speaker, I would like at this time to yield to the gentleman from Vermont via Springfield, Massachusetts, one of the most distinguished families in Springfield, my friend, Mr. Welch, for 2 minutes.

1:03 PM EDT

Peter Welch, D-VT

Mr. WELCH of Vermont. Thank you, Mr. Chairman.

Mr. Speaker, I rise in strong support of this legislation. The legislation does two things that are good and one thing that is very good in its absence. The two things that are good are one, it addresses very specifically, in a practical way, the housing crisis that has been brought on by the subprime foreclosure debacle.

What it does is it shares the opportunity of relief and it shares the pain of getting the relief so that we can end up at the end of the day with several hundred thousand American families still in their homes, lenders having been able to mitigate their loss, homeowners being able to keep a roof over their head, and the American taxpayer not being left on the hook.

It does it by recognizing we have to use existing institutions to accomplish that. It does it by acknowledging that it has to be voluntary. A lender will be in this program only when they make the practical business decision that it is a better route than foreclosure. A borrower is going to be able to make that same change and has to be able to demonstrate an ability to pay at the new current appraisal value of that property. And in the process of doing that, it means that we use the guaranty

of the taxpayer, but in all likelihood, according to the CBO score, not the money of the taxpayer.

So it is a practical solution to a very severe problem that could only have been brought to this House for consideration with the extraordinary cooperation of both sides in the Ways and Means Committee, the Financial Services Committee, and the help of high administration officials who had significant input along the way.

And it would be very unfortunate if the procedural debates that we are having about process, made at the leadership level, derail what is a practical approach to solving a very serious problem. What this bill isn't, and I congratulate the Members on both sides as well, it is not a blame game about who caused this. That is for another day.

1:05 PM EDT

Lee Terry, R-NE 2nd

Mr. TERRY. Mr. Speaker, I appreciate the opportunity to come down and speak.

Certainly in every one of our districts, the housing crunch or crisis affects everyday people. And we have to look at the best way to resolve this.

And I think what we have today is kind of a best-intentions type of bill. But I don't think it's really getting to the heart of the matter. When I have talked to several economists that specialize in the real estate markets, all have told me that when you're looking back and trying to remedy or bail out what has occurred, that you are really not going to fix the problems or stimulate the housing industry. [Page: H3287]

So I have developed, with several of my colleagues, a bill that is forward looking. It is straightforward. It is an up to $10,000 tax credit for a purchaser of a home, not a foreclosed home only or a new build only or anything like that. Just if they want to buy a new home or a home they would be eligible.

I realize that there was at least a weak attempt to something like that in the amendment that is before us now. We have got a $7,500 tax credit. But when you look at the eligibility and the fact that, yes, it is a refundable tax credit that you have to pay back, it turns out to be rather useless in trying to stimulate the housing market. This is really a faux or phantom tax credit. So I don't think that can be used to help stimulate our economy or the housing market to get us out of the housing

depression here.

And one of the issues that we're talking about here today is the devaluation of our homes because of the housing depression and that what we're going to do is make up the difference of a home that has been devalued that goes into--

1:08 PM EDT

Lee Terry, R-NE 2nd

Mr. TERRY. What we are going to do is spend $300 billion to try and get us to right size that by bailing these folks out. That's just going to prolong the problem according to the economists.

Two points there: If that is all that we are really going to do here, we are not going to turn the tide of the devaluation of our homes. The only way to do that is to increase demand overall, which increasing your tax credit will do, not the phantom one that is here.

The other way is when you look at the market and the availability of credit, especially for lower income people, I think we are doing the right thing here by increasing the cap or the limit on credits for low-income housing. But there is also market-available tools that are out there. I have had people come to my office and present these market, nongovernment bailout programs, not programs but options, where they use a 501(c)(3) entity where you can put the life insurance in and cover the costs,

reduce the house, and I thank you for the opportunity.

1:09 PM EDT

Richard Neal, D-MA 2nd

Mr. NEAL of Massachusetts. Mr. Speaker, I must tell you I swore to myself I was going to resist what I'm about to say until I heard the term ``bailout.'' The minute I heard the term ``bailout,'' I thought to myself the speed with which the Federal Reserve Board and the Treasury came to the aid of Bear Stearns in a 48-hour period. And to use that same example of making it an analogy here is striking.

With that, I would like to reserve the balance of my time.

1:09 PM EDT

Tom Reynolds, R-NY 26th

Mr. REYNOLDS. Mr. Speaker, first, I guess I will ask the gentleman if he has any other speakers. I am prepared to close and yield back the balance of my time.

With that, Mr. Speaker, I think, again, for our colleagues it is important to understand some of what has happened that the minority feels that their rights have been trampled in what has been a very unusual decision on a major piece of legislation, housing. It is certainly a significant piece of legislation because the Rules Committee granted 3 hours of debate by various jurisdictions. So it certainly sends a signal to all observers that this is serious. It warrants debate. And it is now before

the House.

But I want to remind my colleagues that this is not a bill that has gone regular order. There is a Senate bill that is energy that has come over to the House. And we have now amended it entirely with a housing amendment. And so this is an amendment to an existing Senate bill to circumvent all of the regular order process that the House enjoys and has had speakers of both parties affirm this should be the action of how we debate great issues of the day.

This body is really infamous for acronyms. So today I call this the SSAD Amendment, or the Sorry Sick Amendment Decision. It is sad because the bipartisan work that was done in the Ways and Means Committee outlined by many from the Ways and Means Committee is not being worked through a process so that bipartisanship and the ability to have the entire body debate its work that came from committee.

It is sad that the bipartisan work was trampled in the Rules Committee by this decision to slickly move around the mechanism of regular order in our House. It is sad that there is no substitute. It is sad that there is no recommittal. It is sad that what makes it a procedure so unusual and so frustrating is the House never had a chance to work its will on housing legislation. In fact, as I said, the housing bill sent back to the House by the Senate was an energy bill. When it first passed the

House, it had nothing to do with housing. And it is sad that a procedural straitjacket has been used in order to garner the type of votes that the majority wants to put before the House today.

Finally, it is just plain sad that the bipartisan work of the Ways and Means Committee is joined up by the Rules Committee with the Frank housing bill, because it has been clear that senior advisers to the White House will recommend the President veto the work of the Ways and Means Committee.

So as we debate one of the significant issues that many feel should be debated in the House, it is a sad day how we have approached to do it.

I yield back the balance of my time.

1:13 PM EDT

Richard Neal, D-MA 2nd

Mr. NEAL of Massachusetts. Mr. Speaker, let me see what I can do to lift the spirits of the gentleman from New York, my friend, Mr. Reynolds.

In fact, I think what is sad is that you are leaving us, that you're retiring. And I was searching hard to figure out the meaning of that acronym, based upon the fact that the Ways and Means Committee took this legislation up, and I want to reiterate, for the fourth time today, 12 of the 17 Republicans on the committee voted for the very bill that they are now all saying they are going to oppose. Forgive me. That is sad. How can you come to the floor and argue against the proposal that you voted

for in the committee when you agree with just about every part of the bill?

[Time: 13:15]

That's what's before us here. We have heard these arguments, and they have all said, we support most of what's in the bill, but they are prepared because of an institutional constraint with the Senate to vote against the legislation that they favor.

In my home State of Massachusetts, it's sixth in the Nation in foreclosure activity. In Springfield, the largest community in my district, 300 homes have been foreclosed this year and over 2,000 mortgages will reset to higher interest rates by the end of next year.

In response to the worsening housing crisis, Massachusetts this month initiated a new law that extends the foreclosure moratorium from 30 to 90 days. Other States are taking similar action, but, like Massachusetts, they need help from Congress.

Reports seem to suggest that the housing slide won't turn around until 2010. These tax provisions we are considering today for families and communities will help turn it around, I hope, much sooner. It certainly will help our economy and markets in general.

The President's housing proposals really haven't worked. It's time for the Congress to act. We are often accused of having a short memory, but I think all Members in this chamber remember the recent government-backed bailout of Bear Stearns, yes, the bailout of that mom-and-pop operation called Bear Stearns. If we can, with great urgency and enthusiasm, come to the aid of Wall Street, we have no excuse not to help the people who reside on Main Street.

I hope that my colleagues will support this legislation, and I ask unanimous consent to yield the remainder of my time to the gentleman from Massachusetts (Mr. Frank).

1:16 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. Mr. Speaker, I will claim the remaining time on behalf of the Financial Services Committee.

Mr. Speaker, this is a composite package. The President some time ago, a couple of weeks ago, urgently asked the Congress to send him several pieces of legislation, three in particular. One is embodied in the part of the bill that came out of the Ways and Means Committee. [Page: H3288]

Two, in fact, had previously passed the House from our committee, the bill reforming the government sponsored enterprises--and that came out of our committee and on the floor in a form that the administration mostly liked--and the bill to modernize the FHA.

In fact, the Senate then acted on the bill to modernize the FHA. We went into conference, we ran into some difficulty. Not a formal conference, but a conversation. What we have done because, as we know, the Senate is in a situation where procedurally it's often harder for them to act, so we are acting on the basis of a Senate bill.

We are readopting today two of the pieces we already adopted, reforms of Fannie Mae and Freddie Mac and the FHA modernization. I think it ought to be noted that in both cases they are a recognition by the President that the private sector needs to be able to cooperate with public or quasi-public entities to get the job done.

Those who take the philosophy that the market alone is sufficient unto itself, and that public sector intervention will do more harm than good clearly have been repudiated.

The FHA is a government agency. Fannie Mae and Freddie Mac are government creations with both public and private aspects. It is clear that we need both of them if we are to get out of this current crisis in mortgage lending and be able to go forward in a healthy way.

There is one new element today. That is a bill that our committee voted on last week and the week before. We had a markup. It was suggested to us in many ways by some of the regulators. In its essential form it was endorsed last Monday by the Chairman of the Federal Reserve, and we worked closely with his staff. The administration had an objection to one major piece of an auction mechanism. That's the longer part of the bill. What it says is that holders of loans, not the lenders, because the

lenders have unfortunately long since been able to sell off their loans in many cases--and that's part of the problem--if the holders of loans will write down the amount due them in the principal, and if they get to a point below the current value of the home, in many cases these

homes have lost value from when they were first mortgaged, and the borrower can be reasonably expected to repay it, we will broaden the right of the FHA to make a case-by-case determination, provide a guarantee so that can then be financed and resold to the secondary market.

It's entirely voluntary on the part of the lender. The lender will retain the right to foreclose. In many cases we believe that it will pay the lender not to foreclose.

In fact, we have legislation in this package sponsored by the gentleman from Delaware (Mr. Castle) and the gentleman from Pennsylvania (Mr. Kanjorski) that will ensure servicers who are willing to write down the amounts, that they will not be sued if they write down those amounts to a reasonable level. We think that is very helpful. Again, it's voluntary.

We do believe that knowing if you write this down to a reasonable level, accepting your loss, you will be able then to at least get some guarantee of that to help stabilize the situation. But people should understand, there is not $1 of taxpayer money going to writing down that loan. The holders of the loans have to write it down.

