By Robert Pore
robert.pore@theindependent.com

"It is my desire that we be very careful and not adopt a so-called 'bailout' that will change consumer and market behaviors in the future," he said. "We need to be extremely careful."

The Senate Housing bill "contains an amalgam of provisions aimed at easing the current crisis."

Among the provisions in the bill:

* Allowing lenders and home builders who made big profits earlier in the decade but are losing money now to reclaim taxes paid up to four years ago.

* A $7,000 tax credit for people purchasing a foreclosed home and property tax deductions for people who do not itemize their deductions.

* Rewriting of Federal Housing Administration law that would permanently raise the dollar limit on mortgages that FHA can insure to $550,000 in the most costly real estate markets.

* $4 billion to help cities and towns buy up and refurbish foreclosed and abandoned homes.

* $100 million to provide counseling to people threatened with foreclosure and help them in negotiating with their lenders.

* Giving states authority to issue $10 billion worth of bonds to be used to refinance sub-prime mortgages.

* Toughening truth-in-lending laws to try to make sure borrowers have a clearer understanding of the terms of their mortgages.

* A total cost of $15 billion to $20 billion.

Smith said a lot of the home loans that are now in default involve consumers who didn't have to make a down payment and had no closing costs.

"The closing costs were rolled over into the loan itself, so people were entering into a mortgage automatically owing more than the house was worth," he said.

Smith said those lenders who offered those types of deals to people buying homes made a "ton of cash" for several years.

"There are some who are losing money now, but let me just say, that's the marketplace," he said. "We cannot expect the government to bail out individuals or institutions for making a bad decision."

But Smith said he was satisfied with the Federal Reserve's decision to bail out the Bear Stearns investment bank.

Last month, the Federal Reserve, Treasury Department and Securities and Exchange Commission brokered the sale of Bear Stearns to JPMorgan Chase with $29 billion in taxpayer money at stake.

Bear Stearns was one of many investment banks that purchased sub-prime loans from lenders who lent to homeowners who borrowed more than the value of the home they purchased.

"I know that these are tough decisions, and they (the Federal Reserve and other agencies) are experts at doing what they can, given the hand that has been dealt them," Smith said. "I just want to keep a close eye on what's going on and make sure that we don't overreach."