Mortgage Crisis

Roskam Receipts by Sector through 20091206The chart above shows, by industry sector, Peter Roskam’s individual and political action committee (PAC) receipts as reported to the Federal Election Commission (FEC) through December 6th, 2009 for the 2010 election cycle. The source of the data is OpenSecrets.org. On their site you can see more detailed information about who is donating what to Roskam’s campaign.

As the chart shows, Roskam has received a total of $143,000 in campaign contributions thus far this cycle from the finance sector. His receipts from this sector dwarf those from any other industry.

Roskam paid the industry back the other day by voting against against a major regulatory overhaul designed to protect consumers from unfair practices by financial institutions and to prevent another economic meltdown like the one from which we are now just beginning to recover. The commercial banks and credit card companies who donated heavily to Roskam and other Republicans in the House were strongly opposed to reform.

The bill Roskam voted against is H.R. 4173, Wall Street Reform and Consumer Protection Act of 2009. The provisions of the bill, according to the House Financial Services Committee include:

  • Increase Consumer Protections: Creates the Consumer Financial Protection Agency (CFPA), a new, independent federal agency solely devoted to protecting Americans from unfair and abusive financial products and services.
  • Create a Financial Stability Council: Creates a council of regulators that will identify financial firms that are so large, interconnected, or risky that their collapse would put the entire financial system at risk. These systemically risky firms will be subject to increased oversight, standards, and regulation.
  • End Taxpayer Bailouts and “Too Big to Fail”: Establishes an orderly process for shutting down large, failing financial institutions like AIG or Lehman Brothers in a way that ends bailouts, protects taxpayers, and prevents contagion to the rest of the financial system.
  • Rein in Executive Compensation: Gives shareholders a “say on pay” – an advisory vote on pay practices including executive compensation and golden parachutes. It also enables regulators to ban inappropriate or imprudently risky compensation practices, and it requires financial firms to disclose incentive-based compensation structures.
  • Safeguard Investors: Strengthens the SEC’s powers so that it can better protect investors and regulate the nation’s securities markets. It responds to the failures to detect the Madoff and Stanford Financial frauds by ordering a study of the entire securities industry that will identify needed reforms and force the SEC and other entities to further improve investor protection.
  • Regulate Derivatives: Regulates, for the first time ever, the opaque $600 trillion over-the-counter (OTC) derivatives marketplace. Under the bill, all standardized swap transactions between dealers and “major swap participants” would have to be cleared and traded on an exchange or electronic platform. The bill defines a major swap participant as anyone that maintains a substantial net position in swaps, exclusive of hedging for commercial risk, or whose positions create such significant exposure to others that it requires monitoring.
  • Outlaw Predatory Mortgage Lending Practices: Would incorporate the tough mortgage reform and anti-predatory lending bill the House passed earlier this year. The legislation outlaws many of the egregious industry practices that marked the subprime lending boom, and it would ensure that mortgage lenders make loans that benefit the consumer. It would establish a simple standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold.
  • Require the Registration of Hedge Funds: Closes a regulatory hole that allows hedge funds and their advisors to escape any and all regulation. This bill requires almost all advisers to private pools of capital to register with the SEC, and they will be subject to systemic risk regulation by the Financial Stability regulator.
  • The measure passed in the House by a vote of 223-202, with every single Republican in the House voting against it.  It is now up to the Senate to pass their own version of this legislation. According to analysis by the Center for Reponsive Politics, “members of the House who voted against the measure collected 70 percent more from commercial banks since 1989, on average, than those supported it. And they raised an average of 50 percent more from credit and finance companies than the bill’s supporters”.

    This is not the first time that Roskam has sided with the big banks and lenders. Just a few weeks back, Roskam voted against another major reform bill designed to protect consumers from the worst abuses of the credit card companies: H.R. 3639 – Expedited CARD Reform for Consumers Act of 2009. It is clear that if we want our Congress to do our bidding and not that of Wall Street, then we need to stop electing Congresssmen like Roskam who are in the bankers pockets.