Secondly, the borrower can then go to the FHA if the borrower can pay the new loan, but there is no taxpayer money that will go to help pay off that loan. The taxpayer exposure comes in the fact that there are FHA guarantees. If someone gets an FHA guarantee and subsequently fails to make the payments, his or her house is forfeited to the FHA.

We will lose some money on this, we believe. The Congressional Budget Office estimates that half a million foreclosures will be averted by this program, that would otherwise have taken place, at a cost to the taxpayers of $2.4 billion. That means $4,800 for every foreclosure averted.

We are told, well, this is a bailout, and I want to follow on what my colleague from Massachusetts said. We have seen one bailout this year over investors and speculators. It came when the Federal Reserve, actively urged on by the Treasury, bailed out for $30 billion potentially--we don't know what the losses will be--but $30 billion is at risk of what will ultimately be public money, to lenders, to speculators and investors, people who were partners at Bear Stearns.

Now there may have been some confusion yesterday. I tried to avoid it. I am not critical that we are doing that. I am critical of the lack of sensible regulation that led them to be in that position. I think we do have to examine it, and I want to examine it from the standpoint of what we can do that will make it less likely that we will be confronted with that kind of choice, either provide those funds or see serious further economic debilitation.

But for the administration that engineered $30 billion of bailout for the investors and others who did business with Bear Stearns to say that this $2.4 billion cost according to CBO that will avert 500,000 foreclosures is unacceptable as a bailout is as intellectually and morally and economically inconsistent a policy as we have ever seen. It is true, and some of the Republicans have said in a letter to me in the House, that they wanted to question this.

I would note, by the way, we talked about this, I have looked at the letter that was sent to me. I looked again at the letter, and in no case does it say they were opposed to it. People raised questions. Maybe that's an easy way to kind of cover your bases, but my point is not so much those who wrote the letter, it's the administration.

The administration says they're going to veto this bill, that it's a bailout. It is $2.4 billion versus $30 billion at Bear Stearns.

Now, I believe that Secretary Paulson and Chairman Bernanke have been doing the best they can in this situation. I am not critical of what they have done. Chairman Bernanke has been consistent and thinks this is also a reasonable thing to do.

The President, of course, appointed Secretary Paulson and Chairman Bernanke, and for the administration that supported and facilitated the $30 billion for Bear Stearns which went to lenders, went to investors and some of them were speculators--to then object when it's homeowners seems to me to be entirely the reverse of the reality of the situation.

Again, I want to stress, I was asked by 17 Republicans if the committee would have a hearing. My answer was yes, the committee will have a hearing after we have dealt with the current subprime crisis--and that will be soon, that was our priority--and a hearing not simply to say what did you do, because we cannot compel them to undo it--to look at what they did in the Bear Stearns thing in the context of figuring out how we are best able to diminish the likelihood that it will recur.

But we are in a recession, and a major cause of that recession is the subprime crisis. We do not see any alternatives to this bill to trying to work on that.

Yes, we had Hope Now, and then we had FHA Secure. The administration had several policies. They have been closer, in many ways, to us. The differences are not as great as they once were.

But the fundamental here is this, foreclosures are causing, have caused and are causing serious economic problems. Diminishing the number of foreclosures is in the interest--not simply of those who will avert foreclosure--but of people in the neighborhood of the cities in which they are located and the whole economy. That's why we are going forward with this bill.

Mr. Speaker, I reserve the balance of my time.

1:25 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, I yield so much time as he may consume to the distinguished ranking member of the House Financial Services Committee, Mr. Bachus.

1:42 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. Mr. Speaker, before I yield to the gentlewoman from Florida for 3 minutes, I would like to note the use of the figure $300 billion is not a hopeful sign about a rational debate. Three hundred billion is the total value of the mortgages that could be insured. It would cost $300 billion only if nobody made any payments ever, and when the property was taken by the Federal Government, none of it had any value. CBO gave us a score of $2.4 billion. So we can debate this,

but I would hope we can debate it with real numbers. The CBO score for the mortgage part is $2.4 billion. Everybody knows that $300 billion is not remotely what is at risk.

I yield now 3 minutes to the gentlewoman from Florida (Ms. Ginny Brown-Waite).

1:43 PM EDT

Ginny Brown-Waite, R-FL 5th

Ms. GINNY BROWN-WAITE of Florida. I thank the gentleman for yielding, and I thank him for clarifying the true potential cost of this bill.

Mr. Speaker, today we have to face the fact that many Americans are in a very tough financial position. If I have learned anything over the past year, it is how intricate our financial and economic markets are woven.

As members of the Financial Services Committee, we have been presented and have debated dozens of proposals and ideas to combat this housing crisis before us. Many of them were sound, good ideas worth pursuing.

In the months leading up to today, going around my district I came to several conclusions, but one is that Congress cannot accept the status quo. I have been patient. I believe in the market working itself out, but that just doesn't seem to be happening. At a time when our dollar is devalued, not only is the price of petroleum products, the gas everyone fills up with over $1.70 more than it was a year ago, we also have very high food prices. People are finding it hard to make those payments.

And the beauty of this, it has to be a homeowner who is being helped out, not a speculator, not a flipper.

While Chairman Frank's proposal isn't perfect, I do think it is one that Members should take a very close look at and compare it to what is happening in their districts. It is a voluntary, participatory program. No one is forced to play.

[Time: 13:45]

This is not the silver bullet, by any means. Homeowners, lenders and investors will make sacrifices under this.

But I'm also concerned about hearing from constituents who try to work with their lenders, but their lenders won't call them back. I'm tired of driving through the Fifth Congressional District and seeing many houses vacant because of foreclosure. No one wins when a house in the neighborhood is foreclosed, absolutely no one, because it brings down the value of those properties.

No, Mr. Chairman, we cannot stick with the status quo. That's sticking our policy-making heads in the sand. By providing lenders an incentive to write down mortgages, modernizing FHA, improving GSE oversight and including tax incentives, I believe we can help Americans get back into the market and help the housing market to survive.

The bill isn't perfect, and certainly, neither was the process that this bill comes to the floor. And I'm sure that Chairman Frank agrees that the process is murky, at best. But I do believe that what we have before us will provide relief to Americans, and I urge Members to support it.

1:46 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, the distinguished ranking member of the Financial Services Committee mentioned that this is a shell. Maybe it's a shell game. I'm not sure. But for energy bill being the underlying bill, I think the American people wish we were on the floor today discussing an energy future for America.

It's now my distinct pleasure to yield 5 minutes to the distinguished ranking member of the Housing Subcommittee, Mrs. Biggert from Illinois.

1:47 PM EDT

Judy Biggert, R-IL 13th

Mrs. BIGGERT. I would say that all I can find in the Congressional Budget Office cost estimate is that it's $2.7 billion and not $2.4 billion over 2008 to 2013, as far as the CBO estimate that Chairman Frank was talking about.

You know, Congress has yet to submit a single bill to the President that might begin to address this crisis in the housing market, and here we are again debating controversial new housing legislation, instead of passing common-sense housing reform that could start helping homeowners.

And I feel like I woke up one morning, we just had a markup on the Housing bill, and suddenly, I couldn't even find the number of it, H.R. 3221, and it suddenly was a different bill with a lot of different provisions in it. Some were the same and some weren't. I have to say this reminds me of the SCHIP bill that we debated, which kind of came over here the same way from the Senate. I don't think it's going to be the same result, but I just can't understand that process.

And I do appreciate Chairman Frank's inclusion of FHA and GSE reform, as well as the funding for housing [Page: H3291]

counseling and mortgage fraud in the bill that we're considering today. But these are much needed reforms that could increase the liquidity in the housing market and provide consumers with an alternative to the bad subprime loans, and help to restore consumer confidence, which is so important.

But attaching these things to a taxpayer-funded bailout will not get them any closer to the President's desk. And make no mistake. This is a bailout. It would place U.S. taxpayers on the hook for the $300 billion guarantee, but that includes the riskiest mortgage debt on the market. And it does this by allowing speculators, borrowers who have overstated assets, who have cheated and knew that they couldn't make the payments, and those who invested irresponsibly, to pawn off their financial liabilities

on U.S. taxpayers. This is a liability.

And instead of serving distressed homeowners, the bill requires that the lenders, not the homeowners, to make the decision to place the mortgage in the program. Since the lenders are the ones that would like to get rid of their bad loans and put those on the, be guaranteed by the Federal Government, the taxpayers, the taxpayers will be bailing out the banks, the investors on their most unwise lending decisions.

Even more disturbing is that the bailout is partially funded on the backs of seniors through changes to FHA reverse mortgage program.

Mr. Speaker, we shouldn't be asking American taxpayers to pay for the mistakes of those who over estimated their income on mortgage applications, or scam artists that inflated appraisals and flipped properties.

Nor should they pay for homeowners who chose to live beyond their means, using inflated home equity loans to buy a new plasma TV, a swimming pool or a fancy car. It is not fair to those who saved and invested responsibly.

The majority of Americans are working hard to make ends meet. Ninety-three percent of our mortgage holders are making their payments on time. Fifty-one out of 55 million Americans with a mortgage are making their mortgage payments on time.

Twenty-five million Americans own their own homes and have no mortgage. Thirty-four million Americans are prudently renting because they aren't ready to own a home. These hardworking Americans should not be forced to foot the bill for the bad decisions of a few who gambled that their home values would never stop rising. They don't think that's fair, and I don't think so either.

I understand that many of my colleagues are looking at the economic effects of the housing bubble and saying to themselves, ``We must act, we must do something. ``But we shouldn't do something if it's not right. Congress can help struggling borrowers and promote economic growth without burdening the taxpayers with inappropriate spending.

And that's why I join with Financial Services Ranking Member Bachus to offer an alternative plan that helps homeowners in a responsible way. It does include the FHA reform. This could solve this problem right away. Our substitute funds housing for counseling, other reforms to GSEs that's so important, without a so-called trust fund or slush fund.

And there's nothing in the Democrat alternative that would prevent a similar housing crisis like this in the future. Though improved, disclosure lender registration higher price is standard.

1:52 PM EDT

Judy Biggert, R-IL 13th

Mrs. BIGGERT. Our Republican alternative would do more than put an expensive Band-Aid on the housing market. It begins to address the underlying causes of the subprime mess. It will ensure that borrowers have access to legitimate loans; that they understand the terms of their loan, and that they are taking a loan that they can afford based on the actual value of the house.

We need to bring transparency and integrity to the homebuying process, and we need to expand access to credit for worthy borrowers who genuinely want to pay off their loans, but we need to do it without wasting taxpayers' dollars.

I think we have an alternative bill that would solve these problems. And many were supported by both Republicans and Democrats. It's a commonsense plan that doesn't spend money and, in fact, has been scored by CBO to actually reduce the deficit by $25 million. Coupled with Mr. Terry's tax credit for owner-occupied homebuyers, it will jump-start the flailing housing market and get our economy back on track.

That's why I urge my colleagues to vote against the bill before us today and consider the alternative, if we had the opportunity to have an alternative.

