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House puts heat on bank CEOs
Representative Jeb Hensarling (R-TX) is a member of the House Financial Services Committee
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TEXT OF INTERVIEW
Steve Chiotakis: This morning, Congress will likely be lathering it on thick.
Bank CEOs go before a committee to testify about the massive cash infusion that took place last fall. Several of the executives say they loaned out more money because of it. But, of course, there've been lots and lots of criticism about where the money's gone, or the fact that there hasn't been much accountability.
We're joined by Representative Jeb Hensarling, a Republican from the 5th District of Texas. He's a member of the House Financial Services Committee. Congressman, what's the first question you'd like to ask one of those CEOs?
Jeb Hensarling: Well, I would like to ask 'em, in some respects, what were they thinking in taking the taxpayer money and assuming that life could go on as usual? Having said that, I don't necessarily want this to turn into a public beheading of eight CEOs. A lot of the blame, frankly, belongs with Congress. Congress gave Treasury a blank check, Treasury turned around and essentially gave these banks a blank check. Congress should have written a law that required more transparency and more accountability, and that's where the real fault lays.
Chiotakis: If this cash infusion was supposed to increase lending, why do you suppose banks have been reluctant to do that?
Hensarling: Well, I think it was more than that. The theory was that to stop a bank panic, you had to have an infusion of capital, not necessarily that that would lead to more lending. Frankly, I want banks to make decisions about who they lend to. Part of the reason that we're in the economic challenge that we're in is that congressional policies attempted to force, incent or browbeat financial institutions into loaning money to people to buy homes who couldn't afford the homes. I don't want to repeat that mistake as we try to pull out of this mistake. There has to be accountability on what are they doing with the taxpayer money, and the taxpayer may make the decision he wants his money back.
Chiotakis: Representative Jeb Hensarling, 5th District of Texas. Thanks for taking time to speak with us this morning.
Hensarling: Thanks for having me.
There are two blatant mischaracterizations in Rep. Hensarling's testimony. First, the Bush Admin. under the guidance of Henry Paulson, the Bush appointee to the Sec. of Treasury, went to Congress to ask for the money that was infused into the Wall Street Banks. He said it was needed to avoid a catastrophe of banks collapsing in a domino effect after the Lehmon Brothers collapse. It wasn't simply that Congress, for no apparent reason, gave the Sec. of Treasury a blank check to throw at Wall Street Bankers. Secondly, the comment that "Part of the reason that we're in the economic challenge that we're in is that congressional policies attempted to force, incent or browbeat financial institutions into loaning money to people to buy homes who couldn't afford the homes." is a gross mischaracterization of what happened. Nobody browbeat anybody. The sub-prime mortgage industry (individual lenders and Wall Street investment firms) were inebriated with all the money they were making on issuing loans to people, and there was no regulation to stop them from issuing loans to people who couldn't afford them. The thought process was that the value of homes would go up forever, and that the interest rates would remain low forever. Therefore, "not being able to afford a house that doubles in value every three to five years" was considered ridiculous to many buyers and most lenders who had no vested interest in the transaction after the home purchase was complete. They simply took their closing costs and walked away from the situation, scott free. Congress had nothing to do with it. This guy is a dangerous liar and is among the party that got us into this economic crisis.
Why should existing mortgages be subsidized by tax payers? Are they some privileged citizens or what? They took loans which they can not afford. They participated in the bubble and lost. So just foreclose and move on.
Not a single penny of tax payer money should go to these speculators.
For some reason people seem to think real estate assets owner are a privileged class.
In addition to the previous post, we also need to dump the credit bureaus which are just businesses trying to generate a profit. It's already proven they have horribly inaccurate information that is difficult to challenge and is truly not a very good indicator of one's ability to pay a financial obligation. Instead, lets do things the old way. Show your tax returns, bring in your paid bills and make a call to their employer. This isn't rocket science, just use common sense and remove some of the big business nonsense from lending.
