Weekend Watchdog Wrap-Up

Bill Scher

While the financial crisis did lead to much substantive discussion yesterday, the Sunday shows still go 0-for-3 for the Watchdog.

George Stephanoulous on ABC’s This Week asked former Treasury Secretary James Baker if he supported having our federal government directly buy shares in troubled banks to stabilize the credit markets. But he didn’t drill down into the potential devils in the details. As David Sirota recently flagged, we still don’t know to what degree funds will be used to buy shares that offer taxpayers an equity stake, or to simply buy toxic assets that only transfer taxpayer funds to irresponsible banking executives.

On NBC’s Meet The Press, instead of asking If the economic rescue plan would prevent us making investments in energy, education, health care and infrastructure, Tom Brokaw made the presumption that it certainly would — asking former Bush administration budget director Rob Portman and Gov. Jon Corzine, ” Don’t you think the American public wants more candor and is prepared to hear someone say, look, there’s going to be no gain unless we go through some pain?”

No one asked about how McCain altered his mortgage plan during the week, removing a pledge to make sure irresponsible lenders take a loss, and instead, having our government buy mortgages at face value. But Stephanopoulos did ask Republican Minority Whip Roy Blunt about the McCain plan, and notably, Blunt would not fully embrace it:

REP. BARNEY FRANK: We also explicitly gave [the Treasury Secretary] not just authority, but a direction to use some of these funds to buy up the mortgages. And then having bought up the mortgages, or enough of the mortgage securities to be in control, to try and reduce foreclosures.

Foreclosures are not a good idea generally for anybody. And if you’ve got homeowners who can pay a large part of what they owe, but not all of it, the federal government is mandated here to try and buy up those mortgages and then reduce what they pay. Not at face value, we’re not going to buy up the mortgages at face value, because the people who lent the money shouldn’t get out of this hole.

But if they are willing to take a lesser amount from the Treasury, we can then avoid the foreclosures.

STEPHANOPOULOS: Congressman Blunt, Senator McCain did suggest this week buying up the mortgages at face value. Do you agree with that or with what Congressman Frank is saying right now?

REP. BLUNT: Well, I think what Senator McCain talked about this week was essentially in several pieces of law already looking at mortgages that the government could simply take over, clearly buying mortgages, if you buy mortgages, for no more than their value.

Somebody needs to take the loss here, and it needs to be the person that had the bad judgment of making that loan, of buying those poorly put-together mortgage-backed securities.

There’s going to be loss here, and it shouldn’t be loss borne by the taxpayer. Barney’s absolutely right…

STEPHANOPOULOS: So then you don’t agree with Senator McCain’s…

BLUNT: Barney’s absolutely right, that foreclosures don’t help the neighborhood. They don’t help the property. They usually don’t do anything to help the specific piece of property that’s involved. And we just need to look at this carefully.

There’s merit in the McCain plan. That’s why it’s already in — some of it’s already in the FHA reauthorization bill. Some of that flexibility is here.

But you have to be sure, again, that taxpayers are protected. And I think, when see the specifics of the McCain plan, you’ll see those kind of protections.

STEPHANOPOULOS: So you think he will? You don’t believe that there should be full value given back to the lenders; they should take some kind of a penalty?

BLUNT: Oh, absolutely, the lenders should take a penalty, and they should take a significant penalty, just like Secretary Baker said earlier.

These lenders that loan money to people that they thought could not pay it back, even though the federal government was encouraging some of that, overdid that. And once they got those loans out of their building, they thought they had no ongoing responsibility.

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