New Stance for House Banking Panel : Gonzalez Seeks 6% Mortgage Rate for First-Time Home Buyers

Rep. Henry B. Gonzalez (D-Tex.), the outspoken populist who is the new chairman of the House Banking Committee, called Friday for a national housing trust to offer 6% mortgages to first-time home buyers, promised tough new oversight of the Federal Reserve Board and announced a special investigation of the ailing savings and loan industry.

Linking himself to a tradition of bank critics going back to Thomas Jefferson, Gonzalez promised that the committee will be freewheeling in a way not seen since the era of a fellow Texan, the late Rep. Wright Patman.

With consumer activist Ralph Nader smiling with approval from the sidelines, Gonzalez said at a news conference that he will explore the state of the national economy, the “dangerous concentration” of financial power caused by bank mergers across state lines and assorted other financial issues.

Gonzalez, who has served in Congress 28 years, was formally chosen by fellow Democrats as committee chairman on Tuesday, succeeding Rep. Fernand J. St Germain (D-R.I.), who was defeated for reelection.

More Freedom Promised

St Germain kept tight personal control over the committee and was sympathetic to the savings and loan industry, which fought all efforts at increased government regulation until the current financial crisis crippled hundreds of thrift institutions.

Gonzalez promised considerably more freedom for individual committee members to offer their prescriptions for solving the S&L; crisis and other impending problems. The chairman’s job, he said, will be like “leading a fractious family across Pennsylvania Avenue in high traffic.”

The committee’s top priority will be legislation to deal with the S&L; crisis. Experts believe that it may cost between $50 billion and $100 billion to close or merge financially crippled S&Ls.; Congress will be debating how much of these funds will be provided by the taxpayers.

Gonzalez disclosed that he has assigned committee investigators to gather data from the Federal Home Loan Bank districts around the nation about the crisis of insolvent S&Ls.; “These materials will prove invaluable as the committee wrestles with the . . . problem in the coming months,” he said, during a wide-ranging 90-minute news conference, his first general meeting with the press since becoming committee chairman.

“It is crucial that we develop a source of information independent of the Home Loan Bank Board (the regulatory agency for S&Ls;) and other well-worn experts,” the new chairman said.

Wary of Risky Business

Gonzalez is very skeptical of the benefits of deregulation, which allowed S&Ls; to get into new and riskier types of business, compared to their traditional role of financing home purchases. Congress gave the industry everything it asked for in the past two decades, he told reporters.

The new chairman said he wants to ease the financial strain of buying a house for young families and first-time homeowners.

He suggested that the Federal Reserve Board use some of its surplus funds to establish a national housing trust, with expenditures of $2 billion a year for three years for subsidized loans. The mortgages would be capped at 6%, making home loans affordable for individuals who otherwise would be unable to qualify as borrowers, Gonzalez said.

In addition to considering the Fed as a potential source of housing money, Gonzalez views the agency as a center of power that does not receive enough critical scrutiny from Congress.

“The Fed has accumulated tremendous power with very little accountability,” Gonzalez said. “You shouldn’t have anybody exercising power without accountability.”

He wants to hold hearings in each of the 12 Federal Reserve districts about the agency’s policies and their impact on business and consumers. “We need to go out to the people, to hear from the little banker, the consumer, the civic leader who doesn’t have a chance to get to Washington,” Gonzalez said.

Through its regulation of the monetary supply, the Fed helps raise or lower interest rates, a subject of vital interest to anyone who is borrowing money, whether it is for the purchase of a car or a home, or for the expansion of a business. Gonzalez follows the tradition of Patman, a congressional gadfly during the 1950s and 1960s, and other Western populists who saw the Fed as the upholder of the interests of big banks and wealthy creditors at the expense of consumers, small businesses and borrowers.

Menu Will Be Full

A recurring theme in American history has been “who determines the allocation of credit and for what purpose,” Gonzalez said. The Banking Committee has abdicated its basic responsibility by failing to carry out constant oversight of the Fed, he said.

The committee’s full menu of activities, which will begin next month with general hearings on the economy, will include discussion of new financial powers for banks.

The banks want the power to enter new businesses, notably the sale of securities and insurance.

“The issue of new powers for banks was not settled in the last Congress,” Gonzalez said. “Clearly, it must be on the priority list as we move into the 101st Congress.”