The really interesting thing I noticed about all the press around The Mount Vernon Statement is that nowhere was a mention of Contract With America and how this documents echoes that bold manifesto, yadda yadda yadda. Apparently that's because Newt himself is helping to push yet another document- the Contract From America- on behalf of the Tea Party Patriots today at CPAC. This Contract has 22 "solutions" which will be narrowed to ten today by voting. The ten winning solutions will then be unveiled to the world on April 15.
Among the more interesting ones:
PROTECT THE CONSTITUTION: Require each bill to identify the specific provision of the Constitution that gives Congress the power to do what the bill does.
No doubt, an outgrowth of catcalls during last fall's town hall meetings that the Constitution does not allow for comprehensive health care reform.
ENACT FUNDAMENTAL TAX REFORM: Adopt a simple and fair single-rate tax system by scrapping the Internal Revenue code and replacing it with one that is no longer than 4,543 words -- the length of the original Constitution.
On this one, I turn to the wisdom of Barney Frank, who once wondered aloud on the House floor why Republicans think the usefulness of a bill is inversely proportional to its length.
LET US SAVE: Allow all Americans to opt out of Social Security and Medicare and instead put those same payroll taxes in a personal account they own, control, and can leave to whomever they choose.
Partying like it's 2005!
AUDIT THE FED: Begin an audit of the Federal Reserve System.
Ron Paulite fingerprints, perhaps, and something we can agree on.
I also do find it interesting that while the Mount Vernon Statement is signed by Christian fundie types and espouses the usual language on "family values", etc., but this document doesn't have anything on "values" "traditional marriage" "unborn fetuses" or the like. Of course, the Tea Party types have always been more about economic and constitutional issues, but that has drummed up some attention among the fundie types at the National Tea Party Convention:
One convention development that might have slipped past the mainstream media's coverage was a new effort by some longtime Religious Right leaders to hoist them-selves aboard the Tea Party bandwagon.
[...]
Rick Scarborough, the founder and head of a small, but disproportionately influential, Texas-based outfit called Vision America, has come up with a plan to try and fuse the Religious Right's "traditional family values" agenda to the economic concerns that have thus far mostly dominated the Tea Party movement.
At a workshop at the National Tea Party Convention given by Scarborough, the senior pastor of Harvest Point Church in Nacogdoches, Texas, unveiled what he's calling the "Mandate to Save America," a plan that might, as Devin Burghart of the Institute for Research & Education on Human Rights who attended the convention recently reported, signal "a shift taking place ... transforming the focus from bailouts and deficits to the culture war."
Scarborough is a former Southern Baptist pastor from Pearland, Texas, who in addition to Vision America, also heads up Vision America Action and the Judeo-Christian Council for Constitutional Restoration. According to Burghart, Scarborough told a crowd of 200+supporters at the Tea Party Nation convention that it was time that differences between "fiscal and social conservatives ... cease[d]."
The 21st Century Democrats' Youth Leadership Speaker Series is off to a great start teaching and inspiring tomorrow's progressive leaders of the Democratic Party with speakers like Congressman Barney Frank, Congressman Dennis Kucinich, and--soon--Interior Secretary Ken Salazar.
Last week, President Barack Obama released key legislation designed to fight the banking industry's too-big-to-fail problem. But Obama's plan doesn't actually address too-big-to-fail at all. It reinforces a broken system in which economically dangerous companies are bailed out whenever they drive themselves to the brink of failure.
If we want the economy to support all people, we have to break up the big banks and start treating the creation of good jobs as an economic priority on par with Wall Street rescues.
The editors of The Nation break the political debate over banking into three camps:
The first camp is composed of bank lobbyists, Republicans and conservative Democrats and wants to do nothing.
Camp two, endorsed by the White House and influential Rep. Barney Frank (D-MA), would impose tougher regulations on too-big-to-fail banks to keep them from getting out of control.
The third camp wants to go even further: If a bank is too-big-to-fail, it is also too-big-to-regulate. Companies that pose a danger to the economy have to be split up into smaller firms that cannot induce economic ruin.