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    More mail from Peter Roskam yesterday. This time a piece designed to scare me about the national debt.  On the back, next to Roskam’s signature, it tells me “This mailing was prepared, published and mailed at taxpayer expense. This is a service to the the citizens of the Sixth Congressional District of Illinois.” Right next to the pretty glossy photo of rich white people walking in a park, probably in Wheaton.

    So how is this a service? A service to the residents of the sixth might be a mailer that told the victims of the Bush financial collapse how to get job re-training and unemployment benefits, and food stamps, and suicide counseling. No, this is a political message, designed to help Roskam’s party defeat the efforts of President Obama to make things better for ordinary Americans.  Pretty ironic when you think about it – Roskam’s spending our tax dollars to print and mail this political message railing about the national debt and excessive spending. What an ass. Based on their polling, Roskam and his Republican colleagues believe that debt and budget deficits are one area where President Obama is potentially vulnerable and so they’re wasting our money on propaganda like this.

    Roskam says that “we’re at near historic debt levels, the likes of which have not been seen since WWII: the national debt is over $11 trillion dollars and growing rapidly.” Well, that’s true enough.  But where did all that debt come from? The New York Times’  David Leonhardt did a great job analyzing the growth of budget deficitsback in June: America’s Sea of Red Ink Was Years in the Making.

    It all began when George Bush took office in 2001. As the last Democratic president left office, he handed President Bush a booming economy and a budget surplus projected at $800 billion annually through 2012. Under Bush, the nation plunged into recession in 2001 and the country was forced to increase spending on economic relief while tax revenues decreased. Meanwhile Bush started two expensive wars, one of them inargueably elective, and spent billions on a Medicare prescription drug benefit that was largely a gift to insurance and pharmaceutical companies. So as spending soared and tax revenues decreased, what does Bush do: why give huge tax cuts to the wealthiest Americans, further decreasing revenues and increasing the deficit.

    Bush’s economic policies resulted in his second recession, the present one, that began in 2007. Again tax revenues plummeted and safety net spending increased.  And then then the mortgage and banking crisis, a product of Bush’s anything goes anti-regulatory policies. Bush is forced to bailout the banks, Fannie Mae, and Freddie Mac to prevent a global economic collapse, further increasing the deficit. Bush leaves office and hands President Obama a $1.3 trillion deficit, two wars with no end in sight, and an economy in ruins.

    Leonhardt breaks down responsibility for the deficit like this:

    You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush’s policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama.

    The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years.

    About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.

    Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing.

    About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas.

    So about 10 percent of the present deficit is attributable to President Obama’s policies: 7 percent to economic stimulus to pull the nation out of the economic crisis he inherited from an incompetent Repupublican administration and 3 percent related to his new domestic programs. 3 percent!

    If Peter Roskam were serious about reducing the deficit he would:

    • Stop wasting tax dollars on political mailings and telephone campaigns
    • Start working to repeal the irresponsible Bush tax cuts
    • Start working to disengage the country from the wars in Afghanistan and Iraq that he has supported and to reduce military spending to reasonable levels
    • Get behind the President’s efforts to fix the healthcare system
    • Stop working for more tax breaks to the wealthy like an end to the estate tax

    But then we all know that Roskam is not serious about reducing the deficit. His only interest is in using it to make things more difficult for the President in hopes of boosting his party’s political fortune.

    Are you a resident of Illinois’ 6th Congressional District who’s having difficulty paying a mortgage with an exorbitant interest rate? Think your Congressman, Peter Roskam, cares and wants to help? Guess again.

    Yesterday (5/1/2008) the House Financial Services Committee sent a bill to the House floor to help mortgage holders in danger of foreclosure. The bill, H.R. 5830: FHA Housing Stabilization and Homeownership Retention Act of 2008, makes up to $300 billion in federally insured loans available to allow mortgage holders in danger of foreclosure to refinance at more affordable fixed rates over 30 years. All penalties related to delinquency and/or early payment of the existing mortgage are waived and lenders are required to reduce the principal balances. As many as 1.5 million homeowners may be assisted if the bill becomes law. Opposition is expected from Republicans in the Senate and from President Bush.

    Peter Roskam, who holds a seat on the House Financial Services Committee, voted against the bill in Committee, attempting to prevent it from being sent to the full house for a vote. Roskam receives a large percentage of campaign contributions from the financial services and real estate industries, and by his vote, has signaled his intent to continue to work to advance the interests of that sector rather than attend to the needs of homeowners in his district.

