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DeMint Opposes Bailout for Mortgage Companies
Bill includes $300 billion bailout, $4 billion in questionable local projects, new slush fund for wasteful spending, new fingerprint database of bank and real estate employees, and IRS reporting of credit card transactions

June 24, 2008 - Washington, D.C. - Today, U.S. Senator Jim DeMint (R-South Carolina) announced his opposition to the Senate housing bill, which bails out mortgage companies that engaged in risky loans. The bill also includes billions for questionable local projects, a new tax to fund a housing slush fund, a new fingerprint database of bank and real estate employees, and IRS reporting of everyday credit card transactions.

“It’s frustrating that Congress cannot pass needed housing reforms without piling on counter-productive bailouts and unnecessary spending,” said Senator DeMint. “The hundreds of billions in bailouts for lenders like Countrywide is an irresponsible use of taxpayer dollars. This bill forces millions of Americans who have played by the rules and paid their mortgages on time to pay for the mistakes of a few bad actors in the lending industry. And it’s outrageous that the Senate is trying to rush this bill through while a cloud of corruption hangs over it.”

“Perhaps most puzzling are provisions tucked in the bill that require normal credit card transactions to be sent to the IRS and that force thousands of Americans to send their fingerprints to the FBI. These provisions raise serious concerns. Why are we gathering personal information on millions of Americans that have committed no crime?”

Senator DeMint supports GSE regulatory reforms and FHA modernization. However, this bill also contains many problematic provisions that could worsen the situation for taxpayers and new homebuyers:

Over $300 Billion Bailout: Creates a new program within FHA would refinance and provide taxpayer-backed insurance for up to $300 billion of mortgages that are currently in default. This bailout would shift the riskiest mortgages in the market, currently held by private companies and private citizens, to American taxpayers. The Wall Street Journal estimated that just one company, Countrywide Financial could, receive a “potential taxpayer bailout of more than $25 billion.”

$4 Billion for Questionable Local Projects: Includes $4 billion in deficit spending for the Community Development Block Grants (CDBG). These CDBG funds would be used to purchase and rehabilitate foreclosed properties, essentially funding government competition against private consumers. Also, recipient governments would not be required to spend the money until 18 months after they receive it, allowing funds to sit on the sidelines for a year and a half, possibly after the housing markets have recovered. CDBG currently has unused funds. As of the end of FY07, over $20 billion in unspent CDBG funds.

New Spending Slush Fund: Creates a permanent Housing Trust Fund, paid for by taxing Fannie Mae and Freddie Mac at least $500 million each year. This tax will be passed on to individual homebuyers. What’s most offensive, for those who seek honest government, is that this new spending will not take place with the oversight usually offered by the congressional budget and appropriations process. Instead, this money will flow through the U.S. Treasury, circumventing federal budget rules.

New Fingerprint Database of Bank Employees, Realtors, and more: Requires anyone involved in originating a mortgage loan, including part-time bank employees and real estate professionals, to submit their fingerprints to the FBI. The Competitive Enterprise Institute recently wrote: “The rationale for this new fingerprint registry is thin. Were a significant number of bad loans made by ex-convicts? And how would the targeting of lower-level employees – rather than executives like Countrywide Financial CEO Angelo Mozilo – stem the creation of problematic mortgages?”

IRS Reporting of Americans’ Electronic Credit Card Transactions: Requires payment companies (credit cards and third party payment systems) to report to the Internal Revenue Service every individual entity (“payee”) they made a payment to and the gross amounts paid to those entities. This is a new burden intended to close the gap between taxes that should be paid and what actually comes to the IRS. These costs are going to be passed on to small businesses and their customers. As FreedomWorks Chairman Dick Armey recently stated: "Privacy groups like the Center for Democracy and Technology and small business organizations like the NFIB sharply criticized this idea when it first appeared earlier this year. What is the federal government's purpose with this kind of detailed data? How will this database be secured, and who will have access?”

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