The Nation editors rightly see the third strategy as the most sensible. While the "break-up-the-banks" policy is being portrayed as a left-wing pipe dream by cable news networks, the policy actually relies on an age-old observation of conservative economists. Regulators make mistakes, and they often get co-opted by the very industries they are supposed to be supervising.
The practical policy is to impose structural limits on what activities banks can participate in and how big they can get. Just look at the list of high-profile supporters: former Federal Reserve Chairman Paul Volcker, former Citigroup Chairman John Reed, Bank of England Governor Mervyn King. I don't remember seeing any of those guys at the Iraq War protests.
Many of the regulatory blind spots that brought down the economy were obvious to some policymakers for years. Back in 1994, Sen. Byron Dorgan (D-ND) wrote an article for The Washington Monthly warning that derivatives trading was putting the economy in grave danger. Commodities Futures Trading Commission Chair Brooksley Born tried to take action on these derivatives, but was overruled by other regulators, including then-Fed Chair Alan Greenspan, and then-Treasury Secretary Lawrence Summers, now the top economic adviser to President Obama. Summers and Greenspan even convinced Congress to pass a law banning the regulation of key derivatives, including credit default swaps, which ultimately brought down insurance giant AIG.
Fifteen years after Dorgan's article first ran, The Washington Monthly is featuring it again, along with a recent speech by Dorgan that details massive failures in Wall Street and Washington.
"We had regulators come to town in recent years and willfully boasted that they wanted to be blind as regulators," Dorgan says.
There are good elements of Obama's plan to deal with too-big-to-fail. It gives policymakers the option of putting a too-big-to-fail institution through a special bankruptcy process administered by the executive branch, thus avoiding the problems created in bankruptcy court when Lehman Brothers failed. But the bad part is really bad: Officials would also have the option to provide unlimited bailouts to Big Finance via loans, guarantees and even asset purchases.
As Mike Lillis notes for The Washington Independent, some responsible Democrats like Rep. Brad Sherman (D-CA) have been objecting to this aspect of the legislation for months. Sherman, in fact, calls it "TARP on steroids," noting that the bank bailout at least came with some meager oversight and a limit on the program's actual size.
The bank lobby is spending money like mad to maintain their stranglehold on the economy. Neither Congress or the administration will change course without intense public pressure. So it was very reassuring last week to see thousands of people protesting the annual meeting of top bank lobby group, the American Bankers Association. David Moberg chronicles the protest in a blog post for Working In These Times that covers speeches by both key union leaders and ordinary people facing foreclosure after watching their tax dollars go to the very bankers who wrecked the economy.
"There was broad agreement on anger at the banks for providing so little, if any, public benefit for the massive bail-out, and for so quickly returning to the greed and abuse that precipitated the crisis," Moberg writes.
Laura Flanders covers the protests for GRITtv, including video of protesters chanting "Bust up big banks!" In a roundtable discussion with Christina Clausen of the United Food & Commercial Workers Union, George Goehl of National People's Action and Rob Robertson of the Right To The City Alliance, Rolling Stone journalist Matt Taibbi explains the overriding impotence of the regulations Congress is about to approve. Regulators will not be able to crack down on abusive derivatives, a full 8,000 of 8,200 banks will be exempt from Consumer Financial Protection Agency oversight, while the same agencies that screwed up heading into this crisis will be charged with preventing the next one.
"They've had sweeping powers to do whatever they wanted," Taibbi says. "They've had this regulatory power all along."
What we need are good jobs, and lots of them. Obama's economic stimulus package has made tangible economic progress. It's saved hundreds of thousands of jobs, and is clearly responsible for the turnaround in gross domestic product (GDP) we saw in the third quarter. But a full 17% of the workforce remains unable to find full-time work, as Julianne Malveux explains for The Progressive.
When Wall Street crashed in 1929 and unleashed the Great Depression, the government eventually stepped in as an employer-of-last-resort. The Works Progress Administration (WPA) and Civilian Conservation Corps (CCC). built schools, parks, roads and bridges which still serve our communities today. Both the WPA and the CCC employed literally millions of people-in the 1930s. It's a model that could work very well today.
