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Senators urge dropping barriers to refinance

Both of California’s U.S. Senators are among more than a dozen from both sides of the aisle who urged the Obama Administration today to make administrative reforms to help millions of responsible homeowners refinance and take advantage of today’s record-low interest rates.

The lawmakers – writing to Housing and Urban Development Secretary Shaun Donovan, Treasury Secretary Timothy Geithner, National Economic Council Director Gene Sperling and Federal Housing Finance Agency Acting Director Edward DeMarco – said that with interest rates at 3.94 percent, it’s time to lower barriers that keep borrowers trapped in higher-interest loans and to address other hurdles that limit existing refinancing programs.

Specifically, they called for removing loan-to-value limits, which they said would provide the most at-risk borrowers an alternative to simply walking away from their mortgage; eliminating loan level price adjustments, which they say make a refinance less affordable, reduce the benefit to the borrower, and can’t be justified on loans on which Fannie Mae and Freddie Mac already bear the risk; and ensuring that second lien holders don’t stand in the way of a refinance.

“Time is of the essence and we urge you to act quickly and aggressively to ensure that responsible homeowners receive the full benefit of these lower rates,” they wrote.

In addition to U.S. Senators Barbara Boxer, D-Calif., and Dianne Feinstein, D-Calif., the letter was signed by Johnny Isakson, R-Ga.; Robert Menendez, D-N.J.; Mark Begich, D-Alaska; Jeff Merkley, D-Ore.; Sheldon Whitehouse, D-R.I; Debbie Stabenow, D-Mich.; Scott Brown, R-Mass.; Robert Casey Jr., D-Pa.; Richard Burr, R-N.C.; Frank Lautenberg, D-N.J.; John Kerry, D-Mass.; Mark Warner, D-Va.; Saxby Chambliss, R-Ga.; and Ron Wyden, D-Ore.

Read the full text of the letter, after the jump…
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Dissecting the debt-ceiling/deficit deal

The debt-ceiling and deficit reduction package on which Congress will vote later today “removed the cloud of uncertainty that was over our economy” and paves the way for further, balanced debttt reduction later on, a top White House aide said a few minutes ago.

On a conference call with reporters, David Plouffe – senior advisor and assistant to President Barack Obama – said the bipartisan “supercommittee” this package creates will have until Thanksgiving to come up with a plan that will mix spending cuts with tax reform, possibly including closing corporate tax loopholes and raising taxes on the nation’s wealthiest.

Asked why anyone should believe this panel will succeed in accomplishing what so many others have failed to do – devising a plan that can get enough votes in Congress plus the President’s signature – Plouffe replied that this commission isn’t starting from square one. Its work will be based in part on frameworks already established by the National Commission on Fiscal Responsibility and Reform and in the more recent, direct talks between the President and House Speaker John Boehner.

National Economic Council Director Gene Sperling noted that when the Senate’s “Gang of Six” recently advanced a plan with even more revenue than the President had sought, as many as 15 to 20 Republican senators appeared ready to sign on. Poll show the public wants a balanced approach and experts say it’s the only way to go, Sperling said, so Republicans in both chambers will have to realize they can’t put an undue burden of deficit reduction on the nation’s most vulnerable if they want to see it become law.

But voices at both sides of the political spectrum are crying foul. Lots more on that, after the jump…
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Obama pitches bank fee to recoup TARP funds

President Barack Obama today is proposing a Financial Crisis Responsibility Fee to be imposed on the remaining debt of the largest financial firms until taxpayers are fully repaid for the Wall Street bailout.

The fee will be in place at least 10 years, but even longer if needed to pay back every penny of the Troubled Assets Relief Program (TARP). Small banks will pay nothing; only firms with more than $50 billion in assets – about 50 or so – will pay, and the White House projects about 60 percent of the revenue will come from the 10 largest firms.

Gene Sperling, counselor to Treasury Secretary Tim Geithner, told reporters on a conference call this morning that the fee’s goal is to ensure banks saved by TARP take responsibility so taxpayers suffer no expansion of the federal debt as a result.

“It is not plausible for these major financial institutions to suggest that they can afford excessive, multimillion- or even multibillion-dollar bonus pools for their top executives but can not afford to make whole the taxpayers who funded the policies that helped them survive this exceptional financial crisis,” Sperling said, noting the TARP legislation actually required the President to put forth a plan by 2013 to recoup any outstanding money from the program.

Sperling said a year ago, people feared taxpayers would lose most of the $700 billion committed to TARP. But banks began repaying, and by August, that projection was down to a loss of $341 billion; now it’s somewhere between $90 billion and $117 billion, and he estimated a decade worth of this fee would raise about $90 billion.

The Republican National Committee issued a memo this morning complaining both that some of the largest banks – including J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Wells Fargo and Citi – already have repaid their TARP debts, and that banks could pass this new cost along to customers through lower interest payments on savings and in other ways. Said RNC Chairman Michael Steele:

“President Obama’s plans to institute a ‘financial crisis responsibility fee’ to recoup the bailout funds from major banks is nothing more than another tax on the American public. The fact is this money has already been paid back by the banks and this punitive tax will hurt Americans’ savings and discourage job creation at the worse of economic times. However, it will fatten the wallets of Democrats on Capitol Hill by $90 billion over the next ten years. President Obama and Congressional Democrats are taxing banks for the same reason Willie Sutton robbed them – because that’s where the money is, and they desperately need these funds to finance their runaway binge spending for their liberal agenda.”

But Sperling said “nothing will be good enough until the taxpayer has been paid back every penny,” and banks that hike customer fees and lower interest rates to compensate for this fee would be doing so “to their own disadvantage,” discouraging customers from doing business with them.