National Guard and Reservists Debt Relief Act of 2008

NATIONAL GUARD AND RESERVISTS DEBT RELIEF ACT OF 2008 -- (House of Representatives - October 02, 2008)

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Mr. CANNON. Mr. Speaker, I yield myself such time as I may consume.

I'm happy that the House is able to complete today the Congress' consideration of this bipartisan legislation. As we have stated at every turn, Republicans strongly support the mission and appreciate the sacrifice of our dedicated Reservists and Guardsmen. We continue to agree that Reservists and Guardsmen who are plunged into bankruptcy by the demands of their service should be given a helping hand under the Bankruptcy Code.

Earlier this session, Judiciary Committee Republicans labored long and hard to achieve a workable compromise that would help these willing warriors. The merger issue for us was simple--that the bill respond to bankruptcies attributable to a Reservist's or Guardsman's service. The Senate has returned a bill to us that preserves the balance that we struck. The Senate has added one amendment, but it is technical in nature and was sought by the Administrative Office of the United States courts.

I urge all Members to support the passage of this legislation, and I look forward to the bill's implementation as law. I also look forward to the results 2 years from now of the GAO study contained in the bill. This study will tell us for sure whether Reservists and Guardsmen are using the relief granted by the bill when it is their service that leads to bankruptcy--not other factors. With this study in hand, when the bill reaches its 3-year sunset, we will know for sure whether it's being abused in cases lacking the necessary link to service. If it is being abused, we will be able to address that abuse at the time that reauthorization is considered.

In light of these considerations, I'm pleased to support passage of the bill.

I would also like to thank others who have worked on this bill, in particular Congressman Rohrabacher from California. I made, as the chairman of the Subcommittee on Commercial and Administrative Law that has oversight of the Bankruptcy Act, a promise that we would reconsider this bill that was done some years ago. Mr. Rohrabacher has done an amazing job, given leadership and determination to bring this bill to where it is today and, by doing so, has redeemed my promise and his and that of many other people.

I reserve the balance of my time.

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Mr. CANNON. I thank the gentlelady.

The American people are enraged by this bailout, or rescue as we're now calling it, and I think justifiably so. And they ought to be enraged that the real cause here--or the real cause of what I think should be the rage is that this has been done in a way that has been mandated, directed, expected that we would respond without much involvement. The rage of the American people reminds me of a bull often goes after the cape rather than goring the toreador. And what we need to do here, I think--I hope the American people recognize the opportunity to demand a transparent government.

There was no reason why the administration couldn't have made its three-page proposal available not as a legislative demand but as an outline of what the discussions should have been. There is no reason why we here in Congress have not done an open rule and had a debate on this. We could easily have taken this measure, debated it openly, amended it, adjusted it, and done things that make some sense.

Now the problem as I see the bailout--and the gentlelady and I have talked about this at some length--is that it pumps liquidity into banks and takes paper. That paper we hope is good. We hope it will be more valuable than what we have spent on it.

Ms. ZOE LOFGREN of California. I wonder, I did yield, but we have other speakers. So I wonder if--and we can have this further discussion--but whether on the mortgage, primary residence mortgage issue, you think there is further opportunity to make progress between Republicans and Democrats, conservatives, and nonconservatives?

Mr. CANNON. I thank the gentlelady. We have plenty of time on my side. If the gentlelady would like to yield back temporarily, I would be happy to use my time to talk about that point.

Ms. ZOE LOFGREN of California. I will do so because I don't want to take advantage of the chairman's yielding me unlimited time when there are other speakers.

But I would just say in the discussions that we have had that have been very honest and very practical--and I think totally bipartisan, I would even say nonpartisan--trying to find common ground in the interest of the American people in this. I have a sense of optimism that we can do something important on the mortgage bankruptcy issue aside from this recovery package that is coming.

Having said that, I will yield back to the chairman of the committee, and perhaps Mr. Cannon will use some of his time to further explore this.

Mr. CANNON. I thank the gentlelady, and if she wishes to remain, perhaps we can have a colloquy at some point.

Let me make a couple of points. We have had a long and intense discussion about what we can do to help solve, not the problem of the banks with their toxic loans which we hope we will buy at a reasonable price in a reverse auction, but what we do on the other side of this problem, which is homeowners who can't afford the loans that they got on property that was often misappraised or appraised fraudulently and therefore left in a box without being able to pay, with mortgages that are resetting at higher interest rates, sometimes with higher balances because of the way the mortgages were arranged.

So how do we help Americans stay in their homes in a reasonable fashion? And we've talked about bankruptcy as one way to do that.

Now in the bill that we did not pass here in the House recently, the Secretary had wide authority. I'm expecting that authority to be continued; and what I would hope is that the Secretary will not just put $700 billion into paper which may or may not be useful, but also something like $50 billion or $100 billion into funds that are intended to help people stay in their homes by creating the opportunity to buy mortgages at a discount, then renegotiate those mortgages with the people who are in those homes or others, and thereby avoid the downward spiral of housing costs.

