A cardinal rule of Washington is don't tick-off anyone chairing a committee essential to your operations.

Well, it looks like this U.S. Treasury Department has done just that.

U.S. Sen. Chris Dodd and U.S. Rep. Barney Frank have just about had it with the U.S. Treasury Department and its implementation of the Troubled Asset Relief Program (TARP).

Dodd, D-Connecticut and Chairman of the Senate Banking Committee, and Frank, D-Massachusetts and Chairman of the House Financial Services Committee, said this administration's Treasury department may not get the second half of the $700 billion TARP financial rescue fund, as they are upset at how the program is being run, Bloomberg News reported.

"I would be a very hard person to convince that this crowd deserves...the next $350 billion," Sen. Dodd told Bloomberg News.

Further, Rep. Frank said Treasury has ignored "clear Congressional intent," and that at the very least he wants to see that some of the new money was going to used for home mortgage foreclosure relief, Bloomberg News reported.

Most investors know that there's a difference between Democratic Party leadership and Republican Party leadership, as it relates to U.S. fiscal and economic policy.

However, although more economically-cohesive than the Democratic Party, the Republican Party is not monolithic, and there's perhaps no better example of these often nuanced differences in policy than the positions on home mortgage assistance policy held by U.S. Treasury Secretary Henry Paulson, and FDIC Chairman Sheila Bair.

Paulson has been slow on payment relief

Although he has shown support for mortgage refinance programs aimed at achieving lower payments - - 'payment relief' in Washingtonspeak - - Paulson has steered clear of policies that would mandate that banks unilaterally lower principals, or interest rates, preferring to stick with a voluntary approach, whereby banks basically negotiate with borrowers on a case-by-case basis.

That traditional Republican response, economist David H. Wang said, "has prevented mortgage refinancings from occurring for those who don't truly need them," but it also has increased the at-risk mortgage pool, delaying the housing sector's recovery.

A solution to the above, in Wang's view? Adopt the FDIC plan backed by Bair, whereby the Treasury would use its funds to speed refinancings for at-risk homeowners in owner-occupied homes. Wang agreed with Bair that the FDIC plan could prevent 1.5 million foreclosures by the end of 2009.

"It could prevent even more, perhaps as many as 1.8-2 million foreclosures, and until the U.S. ends these waves of foreclosures, very little good news will occur from a GDP standpoint, which is why Bair's plan should be enacted," Wang said. "I also think President-elect Obama should appoint her to a Special Advisor post in the Obama Administration, solving the home foreclosure problem is that critical to the nation's economic health."

Mortgage applications decreased last week, as an increase in borrowing costs discouraged mortgage refinancing activity, the Mortgage Bankers Association announced Wednesday.

The Mortgage Bankers Association's composite index of applications declined 1.9% on a seasonally-adjusted basis to 671.7 from last week's 684.9.

The Refinance Index decreased 4.7% to 2,448.2 from 2569.0 the previous week and the seasonally adjusted Purchase Index increased 1.6% to 368.8 from 363.1 one week earlier.

Mortgage rates rise

Meanwhile, the average rate for a 30-year fixed loan rose to 6.37% from 5.98% the prior week; 30-year rates are at five-month high. The average rate for a 15-year fixed mortgage increased to 5.72% from 5.26%.

Also, the share of applications that involved a refinance declined to 50.6% from 52%.

Economic Analysis: A large increase in conventional mortgage rates -- the average rate rose about 40 basis points in one week. The U.S. Federal Reserve has cut benchmark, short-term interest rates by 225 basis points, but mortgage rates have not fallen, they've risen. That's a tell-tale sign that banks remain concerned about their portfolios and about sluggish housing market conditions. For the housing sector to regain its sea legs, rates must move toward the lower-end of their 10-year range, which would increase housing demand by lowering monthly payments for purchases.