Financial literacy

Wall Street Accountability and Consumer Protection Act

hmoroz — Thu, 17 Dec 2009 11:24:17 -0500

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Percentage of delinquent loans originated by IndyMac, which failed in the summer of 2008, that required either very little or no documentation: 81.9

Estimated total support made available by the federal government to the financial system since 2007: $23.7 trillion

Year in which Goldman Sachs paid its highest bonuses ever: 2007

Year in which Goldman Sachs is expected to break this record: 2009

Total federal TARP funds used to bail out Goldman Sachs Group: $10 billion

Number of homes the Center for Responsible Lending estimates could be saved by court-supervised modifications of mortgages in bankruptcy: 800,000

Overview/Summary

Middle Class Position Analysis

Middle Class Supports. The economic and financial crisis has demonstrated that the current financial regulatory system permits banks, mortgage brokers and servicers, and other firms to enrich themselves at the expense of ordinary Americans. Abusive and fraudulent mortgages sold to unsuspecting homeowners fueled the housing crisis while credit card companies used deceptive billing practices to mire cardholders in debt. The federal government leaped into action to assist the financial services industry when firms like AIG, Morgan Stanley, and Citigroup were at risk. The $700 billion TARP program and trillions of dollars more in cheap loans and guarantees have nurtured the financial services sector back to health, profits, and gigantic compensation packages. Meanwhile, middle-class Americans continue to face foreclosure and abusive lending and credit card practices in addition to extended bouts of unemployment.

The Wall Street Reform and Consumer Protection Act’s creation of a Consumer Financial Protection Agency is a critical innovation to protect ordinary Americans from deceptive and abusive lending practices. While consumers are currently guarded from faulty products like toasters, no single agency is tasked with overseeing the financial products and services – from credit cards to mortgages and student loans – that Americans rely on every day to earn a middle-class standard of living. The CFPA will be empowered to root out products and services that are harmful to aspiring middle-class and middle-class Americans. It will promote equal access to safe credit products and root out harmful ones like certain subprime mortgages, abusive credit card practices, and usurious payday loans. The Agency is critical to making the financial services sector work for ordinary Americans. The Mortgage Reform and Anti-Predatory Lending Act, which is included in the bill, also takes important steps to combat and end the abusive lending practices at the root of the financial crisis.

The legislation’s increased regulation of executive compensation, improved protections for investors, and expanded oversight of derivatives all address factors – compensation structures that encouraged excessive risk taking, fraudulent investment practices like Bernard Madoff’s Ponzi scheme, and opaque derivatives contracts – that contributed to the financial crisis. These steps will help ensure that similar practices do not precipitate another crisis.

The Financial Services Oversight Council, the regulatory powers granted to the Council, and the dissolution authority included in the legislation make the development of a financial threat into an agent of financial and economic destabilization less likely. By regularizing a process for oversight of financial markets and creating a mechanism for regulators to impose capital, leverage, and other standards on at-risk firms, the legislation significantly enhances the federal government’s capacity to stem an outbreak of instability before it begins. Most importantly for middle-class Americans, this process and the dissolution authority created by the legislation rely on assessments of the largest financial firms for funding. Thus, if future bailouts become necessary, they are much less likely to use taxpayer dollars.

Quotes from Experts

Beyond this Bill

Additional Resources

Americans for Financial Reform

“Financial Regulatory Reform,” from the House Financial Services Committee

“Consumer Financial Protection Agency,” from the Consumer Federation of America

Wall Street Accountability and Consumer Protection Act

hmoroz — Thu, 17 Dec 2009 11:24:17 -0500

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Percentage of delinquent loans originated by IndyMac, which failed in the summer of 2008, that required either very little or no documentation: 81.9

Estimated total support made available by the federal government to the financial system since 2007: $23.7 trillion

Year in which Goldman Sachs paid its highest bonuses ever: 2007

Year in which Goldman Sachs is expected to break this record: 2009

Total federal TARP funds used to bail out Goldman Sachs Group: $10 billion

Number of homes the Center for Responsible Lending estimates could be saved by court-supervised modifications of mortgages in bankruptcy: 800,000

Overview/Summary

Middle Class Position Analysis

Quotes from Experts

Beyond this Bill

Additional Resources

Americans for Financial Reform

“Financial Regulatory Reform,” from the House Financial Services Committee

“Consumer Financial Protection Agency,” from the Consumer Federation of America

The American Housing Rescue and Foreclosure Prevention Act of 2008

hmoroz — Fri, 25 Jul 2008 11:21:47 -0400

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Percent increase of foreclosure filings from June 2007 to June 2008: 53

