On the Spot (CNSNews.com) - Rep. Barney Frank (D-Mass.), author of a $300 billion bill that would back the refinancing of mortgages at risk of default, told Cybercast News Service on Wednesday that he does not think it is the federal government's job to bail out people who take risks and lose, and that his legislation is not a bailout.

Republicans, however, said the bill, which now pending a vote in the Senate, is a bailout for irresponsible borrowers and lenders and that it creates a "moral hazard."

"No," said Frank, "no, I don't" think it is a bailout when asked by Cybercast News Service. "Who are we bailing out here?"

Rep. Jeff Flake (R-Ariz.) told Cybercast News Service, "Yes, of course I am concerned that this is a bailout. There is certainly a moral hazard that I don't think we can ignore."

"I am very much opposed to it," he said. "It is not the role of the federal government to bail out people who take risks and lose. All we do is invite irresponsible action in the future. It's the old moral hazard that we are not very good at recognizing."

The Housing and Economic Recovery Act of 2008, which was passed by the House in August 2007 and may be voted on by the Senate this week, provides $300 billion for the Federal Housing Administration (FHA) to back less expensive home loans for borrowers who face foreclosure.

If it were not for the financial backing of the federal government, it is likely that many of these borrowers would be forced to default on their existing loans.

But Frank said that neither the lenders nor the borrowers will receive any federal money.

"Not one penny is going to the lenders other than what borrowers already owe them, and even then, it's going to be less, about 80 percent, of what the borrowers owed them," he said.

"We are not totally bailing out the borrowers because they are getting no public money," Frank added. "What they get is the right to go to the FHA and get a guarantee if they can show the FHA that they can repay it."

Sen. John Thune (R-S.D.), who voted to bring the bill to a vote in the Senate, told Cybercast News Service that he thinks the question of whether the government should be bailing out irresponsible lenders and borrowers is vital.

"That's the important part of this debate," he said. "How do we structure something that actually helps homeowners and not lenders that make bad decisions? So, yes, that's certainly a concern."

Thune said he does not know which way he is going to vote on the bill because he is currently in the process of weighing its impact on South Dakota.

Sen. Orrin Hatch (R-Utah) also told Cybercast News Service he is concerned about bailout aspects but that he is "naturally more concerned about helping people right now."

Sen. Larry Craig (R-Idaho), who also voted to bring the bill up for a vote, said that he thinks Congress ought to figure out a way to solve the housing crisis without creating "a federal dependency."

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