Banking/Financial Institutions

Congressional Oversight Panel finds the AIG bailout benefited Goldman Sachs, which in turn helped foreign firms doing business with Goldman.

The United States could have asked foreign countries to "share the pain" of the bailout of the financial system, a government watchdog said in a report on Thursday.

In 2008, Congress voted to bail out the financial system with $700 billion, but more of that money went to financial firms based abroad than money from other countries wound up helping U.S. firms, the Congressional Oversight Panel report concluded.

"America's rescue had a much greater impact on other nations than their rescue programs had on the United States," the panel's chairwoman, Elizabeth Warren, told reporters late on Wednesday. "If the U.S. had gathered more information on the flow of rescue funds, it could have asked other countries to share the pain."

The report said the U.S. effort focused on flooding as much money into as many banks as possible, but that foreign countries designed their efforts more narrowly toward institutions that often did not have major U.S.-based arms.

More homeowners chose shorter-term, fixed-rate loans when refinancing during the second quarter as mortgage rates hit their lowest levels in 20 years. 

Although 30-year fixed-rate loans are still the most popular, the number of borrowers choosing 15-year and 20-year fixed-rate loans hit their highest level since 2004 during the second quarter, Freddie Mac said on Wednesday. 

Borrowers opted for fixed-rate loans regardless of whether their original loan was fixed or adjustable. Fixed-rate loans accounted for more than 95 percent of refinanced loans. 

Mortgage rates continue to drop to record lows, down to 4.57 percent last week for a 30-year fixed mortgage from 4.6 percent from the previous week, the lowest on the Mortgage Bankers Association's records, which have been kept since 1990. 

Rep. Paul Kanjorski (D-Pa.) on Wednesday sharply criticized a federal effort to boost lending to small businesses through Federal Home Loan Banks.

Kanjorski, a top Democrat on the House Financial Services Committee, criticized the network of government-sponsored banks for failing to extend money collateralized by small business or agriculture loans.

"The failure of too many [home loan] banks and their regulator to make economic development a priority is extremely disappointing and it ignores the reforms adopted by Congress more than a decade ago," Kanjorski said in a statement. "Simply put, the Federal Home Loan Banks must do more to promote job growth."

Kanjorski's comments come after a Government Accountability Office report showed small business and agriculture loans represent a tiny share of the number of loans that are used as collateral for new money lent by the home loan banks. The home loan banks lend money to private banks that pledge collateral, usually home mortgages. In 1999, Congress allowed the home loan banks to accept other forms of collateral, including agriculture and small business loans.

The GAO report showed that the agriculture and small-business loans amount to only 1 percent of the new lending from the home loan banks.

Kanjorski criticized the federal regulator for the home loan banks for neglecting the law's intent to boost small businesses.

The Obama administration announced it will spend another $3 billion to help unemployed workers pay their mortgages. 

Home loan applications were nearly flat last week as mortgage rates hit record lows. 

Overall applications increased 0.6 percent from a week earlier, the Mortgage Bankers Association said Wednesday. Refinancing applications were up 0.3 percent and loan applications to purchase a house increased 0.3 percent, all seasonally adjusted figures. 

Mortgage rates continue to drop to record lows, down to 4.57 percent last week for a 30-year fixed mortgage from 4.6 percent from the previous week, the lowest on the MBA's records, which have been kept since 1990. 

The average rate for a 15-year fixed-rate mortgage also dropped to 3.95 percent from 4.03 percent. 

Mortgage rates tend to follow the yield of U.S. Treasury bonds, which has lowered since the spring as investors bought Treasurys amid the European debt crisis. 

Government-controlled Fannie Mae and Freddie Mac can't be eliminated before figuring out what entity will replace them, a top Democrat said Tuesday. 

House Financial Services Chairman Barney Frank (D-Mass.) said he was uncertain about what to do about the two mortgage giants -- together they own half the mortgage market or about $5 trillion in loans -- but there isn't any urgency to make changes while in conservatorship, he told Fox Business Network today. 

"There is a consensus of all the people in the housing area that you can’t simply abolish them without figuring out what replaces them," he said. "What replaces them may be purely private but there needs to be some clarity. Given they are now in conservatorship, the urgency is not there because they are not doing the bad things they did before buying loans that can’t be sustained."

The Federal Reserve's move on Tuesday came amid broader signs of economic uncertainty over the pace of the recovery. 

The House Financial Services Committee will hold a hearing next month on whether the Securities and Exchange Commission is getting an exemption from rules that require the public release of documents. 

Panel Chairman Barney Frank (D-Mass.) told The Hill Tuesday that a hearing is scheduled for Sept. 16 on the issue of whether the SEC is being allowed to skirt too much of the Freedom of Information Act (FOIA) as part of a provision included in the newly enacted financial regulatory reform law. 

Frank said he would withhold a decision on whether the provision should be narrowed until after the hearing. 

He emphasized the request to change the language has been ongoing for nearly five years and there weren't any questions about the exemption at any point during the process. 

A top House Democrat unveiled legislation Tuesday to strike from the recent financial overhaul broad powers for the Securities and Exchange Commission (SEC) to withhold information from Freedom of Information Act (FOIA) requests.

Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, introduced legislation to limit the SEC's new power to withhold information it obtains from financial firms as part of “surveillance, risk assessments, or other regulatory and oversight activities.”

The exemption has been heavily criticized by some Democrats and Republicans, as well as consumer advocacy groups. Support appears to be growing in the House and Senate for legislation to overhaul the section of the financial bill signed into law in July.

The Towns bill is a companion to legislation introduced last week by Sens. Patrick Leahy (D-Vt.), John Cornyn (R-Texas), Ted Kaufman (D-Del.) and Chuck Grassley (R-Iowa). House Financial Services Committee Chairman Barney Frank (D-Mass.) has scheduled a September hearing on the issue to give lawmakers time to pass legislation if necessary before the full force of the financial overhaul takes effect.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) told reporters last week that he was not concerned by the section of the bill.

Mary Schapiro, SEC chairwoman, said last week that the language does not give the commission a "blanket" exemption.