Congressman Roy Blunt stopped short of throwing his full support behind John McCain's mortgage takeover plan Sunday, saying that "lenders should take a significant penalty," for failing mortgage securities.
Blunt made his comments on ABC's This Week in a discussion about the economy with Massachusetts Rep. Barney Frank.
McCain proposed a $300 billion dollar plan this week where the government would buy failed mortgages at face value.
"Somebody needs to take the loss here, and it needs to be the person that had the bad judgment of making that loan, of buying those poorly put-together mortgage-backed securities," Blunt said. "There’s going to be loss here, and it shouldn’t be loss borne by the taxpayer," he added.
When host George Stephanopoulos pressed Blunt on whether he agreed with McCain's approach, "Barney’s absolutely right, that foreclosures don’t help the neighborhood. They don’t help the property. They usually don’t do anything to help the specific piece of property that’s involved. And we just need to look at this carefully."
Blunt added: "There’s merit in the McCain plan. That’s why it’s already in -- some of it’s already in the FHA reauthorization bill. Some of that flexibility is here. But you have to be sure, again, that taxpayers are protected. And I think, when see the specifics of the McCain plan, you’ll see those kind of protections."
Blunt said the lenders should pay a significant penalty because "once they got those loans out of their building, they thought they had no ongoing responsibility."
"That’s part of this problem. Part of this problem is clearly not regulating these government-sponsored entities, Fannie and Freddie, for years," Blunt said, noting that President Bush called on Congress to more clearly regulate these entities beginning back in September 2001.
This comment sparked a mild debate with Rep. Frank over which party bears the blame for the crisis.
"From 2001 to 2006, the Republicans controlled the House. I was in the minority," Frank said.
"Mike Oxley, of Sarbanes-Oxley fame, noted that, in 2005, he did try to get a bill through to regulate Fannie Mae and Freddie Mac. I cooperated with him some. It failed in the Republican Congress," he added. "The Democrats took over the Congress in 2006. On February 1, I became the chairman of the committee, and on March 28, we passed the bill to regulate Fannie Mae and Freddie Mac," Frank went on.
Congressman Blunt, it’s been reported that Congressman Frank and the Democratic leaders are working on a stimulus package of about $150 billion, to include extending unemployment benefits, food stamps, infrastructure spending, and talking about coming back after the election to pass it in a lame duck session?
"I think the many members of the Congress that were on the wrong side of this just need to admit that they were on the wrong side of this and move on. Senator Shelby, on the Senate side, was right on this. Richard Baker, on our side, was right on this," Blunt said. "President Clinton said the same thing, that Democrats need to admit that Republicans in Congress -- this is a Clinton quote -- 'were calling on more regulation, and it didn’t happen.'"
On a possible $150 billion dollar economic stimulus package that could include an extension of unemployment benefits and food stamps, Blunt said, "I certainly will work on stimulus package that makes sense."
But again, he stopped clear of a full endorsement of the Democratic proposal.
"Let’s not use the stimulus package as an excuse to do what Democrats have wanted to do from day one of this Congress, which is a huge public works plan -- now the reason to have that is the economic stress -- and bailing out states who spent a lot more money than they should have," Blunt said.
Frank said he disagreed with Blunt that the "states are at fault that they spent too much on medical care for lower-income people and children."