Geithner, the U.S. Treasury secretary, is offering new incentive payments to the two government-supported mortgage financiers if DeMarco drops his opposition to principal reductions for homeowners whose loans are backed by the companies. Geithner told Congress yesterday he was sure the economics would work in favor of debt reductions "in some circumstances." The Treasury would pay a maximum of 63 cents for each dollar of loan forgiveness as part of its expanded Home Affordable Modification Program.

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