Approximate value of mortgages that Fannie Mae and Freddie Mac own or guarantee: $5.2 trillion

Total residential mortgage debt outstanding in the first quarter of 2008: $12.1 trillion

Total outstanding public debt: $9.5 trillion

Percentage of new mortgages Fannie Mae and Freddie Mac currently originate or guarantee, according to Treasury Secretary Henry Paulson: 70

Number of homes that will experience devaluation because of subprime foreclosures that take place nearby: 40.6 million

Average decline in property values for homeowners living near foreclosed properties, in dollars: 5,000

Overview/Summary

Middle Class Position Analysis

Middle Class Supports. As many as 2.5 million families could lose their homes to foreclosure in 2008. At the same time, growing doubts about the solvency of Fannie Mae and Freddie Mac threaten to further destabilize the entire U.S. economy. Congress is not acting a moment too soon..

The refinancing program created by the American Housing Rescue and Foreclosure Prevention Act will have concrete results for middle-class homeowners facing the frightening prospect of foreclosure. Although participation in the program is voluntary for lenders, many are expected to participate and the measure is projected to help approximately 400,000 homeowners. Because the bill forces lenders to write down the principal by at least 10%, the program offers a less generous bailout to mortgage lenders than it otherwise might. Since irresponsible lending is a major cause of the current financial and home equity crisis, the effort to restrict the tax-payer funded bonanza for these lenders is beneficial.

The $4 billion of CDBG funds authorized by the legislation addresses two important problems plaguing aspiring middle-class Americans: the community breakdown that can result from vacant foreclosed homes in neighborhoods across the country and the lack of affordable housing in many communities. Middle-class Americans who are current on their mortgages and face no personal risk of foreclosure are nevertheless harmed when a foreclosed home down the street brings down property values, erodes the local tax base, and threatens to become a magnet for crime. The Center for Responsible Lending has shown that approximately 40.6 million homes will experience devaluation because of nearby subprime foreclosures, that homeowners living near foreclosed properties will lose approximately $5,000 on the value of their homes, and that approximately $200 billion dollars in house values and tax base will be lost from nearby foreclosures. By funneling federal money to local agencies to serve lower- and extremely low-income individuals, the CDBG funds will help neighborhoods recover from the harm done to their communities by foreclosures while helping to ensure that neighborhoods can accommodate aspiring middle-class Americans.

While the Congressional Budget Office believes that there is a 50% or better chance that Treasury will not have to use its new authority to purchase stock in the GSEs, the enactment of this authority reassures markets that the federal government is willing to serve as a backstop if Fannie Mae and Freddie Mac continue to falter. Because these secondary mortgage lenders hold or guarantee approximately half of all mortgages, their failure would have devastating consequences for middle-class families and the American economy as a whole. The promise of a bailout is regrettably necessary to prevent further market destabilization.

Increased oversight of the GSEs will be crucial to ensuring that the government-backed entities minimize taxpayer risk, while making mortgages affordable to middle-class Americans. Standards for a mortgage licensing and registration system and enhanced mortgage disclosure requirements are forward-looking measures that will help prevent the predatory lending and other improper lending practices that contributed to the foreclosure crisis.

Quotes from Experts

Beyond this Bill

Additional Resources

Mortgage Lending, from the Center for Responsible Lending

Housing Policy, from the Center on Budget and Policy Priorities

A Brief History of Fannie Mae and Freddie Mac, from Time

The American Housing Rescue and Foreclosure Prevention Act of 2008

hmoroz — Fri, 25 Jul 2008 11:21:47 -0400

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Percent increase of foreclosure filings from June 2007 to June 2008: 53

Approximate value of mortgages that Fannie Mae and Freddie Mac own or guarantee: $5.2 trillion

Total residential mortgage debt outstanding in the first quarter of 2008: $12.1 trillion

Total outstanding public debt: $9.5 trillion

Percentage of new mortgages Fannie Mae and Freddie Mac currently originate or guarantee, according to Treasury Secretary Henry Paulson: 70

Number of homes that will experience devaluation because of subprime foreclosures that take place nearby: 40.6 million

Average decline in property values for homeowners living near foreclosed properties, in dollars: 5,000

Financial literacy

Wall Street Accountability and Consumer Protection Act

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

Related Blog: Link

Additional Resources

Wall Street Accountability and Consumer Protection Act

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

Related Blog: Link

Additional Resources

The American Housing Rescue and Foreclosure Prevention Act of 2008

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

Related Blog: Link

Additional Resources

The American Housing Rescue and Foreclosure Prevention Act of 2008

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

Related Blog: Link

Additional Resources