I don't know that we're going to be able to do much with bankruptcy if this bill that passed the Senate passes the House today, I don't know that we're going to be able to deal with it. But I think that we ought to demand as the House that the Secretary recognize that this is not just a matter of buying paper and saving banks, but it's rather a matter of keeping a downward spiral on housing prices from continuing so that Americans can maintain the value on their homes, can keep their homes, and we can get this economic crisis behind us and perhaps even save some money.

I recognize the gentlelady is standing there. I would be happy to yield to her.

Ms. ZOE LOFGREN of California. Thank you for yielding.

I would just note that in fact in the rescue package there is a provision requiring the Secretary to renegotiate loans and that will actually, I think, be of tremendous value in dealing with the foreclosure crisis that we face when the government owns the whole mortgage, all of the mortgage. But because securities are being purchased because the credit markets are frozen, we won't necessarily own all of the mortgages in every case. And half of the subprimes have second and third mortgages that will be able to defeat any effort to renegotiate.

So I think that moving a narrowly crafted, for-subprime-only primary residence mortgage measure either later in this Congress or early next might be something that could avoid the $2.1 trillion in mortgages that are set to reset and certainly are at risk of default in the next 18 months.

I am just stating here today, I think we have an opportunity to accomplish that working across the aisle and working across ideological barriers because really we're all in the same place. We want Americans to be safe and secure in their homes. If they are able to meet their obligations, we should go the extra mile to allow them to do that.

I just want to say once again how much I have appreciated working with you, Congressman Cannon, over these years. And I said this earlier this week, but if you look at your voting record, you've got one of the most conservative voting records in this Congress, and as I mentioned, I do not. But that has never prevented us from working together to find solutions for the American people.

I really think you're a remarkable legislator, someone whom I respect a great deal, and I thank you for your service to our country.

Mr. CANNON. Reclaiming my time, I thank the gentlelady. The nice thing about being clear in your principles is that it's possible to negotiate and come up with compromises that work. It's been a pleasure to work with the gentlelady and also the chairman of the full committee who is also here with us, Mr. Conyers. It's not possible to be farther apart on the political spectrum than I think Mr. Conyers and I are, but we have had a very pleasant, and I think profitable, working relationship on many issues where because of his clear principles, and I hope my clear principles, we've been able to reach compromise.

Going back to what the gentlelady was saying, I fervently hope that I will not be part of any further negotiations on bankruptcy. I hope that we solve this problem today or tomorrow, I suppose, and then make the American people more safe by us being out of town and then letting the next year's crop of people come back and deal with the issue.

Let me just reiterate a couple of things the gentlelady has said. $2.1 trillion of subprime and Alt-A loans are in trouble. If we don't do something about that, those loans, as they fail--to the degree that they fail, and many are likely to fail--are likely to draw down to create a suction that will pull down the prices of all the other houses in America, creating chaos in our market.

It's imperative that the Secretary recognize his authority under, I think, the current language, and make it clear that he intends to do something not just about the paper because, as the gentlelady has pointed out, we don't own all of the fractions of the interests in these mortgages, and therefore we don't have the ability, by pumping money into paper, to solve the underlying problem. You have to do that in another way. And certainly where you have a second or a third, there is no ability by the Treasury, under the current program, to deal with that suction on prices.

So I am hoping that the Secretary of the Treasury will today make it clear that he intends to use part of this bailout money for which he has I think the discretion. I think it is important that he be clear that he has that discretion, that he intends to use the money that way so we can create a floor not just under the banks but also under the prices of our homes.

With that, I reserve the balance of my time.

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Mr. CANNON. Will the gentleman yield?

Mr. KUCINICH. Of course I would yield to my friend.

Mr. CANNON. Thank you.

We're now at a point where we're going to be voting very quickly on this bill. I think you heard the colloquy between the gentlelady from California and myself. I'm wondering if the gentleman can be satisfied if the Secretary takes a position publicly that he is going to use some of this bailout money under the discretion that he's given in the bill to do what I suggested earlier, which is, to put money into funds that would buy mortgages and keep people in their homes. Is that the kind of thing that we can do--

Mr. KUCINICH. Taking back my time, the bill has language which might be discretionary, but we in the House understand the difference between something that's discretionary and mandatory. And we also know that the way the bill is structured, unless you have a controlling interest in these mortgage pools, there's no way you can do anything because then you have to talk with 20, 30 other interests in order to be able to come to resolution. That's not going to happen.

So we need to be real about this; and, unfortunately, that isn't always the case in our Congress. And when we get real about it and connect to people's aspirations to save their homes with a real solid legislative structure to deliver on that, then the American people and then our economy can celebrate the wisdom of the Congress. Right now, that jury is still out.

I yield to my friend.

Mr. CANNON. Recognizing the gentleman's limited time, we have I think more time on our side, and I would be happy to yield some to Mr. Conyers if he would like more.

Would the gentleman yield for a colloquy on this issue?

Mr. KUCINICH. I would.

Mr. Speaker, may I inquire as to how much time I have remaining?

The SPEAKER pro tempore. The gentleman from Ohio has 30 seconds remaining.

Mr. CANNON. Mr. Speaker, I would yield 2 minutes to the gentleman at this point.

