Rep. Barney Frank (D-MA) introduced H.R. 384—his medicine for the Troubled Asset Relief Program—on January 9; the bill was approved by a 260-166 margin on January 21. That’s something approaching the speed of light for Congressional action. One hitch: the Senate has no plans to consider the bill.

The Senate’s public disinterest does not make H.R. 384 irrelevant, however.  The TARP Reform and Accountability Act instead is regarded as a guide to how the two-week-old Obama administration may structure the remainder of TARP money recently released by the Senate. H.R. 384 would provide at least $100 billion to homeowners facing foreclosure, provide a big chunk to mandated lending, and handcuff executive compensation to some extent.

In a hint of things to come, House Speaker Nancy Pelosi asserted after the vote: “President Obama and Congress are committed to seeing that funds under the [TARP] are used responsibly, with full accountability and transparency, and that help is provided to Americans in danger of losing their homes.” H.R. 384 is the right prescription, of course, Pelosi believes.

“The Frank bill is not necessarily where we are going,” says Stuart Stein, partner and head of the financial service groups at law firm Hogan & Hartson. “But it is forcing a rethinking of TARP.” While the unraveling of the financial sector demanded government response, “they threw things at the wall,” Stein complains. The Capital Purchase Program “wasn’t even debated—Congress is saying wait a minute, what did you do? Congress didn’t have a clue what was happening at Treasury. Now they want a seat at the table.”

Stein believes the “new team’s plan will focus on foreclosures and toxic assets. The “A” in TARP focused on assets.” He prefers the Resolution Trust model to the concept of an aggregator or bad bank. “How do you value those assets? We are really talking about government ownership in banks,” Stein continues: “The FDIC is looking a joint venture structures, participating out loans. We have to stop being so indirect, and stop bailing out failing banks. Strong banks will survive.” It’s not that simple, Stein agrees—this is not the 1980s, the crisis is not localized in Texas, Arizona, southern California, and Florida. The toxic assets aren’t the same, either. “Today it’s a systemic problem, and these troubled institutions are not just home-grown banks. Rescuing the banks will be very difficult and very expensive,” he laments.

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