Hank Paulson, the US Treasury secretary, has been “handcuffed” by George W. Bush in his handling of the subprime mortgage crisis, according to a powerful Democratic senator.
Charles Schumer, chairman of the congressional joint economic committee, said the president was preventing Mr Paulson from taking stronger action to stem the crisis because of his ideological commitment to free markets and small government.
“Paulson is in ideological handcuffs,” said Mr Schumer in an interview with the Financial Times. “Everybody who studies this knows the government should be involved.”
Mr Schumer’s committee published a report on Thursday predicting that 2m homes would be subject to foreclosure by the end of next year, destroying more than $100bn (€70bn, £49bn) in housing value. “This is serious and getting worse,” he said. “Until the market sees somebody is in charge and making sure this doesn’t get out of hand they are going to continue to get spooked.”
Congressional Democrats are pressing for Fannie Mae and Freddie Mac, the government-sponsored mortgage companies, to be given a bigger role in helping struggling borrowers refinance mortgages. However, the proposal is opposed by the administration, which advocates a more limited government response to the crisis.
“If there was a less ideological president, the business community would be happier because there would be much more confidence that somebody was dealing with this,” said Mr Schumer. A Treasury spokesman dismissed Mr Schumer’s criticisms as “ridiculous”, saying: “The secretary and the president have both called on the senate to take up legislation to help struggling homeowners – it’s the Senate that seems to be handcuffed.”
Mr Schumer predicted that turmoil in the mortgage market and the decline in real estate prices would have an impact on next year’s presidential and congressional elections. “If home values are going down it will matter. Everybody knows when a home is sold on the block how much it costs.”
His committee’s report showed the 10 states with the greatest number of predicted foreclosures included Ohio, Florida, Pennsylvania and Michigan – four of the most fiercely contested battleground states in recent presidential elections.
Mr Schumer said about 30 per cent of subprime borrowers were in “bad shape”. A further 50 per cent were at risk but could avoid foreclosure if given the chance to refinance.
Democratic calls for greater intervention in the mortgage markets fit the party’s push for government-led solutions to ease the growing sense of economic insecurity in middle class America.
♠ Posted by Emmanuel in Casino Capitalism at 10/26/2007 03:44:00 PMYou might be wondering about the slightly offbeat title of this post. Well, it's simple, really. Senator Charles Schumer (D-NY) claims that the White House has kept tight reins on Treasury Secretary Hank Paulson. Schumer says that Paulson is being held hostage by Bush's--how do we put it--Friedmanite leanings from addressing the subprime crisis in a substantive fashion. Schumer's observation strikes me as odd, given that Paulson was chosen precisely because he was the head of one of those Wall Street firms which have pumped a lot of cash into Bush's campaign coffers. Somehow, Goldman Sachs doesn't strike me as a bleeding heart. That Bush has an ideological commitment to small government according to Schumer strikes me as fanciful. The administration does become a champion of small government--when it comes to Democratic spending initiatives, that is. In any event, on to the Financial Times article: