Legislation Would Have Rewarded Predatory and Subprime Lenders

[BuyingThyme]

Congresswoman Lee Opposes Massive Bailout
09/29/08



Legislation Would Have Rewarded Predatory and Subprime Lenders

Washington D.C.- Today Congresswoman Barbara Lee delivered the following statement on the House floor in opposition to the financial bailout bill considered today. The Congresswoman voted against the bill, which failed by a vote of 205-228.

“Thank you Madame Speaker and thank you Mr. Frank, the Chairman of the Financial Services Committee, for his efforts to improve the administration’s $700 billion blank check proposal.

“As a former member of the House Financial Services Committee for eight years, I can tell you that the situation we find ourselves in is the direct result of the deregulation happy, turn a blind- eye approach of this administration and its allies in Congress.

“Now we see the horrific price of these reckless deregulation policies. More than 600,000 Americans have lost their jobs since January. People need jobs to obtain credit and to pay their rent. They need jobs to pay their mortgages or to put money in their 401k or retirement account. Millions of people are living paycheck to paycheck, if they have a paycheck.

“Home foreclosures are skyrocketing, and home values are plunging, banks are failing and we are still spending more than $10 billion every month on a war in Iraq that should never have been waged.

“So there is no question that we are confronting an economic and financial crisis.

“But I’m convinced that this bailout plan is not the solution to this mess.

“First, it does little to address the underlying problem – the foreclosure crisis. We need a moratorium on foreclosures and bankruptcy reform to help people stay in their homes.

“Second, this bill should be paid for by the high-flying industry that created this problem. $700 billion should not be given to Wall Street and the Bush Administration unless those who cause this mess pay for it. We should also prohibit the tax deductibility -and my bill the Income Equity Act (HR 3876) would do this across the board - of executive compensation in any company where the highest paid corporate officer is paid more than 25 the times the pay of a bailed-out company’s lowest-paid worker.

“And third, we need an economic stimulus package to deal with the crushing reality of the recession that is hitting people hard and growing every day.

“I cannot vote to reward those predatory and subprime lenders who are creating such havoc in the lives of millions of Americans.

“There is a better way.”

# # #


http://lee.house.gov/index.cfm?sectionid=57&parentid=35§iontree=35,57&itemid=1422

[chicagoexpat]

1. I'm sure you can think of a lot more reasons why we need to link arms w/ the rabid right wing base

if u just TRY

Ur SO MUCH smarter than Obama, Pelosi, Reid, Frank, Warren Buffet.

Why don't u rule the world yet?

[BuyingThyme]

2. Yes, the progressive thing to do is support corporate welfare and

top-down economics.

What a maroon.

[girl gone mad]

4. You aren't adding anything to the debate.

You're just being hysterical.

Take a deep breath and relax. This is not the rapture. This is not the apocalypse.

[chicagoexpat]

5. yeah, freepers luv the rapture -- & they see Obama as the anti-christ

[girl gone mad]

6. mmmkay..

:crazy:

[slipslidingaway]

3. Thanks K&R n/t

[dailykoff]

7. K/R.

Totally counterproductive. Nothing but a shameless heist. Hard to believe ANYBODY here fell for it!

[Rage for Order]

8. This wasn't a result of deregulation per se...

Unless one is referring to the deregulation - erosion, if you will - of the underwriting standards for loans purchased by Fannie Mae and Freddie Mac. Fannie & Freddie buy nearly all of the loans that are originated by mortgage companies, and they publish underwriting guidelines that the mortgage companies adhere to when underwriting loans. If the loans don't conform to Fannie & Freddie standards, they won't buy them. No mortgage company wants to be stuck with a bunch of loans that they can't sell, so they are very careful about following Fannie & Freddie guidelines.

In the past, Fannie & Freddie wouldn't buy a loan if your house payment was more than 28% of your gross monthly income and your total monthly obligations (as listed on your credit report), including your mortgage,were more than 36% of your gross monthly income. In recent years these percentages were changed, and in some cases you could get a mortgage if up to 60% of your gross monthly income went to pay your mortgage and the bills listed on your credit report. In addition, alternative documentation methods were introduced to verify a borrower's income, including bank statement analysis. That is, add up the total amount of deposits to a borrower's bank account in a month to determine their monthly income. This method was wide open to possible fraud, for obvious reasons. Then, as if that weren't enough, they did away with income and asset verification entirely for some loan programs, e.g. Stated Income/Stated Asset (SISA) or No Income/No Asset (NINA). For the icing on the cake, private mortgage insurance (PMI) is required on prime loans with a Loan-To-Value > 80%, but there was no PMI requirement on sub-prime mortgages. The reasoning was that the higher interest rates and discount points paid by sub-prime borrowers compensated for the additional risk. This system obviously did not work.

I am of the mind that Fannie and Freddie need to be disbanded. As long as there is an implicit guarantee that their bad loans will be covered by the government - that is, you and me - they will continue to buy bad debt. If private companies had to buy these loans without the implicit promise of government backing they would be much more diligent in making sure that the loans had a good chance of being repaid. However, since Fannie & Freddie have too much political clout for that to happen, they at least need to return to sensible, sound underwriting standards for the loans they buy.

[BuyingThyme]

9. I think deregulation is entirely responsible for the bubble which has left the void.

It didn't matter who was getting a loan, as long as there was a property waiting to be cast into the money river.