As the current recession makes clear, ending too-big-to-fail and guaranteeing a good job for everyone in our society who wants one are the two most critical structural reforms our economy needs. Don't let lawmakers forget it.
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When I offered in a blog thread to go lobby on TARP oversight and reform while I was in DC, little did I know that I was going to be asked to write about it on Open Left. It's a challenge to rise to the standards set by all the wonderful writers and activists on the front page of this blog. And did I mention that I am sure they are all much better typists than I am....(.Any misspellings really is my typing, I won spelling bees as a kid.)
In the past I have employed 2 methods. The first, more official one is call ahead, get an appointment with hopefully the legislator, but often it is the Chief of Staff, Legislative aide or the Press person. This works when they are friendly, agree with you and want very much for the legislation to pass. My other is the walk in and see what happens....and that's what I did Wednesday, not because Dorgan wouldn't welcome help on this bill because there had been no time to make an appointment.
As the House engaged in a bit of theatrics designed to show the Obama administration it was serious about TARP reform, the Senate now seems to be reconsidering its carte blanche release of the second $350 billion. But the Frank TARP reform bill addresses substantially more issues of concern to TARP critics than does the Dorgan legislation (still in committee with no cosponsors).
Perhaps most importantly, the Frank bill (H.R.384) prevents any funds from being made available unless between $40 billion and $100 billion are committed to a foreclosure prevention plan. The legislation calls for creation of FDIC's popular and oft-cited loss-sharing foreclosure mitigation program that would prevent an estimated 1.5 million foreclosures. Problems exist with the effort, as noted below, but the truth remains that 0$ of the first $350 billion were spent on foreclosure mitigation. The Dorgan bill (S.195) omits all foreclosure provisions. Is this any way to ensure that a foreclosure mitigation plan will actually be administered?
Though the conditions included in each bill for receiving TARP funds - agreements laying out how the funds will be used - are similar, Frank's provisions are stronger. Frank's bill prevents the use of TARP funds for M&As without certification that the action will reduce taxpayer risk or could have occurred without taxpayer money. Frank's legislation requires reports on lending increases attributable to TARP where the Dorgan bill requires only "a detailed monthly report about how emergency economic assistance...is being used..." This Dorgan provision leaves "the intended objectives and goals of [emergency economic] assistance" undefined, while the Frank legislation requires Treasury to establish "benchmarks" in its agreements with firms receiving TARP assistance.
As such, the funds will be released without any further conditions attached to them. Given that incoming Treasury Secretary Timothy Geithner has been closely involved with the disbursement TARP funds so far, virtually nothing will change about the program whatsoever. We still won't know which firms are receiving the money. We still won't know how that money is being spent.
All that was necessary to secure a seamless transition from the Bush bailout to the Obama bailout were two letters sent from Larry Summers to members of Congress. This is the same Larry Summers who, just last week, drafted a massive business tax cut for the stimulus package, which even moderate Democratic Senators found abhorrent. That tax cut was removed from the stimulus because, unlike anything that happens with TARP, one chamber of Congress can shoot it down with a simple majority vote. By comparison, for TARP to be stopped, a two-thirds majority was required from both branches of Congress.
Dodd's willingness to just trust the administration is, as Elena Schor noted earlier in the week, similar to the trust many Senate Democrats placed in the Bush administration when granting them authority to use military force in Iraq. Keep in mind that Dodd was one of the Democratic Senators who gave that authority to the Bush administration. While it can be safely said that there are good reasons to trust the Obama administration more than the Bush administration, HOPE and trust were abandoned as systems of government a long time ago. A far greater level of assurance than a letter to Congress would have been President Obama signing a Senate-approved version of HR 384 into law. It is a willingness to sign such laws, beyond HOPE, that was the reason so many Americans voted for Obama back in November. Letters of assurance are no substitute for actual laws.
