In hindsight, a bailout and switch?

By Lisa Mascaro (contact)

Sunday, Nov. 16, 2008 | 2 a.m.

Washington — Rep. Dennis Kucinich is often on the rough end of jokes, what with his calls to impeach the president and his belief in UFOs.

But upside-down homeowners in Las Vegas who happened to hear the Ohio Democrat grilling a Treasury Department official last week over the $700 billion Wall Street bailout may have found comfort in a lawmaker speaking a language they understood.

Nevada posted the highest foreclosure rate in the nation again in October — as it had for the past 22 months.

One in 62 homes received a foreclosure filing.

The glitz of the Strip may be miles from the Rust Belt of the Midwest, but Ohioans and Nevadans have more in common than they might realize in the mortgage meltdown.

One neighborhood in Cleveland has been featured as an example of what went wrong — housing prices skyrocketed, crashed and then left rows of shuttered homes.

The Treasury Department announced last week it would shift the emphasis of the bailout from buying up troubled mortgage-backed securities to injecting banks with capital to help them keep lending.

The announcement seemed to catch Washington by surprise.

Practically no member of Congress liked voting for the $700 billion Wall Street bailout.

Scores of lawmakers, including Nevada’s Democratic Rep. Shelley Berkley and Republican Rep. Jon Porter, essentially said they held their noses while casting votes. Republican Rep. Dean Heller escaped the uncomfortable position by voting no.

The alternative of doing nothing, the reluctant lawmakers believed, was worse. They were being told at the time the health of the entire U.S. financial system rested on their decision.

But what lawmakers dislike even more than a tough vote is what some are now calling the “bait and switch” coming from the Treasury Department as the program’s purpose shifts before their eyes.

Somehow the promise of the bailout — that helping Wall Street would help Main Street — was not being fulfilled in ways they could see. Nevadans and others nationwide are still losing their homes.

At a congressional oversight committee hearing late last week Kucinich wanted to know why, exactly, homeowners were not being directly helped by government-led loan writedowns.

“We’ve got millions of people losing their homes,” Kucinich railed at the hearing. “Tell me: Why isn’t it happening?”

Interim Assistant Treasury Secretary Neel Kashkari, the bailout point man, tried to explain.

The portion of bailout money so far allocated from Congress could help save an estimated 3 million home loans that are in trouble, the Treasury man said. He noted there are 55 million mortgages held in this country.

“Or,” he offered, “we could benefit every American by not allowing the financial system to collapse.”

Put another way: “Imagine how many foreclosures we would have if the banks collapse,” Kashkari said.

Kashkari reminded that other federal housing loan programs were helping homeowners more directly with their mortgages.

It was a tough crowd at the oversight hearing, even in a lightly populated week in Washington when Congress was not in session and only a few lawmakers sat at the dais.

“Congress is feeling you played a bait-and-switch game,” Republican Rep. Darrell Issa of California told the assistant secretary.

Kucinich took over again and explained what he saw happening as a variation of the trickle-down theory of economics long touted by conservatives.

“One model may keep several banks afloat. Another model keeps people in their homes,” Kucinich said. “Trickle never gets down. Everybody understands that.”

Kashkari’s boss, Treasury Secretary Henry M. Paulson, is expected to address these and other issues on Tuesday before the House Financial Services Committee.

Heller has a seat at the table as a member of that committee. Perhaps, like the others, he will have a few questions, too.