1:53 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. I yield myself first 45 seconds to say that on the scoring, $2.4 billion was the CBO score for the mortgage part. They did say a total of $2.7 billion. The other $300 million is attributable to an amendment offered by the gentlewoman from Illinois on mortgage. So the gentlewoman from Illinois is correct. It is $2.7 billion. That includes the $300 million she added to the bill with her amendment, and the $2.4 million in mortgages.

1:54 PM EDT

Tom Price, R-GA 6th

Mr. PRICE of Georgia. Mr. Speaker, reserving the right to object, I appreciate my colleague on the committee for attempting to clarify an issue which is, I think, significantly problematic.

The issue of defining foreclosure time, and length, the particulars have always been the purview of the States. And I know that this amendment is an attempt to try to clarify that. In fact, I think it confounds it, and my concern about the unanimous consent request is that it doesn't make it clear still. So I have significant concerns about the amendment.

I'm happy to yield to my friend from Ohio for any clarification that he might offer.

1:55 PM EDT

Steven C. LaTourette, R-OH 14th

Mr. LaTOURETTE. If the gentleman would yield to me on his reservation, I would make this observation to the gentleman and to the House. This amendment that Mr. Miller and I crafted, obviously, one of the things that vexes, and it doesn't matter whether it's financial services or anything else, one of the things that continues to vex and cause tension between the Federal Government and the States is this whole issue of preemption.

So when Mr. Miller came to me with the original amendment, we began to hear some concerns. And quite frankly, the concerns were are you opening the door to a Maryland-type situation, where they can pass a State law that says that nobody can foreclose on property for 5 years, 10 years, 15 years. And clearly, although I happen to think that that kind of abrogation of property rights is an unconstitutional exercise of legislative authority, I understood the concerns.

And so I will tell the gentleman on his reservation that we sought the advice of the OCC and the OTS and received a list of things that are already preempted. And as I think the gentleman has accurately stated, the manner, the process in which foreclosures have happened have always been the purview of the States. And then the boarding up of properties or the maintenance of properties that are foreclosed. [Page: H3292]

And so it is my attempt through this unanimous consent request, I think, from all Members, and I think Members on both sides of the aisle have some concerns about this. This wasn't limited to Republican Members. There were some Democratic members that had concerns as well. The OCC has indicated to us that this answers that concern. It doesn't deprive them of their authority under the National Bank Act. Some of the banking institutions that were originally concerned about the amendment have indicated

the that this is language that they can live with.

And just as a Republican Member of the House, I would say to the gentleman from Georgia, under his reservation, that this is typically the point in our debates where our distinguished chairman of the Financial Services Committee skewers us as Republicans for being for States' rights on some days and being against States' rights on other days. It was my goal to make sure that States' rights were preserved on those things that they've always had the opportunity to regulate, and not impinge upon

those, but also recognizing that not all the best ideas in terms of how to proceed on process or maintenance necessarily emanate from this Chamber.

I thank the gentleman for yielding on his reservation.

1:58 PM EDT

Tom Price, R-GA 6th

Mr. PRICE of Georgia. Reclaiming my time, I appreciate those comments and I would agree. I think that all of us, many of us in the House, many certainly on this side of the aisle, want to retain the States' prerogative in the area of foreclosure. And I would suggest to the gentleman that his comment about that, and the discussion that's gone on on the unanimous consent request and the language therein, is something that ``they can live with.''

And I would suggest, Mr. Speaker, that this probably should have been dealt with in committee, and it might have been able to be clarified to a much greater degree. My concern remains.

1:59 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. Mr. Speaker, I regret that, but sometimes people would rather see things not improved so they can then complain that they weren't improved. Fortunately in this case, we are not constrained.

The gentleman from North Carolina and the gentleman from Ohio said it had not come to our attention fully until after the committee markup. What happened was that they came forward with this amendment, and we heard some concerns from the Comptroller of the Currency, as the gentleman from Ohio has said, and from bankers.

We then talked to the gentleman from Ohio and the gentleman from North Carolina (Mr. Miller), talked to the American Bankers Association, the Community Bankers Association, the Mortgage Bankers, the OCC, various of the advocacy groups, the State Attorneys General, the National Council of State Legislators, and they came to an agreement that adding these words would make this something that would work.

Now, the obvious thing in a constructive way would have been with the agreement of all of the stakeholders and the conversations among Members on both sides to be incorporated into the bill. But constructive isn't always the order of the day.

So let me make this announcement which I have also, in anticipation that there might be such an objection, although I had spoken to the ranking member and he told me he thought we should go forward. It was my understanding the gentleman from Ohio had talked to the leadership on the Republican side. They thought it should go forward. So here is where we are. We will vote on the Miller-LaTourette amendment. I will guarantee to the Members that when this goes forward in any discussions we have with

the Senate, we will accept this language, the Miller-LaTourette language, or if someone comes up with a better idea, any other language that would be mutually agreed upon by the gentleman from Ohio and the gentleman from North Carolina, the two bipartisan sponsors.

So while we don't get the unanimous consent agreement, because some people would rather there not be a resolution over an objection, let me announce what may be a first, and I'm not always the most technologically updated person; I don't have a lot of the devices, but I do want to maybe be the pioneer of the virtual unanimous consent agreement. In good faith the gentleman from North Carolina and the gentleman from Ohio want to amend this, they were denied unanimous consent, but I am prepared

to act as if the body, and I have no question that it would have been adopted had we had a chance to vote on it, that it be incorporated. And as we go forward, we can guarantee Members that this language, if this bill is included, this will be included; and I can report that all of

the stakeholders, the community advocacy groups, the banks, and the public officials at the State and local level believe that with the language that was worked out by the gentleman from Ohio and the gentleman from North Carolina with the Comptroller of the Currency, it will be fine.

So I wish we had got unanimous consent, but I want to assure Members that in this process going forward, our failure to get real unanimous consent, as opposed to virtual unanimous consent, will make no difference whatsoever.

On this point, let me yield 3 minutes to the gentleman from North Carolina to complete this conversation.

2:04 PM EDT

Tom Feeney, R-FL 24th

Mr. FEENEY. Mr. Speaker, I thank my friend from Texas, and I would say that people in my district, there are some people who are hurting right about now as there are around the country. There are some people, indeed, who are homeowners in very bad shape. Some, for example, were duped or lied to by people that loaned them money. Some, a few, have lost their jobs. Some bought homes at the high of the housing market, say $150,000, now to find that their house is more like $120,000 or $100,000. And

we all feel very sympathetic for those people.

But I don't feel too terribly bad for speculators that went in search of ways to get higher returns and take higher risks as an exchange, and that's who is getting bailed out today. I also don't have complete sympathy when it comes to using taxpayer money to reimburse people that, for example, put zero money down. They didn't buy that home. They bought an option to buy the home. People that bought into a 3-percent teaser rate knowing that if the interest rate went to 7 percent, they would never

be able to stay in that home. People that used no documentation to demonstrate that they ever had the chance to repay. They moved into a home with an option to continue buying it. They didn't make the type of commitment that most homeowners do [Page: H3293]

to put 10 or 20 or 30 percent down and to make sure that they have a mortgage and a loan that they can pay under virtually any circumstance except for a disaster.

Who does this bill help? Well, The Wall Street Journal made it very clear who this bill helps. This bill is a bailout from American taxpayers of speculators and imprudent borrowers. Less than 1 percent of borrowers whose homes, under this bill, would be eligible when all is said and done to be helped.

I come today to speak on behalf of the forgotten man. And that includes some 50 percent of Americans that either own their home or are renting. Every one of them watching today needs to know that they are bailing out irresponsible speculators and lenders and they will pay the price of this bill. I come here to speak for the 90-plus, 95 percent of homeowners that are making their payments on time, that took out responsible loans. They need to know that they are bailing out irresponsible speculators

and people that went in search of higher profits.

Investors who take advantage of this program are basically getting a guaranteed gift from the government: 85 percent of a loan that they know is not likely to perform. We are bailing out people that will cherry-pick the very worst loans in their portfolio.

Who is here speaking on behalf of the forgotten man? Who is here speaking on behalf of 99 percent of Americans that did not behave irresponsibly, that did not behave foolishly, that ultimately will pay the price for this bill? Well, some of us in the minority are here speaking on behalf of the forgotten man, which is 99 percent of America.

And I would leave you with this: Chairman Frank and the CBO and others can estimate how much this bill will cost these forgotten men and women, 99 percent of Americans who were not irresponsible who will pay the price. The answer is we don't know. We don't have a crystal ball. If property prices around the country take off by another 50 percent and go up, there will be no cost. If they go down by 30 percent, the cost will be closer to $3 billion.

2:09 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, at this time it is my pleasure to yield 5 minutes to my colleague and friend from the great State of Texas (Mr. Hensarling).

2:09 PM EDT

Jeb Hensarling, R-TX 5th

Mr. HENSARLING. I thank the gentleman for yielding.

I first come here somewhat amused at the lecture that some of us received from the majority leader last evening on abuse of process. I hear many of my colleagues on the other side of the aisle say that we have a housing crisis and that this is one of the single most important bills to come to this floor in this Congress. And yet here we are, as the minority, not being allowed any amendments, not being allowed a substitute, not being allowed a motion to recommit, not even being allowed to have

an up-or-down vote on the bill. And we're accused of an abusive process?

But enough of that.

Let's look at the substance of this. There is a great challenge in our housing markets. There is no doubt about it. And there are innocent people who have suffered, and they deserve to be helped. But this is the wrong plan.

What we need to do, Mr. Speaker, is, number one, we have to have better disclosure so that people understand the economic obligations they're undertaking. We need to enforce the laws that we have on the books. Mortgage fraud has been rampant on both the borrowers' side and on the lenders' side.

We need to prevent the automatic tax increase that has been included in the majority's budget that's going to impose a $3,000-a-year on the average American family tax increase phased in over the next 3 years. We need to do something about the skyrocketing cost of gasoline and food that has occurred on the watch of the majority. They've been in charge of the economic policies of this country for almost 18 months.

The shrinking American paycheck is our challenge. A huge bailout of Wall Street and borrowers, some who may be innocent victims and some who may be guilty, is not the answer, and using taxpayers' money to do it is simply an insult.

Number one, we ought to have the facts before we actually take on a major piece of legislation. The American people need to know. Over half of America rents their homes or owns their home outright. Of those who have an active mortgage, 95 percent are making their mortgage payments on time. You have roughly 2 percent who are in foreclosure. So now we're being asked essentially for 98 percent of America to bail out 2 percent of America.

Now listen. On the investors' side, these are a big bunch of boys and girls on Wall Street who made decisions about what they should invest in. We know from the Financial Crimes Enforcement Network that mortgage fraud has been rampant: 1,400 percent increase over the last 6 years; 42 percent increase last year alone, with the majority of the fraud being borrowers who lied about their income, about their assets, about their occupancy; and yet we have a bill to help them out.

Let's hear from some of the people who are being called upon to do the bailout. I often ask people who reside in the Fifth Congressional District of Texas that I have the honor of representing what they think about legislation coming to the House floor. And I hear from people like the Sadler family in Mesquite, Texas, and they write:

``Congressman, 3 years ago my husband and I faced the loss of our home due to a decrease in the sales income. We cut our expenses as much as possible, but it was simply no longer affordable. We made the decision to put the home on the market before we faced foreclosure.

