Governer of New Jersey Complains That Tarp is not Preventing Foreclosures

Governor Jon Corzine of New Jersey said last Monday that the programme kicked off by the Treasury to infuse the banks with funds has not helped the fundamental problem of increasing number of foreclosures. He said the $700 billion bailout package is not seeping down to the ordinary foreclosed victim. He cryptically commented, “The TARP is a piece of cloth concealing the most real and fundamental problem” – that of foreclosures. He was addressing the Thrift Supervision National Housing Forum.

The first half of the package ($350 billion) had been utilized to infuse funds into the banks to make their balance sheets look healthy but the banks have not utilized it in lending to borrowers. He suggested that a more useful way would be to channel the funds to a general, systematic programme to modify soured loans and the second installment should be utilized for stabilizing the lending markets. Corzine was also of the opinion that a moratorium should be imposed on foreclosures while going back to banking rules that were prevalent before 2005.

The trouble started from 2005 with the introduction of a bankruptcy law that made it difficult for consumers to prove that they be allowed to clear their loans in Chapter 7 bankruptcy. Corzine explained the necessity of a “central focus where all of this modification can come together” under certain conditions. The reo house should be the borrower’s first house of residence, the borrower should have a fair credit history and must get counseling. Also the lender should reduce the mortgage principal.

Corzine proposed that the same type of approach should be taken as was done by the Home Owner’s Loan Corporation in 1933 to make refinancing of house loans possible so as to check foreclosures. Home loans were changed to long-term ones and granted to over a million people who were exposed to this risk. He said, “The solution to the housing market meltdown is going to take a large-scale response at the ground level.” He was addressing reporters after the speech and commented that he wanted the Congress to try to increase the $700 billion to $800 billion plans.

Obama talking about new horizons on the economic front said his target was to create a minimum of 2.5 million jobs before 2011 drew to a close and kick off the biggest American investment infrastructure related move since the 50’s.

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