Treasury Bars Use of TARP Funds to Help Borrowers Facing Foreclosure

If you had any doubts about whose side the Administration is on, this story should settle all doubts. From the Nation:

Consider this: the recent Fed audit revealed over $3.3 trillion in emergency assistance to the banks and other corporate behemoths during the financial crisis–no strings attached….

Then consider the 19 states which are recipients of the Hardest Hit Fund (HHF)–a portion of TARP money set aside to help homeowners in states struggling with the highest unemployment rates and steepest declines in the housing market.

Some of those states, including Ohio, let Treasury Secretary Tim Geithner know as far back as this past spring that they wanted to use some of those funds to assist legal aid groups that help individual homeowners….

Treasury solicited the opinion of an outside law firm, Squire, Sanders & Dempsey. Never mind that the firm’s clients include BB&T Corporation and payday lender CNG Financial Corp. The firm said, in essence–sorry, no can do on the legal aid. Not permitted under the TARP.

Huh? Hold on a sec–is this the same TARP that granted the Treasury Secretary all those “extraordinary powers” to protect people’s home values, preserve home ownership, promote economic growth, etc.?

Yves here. The skepticism is well warranted. This isn’t an area in which a law firm would have much (any) liability on an opinion. Ergo, a combination of Treasury body language and selection of the firm would have determined the outcome. Besides, the TARP explicitly put the Treasury secretary above the law. So why is Treasury even getting an opinion? This is clearly an exercise in creating an excuse for an action it wanted to take.

The article also details actions by Rep. Marcy Kaptur and Sen. Sherrod Brown to reverse the Treasury action. Kaptur has introduced a bill (HR 5510) to amend the Emergency Economic Stabilization Act of 2008 to enable nonprofits, both counseling firms and law firms, to receive TARP funds to help single family homeowners to prevent foreclosures. Brown introduced a parallel measure (S 3979) in the Senate.

Please contact your Senators and Representative and ask them to cosponsor these measures. And annoy Treasury by calling or e-mailing them (try the Domestic Finance and Economic Policy contacts) to tell them they are on the wrong side of this issue.

Originally published at naked capitalism and reproduced here with the author’s permission.