``I am adamantly opposed to my tax dollars going toward bailing anyone out of a mortgage crisis. If we didn't have to give up so much of our income to the government for taxes, we could have continued to afford our home.''

And what is the answer of the Democrat majority? Well, to the Sadler family in Mesquite, we're going to increase your taxes an extra $3,000 a year.

Mr. Speaker, I heard from Sergeant First Class Kenneth Adams of Frankston, Texas. He writes:

``Congressman, the mortgage crisis Congress is trying to fix is an insult. My house went unpainted until I could return from serving in Iraq. I'm a Sergeant First Class in the United States [Page: H3294]

Army with over 20 years active and reserve service. Some day I would like to use my VA house-buying benefits, but what a fool I was to earn those type of benefits when all I had to do was be irresponsible, overspend, and have the government bail me out.''

[Time: 14:15]

That's the answer that the Democrat majority brings to the floor, and it is an insult to 98 percent of Americans who did it right.

Mr. Speaker, we should reject this legislation.

2:15 PM EDT

Sheila Jackson Lee, D-TX 18th

Ms. JACKSON-LEE of Texas. Mr. Speaker, in 2007, Texas ranked fourth behind California, Florida and Illinois in pre-foreclosures. We're reminded of Franklin Delano Roosevelt who said we have nothing to fear but fear itself. We certainly have to face fear and to be able to respond to this collapse in mortgages and our economic markets, by resolve and not fear.

And so this is not a bailout. It's a helping hand. It's what Franklin Delano Roosevelt did to restore this country, and it worked. We survived.

And so this tells us that we can survive, providing $10 billion in low-income tax credits for low-income homeowners and to also build rental properties. We also give a $7,500 tax credit for first time home buyers and a $700 tax credit for those who are paying property taxes.

And it does fix the GSEs. It does provide an opportunity to get us out of this mortgage foreclosure hold, but it does it in the right way. It's not scandalous. It's not illegal. It allows us to be able to have the mortgage owner sell it back to FHA at a lower price; the lower mortgage is then backed by FHA, and it isn't a gimmick. It's not a flipover. Any profit made by the homeowner comes back to the government if the property is later sold.

And we protect our disabled veterans, those who have fallen upon hard times. They can still be in the program even if they are in bankruptcy.

Mr. Speaker, this bill responds to the homeless and the helpless. What it does say is those who are living from hand-to-hand, who are living in their parents' homes, who have been thrown out of their home, who have been thrown out because they're in rental property, this is a fix and the life and the spirit of what America is all about.

We don't believe in giving a fish. We believe in giving a fishing rod. This is an even-handed, balanced way between the House and the Senate to provide tax relief but also to be able to provide the construct and the infrastructure to get our houses back together, along with our stabilization bill that says we're going to buy back foreclosed homes and give them to people who need them.

Is there anything wrong with America rising to be higher angels and helping our fellow brothers and sisters?

2:23 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. Mr. Speaker, first I wondered how I'd fill 2 hours, but I could do that just responding to the inaccuracies we've just heard. Let me pick a couple.

The gentleman from New Jersey said that the administration wanted FHA reform and GSE reform and this Congress wouldn't get it. Well, he misread the newspaper. Bryan Montgomery, the head of the FHA, was quoted yesterday as saying, if Congress had done what I wanted in 2006, this wouldn't have happened. It was the Republicans who were in power in 2006. It was under the Republicans that GSE reform and FHA reform were frustrated.

When we took power as the Democratic majority, last year this Financial Services Committee and this House passed both of those in forms very close to what the administration wanted. In fact, the holdup on the GSE, and I know the gentleman thinks the notion of building affordable rental housing with public help is, as he calls it, a slush fund, and I think it's that lack of sympathy for affordable housing that was one of the contributing factors to getting people into homes they couldn't have

owned.

But the fact is that we sent the GSE bill over to the Senate last year with a very large majority in favor, and the Senate hasn't acted, partly because the ranking Republican on the Senate committee hasn't wanted to act. I know the administration has been trying to persuade him to act.

So the notion that the affordable housing trust fund, that's slush fund for the gentleman from New Jersey, housing for lower income people, for elderly people, for disabled people, that's slush fund, well, it was not that that held it up. It was the refusal apparently of the ranking member to act on it.

So this is an example of the inaccurate descriptions you're getting.

2:25 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. No, but the gentleman very inaccurately blamed the Democrats. He forgot, Bryan Montgomery said in 2006, the Republicans did it.

I think one ought to be more accurate and less partisan in a description of reality. The fact is that those were defeated under the Republicans when he was on the committee. Then, the Democrats did pass them.

And as to the GSE bill, he said it was the slush fund. I really like that phrase, ``slush fund.'' That's affordable housing for people, for lower income people. He said that's what's holding up the GSE bill. That is not remotely true. The GSE bill was sent by us to the Senate. They haven't taken it up. By the way, the affordable housing trust fund was in the Senate committee version when the Republicans were in power under the current ranking member when he was chairman. So that is just inaccurate.

[Page: H3296]

It is true they have been held up in the Senate as they were held up under the Republican leadership as well. We are closer to passing them. I am confident that they are going to get passed fairly soon. We did finally get to some conversation on the FHA.

My objection was that the gentleman acted as if the world was created in January of 2007 and the Democrats refused to pass the bill, neglecting to note that the head of the FHA himself put the blame much earlier when the Republicans were in power.

I now yield 3 minutes to the gentleman from North Carolina (Mr. Miller).

2:26 PM EDT

Brad Miller, D-NC 13th

Mr. MILLER of North Carolina. Mr. Speaker, I wish to address specifically the amendment that Mr. LaTourette and I have offered.

Mr. Speaker, the worst of the foreclosure crisis is yet to come. Mr. Frank just corrected incorrect factual assertions. Let me correct one as well.

Mr. Feeney said a few minutes ago or gave the example of a 3 percent teaser rate. Mr. Speaker, the typical initial rate for the mortgages that are causing this problem was 8 1/2 percent, which is already well above the conventional prime rate.

According to The Wall Street Journal, 55 percent of the people who got those loans qualified for prime loans. Their trust was betrayed. And the typical adjustment after just 2 or 3 years was a 30 to 50 percent higher monthly mortgage payment. Seventy percent had prepayment penalties so people couldn't get out and would have to pay when they got out, when they refinanced out of a loan they could not possibly afford and the lender never intended they would afford because they required they come

back and refinance again.

It's not surprising that 3 million homeowners with subprime loans are expected to enter foreclosure proceedings in the next couple of years and 2 million of them will likely lose their homes. Another 40 million homeowners will see the value of their homes decline when other homes in their neighborhood are foreclosed, and they will lose $200 billion in their home property values.

Credit Suisse now estimates that there is another wave of foreclosures coming after this one as even more exotic, innovative mortgages go into default. Credit Suisse estimates that in the next 5 years 12.7 percent of homeowners with mortgages are expected to lose their homes to foreclosure.

Mr. Speaker, when those families lose their home to foreclosure most will fall out of the middle class and into poverty.

The policy failures that caused this problem, that led to this crisis, were in Washington, but State and local government are having to deal with the consequences.

Property rights, contracts and foreclosure proceedings are all matters of State law, not Federal law. The laws vary from State to State, but every State's foreclosure law includes protections for the borrowers whose homes are being seized and sold to pay the mortgage.

[Time: 14:30]

State laws have notice requirements. They provide reasonable time for the families who are losing their homes to find someplace else to live and to move; they limit the costs that they be charged to homeowners; they allow homeowners to cure defaults in some circumstances. Many States limit or prohibit deficiency judgments if the sale of the home is not enough to pay off the debt, and on and on. And several States, not surprisingly, are now considering additional laws to protect borrowers who

are losing their homes to foreclosure.

Recently, there has been some suggestion, some hint in the press and elsewhere that if State and local governments start getting underfoot, if they start making a nuisance of themselves, the lending industry will argue that some of the especially annoying State laws, State foreclosure proceedings cannot be applied to mortgage holders or mortgage services that are affiliated with national banks or trusts.

There is no Federal foreclosure law, but they argue that State foreclosure proceedings could be preempted by Federal laws that govern national banks and trusts. This amendment clarifies that State laws and local ordinances on foreclosure and foreclosed properties are not preempted by Federal law.

2:30 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, I yield myself 3 minutes.

Mr. Speaker, I've spent nearly three decades in the housing business. And over those three decades the housing market has gone up and the housing market has had its soft moments, and one of the soft moments we're experiencing today. I liken it to the fact that the housing market has a cold. And when you go to the doctor and you talk to the doctor about a cold, what does he usually tell you? He says, you know, you're going to have to let it run its course. And quite honestly, over the years as

these housing downturns have happened, that exactly what we've had to do is let these markets run their course. And what we do know is that when they run their course, that they come back a lot stronger.

We have just come off an unprecedented run in housing where the rise in home ownership has risen to record levels. And how did we do that? Well, we did it with the marketplace.

One of the things about this bill that bothers me is that we leave people with the understanding that if their house goes down, the government will come in and make up the difference. We can't do that. People buy stocks, people buy bonds, people buy other assets. They go up, they go down. But it's not the role of the Federal Government to create a profit opportunity for people.

One of the things that we know is that, as the ranking member, I think, pointed out, is that we have 110 million people that are already meeting their own housing needs. Some of them are having problems, yes, they are, and we're sorry about that. We know about 51 million people in America have mortgages. And a lot of those folks are taking second jobs and doing things to make sure that they meet their rental payments and meet their housing payments. And you look at the fact that 94, 95 percent

of those people are making those payments, not only are they making them in full, but they're making them on time.

What we can't let the Federal Government be is the piggy bank when things don't go exactly the way we planned. I would like to go back over my 30 years in the real estate business and wish the Federal Government could have been my piggy bank when I bought property that didn't go in the right direction. Some of it went down, some of it went up. But what I do know is that it is important that the Federal Government not get into the business of trying to manipulate markets.

Markets are very efficient. In fact, they're a lot more powerful than the Federal Government. I know everybody here feels like they may be a powerful person and part of a powerful government, but quite honestly, these free markets are much more powerful than the Federal Government and they're much more efficient and they're much better able to deliver a housing market that the American people can sustain and count on.

And so that's one of the reasons that I rise in opposition to this bill today is, as I look across America--and I wish you could have been at a town hall meeting with me the other day where people weren't asking about mortgages, Mr. Speaker, they were asking when is this Congress going to finally do something about getting a comprehensive energy strategy for America? When are we going to open up the ability to drill in these other areas? And when are we going to be able to come up with more nuclear

power plants?

Mr. Speaker, the American people don't want to make their neighbor's payment when they're having a hard time making their own.

2:36 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, I yield 3 minutes to the distinguished gentleman from South Carolina, a member of the House Financial Services Committee, Mr. Barrett.

2:37 PM EDT

Gresham Barrett, R-SC 3rd

Mr. BARRETT of South Carolina. Mr. Speaker, I rise to oppose this bill, which I think is unhelpful for the housing market and unfair to the American taxpayer.