TARP money will be released, without any new conditions, oversight or transparency attached to it. At this point HOPE has moved from a campaign slogan to a system of governance.
The market is off 300 points, and Barry Ritholz is saying that $700 billion is just a start. Dean Baker says you shouldn't make a decision when the banks are pointing a gun to your head.
According to the NYT, Lloyd C. Blankfein, Goldman Sachs CEO, was in the room with Henry Paulson (former CEO of Goldman) when the decision to save AIG was made. Why does this matter? According to the NYT, AIG owed Goldman $20 billion. If AIG had been allowed to go bankrupt, Goldman would be in line with all the other creditors, hoping for a few dimes back on each dollar of debt. Because Henry Paulson decided to rescue AIG, Goldman gets paid in full.
The bailout details aren't clear, but I see no reason to think that the addition of House Republicans to the negotiating process has improved anything. For what they've tried to do here, Barney Frank and Nancy Pelosi should be moved into the 'moderate Republican' column. I've long thought that Pelosi got a bad rap, that she was just managing a Blue Dog dominant caucus. But this, plus Barney Frank's utter contempt for the voters, for common sense, and for a completely corrupt Wall Street bailout, changes my mind.
I can't believe these two would do this. It's not just the $700 billion give-away. Pelosi and Frank are jamming this down the throat of the Democratic caucus for no good reason. This probably won't unfreeze the credit markets, it's not going to solve the crisis, all it's going to do is give money to Wall Street executives. And it is wildly unbelievably unpopular; no member is getting positive calls about it and every member is getting huge numbers of angry calls.
It's a horrible, craven, corrupt deal, it's politically idiotic, and it is a testament to the utter and intentional failure of Speaker Pelosi, Majority Leader Hoyer, Caucus Chair Emanuel, and Finance Chair Frank.
The Democratic rank and file haven't seen this bill, and I'm pretty sure that the Republicans aren't going to want to vote for it. No one likes it. Hell no on this deal.
Update: How many times do we have to go through this? There IS NO PONY PLAN. It's either the plan on the table or the election. There is no alternative. You can't vote for your own particular bailout, it's a yes/no on this one.
In 2002, you couldn't vote for a specific type of war, you had to vote to let George Bush run his own war. That's the choice on the table, my friends.
I've been in the 'hell no' camp with regards to the bailout proposal put forward by Hank Paulson. Most progressives, though, have accepted the notion that - even if it's not the Paulson proposal - something must be done. The split is really between the 'do it right now' camp and 'do it after the election camp'. Progressive economist Dean Baker was in the urgency camp, but he recently began arguing that Democrats should walk away. I asked him to clarify - what specifically made him think the meltdown threat was overblown, and here's what he emailed me.
Well, there is a risk of a meltdown that would be really awful, but I am less concerned about that today than I was a week ago largely because of the way the Bush administration is acting. If you really fear a meltdown, you don't go to the wall to stop an idiot special interest bankruptcy provision for the benefit of the bankers.
And that's what this urgency is really about, getting something done before the election so Democrats can't design a real bailout package. I don't understand why Democrats want to move this forward; Barney Frank seems to be afflicted with 'dealitis', as are most Democratic leaders. And we're not hearing any pitchforks from progressives, though there are slow rumblings.
But this $700B 'bailout' is a huge mistake. As Jerome A Paris makes clear, our financial system is extraordinarily broken. There's also plenty of cash to take over these banks, but these bankers want government money because it comes on better terms than Warren Buffett's sweetheart deal.
It should be obvious at this point that there's no urgent need for a deal. We're going to muddle along with a broken financial system for awhile, and the Bush administration is simply not acting like a meltdown is a realistic possibility. So why should we? Let the voters decide this one.
Update: I'm sympathetic to the people who want to do the bailout the right way, but as we saw with the war in Iraq, there is no pony plan. There is only this bailout or no bailout. No alternatives are part of the decision matrix, my friends. However, if you wait until the election, then a bunch of new alternatives do open up.
Which is why 'hell no' makes the most sense. And yes, credit is tightening up but that's not going to change for some time regardless.
