'People Are Outraged' Over Banking Situation

Mortgage help for homeowners is coming, says Rep. Barney Frank

House Financial Services Committee Chairman Barney Frank is warning banks eager for TARP II money that the public doesn't support the bailout and that Congress is not likely to OK spending the second half of the $700 billion package until Wall Street changes its ways. Frank said the treasury will soon announce a major plan to help troubled homeowners avoid foreclosures by, in some cases, reducing mortgage payments.

In a breakfast round table with reporters, Frank said that the public is angry that the banks haven't started to lend more money. He said that people are also mad at CEO pay, purchases of executive jets, and even stadium naming rights. While he said that it is inevitable that some bankers will be rewarded with TARP funds, it is the responsibility of banks and financial institutions receiving the money to win the public's support.

"People are outraged," said Frank, who strongly backs CEO pay caps and has indicated support for limiting lobbying expenses by the institutions.

He warned that until the public turns around to support spending TARP II money, none will be approved by Congress. "I am confident you won't see that going forward," he told reporters. In the meantime, he said, Congress will start drawing up legislation to regulate and punish the industry, starting with pay caps. He said the legislation should be ready by summer.

On the housing crisis, Frank said he anticipates that the awaited treasury measures will include a $50 billion plan that will cut house payments to a level that people can afford. Frank, who discussed mortgage issues at a dinner with Treasury Secretary Timothy Geithner and others this week, said that the goal of the program will be to help those in troubled mortgages stay in their houses. One plan to cut the loan principal to what owners can afford will very likely include a payment-to-income ratio that homeowners will have to meet. Franks indicated that those in troubled mortgages will have to pay a minimum of 31 percent of their income for house payments. He didn't give many details on the plan to help with foreclosures but put a price tag on it of $50 billion.