Like many of my colleagues, I'm concerned that this program will only distort housing prices, causing problems in the future by forcing the taxpayer to foot the bill.

I have no doubt that some of the lending practices in the beginning of the decade, Mr. Speaker, were irresponsible, and that the government should take certain steps to help the market right itself and to prevent these problems from recurring in the future. At the same time, I'm a firm believer in the power of the free market, and I believe that the housing market fundamentally reflects the laws of supply and demand.

I'm always wary of government intervention in the markets and concerned about unintended consequences. I fear that in our rush to help, we are overlooking the basic realities about today's housing market and about the cost of government spending.

I think we can all agree that government programs cost money, and this program has the potential to cost a tremendous amount of money. And that money comes from the taxpayer, Mr. Speaker. Because, in reality, like the laws of supply and demand, decisions have consequences, and money has to come from somewhere. It's not fair to ask my constituents from South Carolina, who work hard and spend wisely and pay, in my opinion, too much tax money, to carry the burden for others' financial mistakes.

While I believe that people in need deserve our understanding and our help, I trust in the ability of the free market to correct itself. And I think Americans know how best to spend their money and should be trusted to make their own financial decisions. I also think that lenders have a responsibility to live with the consequences of investments that did not quite turn out as planned.

Mr. Speaker, I offered an amendment in the Financial Services Committee that is representative of my concerns. The amendment was not adopted, and it was very simple. It was to strike the section of the bill that prohibits FHA from denying borrowers entry into the new FHA program solely on the basis of the mortgagor's current FICO or other credit scores, or any delinquency or default by the mortgagor. In South Carolina talk, Mr. Speaker, this amendment would have given the FHA the opportunity

to use individual pieces of information on their own that reveal the risk of borrowers defaulting. In offering the amendment, I wanted to allow the FHA to protect the American taxpayer by giving them every tool available.

I understand the motivations of this section of the bill to try to include as many people as possible in the program meant to help them. And I understand it would be nice if we could help all of these borrowers, but some may have very bad credit scores that reflect irresponsible borrowing behavior. It's not fair to the American taxpayer to insure the loans of the riskiest borrowers who may not be able to pay their mortgages no matter what the terms of the loan.

Without a doubt, it's never easy to hear the stories of hardworking individuals and families losing their homes, but I do not believe that more government intervention is the solution to our problems. And we should not allow the American taxpayers to become the insurance policy for the financial decisions that did not turn out as planned or for temporary market downturns. We should not punish those hardworking and responsible American taxpayers for the mistakes of a few. For these reasons, and

others, I oppose this legislation and ask my colleagues to do the same.

2:40 PM EDT

Gary G. Miller, R-CA 42nd

Mr. GARY G. MILLER of California. Mr. Speaker, I rise in support of this bill.

A lot of people are losing their home in this country. In fact, in California, 500 families or more lose their home every day. And that not only hurts them, but the neighbors around them. Because of foreclosure, their home value drops weekly.

I don't support government bailouts. I consider this bill we're dealing with here far from a government bailout. If you look at the situation people are in today, people are suffering from shrinking paychecks, other things go wrong in their life. But this loan is the most expensive FHA loan you will get.

Normally, a person can go to get an FHA loan, put 3 percent down, and the government will basically be guaranteeing 97 percent financing. Under this loan, the lender has to be willing to take 85 percent of current market value. Let me explain that so it makes it understandable to most people.

Let's say you bought a house for $580,000. The first trustee gets $5,000, but current market value is $400,000 for that house. The people are upside down, they can't make the payment, it is going into foreclosure. The lender has an opportunity to allow another lender to buy them out with an FHA loan guarantee, and they're willing to take $340,000 for a loan they have that the market today is $400,000, and the new loan against that house will be $360,000. Now, that sounds really good. And we say

the person is going to make a lot of money, it's a bailout. But this is really more like a joint venture. And I don't think CBO even scores this portion. If you sell the home the first year, we either get 3 percent of the loan amount or 100 percent of the profit on the home, whichever is

greater. If they sell the second year, we either get [Page: H3298]

3 percent, or 80 percent of the profit, whichever is greater. The third year, 60 percent. And if you hold it for 30 years and you sell that home, FHA gets 50 percent of the profit on that home.

Now, I don't know how most people look at it, but that's the worst FHA loan you can get. It's not a bailout, but it's enabling a person who's losing their home and a lender who says, well, if I foreclose it on $400,000, I might get $380,000, $390,000. And what does that do to a neighborhood? That home that originally sold for $580,000, now the market value for that home in that neighborhood is now $380,000, $390,000 or $400,000.

This is more like a refi. It doesn't impact the value of the homes in the community. It basically helps a person get in position where they can retain ownership of their hone. And they're not going to make a windfall profit for it.

I would like to thank the chairman for introducing language in this bill that I worked on for 5 years, and that's raising conforming home limits in high-cost areas. Basically, Freddie and Fannie and FHA, in high-cost areas, you can borrow a maximum of a $730,000 loan from them today. The biggest problem we've had in the marketplace in recent years is people have been forced into jumbo loans. If you look at a GSE loan, that's Freddie and Fannie, compared to a jumbo loan today, you can generally

save about 100 basis points in interest rates. That's a huge amount of payment a person can save each year, enable a person to be able to put away money in the future for house payments if times get tough and basically own their own home.

Some people have said they don't trust the Refinance Program Oversight Board because they don't have any idea what the Board is going to implement as far as criteria to qualify for this loan. I have a problem believing that we can't trust the Secretary of Treasury, the Secretary of HUD and the Chairman of the Federal Reserve Board to come up with criteria based on income, assets, liability, payment history, other criteria, debt-to-income ratio. If we can't trust those three individuals to come

up with a reasonable criteria under which this loan is made, I think we're in trouble in this country.

The problem some people have is FHA exists. FHA loans are made today, and FHA is guaranteeing, through insurance premiums, these loans. Now, a normal FHA insured premium costs a borrower .55 percent per year, about half a percent. Under this new program, they have to pay 1.5 percent per year to FHA to underwrite this guarantee. That's far from a giveaway. I can't see anything in this FHA loan that's a giveaway.

I rise in strong support of this bill.

[Time: 14:45]

2:44 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, now it is my honor to recognize for 3 minutes the distinguished gentleman from Georgia (Mr. Price), who is also a member of the Financial Services Committee.

2:47 PM EDT

Tom Price, R-GA 6th

Mr. PRICE of Georgia. I thank the gentleman.

I would suggest, Mr. Speaker, that these threats do no favors to the American taxpayers across our country. The chairman is ensuring that we will get full and active participation in this program, populated by the riskiest of loans with enormous redefault rates and cost to the American taxpayer of up to $300 billion. Mr. Speaker, that's irresponsible and it's unwise.

2:48 PM EDT

Mel Watt, D-NC 12th

Mr. WATT. Mr. Speaker, I was listening to this debate, and the only thing I could be reminded of was a few years ago when I had a very, very serious political campaign mounted against me and that had about $800,000 spent on television ads telling people how terrible I was, and at the end of the campaign, my mother finally called me and said, ``Are you really that bad?''

I don't recognize the bill that's being described here on the floor. Title II and title III we have overwhelmingly passed previously. Title V was overwhelmingly passed out of the Financial Services Committee. And all of the representations that are made about title I seem to me to be just outrageously overstated.

Like FHA is going to assume all of this responsibility. This is a bailout.

This is a voluntary program. FHA is not out soliciting any of these loans. They will evaluate the credit worthiness of everyone who comes to them.

Like this will cost $300 billion.

There's no way this program will cost $300 billion unless every single person who gets involved in it defaults and we get nothing out of a foreclosure or reclaiming of the property.

Like this is going to benefit speculators.

The bill explicitly says that this is limited to homeowners, not people who have been speculators. I don't know what else we could say on that. The language is absolutely explicit that only homeowners qualify for this program. [Page: H3299]

Or maybe like the most outrageous one that I've heard today: Well, the market will take care of this.

Well, the market is how we got here in the first place. If the market had been taking care of this, we wouldn't be in this crisis. We wouldn't be having the problem that we are trying to solve. And so this notion that the market is somehow going to overnight correct itself and we will solve this problem solely through market forces just doesn't make a lot of sense to me. But, again, my mother started to question after a while, after people said it over and over and over again. Maybe my colleagues

think if they say it enough, that this is terrible, they will convince somebody.

2:51 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, it is now my honor to introduce another member of the Financial Services Committee, the gentleman from North Carolina (Mr. McHenry), for 3 minutes.

2:51 PM EDT

Patrick McHenry, R-NC 10th

Mr. McHENRY. Mr. Speaker, there are many good and decent people who are in financial distress right now across this country. Some with mortgages they can't afford. Some made poor financial decisions. Some were victims of fraud. Some were simply speculators acting on their instincts.

But the reality is that most borrowers are paying on time. They are making their mortgages; 92 percent of borrowers are paying on time across this country; 6 percent are late but not yet in foreclosure, and 2 percent are actually in foreclosure. This bill is directed to the 2 percent on the backs of the 98 percent. That means that 110 million households are meeting their obligations. This legislation under consideration today would require that those 110 million families bail out the lenders

on Wall Street. And I will tell you it's simply a case of robbing Peter to pay Paul.

We are sending the message to financial institutions and Wall Street investors that when those investors make poor choices and take ill-advised risks that the Federal Government will step in and bail them out. That's a bad decision. In fact, this is a $300 billion taxpayer bailout that will cost the American taxpayer $5,000 for every foreclosed loan that is dumped into the program. And make no mistake about it. They will be dumped into the program. And it's not the homeowners who will control

this. It will be the lenders and servicers who will decide to take advantage of this for their own personal advantage, the servicers and the lenders.

The one thing that we know for sure is that those lenders and servicers are only going to submit those loans that they don't believe will pay. The American taxpayer will instead be punished. Ultimately, the real losers are the American taxpayers who are left to guarantee the loans that nobody else wants.

Mr. Speaker, in the past couple of months, I received several calls, letters, conversations I have had with my constituents, talking about the struggles that they are making in order to pay their mortgage. They don't want to have to pay somebody else's mortgage. They are struggling enough to make their ends meet with high gas prices, the rising cost of health care. And I'm not advocating that we do nothing. In fact, I have been working very hard in my district with foreclosure prevention seminars,

working with the Hope Now alliance, which has helped 1.4 million homeowners stay out of foreclosure, keep their homes.

These are the things that Congress should be doing, is helping individuals get through this crisis. We shouldn't have a massive bailout of lenders on Wall Street. We shouldn't bail out the servicers. They took ill-advised risks, and as such, the losses should be carried by them, not by my constituents who are paying on time.

Let's oppose this legislation and do what's reasonable and right for the taxpayer.

2:55 PM EDT

Tim Mahoney, D-FL 16th

Mr. MAHONEY of Florida. Mr. Speaker, I rise today in strong support of the American Housing Rescue and Foreclosure Prevention Act.

I must say that I'm extremely disappointed that the President and many of my friends on the other side of the aisle have expressed opposition to this legislation. I think it's telling that Federal Reserve Chairman Bernanke has expressed his support for the bill.

