In last week’s media blitz of trying to explain our financial crisis, the clearest description I saw was a Chattanooga Times Free Press cartoon, which the Chicago Tribune ran on its editorial page on Sept. 25. Titled “The Rescue Plan,” it depicts four firemen hosing down a bank, while they are surrounded on every corner behind them by a community burning. I’m still waiting for the headline, “It’s the Foreclosures, Stupid!”
To their credit, several reporters have included references to critics of our financial system. John McCarron in his Chicago Tribune column on Sept. 21, remembers the late activists Gale Cincotta and Msgr. Jack Egan, who “complained that finance companies were pushing ruinous payday loans and high-interest mortgages like crack cocaine.” I had the privilege to work over a decade for Gale and I confess to having been an altar boy for Msgr. Egan.
There have been only a few press references to efforts in states such as North Carolina or cities like Dayton, Ohio to squelch predatory lending. But these and other local efforts were trumped by Bush regulators and left unsupported by congressional gridlock that would not pass national anti-predatory legislation.
I haven’t seen any in-depth analysis of how Phil Gramm’s repeal of Glass-Steagall in 1999 enabled commercial lenders to underwrite, trade, and purchase instruments such as mortgage-backed securities and collateralized debt obligations.
In the midst of this current DC chaos, I joined 18 other board directors of the National Community Reinvestment Coalition from around the country in meeting with Federal Reserve Chairman Ben Bernanke on September 22 to share our outrage (which I assure you is much higher than Treasury Secretary Paulson’s).
My colleague Stella Adams played her “I told you so” card, citing a March 2006 meeting as a member of the Federal Reserve’s Consumer Advisory Council at which she had spoken to him about the prevalent abusive lending plaguing communities.
NCRC is persistently arguing that Congress cannot pass legislation bailing out Wall Street that does not include rescuing our communities too with:
- Loan Modifications – Foreclosure prevention efforts should take the form of broad scale loan modifications styled after the Home Owners Loan Corporation of the 1930s, such as NCRC’s proposed Homeowners Emergency Loan Program (or HELP Now), about which NCRC’s John Taylor wrote in the Spring 2008 issue of Shelterforce.
- Anti-Predatory Lending Provisions — Congress should enact protections for homeowners to ensure that unfair and deceptive lending practices do not again lead to a foreclosure crisis. Sen. Christopher Dodd’s Homeownership Preservation and Protection Act of 2007 should be added to the current proposals.
- Bankruptcy Reform — Congress should amend bankruptcy law to allow judges to modify the terms of primary mortgages, as is currently allowed for investment properties.
I would also add a call for a national foreclosure moratorium to stop the bleeding and give all the hard-working counselors throughout our country the time they need to work through loan modifications for the borrowers, who have been victimized by their own federal government having ignored their plight while Wall Street profiteered from their abuse.