Banks Trying To Convince Lawmakers That They Are Doing Their Best To Contain Foreclosures By Issuing New Loans

Some of the jumbo banks of the country are trying to convince the lawmakers that they are using sanctioned money to contain foreclosures by issuing new loans. These banks are all benefiting from the $700 billion bail out package. The lawmakers were being told that the money was being well utilized.

Barry L. Zubrow of Morgan Chase informed the Senate Banking Committee that a part of the $25 billion that the Treasury had released was to be used to “expand flow of credit” and also to help with the refinancing of 400,000 householders at foreclosure risk. Spokespersons of Goldman Sachs, Bank of America as well as Wells Fargo said of the amount ($85 billion) they had collectively received were being diverted for payment of salaries and bonuses. When asked whether the bailout money would be used for compensating executives the answer was a categorical “no” from Jon Cambell of Wells Fargo. He said, “The answer is no.”

The lawmakers continued to press hard with questions .Senator Christopher Dodd (Democrat) from Connecticut said, “Hoarding capital and acquiring healthy banks are not – I repeat are not – reasons why Congress authorized $700 billion in emergency funding.”

Senator Charles Schumer (Democrat) from New York said the lawmakers were seeing if the banks offer more loans and on this condition will a further amount of $350 billion be sanctioned from the original bailout package. He clarified, “Any new capital injections must come with tougher requirements.”

The Treasury has already released $290 billion out of the promised amount. The Democrats are hoping to see that a bill sanctioning $25 billion to the automobile industry would be passed. The specific purpose was to help General Motors so that it did not go bankrupt. Democrat Senator Tim Johnson was concerned with reports coming in of over generous packets being given to executives of the companies that are receiving the government funds. Stockholders are also getting dividend bailouts from over the half the money that they have so far received. Johnson bluntly stated, “The intent of the bailout was to stabilize troubled financial institutions and help those businesses and individuals and Main Street affected by the credit freeze. Those making the decisions on how to spend the $700 billion, and those receiving the funds, must remember this intended use.”If required Congress can block the balance amount and also reenact the law if the main target of containing foreclosures by sanctioning new loans is not achieved.

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