Sen. Ted Kaufman on foreclosure moratoriums and consequences to the economy

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: The Congressional Oversight Panel that was created to monitor the Wall Street Bailout has a new report out this morning. It says all those mortgage documentation issues that led to foreclosure moratoriums at many banks could have severe consequences for the economy. At issue is whether banks followed the proper paperwork procedures when transferring ownership of mortgages and also when processing foreclosures.

Former Senator Ted Kaufman is a Delaware Democrat who chairs the Congressional Oversight Panel. And he joins us now. Senator, welcome to Marketplace.

TED KAUFMAN: Thanks for having me on, Jeremy.

HOBSON: Does this problem have the capacity, do you think, to call into question the ownership of tens of billions of dollars worth of mortgages and actually lead to another financial crisis?

KAUFMAN: Frankly, we don't know yet, what the implication will be. What we're calling on Treasury to do, really takes a hard look at this. There's a number of different things that could be a major problem. One is due process. The second is the fact that thousands of documents are being signed by people. No one knew what was really in them. And then we have a major mortgage modification program to try to help people that are having problems -- $30 billion program and we're very concerned that our services, can they really modify what is really going on and are they modifying what's going on with mortgages. So it's a major concern.

HOBSON: A lot of banks halted foreclosures for a period, and then restarted them. Do you you think that they were right to restart foreclosures?

KAUFMAN: That's what Treasury has to find out. We could lay this thing out, we just think this is important enough that they should start doing some extra special things that they should check. And we think they should go to stress tests and really test the banks, they've not done that since 2009. Because look, we could have systemic problems there. People could lose faith in the markets themselves. And finally we get back to this really important thing and that is individuals having due process. Now we're not dealing with their local bank, they're dealing with some faceless organization and treasury has to look into that.

HOBSON: How long do you think until we know the size and the scope of this problem?

KAUFMAN: I don't know. I mean we're working on it. It should be soon. They're drilling down, I know they're drilling down throughout the organization. We have the fifty attorney's general working on this, so I think we'll have something to it. Time is of the essence to get and get it right and get it right quick.

HOBSON: Former Senator Ted Kaufman who chairs the Congressional Oversight Panel that oversees the Wall Street Bailout. Thanks so much for your time.

KAUFMAN: Thank you for having me Jeremy.

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