Sorry Democratic leaders, but this is a partisan crisis.
According to one GOP lawmaker, some House Republicans are saying privately that they'd rather "let the markets crash" than sign on to a massive bailout.
"For the sake of the altar of the free market system, do you accept a Great Depression?" the member asked.
Meanwhile, the National Review is blaming the Washington Mutual failure on minorities. We have an election in 40 days. This should be up to the voters, which means that, ick, it's not actually 'above politics'.
So the deal fell apart. I reported this first, and because I was out on a limb I was getting pressure from various insider operatives throughout the day telling me that I was wrong, that there was a deal in place. I knew that Pelosi was negotiating with her own caucus at 3pm for a meeting with Bush at 4pm, so how could there be a settled deal in place? Nevertheless, it's a scary place to be to directly contradict political leaders because you look really really stupid if you're wrong, and it's not like I have an institution to bail me out when I'm wrong. Note that even reporters scared to say what was right in front of them; they were putting into their stories that points of contention hadn't been ironed out even as they titled their stories 'deal reached' and started them with four paragraphs on how a deal had been hashed out. And now all of a sudden it 'fell apart'.
This happened with FISA as well. Steny Hoyer kept saying 'we're near a deal' every few days, and eventually after getting it wrong for months, it came true. It seems like Democratic political leaders are more interested in cutting deals just to cut deals, they like forming gangs in the Senate and just generally passing legislation. It is how they see their job, it is what they do, it is in many ways who they are. Let's just get something done, and by that they mean 'let's eat some shit and pass a bill'. Don't stand in their way because then you're making things 'too political'.
That's why they are angry at McCain and the House GOP for screwing this up. Now I'm mad at McCain because he's crazy and wants to use this chance to cut more taxes (and probably start another war if he can). But that's not what these bureaucratic Democratic leaders dislike; they had a deal that the leadership thought it could shove down the throats of the caucus, the Bush Dogs being the only group that willingly enjoys eating shit. They had cut a deal. A deal. Don't you understand, they were going to pass something, get something done, isn't that awesome?
And so they are mad that McCain came in their and injected 'Presidential politics' into the negotiations and fucked it all up. Another way of looking at it is that McCain saw the writing on the wall, decided that he wanted to take advantage of a sour public mood, and acted like a narcissistic drama queen. But on one level he's right. Politics is how we're going to solve this, there's an election in forty days and the public is going to be able to weigh in. And that's how it should be, that's called democracy.
House Republicans say they have significant leverage on the revamped bailout package, claiming that Democrats will scramble for votes unless they make changes to it.
Republicans in the lower chamber are balking at the bailout package, saying that Democrats will be solely responsible for the ramifications of what they see as a flawed compromise.
This is why Hell No would have been the right message from the start.
In keeping with the ridiculous back-and-forth about whether there's a deal on the table, here comes an article from Bloomberg titled US lawmakers agree fundamentals of rescue deal . Here's a passage from the article, which is now on its fourth update.
Frank said a Democratic provision to let judges rewrite mortgage terms for homeowners in bankruptcy proceedings is the ``most controversial'' and remains an ``outstanding issue.''
``We pushed very strongly for it,'' Frank said. ``We haven't resolved it yet.''
``Bankruptcy is the one issue where our Republican colleagues told us they thought that would blow up the whole thing,'' Frank told reporters. ``So it hasn't been finally resolved, but that's on the table.''
This is crazy talk. There's no deal yet, as the article makes clear. They don't agree on the bankruptcy provision, which is a pretty big piece of the puzzle and could lead to a wave of failures of insolvent financial institutions.
Pelosi is gauging support right now for the bankruptcy provisions within the non-Blue Dog caucus. Democratic rank and file can still fight this steaming pile of shit.
Sometimes, as a blogger, you find ideas for several small posts, instead of one or two large posts. This is one of those times. So, here comes several hours worth of blogging in one post, designed as an alternative to First Read. Let me know if you like these posts, as opposed to my usual, longer fare, and maybe I'll try to put them together more often.
