Rep. LaTourette: Government needs to 'think outside the box'

WASHINGTON D.C. -- U.S. Congressman Steve LaTourette (R-Bainbridge Township) said the current financial situation in the U.S. "is a mess" and the government needs to "think outside the box" when it comes to solving the crisis. 

He made the comments at the hearing before the House Committee on Financial Services where the committee is overseeing whether enough help is being given to homeowners to modify their mortgages.

LaTourette said the $700 billion bailout is not being used as intended and a new government program intended to keep homeowners in their homes received only 42 applications in the first two weeks, a dismal fraction of the 400,000 homeowners it was intended to help.

In July, Congress passed a foreclosure relief bill that created a $300 billion "Hope for Homeowners" program through the Federal Housing Administration (FHA).

The program, which began October 1, allows homeowners to try to adjust their mortgages to 30-year fixed loan rates so they aren't saddled with unaffordable home loans, including those with adjustable rates.

LaTourette said the plan was intended to help homeowners save their homes and was expected to help some 400,000 homeowners.

The FHA said it only received 42 applications in the first two weeks of the program and expects only 20,000 homeowners to apply to refinance their loans in the coming year.

LaTourette said the problem is that people can't find lenders willing to work with them to take advantage of the government-backed program, and that homeowners stuck in unaffordable mortgages aren't reaching out for help.

LaTourette also said a hearing scheduled for 10 a.m. on Nov. 18 will focus on the $700 billion bailout and whether the Troubled Assets Relief Program (TARP) is being used as intended.

He said that hearing will touch on the National City/PNC deal.

The Pittsburgh-based PNC was able to secure $7.7 billion in TARP funds, including National City's share of the funding, to buy National City at a fire-sale price, LaTourette said.

LaTourette, who opposed the bailout, believes the funds should be used to ease the credit crisis and purchase toxic mortgage assets, not take an equity stake in banks and then allow banks to use the funding to buy other banks.

Treasury Secretary Henry Paulson testified before the U.S. Senate on Sept. 23 that Treasury would not use bailout money to take an equity stake in institutions, saying that would be a sign of failure.

He told Congress the funding would be used to buy toxic mortgage assets. After the bailout became law on October 3, Paulson announced he would use $250 billion to buy an equity stake in banks so they could provide more loans.

Just today, Paulson announced that none of the bailout money will be used to buy toxic assets.

LaTourette said, "I feared all along that Treasury would play God and pick winners and losers, and they're doing that and deciding how to use billions of your money on the fly."