Congressional report says TARP mortgage modification program has not been effective
Appointed Sen. Ted Kaufman (D-DE) (L) raises his right hand and is sworn in by Vice President Dick Cheney (R) as his wife Lynne Kaufman (C) holds the bible in the Old Senate Chamber at the U.S. Capitol on January 16, 2009 in Washington, DC.
TEXT OF INTERVIEW
JEREMY HOBSON: About $50 billion of the $700 billion TARP bank bailout was set aside for mortgage modification. The money is being used to bring down people's monthly mortgage costs so they can stay in their homes. Well, the Congressional Oversight Panel has released a report that says those efforts have not been effective.
Former Democratic Senator Ted Kaufman chairs the panel and joins us now. Good morning.
TED KAUFMAN: Good morning, Jeremy.
HOBSON: So in your latest report, the Panel estimates that the HAMP program, the mortgage modification program included in the TARP, is only going to prevent a fraction of the foreclosures that were initially estimated by the Treasury Department. Why stick with this program?
KAUFMAN: The idea was hopefully we'd be able to avoid three to four million foreclosures. It looks like its going to be 700- to 800- thousand foreclosures but for those 7- or 8- hundred thousand Americans, that's a very important thing. The other thing is it originally was estimated to be $50 billion and down to $30 billion and it looks like it's only going to be a $4 billion program, so it's not like we spend all the money we thought we would and then come out with a small end. We are going to spend a lot less money, and we're going to get a lot less results.
HOBSON: Why do you think it hasn't worked?
KAUFMAN: A lot of conflict of services. The people who are actually handle the loans between the borrower and the lender, these folks got more money, frankly, foreclosing than they did modifying. So it was to their advantage to foreclose and not to modify.
HOBSON: Senator Kaufman, your panel oversees not just the mortgage modification program, but the entire $700 billion TARP funds. Let me just quote from you something that you say in the latest report -- "a significant portion of the $166.7 billion in TARP funds currently outstanding relates to Treasury's investments in AIG, and assistance provided to the automotive industry." Do you think that we're going to get the money back from both of those programs?
KAUFMAN: Right now it looks like the AIG program -- present estimates are it will cost us $14 billion. And the auto industry it looks like will cost about $19 billion, so it's nothing like what we originally said. In addition in the back capitalization program they expect to gain $22 billion. So it looks like the total TARP program at the present CPL estimates is about $25 billion in costs.
HOBSON: Quite an amazing turn around for the TARP. Former Senator Ted Kaufman chairs the congressional panel that oversees the TARP. Thanks so much for speaking with us this morning.
KAUFMAN: Great talking with you Jeremy.