Kyl: Bush Has No Responsibility For Mortgage Crisis

Jon Kyl and Chris Dodd on Late Edition talking about the housing crisis. Transcript from CNN:

BLITZER: A lot of people, Senator Kyl in Arizona, in the housing market out there, they're suffering big-time right now. How much of the blame, and I know you're a blunt guy, how much of the blame does the Bush administration deserve for allowing this kind of situation to deteriorate, as it has?

KYL: Virtually none.

BLITZER: Why?

KYL: We've been predicting for years that this problem would come along. When I was chairman of the Republican Policy Committee, we wrote papers on it.

BLITZER: But isn't the federal government responsible for making sure this kind of situation doesn't happen?

KYL: The problem is, there is very little regulatory authority. That's why this legislation that Senator Dodd has been working on, the one good feature of it is additional regulation. But we should have had that regulation four years ago. The other problem, here, is that much of the bailout here is for the people holding bad loans, not the homeowners. It's for the speculators, the investors. I know in the oil crisis, everybody's concerned about the speculators driving up the price. What do you think happened in the housing market?

BLITZER: Senator Dodd, go ahead and respond.

DODD: No, no, no. Very specifically, Jon, we absolutely seclude speculators from having any benefit all the under the act. That's very clear in the law. Of course, this is a highly regulated industry, Jon. This isn't like hedge funds. The mortgage market has been a highly regulated industry. Where were the cops? Why weren't they out there saying when brokers were luring people in and saying I'm your financial adviser, a fully indexed price, don't worry about it, lie about it if you want, we'll get you into that home.

Those were people that had a responsibility, that failed in that responsibility, and the regulators watching them should have been doing a better job and they didn't do it. That's a major reason why we're seeing the problems we're seeing today.

KYL: Just one quick example. There's much to be said. The provision that Chris alluded to that the Bush administration opposes and would veto the legislation over are these CDBG grants. They don't help.

BLITZER: You've got to explain what that means.

KYL: The community development to block grants, which enable local governments to purchase homes from the people who are holding them, the investors that are holding them. It doesn't help the homeowner at all. They're in foreclosure. It helps the people holding the paper, the money. It's a good example of how --

BLITZER: I want to move on, but I'll let Senator Dodd respond.

DODD: The community development block grant is money that goes directly to governors and mayors in order to help them rehabilitate foreclosed properties so they can put them on the market and sell it. It doesn't go to the homeowner at all.

KYL: That's my point.

DODD: That money, because you have declining property values, that is the resources coming from for police and fire and other matters. These are things that mayors need. We provide that when you have floods and hurricanes. This is a national crisis and our communities need to help. But you're not purchasing mortgages with that money at all.