UAW Region 4 Delegates Throw Support to Obama's Campaign for PresidentDUBUQUE - Delegates of United Auto Workers Region 4, which includes 30,000 members and retirees in Iowa, voted today to support Senator Barack Obama's presidential campaign. The group announced its overwhelming support at the close of a weeklong conference where seven of the major Democratic presidential candidates addressed the group earlier this week.
A big score for Obama, but keep in mind that Gephardt wont this endorsement in 2004.
Plants for Hillary: The Edwards campaign has produced a satirical attack website, Plants for Hillary. If nothing else, it is a sign that Edwards plans to stay on the attack against Clinton. Personally, I think that this planting story might even be more damaging to Clinton than attacks on her hawkishness. I've grown convinced that most voters don't choose candidates based on issues, but instead on identity connections and personality traits. Even if it is an isolated incident, and even if other campaigns do it (a charge about which I remain skeptical), this is a new attack on Clinton's character that neatly slots itself into an old narrative about her (cold and robotic). This could be the equivalent of when Dean yelled at a Republican heckler back in January 2004. Unlike attacks on Clinton's electability and bizarre masculine outrage over her "playing the gender card," both of which I think are whining, bullshit, loser attacks that are proven to backfire, the two pronged issue / character attack on Clinton's hawkish-ness / robotic-ness might just work. (Incidentally, I also don't buy the insider / outsider thing against her, since every Democrat running is a federally elected official using DC consultants and pretty much the same group of wonkish policy professionals.)
"We'll either do it the easy way or the hard way. It's up to the Republicans," Reid said at a press conference today, according to Roll Call. "We will have a Sunday vote scheduled ... If they want to give us consent to have a vote earlier, we'll do that. But if they don't, we're not only going to be here, we're going to be here working."
These are the tactics Reid and all Congressional Dems need to employ if they expect Republicans to face serious political blowback for engaging in record-breaking filibusters. If Republicans want to filibuster, fine. However, despite objections from "Oh, No!" Democrats, when they do so Democrats need to make them actually filibuster.
All but the top four districts are currently held by Republicans, showing that Democrats still have a wide array of pickup opportunities in the House, too. The line breaks are designed to crudely group the seats into four categories: likely Dem, lean Dem, lean Republican, and likely Republican. It isn't all as simple as Partisan Voting Index rankings, of course, but they do serve as a useful overview of the situation.
Brad Miller Takes Center Stage: Representative Brad Miller (D, NC-13), who I worked for in 2006 during his re-election campaign against the despicable Vernon Robinson, finds himself at the center of two major fights right now. First, he is on the committee that will review Barney Frank's bad predatory lending bill, that Irv Ackelsberg and Dan U-A provided updates on here at Open Left. Second, his subprime mortgage bill is slowly moving forward, and the DCCC plans to make it a centerpiece of their 2008 campaign. Here is Rep. Miller speaking about the bill today:
What committee seats would you want? Working for Representative Miller last year gave me a new perspective on how Congress works. Specifically, it gave me more insight on the committee system that is so important to the day to day operation of Congress. It made me wonder, even though I never intend to be in Congress, if I were in Congress, what House committees would I want have a seat on? It is a tough choice, but I would probably go for Education and Labor as my main committee, and Space and Aeronautics as my subcommittee. If I was allowed one more, which I don't think members get to do, it would be hard to choose between House Administration and the Select Committee on Energy Independence and Global Warming. It will never happen, and truthfully I don't even want it to happen, but it is fun to think about, none the less. What committees would you choose?
This is an open thread on these and other subjects.
Kagro X wrote today at DKos about the Barney Frank Predatory Lending Bill. In his post, like Matt and Duncan earlier, he mainly focused on Yield Spread Premiums, the gross practice where a mortgage broker and a bank split the profit of selling you a higher-cost loan than the one you should have been given.
YSP's are terrible, and recipes for abuse, and Mortgage brokers have played a big role in the foreclosure crisis. That said, a focus only on brokers, and YSP's is not wise. It is not a battle that, even if won, will stop the foreclosure crisis.