Mr. Speaker, the President and some of my Republican colleagues have called this plan a bailout. Clearly, the party that claims to represent big business doesn't understand business.

This plan requires current mortgage holders who choose to participate, not taxpayers, to realize the loss of at least 15 percent. And by putting homeowners in mortgages with rates and payments that we know they can afford, we are minimizing the risk of future defaults. And by doing so, we are injecting confidence and liquidity back into credit markets, thereby taking an important step to ensure the economy has the capital to begin digging ourselves out of this recession.

For anyone who calls this a bailout of risky investors, I would invite them to come to my district and meet some of the thousands of families who are in foreclosure. These are families with dreams and hopes. They, like everyone in this room, were trying as best they could to live the American Dream of homeownership. These are not frauds and cheats. They are firefighters and teachers who were forced into the subprime mortgage market in order to realize their dream.

The only moral hazard before us today would be our failure to act. If we are to protect our economy, our families, and the American Dream of homeownership, pass this amendment today.

2:56 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, it is my honor to introduce another distinguished member of the Financial Services Committee, the gentleman from Illinois (Mr. Roskam), and I yield to him 3 minutes.

2:57 PM EDT

Peter Roskam, R-IL 6th

Mr. ROSKAM. I thank the gentleman for yielding.

Mr. Speaker, have I ever told you about my dog, Max? I don't think I have. Let me just take a minute and tell you about Max.

Like a lot of us who are fathers of younger children, I have four children, who approached me, Mr. Speaker, and begged me and begged me and begged me to get them a dog. And for years I was able to avoid eye contact and was able to keep an animal out of my house. But, finally, in a moment of weakness, I said yes.

And a friend of mine, Mr. Speaker, realized what was happening, and he pulled me aside and he said, ``Look, if you're going to get a dog, realize this: You get what you pet.'' You get what you pet. So if a dog comes in and it's disobedient and you pet that dog and give it all kinds of affirmation, then guess what. It's going to keep being disobedient. And not being very wise, we started to do that, and so now we've got a slightly out-of-control dog.

Now, why do I mention Max? We're on the verge of doing that same type of conduct exactly to people who have fundamentally made some bad decisions. Let's take the borrowers aside, and I realize the chairman has worked hard, but let's take the borrowers aside and just put them in a different category because what we're going to be doing today, in addition to helping borrowers, is really bailing out lenders. And I don't think that's an overcharacterization. I don't think that's an unfair way of

looking at this. We are being told that lenders who were in this, who are great advocates of the free market when they're making money, they love the free market when they're making money, and now all of a sudden, they are coming to the Federal taxpayer and saying this has gotten a little bit more complicated than we thought, and now we want the taxpayers to come in and take care of this from here out. It's voluntary on the

part of the lenders, and think about how voluntary that would be. What a great invitation. These lenders go and they say here's our pile of bad debt. Let's take a haircut, 85 percent of the value, shove that off to the FHA, which is pretty ill equipped, I might add, to take on this obligation--let's shove that off to the taxpayer, and instead of getting our heads chopped off as lenders, we're just going to get a haircut.

I think we can do a lot better, I think, over a period of time.

[Time: 15:00]

There is a great willingness, Mr. Speaker, on this side of the aisle to try and work creatively and to try and work substantively on solutions. But I think as we reflect back on this, in the [Page: H3300]

chairman's own words, it is going to cost $5,000 for every defaulted mortgage that is assumed by the FHA, times a half million. That gets us to the $2.5 billion figure that makes many of us cringe.

And I don't think that those types of numbers should be allocated to lenders and bailing out lenders who made bad decisions.

3:00 PM EDT

Steny Hoyer, D-MD 5th

Mr. HOYER. I thank the gentleman for yielding.

This is not about petting dogs. This is about people who are hurting. This is trying to reach out to people who have been savaged in many ways by this economy and the policies that have led to an economy where average working incomes are down $1,000 and where gasoline prices have exploded over 200 percent from $1.46 to $3.56. I would remind you that under the Clinton administration they went from $1.06 to $1.46, 5 cents a year during the 8 years of the Clinton administration. They are going up

5 cents a week during this administration.

People are stretched.

I didn't hear people come to this floor and say $30 billion for Bear Stearns. It was outrageous, putting the taxpayers' money--Mr. Flake says he did. Thirty billion dollars. We just talked about $2.5 billion for literally tens of thousands, hundreds of thousands, perhaps as many as 1 million people. There is a crisis, and they have asked us to respond.

I want to congratulate the chairman of our committee. I want to thank the ranking member of the committee. I want to thank all the members of the committee for giving this their attention and trying to come up with a solution that works. Was this a partisan, divisive solution? Absolutely not. The Secretary of the Treasury has said that this is a product that merits serious consideration.

For a time, I thought he was for it. I am not sure now. There seems to be some internal division within the administration. Mr. Bernanke, the head of the Federal Reserve, former chairman of the Council of Economic Advisers, said that this is a good thing to do.

So, Mr. Speaker, today through this comprehensive landmark legislation, the American Housing Rescue and Foreclosure Prevention Act, this House is going to act not to pet dogs but to help people. This House will take decisive action to keep hundreds of thousands of families at risk of foreclosure in their homes and will help stabilize the housing markets across the Nation that have been wracked by an unprecedented drop in home values over the last 2 years.

Make no mistake: The slumping housing market has had negative, rippling effects throughout our economy. It is not just people in houses that are having problems, but the subprime crisis has affected our entire country and the availability of credit. And thus it is imperative that we take responsible, reasonable steps such as this to strengthen our weak economy and ultimately benefit not just those who are at risk of losing their homes, but every American.

As Federal Reserve Chairman Ben Bernanke pointed out in a speech on Monday, Monday, just a few days ago, at Columbia University, ``High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets, and the broader economy.''

And the answer is, don't pet your dog. It was bad behavior. Leave him alone. Or punish him. What we want to do is help people do the right thing.

He continued: ``Therefore, doing what we can to avoid preventable foreclosures is not just in the interests of lenders and borrowers, it's in everybody's interest.'' Those are Bernanke's words. Not Chairman Frank's. Not mine.

Mr. Speaker, that is precisely what this legislation, the product of hard work by Chairman Barney Frank and so many others, is designed to do: Avoid preventable foreclosures.

There is little question that after an historic housing boom in the first half of this decade we now are faced with a housing crisis. Foreclosures soared to an all-time high in the last quarter of 2007. According to Mortgage Bankers Association, more than 1.2 million properties received foreclosure notices in 2007, up 75 percent from 2006. And 1 in 33 homeowners is projected to be in foreclosure over the next 2 years. So much for a great economy.

This legislation, in short, will expand the FHA program so that borrowers in danger of losing their homes can refinance into lower-cost, government-insured mortgages that they can afford to repay.

I've heard so much talk about a family-friendly Congress. Family values. Caring about children. What can be more family friendly than keeping families in their homes? I think not too many things.

But to be clear, this bill will minimize taxpayer exposure. In fact, the Congressional Budget Office estimates that the cost of putting homeowners into affordable loans under the bill would be not $30 billion, not $20 billion, not $10 billion, but a total of $2.7 billion. A few days in Iraq. A few days in Iraq. Not a month. A few days in Iraq.

Contrary to the rhetoric coming from some, this bill is not a bailout for irresponsible lenders or borrowers. Only primary residences are eligible. Investors and lenders must take significant losses, as they should. The owner of the old mortgage can only receive 85 percent of the current value of the home.

And in return for an FHA guarantee on the mortgage, borrowers must share with the government any profit from the resale of a refinanced home. The government will only have liability if the borrower defaults and the amount recovered in foreclosure is below the outstanding debt still owed.

Furthermore, this legislation includes tax provisions to expand refinancing opportunities and to spur home buying.

It increases the VA home loan limit for high-cost housing areas, which we passed before, enabling veterans to have more homeownership opportunities. We are having people come home from Iraq. We are going to be talking about that. They may have lost their home because they went to Iraq and they couldn't keep their home. This helps them get back in a home.

And it includes FHA modernization provisions that have already passed this House, as well as GSE reforms such as strengthening the regulation of Fannie Mae and Freddie Mac and raising their loan limits to increase liquidity in the mortgage market.

Chairman Frank has talked to Secretary Paulson about that. I have talked to Secretary Paulson about that. I am sure many of you on your side of the aisle have talked to Secretary Paulson about that. He thinks this is absolutely essential.

I urge my colleagues on both sides of the aisle, let's mitigate the effects of the bursting of the housing bubble. Let's prevent hundreds of thousands, and perhaps up to 1 million people, from foreclosure and allow American families to stay in their homes through this responsible legislation.

Let's stabilize our housing market and help millions and millions of homeowners who are not at risk of foreclosure, but whose neighbors are at risk for foreclosure, and if they are foreclosed upon, will see their home values deteriorate. So the assistance is not just to those at risk of foreclosure, but to all those who are in communities where homes are at risk.

Let's pass this comprehensive, bipartisan legislation today and work to get it to the President's desk without delay. I am hopeful that the President will see fit to sign it. Vote ``yes.'' Vote ``yes'' on the American Housing Rescue and Foreclosure Prevention Act of 2008. Vote ``yes'' for the families of America.

3:09 PM EDT

Jeff Flake, R-AZ 6th

Mr. FLAKE. I thank the gentleman for yielding. [Page: H3301]

The gentleman from Massachusetts knows the respect I have for his knowledge of free market economics. He often scolds us on this side of the aisle when our rhetoric doesn't match our actions. And he is often justified in doing so. I have heard him quote Adam Smith and Milton Friedman with the best of them.

That is why I was baffled to see this bill come to the floor from his committee, a bill that violates the same principles that he has chastened us for not recognizing. He was right then. And he is inconsistent and wrong today.

This bill has ``moral hazard'' written all over it. We know that a party insulated from risk behaves differently than a party that is fully exposed to risk. The truth is here we are insulating home buyers and home owners from risk. And we will simply prolong the housing crisis by doing so.

Let's be real here. The purpose of this legislation is to insulate political parties from risk. That is what we are doing here. If we felt such a need to intervene here, we ought to remember what we did last September when I believe, if I remember right, we encouraged FHA to give no-money-down loans. Why is it that we think that we are so prescient here about what is going to happen?

We can't outguess the market. We shouldn't try to. We simply will delay the bottom and delay and increase the dislocations that will occur when its politicians decide to allocate resources and capital rather than the markets.

3:12 PM EDT

Melissa Bean, D-IL 8th

Ms. BEAN. Mr. Speaker, I rise to engage in a colloquy with the chairman of the Committee on Financial Services.

Mr. Chairman, section 505 of title V of this legislation contains language pertaining to the treatment of disabled veterans in the bankruptcy code.

Every Member of the House supports ensuring that no disabled veteran is discriminated against for obtaining federally supported housing loans or subsidies.

Mr. Chairman, can you clarify for me why this provision was included in the bill, and why we need to protect disabled veterans from discrimination in this legislation?

