Paulson Dismisses Mortgage Rescue Plans

Wall Street Journal (02/28/08) P. A1; Phillips, Michael M.; Ip, Greg
Treasury Secretary Henry Paulson believes proposals being considered by lawmakers to curtail foreclosures are tantamount to bailouts of lenders, investors and speculators who engaged in risky deals, noting that they fail to help borrowers struggling to make their mortgage payments. According to Paulson, "I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street." Paulson insists that the market-based approach supported by the Bush administration is sufficient, but House Financial Services Committee Chairman Barney Frank, D-Mass., is among those lawmakers who believe the government needs to do more to ease the housing crisis. While lawmakers propose bills that would set aside billions of dollars to refinance distressed loans or help states and local governments purchase foreclosed properties, Paulson will continue pressuring mortgage servicers to work with subprime borrowers vulnerable to default if interest rates rise and extend such assistance to prime borrowers.