Below, I try to explain why Barney Frank's bill is so bad and why a focus solely on brokers is misguided. If you really want to stop the foreclosure crisis in our Country, you are going to have to look behind the curtain and find out who benefits from this bill.
I am writing regarding Matt Stoller's post about predatory lending and the Barney Frank bill that is to come to a vote this week in the House. In fact, this weekend Barney Frank and I had a heated exchange at the National Consumer Law Center's annual conference in Washington. I think you should know why I was so angry at Congressman Frank, and why it is important that his bill is stopped or strengthened.
First, a little background on myself and the issue. I spent 30 years at Community Legal Services (CLS) in Philadelphia, largely with a focus on consumer law. CLS has more lawyers working on saving homes from predatory mortgages than any other law firm in the country. I have personally represented or advised hundreds of victims of the subprime scandal, and I have testified before the Senate Banking Committee and the Federal Reserve Board. For years, we have been warning about the dangers-both to our neighbors and to the larger economy-of the out-of-control subprime mortgage market. While it is good to see the Congress finally taking up the issue, I have strong reservations about the work product that is making its way to the floor for a vote. An already weak bill is getting weakened even further, and it is undercutting the hard work that activists have made on a state level for the past ten years.
Here are my principal worries about this bill, and why I am so upset at the role Rep. Frank is playing:
1) It is America's homeowners, not the investment machinery that has caused the current crisis, that need protection.
The Frank bill does define new and important standards in mortgage lending. However, two of the most important restrictions--on lending without regard to repayment ability or "net tangible benefit" to the borrower--Chairman Frank has apparently decided to immunize holders of the loan from any of the remedies that would apply to these two restrictions. In other words, as long as you didn't actually make the loan, you are not responsible if it later turns out that these new standards were violated, that, for example, the borrower is a senior citizen on Social Security and that the loan was unaffordable or purposeless from the beginning.
This makes no sense. It is my experience that the original lender is NEVER the entity that is foreclosing, and is often out of business at the time the abusive quality of the loan is discovered. To be meaningful, any lending standards applied to the front end of a loan must be enforceable against subsequent holders of the loan, particularly when the homeowner is being threatened with a foreclosure. Given that it is precisely the secondary market that has driven the demand for the abusive loans now going bad, it is unconscionable that this very market would be protected from irresponsible and destructive lending practices.
2) The mortgage industry itself is using this bill a vehicle to provide Wall Street and investors pre-emption against the state laws that have, in the absence of Congressional action during all these years, provided the only legal protection against predatory lending.
Currently, the Frank bill not only insulates the secondary market from the new ability-to-pay and net-tangible-benefit standards, but also, amazingly, pre-empts any state law that currently provides such protections as against secondary holders. Many states, such as North Carolina and New Jersey, have passed laws providing protections in those areas. The industry is now trying to crush those laws. Here in Pennsylvania, the Banking Department has announced a new regulation that would prohibit mortgage lending that occurs without verified evidence of the borrower's ability to repay the loan. This is the first state effort to address the problem since the legislature pre-empted a strong, Philadelphia anti-predatory city ordinance in June 2001. This important first step will hopefully remove from Pennsylvania the scourge of the so-called "no-doc" loans where income is fabricated on a loan application the broker or lender gets the borrower to sign at the closing table. My hope has been that this new regulation would create a foreclosure defense in those circumstances where that occurs. If the Frank bill passes, however, that defense may be pre-empted-at least that's what the foreclosure firms will argue.
Insulating the secondary market is the wrong thing to do. And at the very least, more expansive protections at the state level should be encouraged, not destroyed. While the GOP Congress spent years ignoring the issue, advocates and activists worked hard all over the Country to tackle predatory lending. The irony of a Democratic Congress now pre-empting our efforts is a bitter bill to swallow. Please help us insist that there is no federal preemption of our laws. If this kind of preemption is the quid pro quo for a federal bill, then I say, to hell with a federal bill.
I will check in periodically to see if I can answer any questions that you might have.