3:12 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. If the gentlewoman will yield, I know sometimes conspiracy theories rattle around this place. The reason we put in the legislation to protect disabled veterans who had bankruptcy from being excluded from this program is to protect veterans, disabled veterans who have been in bankruptcy from being in this program. There were people who suggested that the sensitivity people would have in bankruptcy could be a problem. Now I will point out, by the way, that thanks to

some very good amendments by the gentleman from Georgia (Mr. Marshall) who has dealt with this problem in a more general way, and he is a bankruptcy expert--from the law side not the subject side. But we thought with disabled veterans, we know this engenders prejudice

when people see in some cases people are disabled. So it was there for that reason, to protect people, to make sure that we, the Federal Government, would not, in any way, be discriminating against them and maybe therefore set a good example for everybody else.

3:13 PM EDT

Melissa Bean, D-IL 8th

Ms. BEAN. Mr. Chairman, there have been reports suggesting that this provision could be used as a placeholder for a broader expansion of the Federal bankruptcy laws. Can you clarify that this language will not be expanded in conference to include a broader re-write of the Nation's bankruptcy laws or to be used in conference for any other redrafting of language encompassed under title 11 of the U.S. Code other than this specific provision?

3:14 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. If the gentlewoman will yield, absolutely I can guaranty that. I should be clear. I am cosponsor of the bill that would have provided a bankruptcy avenue for primary residences. That is a separate issue as far as I am concerned. No, this particular provision will not be a vehicle for that.

3:14 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. I yield the gentlewoman 30 additional seconds.

[Time: 15:15]

I guarantee this provision will only be what it is. If anybody wants to move elsewhere, I might support that. But entirely separate from this, this will not be a vehicle.

In fact, I think it would be dishonorable for anyone. We have had too many examples of people trying to use veterans, and particularly disabled veterans, as a political stick to achieve other objectives. I would find that to be an absolutely outrageous procedure, and I can guarantee you it will not happen.

3:14 PM EDT

Melissa Bean, D-IL 8th

Ms. BEAN. I thank the chairman for the clarification. I would also like to commend your leadership on producing a balanced bipartisan bill and allowing me to work with you during the committee markup.

3:15 PM EDT

Melissa Bean, D-IL 8th

Ms. BEAN. Contrary to the earlier comments from our colleague in Texas, I want to specifically acknowledge the inclusion of my amendment to disallow participation in this program to anyone who had misstated their incomes on their original loan or been convicted of mortgage fraud.

On the whole, this legislation will help stabilize the housing market and economy while not creating any uncertainty in legal contracts by reducing risks to lenders who keep qualified borrowers in their homes instead of foreclosing.

3:16 PM EDT

Jim Marshall, D-GA 8th

Mr. MARSHALL. Thank you, Mr. Chairman.

Mr. Speaker, I had originally planned to talk about something else altogether, but it's the nature of the debate that causes me to simply say I do view this as a bailout of sorts, but it's not a bailout for the borrowers, it's not a bailout for the lenders.

If you understand the bill, you understand that actually the deals that the borrowers get are not particularly good. The deals that the lenders get are not particularly good.

This is intended, if it works, as a bailout generally for all those innocent homeowners and taxpayers who have been dragged into this mess in part, because of our failure to regulate previously, in part because of the incompetence, virtually, the pitiful performance the of the rating agencies.

As a result, an awful lot of people, and our economy, are being hurt. I view, this personally, as a bailout for the economy, with an incidental effect of avoiding foreclosures in individual cases--and that's nice. It's nice to help people out--but I am not voting for this thing because it's helping individuals out and happens to help a few lenders out. It's not a bailout for those folks. In my view it's a bailout for the entire economy and all of these people that have been dragged into it.

3:20 PM EDT

Jerry McNerney, D-CA 11th

Mr. McNERNEY. Mr. Speaker, I represent Stockton, California, which unfortunately has the highest foreclosure rates in the country. Many families in northern California have lost their homes and the foreclosures have lead to personal hardships, community instability and national economic risk.

When my constituents asked me what Congress was doing to fix the economy, I told them we are pushing to create family-wage jobs and put money back in people's pockets. Today we are building on these efforts by considering legislation that will provide fiscally responsible options for families struggling to stay in their homes.

Last December I hosted a workshop for foreclosures in Stockton with my colleague, DENNIS CARDOZA, to provide housing counseling to local families. While we expected the turnout to be high, participants started lining up 2 hours early and, ultimately, more than 500 people showed up.

I heard heart-breaking stories from my constituents, and this is just one single illustration of why today's legislation is so important. One of the biggest challenges facing the housing market is in the high-cost States, like California, that housing programs have not kept pace with the times. Unrealistically low limits for Fannie Mae, Freddie Mac and FHA mean people living in the high-cost States have not fully benefited from these programs.

The economic stimulus package, temporary loan limit increase to $730,000, raising the loan limit, injects liquidity into the mortgage market to provide access to credit and opens new opportunities for refinancing.

However, since these increases are only temporary, it is clear that making them permanent will have beneficial effects for the housing market. I introduced the Homeowner Opportunity Act to permanently raise the loan limits, and I am pleased that today's legislation includes my bill.

I want to thank Chairman Frank for all of his support and assistance. This change will benefit my constituents and the entire country.

3:24 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. Mr. Speaker, I now yield 2 minutes to the chairwoman of the Housing Subcommittee, who makes her second appearance today, having carried through passage of a very important bill earlier today, the gentlewoman from California (Ms. Waters).

3:24 PM EDT

Maxine Waters, D-CA 35th

Ms. WATERS. I would first like to thank our chairman, Barney Frank, for the leadership that he has provided on dealing with a serious problem in America. I would like to thank the Members once more for the support that they gave me on the Neighborhood Stabilization Act that we passed today. That, coupled with what is being done now, will go a long way to providing real assistance to our cities, to our counties, to our States and to our citizens.

I know that it has been said over and over again today that people are suffering, that there are people who got into these loans that did not understand what a no-doc loan, a no interest rate loan was, an ARM that was going to reset within 6 months, 1 year or 2 years, and that the mortgage would double, triple or quadruple.

They are innocent, hardworking Americans out there every day who simply want to live the American Dream. Many of them were steered into these loans because there was this big, big housing bubble.

We had these local initiators of loans through our banks and our mortgage brokers who discovered that they could package them, they could securitize them, they would be invested in Wall Street, and the Wall Street people invested mightily in them, and now the services have them all. The only thing that the services can do is foreclose on these properties.

Well, we can do something about it. I don't know why we have to argue and fight about whether or not we can help the American people. They sent us here to look after their best interests.

I don't understand why anybody can call this a bailout when, in fact, nobody has said anything about the bailout of the almost $30 billion for Bear Stearns. If we can help Wall Street, we certainly can help the people who vote for us every day and who sent us here.

We help people all over this Nation in different ways. Some people are confronted with a hurricane, or a flood or an earthquake. American citizens expect us to be there for the citizens when we are needed in different ways. This is a different way.

I ask everyone to support the bill.

3:27 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, it's my honor now to yield 2 minutes to the gentlewoman from Virginia (Mrs. Drake), who has an extensive amount of experience in the housing industry and brings great expertise to this process.

3:32 PM EDT

Ruben Hinojosa, D-TX 15th

Mr. HINOJOSA. Mr. Speaker, I rise today in strong support of the underlying bill, H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act of 2008, and in particular H.R. 5830, the FHA Housing Stabilization and Homeownership Retention Act of 2008, which is part of this housing rescue package.

I am proud to be a cosponsor of H.R. 5830. I believe that it is a well-balanced measure that will go a long way towards turning around the housing crisis and address the issues that have resulted in a nationwide economic crisis.

Mr. Speaker, I am especially pleased with title II of the bill which establishes a long-needed Office of Housing Counseling within the Department of Housing and Urban Development. I commend Chairman Frank and Ranking Member Waters for including it in their bill.

I sincerely appreciate the fact that community-based organizations with expertise in the field of housing counseling will be given a voice in the development of such policies. I am pleased that the bill provides for the building of capacity to provide housing counseling services in areas that lack sufficient services such as large parts of my district in the Rio Grande Valley and in rural America in general.

Moreover, I applaud Chairman Frank and Congresswoman Waters for including in the bill the authorization of $3 million for public service announcements as part of the act's national public service multimedia campaign. This campaign will help persons facing mortgage foreclosure, elderly persons, persons who face language barriers, and low-income persons.

I want to take this opportunity to thank them for increasing the availability, affordability, and quality of housing in rural America. And I believe this bill will do more of the same.

Mr. Speaker, I believe the product Chairman Frank and Congresswoman Waters have brought to the floor will result in more homeowners remaining in their homes and help stabilize the housing market. I strongly urge my colleagues to vote in favor of this bill.

3:34 PM EDT

David Wu, D-OR 1st

Mr. WU. Mr. Speaker, last year 1.5 million American households entered foreclosure, and this year the number of American families in danger of losing their homes could be as high as 2 million. These foreclosures could reduce overall economic activity by $166 billion this year as the effects of the mortgage crisis spill over into other sectors of the economy.

In my State of Oregon, the foreclosure rate among subprime borrowers increased by 28 percent in the fourth quarter of 2007. Over 5,000 Oregon families are currently in foreclosure, more than half of whom hold subprime mortgages.

But this debate is not about facts and statistics. If it were, it would be over by now. By requiring that the holders of debt take a haircut down to 85 percent of current market value, we are [Page: H3304]

sharing the pain. By requiring that people who are working in order to be eligible for this program are paying at least 35 percent of their income in order to be eligible, we are exercising responsibility.

What this debate is really about is a matter of values. The values being expounded on the other side of this debate are absolutely astounding, and nothing illustrates it better than a movie I love, ``It's a Wonderful Life.'' George Bailey was the hero of that movie, and he was dealing with a hard-hearted old man named Mr. Potter. Mr. Potter said to George Bailey as he was trying to save American households, ``Have you put any real pressure on these people to pay their mortgages?''

And George Bailey relied, ``Times are bad, Mr. Potter. A lot of these people are out of work.''

``Then foreclose.''

George Bailey answers, ``I can't do that. These families have children.''

``Not my children,'' said Mr. Potter.

Well, what we hear from the other side is: not my children, these folks are irresponsible, throw them out.

We clearly have the upper hand in this debate.

3:36 PM EDT

Barbara Lee, D-CA 9th

Ms. LEE. Mr. Speaker, let me thank Chairman Frank and Chairwoman Waters for bringing this badly needed legislation to the floor today. Millions of families in America are seeing their dream of homeownership turning into a nightmare. Foreclosure rates have reached crisis levels. In California and in many parts of my district, too many families are facing devastation, and entire neighborhoods are on the brink of collapse.

Homeownership has been the primary means that most Americans have to accumulate any kind of wealth, to send their kids to college, to start a small business, or to do whatever they want to do to be part of the American dream.

I want to thank Chairman Frank for including language in this legislation which I introduced with Senator McCaskill to address the Reverse Mortgage Proceeds Protection Act which protects seniors from losing their homes.

We are beginning to see some of the same abuses in the advertising and high-pressure sales of reverse mortgages as we saw in the subprime mortgage crisis. These provisions will ensure that vulnerable seniors are fully informed of hidden costs and pitfalls of reverse mortgages before they sign.

