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Reacting to news that over half of borrowers have failed to keep up with their mortgage payments even after the terms of their loans have been modified, Office of Thrift Supervision director John Reich on Monday said that focusing on job creation might be a better use of federal dollars.
“I do have a concern about money for loan modifications, particularly with such a high range of re-default,” Reich told participants at a conference in Washington organized by the Office of Thrift Supervision. “Focusing on job creation is a better way to focus federal dollars than on a loan modification process may be only partially effective.”
Reich’s statement clashed with Federal Deposit Insurance Corporation chairwoman Sheila Bair over the best way to use government funds to end the financial crisis.
Reich’s comments were focused, in part, on Bair’s controversial proposal that would use $24.4 billion of a $700 billion government bank bailout program to modify loans. Bair argues that her proposal, which isn’t supported by outgoing Treasury Secretary Henry Paulson, could avert 1.5 million foreclosures. Reich also referred to a job creation stimulus proposal put forward by President-elect Barack Obama.
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