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Congress looking for broader fixes for U.S. economy

On the Hill, bills range from rule changes allowing judges to rewrite mortgage terms to a financial-sector overhaul.

By Staff writer of The Christian Science Monitor / March 28, 2008


Spurred by the mortgage crisis and stress in US financial markets, Congress is ramping up to have its own say in how to revive the economy, even as the Bush administration warns against congressional overreach.

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Fixes in the works on Capitol Hill range from new bankruptcy rules to help homeowners facing foreclosure – including allowing courts to rewrite the terms of a mortgage – to an overhaul of how Washington regulates the financial sector.

Congress also wants to know more about how the Federal Reserve engineered this month's resscue of investment bank Bear Stearns – and what that might mean for other firms or groups at risk in a struggling economy. Lawmakers are asking: Did this deal set a precedent that expands the Federal Reserve's role and was it politically motivated?

Also, if the Fed can run to the aid of an investment bank, shouldn't Washington help out more homeowners and others facing big losses?

Despite the difficulty of consensus in an election year, there is broad agreement on some elements of the pending legislative agenda including the need to complete bills to strengthen the capacity of the Federal Housing Administration and government-sponsored enterprises, such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, to respond to the mortgage crisis.

"There is bipartisan interest in bolstering our economy, maintaining stable and orderly capital markets, and helping struggling homeowners," said Treasury Secretary Henry Paulson in a speech at the US Chamber of Commerce's Annual Capital Markets Summit on Wednesday.

"New ideas and solutions can come from either side of the aisle," he said. But later, in response to questions, he added that "most of the other ideas I've seen would cause more harm than good."

Last week, Rep. Barney Frank (D) of Massachusetts, who chairs the House Financial Services Committee, called for establishing a "financial services risk regulator" to assess risk across financial markets and intervene when appropriate.

"Since the repeal of Glass-Steagall, a host of new players have emerged and old ones are doing new things. To the extent that anybody is creating credit, they ought to be subject to the same type of prudential supervision that now applies only to banks," he said in a March 20 speech to the Greater Boston Chamber of Commerce.