3:38 PM EDT

Marsha Blackburn, R-TN 7th

Mrs. BLACKBURN. Mr. Speaker, I heard from one of my constituents who said they felt like this bill was not really about rescuing homeowners, they felt like it was another attempt at wealth redistribution. They felt that the risk and the costs that are borne and should be borne by irresponsible lenders, investors, and borrowers are going to end up being transferred to the Federal Government and thereby to the American taxpayer once again. And this time, it is to the tune of $300 billion.

What the bill does is the good actors, the 92 percent of all mortgage holders who are paying their mortgage on time, they are going to end up being liable for the irresponsible actions of lenders and speculators. The way my constituencies see it, this is a risky business. This Congress should not send a message that it is acceptable to give up on an obligation because you're going to have a government buyout or a bailout and you are going to be able to cut your personal losses.

Last week I did a seminar in my district. I worked with some government and private sector initiatives such as Hope Now, working to help homeowners weather the storm, to get the information to them that they needed.

Mr. Speaker, that is what we should be doing, educating homeowners on the options at their disposal, as opposed to passing measures that reward recklessness and provide a safety net for irresponsibility. Congress does not need to bail out the housing market, it needs to encourage a kick start. I hope that my colleagues will join me and that together we will vote this bill down.

3:40 PM EDT

Brad Sherman, D-CA 27th

Mr. SHERMAN. Mr. Speaker, the facts are these: Homeowners have signed mortgages where they can't afford to make the payments, especially as they are adjusted upwards. We need to write-down the principal amount to something that these good homeowners can afford. But we are told ``don't bail out the lenders.''

There are two ways to write-down the principal amount of a loan: an involuntary way through the bankruptcy court, and we had a bill before this House which authorized the bankruptcy court in very limited circumstances, very tailored, to write-down the balance of the loan. Don't bail out the lender, just tell the lender they have to take less. That bill is not going to pass. It is opposed by Republicans in the Senate.

The second way is a voluntary way. You make a fair offer to the lender that, if they will write-down the principal amount, then they will get a guarantee of that lesser amount from the government--so at least they will get paid something. Now we are told to vote against this bill because it bails out lenders.

Some are giving hypocrisy a bad name.

If you are going to help homeowners, you have to write-down the balance of the loan. And people come to this floor and they say well, we can't do it the voluntary way, and we can't do it the involuntary way; but just as soon as we find some other way, they will be happy to bail out homeowners.

The fact is they have voted against using the bankruptcy court to write- down the principal amount and not give the lenders anything. And now they are saying when we make a fair offer to the lenders to do the same thing, we are bailing out the lenders.

I have a lot of ``respect'' for anybody who can come to this floor and just say they don't want to help these homeowners at all. That's an honest position. But to say you are against the voluntary and involuntary, that's wrong.

3:43 PM EDT

Randy Neugebauer, R-TX 19th

Mr. NEUGEBAUER. Mr. Speaker, I rise in strong opposition to this bill. I [Page: H3305]

think we have had a good discussion here today. Unfortunately, it was a discussion only and there was not opportunity for our side, or really any other Members to participate in this process of offering amendments that could have most likely made this a better piece of legislation.

There are several reasons I oppose this bill. Number one is the flawed process. In my tenure in Congress, I have never had a major piece of legislation like this where I am not even going to get an opportunity to cast my vote. I know people who are watching this process are wondering, you mean we have been talking all day about this important piece of legislation that the other side says is very important to the American people, yet their Member of Congress is not going to get a vote on this

process. It is a flawed process.

We brought an energy bill over, stripped all of the energy provisions out of it, and we are putting housing into an energy bill. I still don't understand the mechanics of that, and maybe someone later on can explain that to me.

This is also about not saddling the American people who are already struggling to make their own house payments, to make their own rental payments, to pay the highest gasoline prices in the history of this country, and the highest electricity costs and natural gas costs, it is about saddling them now with the payments for their neighbor.

What the 110 million people who are doing the best they can and want the United States Congress to do is to leave them alone and really start addressing the major issues that are important to the American people.

[Time: 15:45]

It's about not rewarding bad behavior. We have some lenders, and we have some borrowers that went out and bet that the housing market was going to go up. It didn't go up, and, in fact, unfortunately, in some places, it went down. And now people are faced with a negative equity or a smaller equity in their home. And we are sympathetic to that.

As I said earlier, I've been in the real estate business for a very long time. I've seen the markets go up. I've seen the markets go down. And sometimes it causes a situation where people don't have as much equity.

But what you have to understand is a lot of people went into this process with no equity. And now this bill says, you know what? We've got a deal for you, because now we're going to help create equity in your house by putting your neighbors at risk.

This is a bad bill. I encourage Members to vote against this bill. I'm sorry. We can't vote against it. Vote against the amendments.

3:46 PM EDT

Barney Frank, D-MA 4th

Mr. FRANK of Massachusetts. Mr. Speaker, I understand the complaints about the process. Remember, though, that several of the bills being reenacted today have already been fully debated and amended on the floor. There is one that was not subject to the normal--and I'm a general defender of the normal--process. It's the FHA rescue bill.

And I will say, in this case, I think it is fair to ask Members to vote for it up or down. It is a very interrelated piece of legislation. It tries to balance cost and incentive. It would be easy to put it out of whack. And in this one case I think it is fair to say you can vote it up or you can vote it down. Members will have a chance to vote on it. While it's in the form of an amendment, if that amendment is defeated, it dies.

I also want to address the issue of the amendment offered by the gentleman from North Carolina and the gentleman from Ohio regarding preemption, because there may be some confusion.

I personally spoke, today, with representatives of the banking organizations, the American Bankers Association, the Independent Community Bankers, and the Mortgage Bankers. They took the position that if we were able to adopt the language offered by the gentleman from Ohio, they would find this a bill that they would accept and would not seek to defeat.

Because of an objection, we weren't able to do this, so technically, yes, they had previously said they were opposed to it in that form. They have also said, after we outlined the procedure that was followed by the gentleman from Ohio (Mr. LaTourette), the gentleman from North Carolina (Mr. Miller) and myself, that it is now acceptable; that is, while we were blocked by an objection from adopting the actual language, the language that was agreed to by them, by the Attorneys

General, by the State bank supervisors, by advocacy groups, will be the language that's in the bill. So let there be no doubt about that. There is no substantive objection to what will happen.

Now, let me talk about the bill. I guess I want to, not damn my bill today with faint praise, but support it. It comes from the economists.

Now, the gentleman from Arizona (Mr. Flake), for whom I have a great deal of respect, a man of very high intellectual integrity, he chided me because I have taken a free market position, but not here. And I'll respond this way.

I have opposed systemic interventions in the market. I think it is generally unwise for us to enact legislation which, in an ongoing way, displaces the market. But that's not what we do here. There is a part of the reality of the market that is called market failure. People have won Nobel Prizes, Joe Stiglitz, for work about market failure. Clearly there has been market failure with regard to mortgages. The market failure was the breaking of the lender-borrower relationship and the substitution

of securitization without appropriate countervailing incentives.

This bill today is no ongoing intervention in the market. It is time limited, and limited in specifics to a subset of mortgages. It seeks to undo, to some extent, to mitigate a market failure. It will leave the market, I believe, stronger going forward.

So I accept the gentleman from Arizona's reminding me that I should stay true to free market principles. This bill is true to free market principles.

And let me quote one of the leading advocates of free market principles in the English-speaking world, the Economist, called to my attention by the staff of the Financial Services Committee, which has done enormously good work in substantively putting this bill together, and in listening to me talk about it in various ways.

And I appreciate both aspects of that.

Here's what the Economist said: ``The plan is hardly a bailout,'' talking about this bill. This is a current Economist. ``Lenders would have to write down their loans to 85 percent of the current value of a house.'' By the way, under FHA Security Administration's plan, they can get a 100 percent loan put in. They can get somebody who's defaulted and get them a 100 percent loan. We require an 85 percent writedown to the value.

``Borrowers would pay a fee for the insurance and give up a share of any later price rise to the government.'' By the way, they would also be barred for 5 years from taking out a second mortgage. So the borrowers under this, if there was an increase in equity, would have to share much of it with the Government, and the earlier in the process in which they sold out, the more the Government would get. That's not the bailout that people have described.

People worry about moral hazard. I would assure people, no borrower who goes through this process will say at the end of it, ``Boy, that was fun. Where do I buy a ticket to get back on Space Mountain?'' They will be deterred.

But we're not relying solely on this. Two-thirds plus of this House, many of my Republican colleagues didn't do it, but many of my Republican colleagues did. We voted for a bill to regulate subprime mortgages going forward. We're not simply relying on people's bad experience. We have put some restrictions on that.

I believe this is pro-market. The markets now are in trouble because a lot of people who were very smart bought things they shouldn't have bought, including subprime mortgages. And having bought things they shouldn't have bought, they now don't want to buy things they should buy.

We all know the little story about the child who touches the hot stove, [Page: H3306]

and having touched a hot stove and being burned, won't go near the stove. We have investors today who, having touched the hot stove, are staying away from the refrigerator, the sink and the shower because they have been so badly burned.

If we do not adopt appropriate responses to this market failure, we will not cure it, and the lag in investments will continue.

We are working through the market here. It is voluntary that a lender says we're going to cut it down. People say, well, they'll dump all their bad loans. Have the Republicans who say that, because many Republicans are with us, so little confidence in the FHA?

Nothing in this bill coerces the FHA to accept a single loan that it finds unlikely to be repaid. And CBO accepts that, because they say of 500,000 loans that they expect to be accepted, the failure rate will be, average out to $4,800 per loan. Do you really think if the loan failed it would only cost us $4,800?

That figure, that $2.4 billion is CBO saying that there won't be many failures because of the criteria that are in this bill.

And people have said, what about the people who paid their mortgages? Well, if they live in a neighborhood where there is foreclosure, they're getting hurt. If they live in a city where the property tax revenues are going down, they're getting hurt. And if they live in America, they are in the midst of a recession in which we are losing jobs when we should be gaining them, in which real wages have been pulled down, and the single biggest cause of this recession is the subprime crisis and its

reverberations.

This is a rare case of a microeconomic factor causing a macroeconomic problem. And the market got us into this. And we don't say junk the market. And I know people who have said, oh, the market's way too smart. And people have said to me, you know, some smart people don't agree with this proposal. Well, I agree with that.

But I also have to note that no dumb people got America into this problem. You had to be really smart to understand collateralized debt obligation derivatives. And the problem is that we need to restrain some of their instincts and let the market function again. And it simply will not happen if you simply let it go.

Here's what we say. And, by the way, I supported Hope Now when it came out. But Hope Now had a flaw. It was based on the notion--Members don't even pay attention to this--it was based on the notion that the problem was when the mortgage reset to a higher rate under adjustable rate mortgages, that would be the problem. That hasn't been the problem.

The problem has been people who owe more than the loan is worth. Some of them were irresponsible in the first place. Some of them made the mistake that almost everybody else made of not foreseeing the depth of the drop in house prices. So Hope Now has been overtaken by events.

We here are responding to reality in a way that is pro-market and minimizes the outlay. I hope the bill is passed.