Tuesday, August 21, 2007
Moral Hazard, yet again....
Today, Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, met with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson. The meeting, which took place in the Senator’s Washington office, focused on the recent turmoil in the financial markets. Dodd, Bernanke, and Paulson also discussed the broader implications for the U.S. economy and ways to help homeowners nationwide.
“I met with Chairman Bernanke and Secretary Paulson this morning and we had a positive discussion,” said Dodd. "I made clear to both that every effort needs to be undertaken to keep our markets functioning efficiently, to keep people in their homes, and to strengthen the markets—for investors, consumers, and businesses. I urged the Fed Chairman to use all the available tools at his disposal to maintain liquidity in the market, and he assured me they are prepared to do so.”
Senator Dodd outlined several steps to help stabilize the market. These steps include lifting the portfolio caps on Freddie Mac and Fannie Mae, encouraging lenders to lend with cheaper money through the discount window, banning predatory lending practices, making credit agencies more transparent, and reforming the Federal Housing Agency. Dodd has also helped secure $100 million in appropriations to help prevent foreclosures.
Since becoming Chairman of the Banking Committee, Senator Dodd has made homeownership preservation a top priority. A longtime advocate of affordable housing and home ownership initiatives, he is concerned that predatory lending practices committed by subprime lenders significantly contribute to the rising rates of defaults and home foreclosures occurring in the U.S. Dodd has urged regulators to apply the same guidelines to the subprime market as the prime market.
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