Congress Angered by Lack of TARP Foreclosure Relief

House Democrats are accusing the Treasury Department of "abandoning" Congress' mandate to use part of the $700 billion Troubled Asset Relief Program funds to prevent foreclosures and brushing aside an FDIC program that would use federal loan guarantees to facilitate loan modifications. Treasury Secretary Henry Paulson told a House panel that he continues to look for a TARP foreclosure prevention program that "strikes the right balance" between protecting taxpayers and being effective. Federal Reserve Board Chairman Ben Bernanke testified that the Federal Deposit Insurance Corp. has developed a "very promising approach." However, he has concerns that the "government might be liable for $100,000" in some modifications if a homeowner with large negative equity simply abandons the property. Secretary Paulson noted that Fannie Mae, Freddie Mac and the Hope Now servicers have adopted a streamlined loan modification approach modeled after the FDIC program. But House Financial Services Committee chairman Barney Frank, D-Mass., argued that such initiatives are not a "substitute" for developing a TARP foreclosure reduction program.