The SPEAKER pro tempore. The gentleman from Ohio is recognized for 2 1/2 minutes.

Mr. KUCINICH. I yield to my friend.

Mr. CANNON. The problem we're facing, or course, is the urgency of what's going on. And the gentleman has heard my concern with the failure of the administration to have this aired transparently; but that said, we do have some urgency. If the Secretary is very clear in what he says, can we move forward, as opposed to, say, amending the Senate's bill--which will come over to us--and then sending it back to the Senate for further votes. Personally, I don't think that that is likely to happen; it's your leadership that will control the Rules Committee. But I suspect that we're not going to get the perfect here with the good, that is, a commitment by the Secretary that is clear and open and patent.

Would that serve to resolve the gentleman's concerns?

Mr. KUCINICH. To my good friend from Utah, the clarity of the Secretary will not trump the language of the legislation. And the language of the legislation does not permit him to be able to have an effective role in saving people's homes. It talks about encouraging, it talks about ``may do,'' but it is not mandatory. And he doesn't have the additional power because there is no mechanism in there to give us a controlling interest so that we can actually create a fix.

I yield to the gentlelady from California.

Ms. ZOE LOFGREN of California. If I may, I think the Secretary has the authority to acquire all mortgages. We fear that he may not. I frankly think if the Secretary--or his successor, starting in January--were to make that a priority, we would solve more of this problem than if it was just done in the natural course of events. I personally believe we need another remedy that I pledge to try and move separately from this package having to do with the bankruptcy primary residence mortgage issue that we have discussed at tremendous length.

Mr. KUCINICH. Reclaiming my time, and thanking the gentlelady and the gentleman, I would say that the legislation doesn't fix the problem; that is the central point. It doesn't empower the Secretary to be able to get controlling interest of the mortgage-backed securities. And that is the central flaw of the policies that we're pursuing. And millions of Americans who are in danger of losing their homes are not going to be helped.

I want to conclude by thanking Mr. Cannon for his service to the United States Congress.

The SPEAKER pro tempore. The gentleman from Utah has 3 1/2 minutes left. The gentleman from Michigan has 1 minute remaining.

Mr. CANNON. Mr. Kucinich, if you would like to continue, we don't disagree, and I think by having a further colloquy, I think we actually can come to an understanding.

As I understand your concern, the Secretary does not have the ability--or it would be difficult for him to buy up all the fractionated interests in any given mortgage, and therefore, he is incapable, in his current position--unless he does something remarkable and spends more money than we intend him to spend, he can't provide relief on individual mortgages.

What I'm suggesting the Secretary has the authority to do is to put money into private funds that can then go to the servicing agent of a nonperforming loan, where the person is in an anti-deficiency State, or otherwise can walk away from that loan without recourse to the bank. At that point, the servicing agent has the ability to sell a mortgage, or a package of mortgages. In that event, what I suggest is that if the Secretary will pump some significant resources into the private sector to buy mortgages from servicing agents, and from banks and others, in a market where we are having deterioration of prices, that would tend, dramatically, to solve the problem. It goes a long way toward, I think, the gentleman's concerns.

Ms. ZOE LOFGREN of California. If the gentleman would yield, as we both know, because we were on the same conference call with one of the foremost authorities in the United States on this subject, the expectation is, in the natural course of events, that about 20 percent of the acquisition of securities would result in owning all of the rights in order to do a negotiation.

So when you look at the entire package, it's not what we want, but it's not nothing either. I mean, if you could actually renegotiate 20 percent of the reset, it would have a market impact. What you're suggesting, I think, makes sense. And I think, also, that the bill that's coming back would allow the Secretary to actually do what you have suggested because there is that discretion in the measure.

If we did what you've suggested, if the experts are correct that we will have 20 percent of all ownership to renegotiate as provided for in the bill, we're still going to need an additional tool which we're not going to get in this bill, but to do a narrow carve-out for the subprime markets to be able to--for judicial intervention for those areas that we cannot get the rights for.

I thank the gentleman for yielding.

Mr. CANNON. Reclaiming my time, let me just say the gentlelady is absolutely accurate in her portrayal of the problem. Let me just clarify one thing, because a lot of people listening to us today don't understand what a reset is.

You have mortgages that are at a fixed rate which will then pop up to a market rate in the future. It is that pop up that is a problem. If you have a mortgagee who is behind in his payments, he may be able to stay in the mortgage when it goes up, but he may not be able to afford it. If he's behind, he can't refinance. He's stuck in a world where he can't get out of that mortgage, and the market will drive him. And the bank that wants him to renegotiate can't do it because of the fractionated ownership of that mortgage.

Ms. ZOE LOFGREN of California. If the gentleman would yield.

If I may, I'm glad you did that explanation. And for people listening who don't have a subprime, it's going to affect them as well. Because if you have a prime mortgage but every neighbor in your entire neighborhood has had their property values collapse, your property value is also going to collapse. So this is everybody.

Mr. CANNON. Reclaiming my time, I thank the gentlelady because she has made exactly the point. What we're trying to do here is avoid the collapsing values of houses.

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