Democratic leaders angry with hedgers

Six Democratic House leaders who deal with financial services issues, including Rep. Barney Frank, D-Mass., Friday expressed “outrage” over a news report that some hedge funds have tried to convince companies that service mortgages not to take advantage of legislation aimed at reducing foreclosures, because it would hurt their mortgage investments. “For hedge funds, which have been the beneficiary of a lack of regulation and a very permissive attitude, now to put obstacles in the way of this important national policy is intolerable,” said a release issued by Mr. Frank, chairman of the Financial Services Committee, Paul Kanjorski of Pennsylvania, Carolyn Maloney of New York, Maxine Waters of California, Luis Gutierrez of Illinois and Melvin Watt of North Carolina. A story in today’s New York Times said that hedge funds “Greenwich Financial and Braddock Financial,” which hold securities backed by mortgages, are arguing that the terms of the underlying loans cannot be changed without their consent. The story apparently referred to Greenwich (Conn.) Capital Markets Inc. and Braddock Financial Corp. of Denver. “We believe the law clearly allows for modification where such changes would involve a lesser loss than foreclosure, and the benefits for the whole economy of such an approach are obvious,” the group said in the release. “People in the financial community should not be surprised if this sort of blatant refusal to show any cooperation whatsoever with our efforts leads to an increased demand for much tougher legislation,” the group said. They sent letters to Harvey Allon, chairman and chief executive of Braddock Financial, and to Richard Baker, president and chief executive of the Washington-based Managed Funds Association. The MFA said it could not respond to the letter because it had not yet received it from the congressmen. Neither company returned calls for comment.