    Residents of the 6th District should contact Representative Roskam and urge him to stop attempting to block Democratic efforts to help homeowners in trouble. Roskam can be reached at his Washington office at (202) 225-4561 or in Bloomingdale at (630) 893-9670.

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    No wonder Peter Roskam loves this guy. According to John McCain, de-regulation of markets is the answer to everything. Even to the problems caused by…er…deregulation of markets.

    In a speech on March 25, to the Orange County Hispanic Small Business Roundtable, McCain had this to say about the origins of the present crisis:

    “The other part of what happened was an explosion of complex financial instruments that weren’t particularly well understood by even the most sophisticated banks, lenders and hedge funds. To make matters worse, these instruments — which basically bundled together mortgages and sold them to others to spread risk throughout our capital markets — were mostly off-balance sheets, and hidden from scrutiny. In other words, the housing bubble was made worse by a series of complex, inter-connected financial bets that were not transparent or fully understood. That means they weren’t always managed wisely because people couldn’t properly quantify the risk or the value of these bets. And because these instruments were bundled and sold and resold, it became harder and harder to find and connect up a real lender with a real borrower. Capital markets work best when there is both accountability and transparency. In the case of our current crisis, both were lacking.”

    I’m good with this so far. Deregulation has led to complex new instruments that are poorly understood and lacking in accountability and transparency.

    And so the obvious solution is more careful regulation of the kinds of transactions that got us into trouble, right?

    Wrong! McCain’s answer: increased de-regulation!

    “In financial institutions, there is no substitute for adequate capital to serve as a buffer against losses. Our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital.”

    Also, get tough on homeowners, further reduce taxes on the wealthy by eliminating the AMT, and reduce the corporate tax rate leaving poor and middle class taxpayers to bear a greater share of the costs of Republican military adventures, oil company subsidies, and bailouts of failed banks. Yep, sounds like Roskam’s kind of plan.

    Trying to understand last weekend’s crisis with Bear Stearns is the kind of thing that just makes my eyes glaze over. I am virtually illiterate when it comes to such matters. But the whole thing did ring a bell to me, being old enough to remember the savings and loan crisis of of the Reagan years. And the plot sounds kind of the same to me: Republican administration unfriendly to regulation of financial services. Excessive greed and lack of adequate regulation spurs previously staid financial industry types to engage in reckless practices resulting in catastrophic collapse and need for government (IE: taxpayer) bailout. Am I wrong?

    The Bear Stearns situation had to be pretty scary to get the Feds to intervene so quickly and dramatically over the weekend. It leaves laymen like me feeling a bit jittery wondering when the next shoe is going to drop. It doesn’t help that commentators are beginning to talk about recession as if it has actually arrived and some daring even to bring up the D word.

    In light of the Bear Stearns catastrophe, Representative Barney Frank, Chairman of the House Financial Services Committee, proposed making significant changes in financial services regulation including the establishment of a “Risk Regulator” (possibly the Federal Reserve) with power to assess and intervene regarding risk across financial markets of all kinds. Its regulatory powers would not be limited only to certain types of corporations such as commercial banks vs investment banks vs other kinds of lenders, as is now the case with regulatory agencies, and would be more responsive to risk associated with newly evolving forms of financial services and funds. Frank also suggested new government interventions to ease the foreclosure crisis.

    Enter Peter Roskam. Our Congressman is a member of the very same Financial Services Committee, whose job it is to oversee all components of the nation’s housing and financial services sectors including banking, insurance, real estate, public and assisted housing, and securities. He serves on the subcommittees responsible for capital markets and for oversight and investigations. Seems like Roskam is going to be close to the center of this discussion on regulation.

    Peter Roskam says that he wants to be our “voice in Congress”. It will be interesting to observe just whose voice he really is during the upcoming deliberation. Is he going to vote in the interests of us ordinary folks who reside in his district? Or is he going to work on behalf of those who are bankrolling his re-election bid, folks like:

    • American Bankers Association PAC
    • Bank of America PAC
    • Capital One Financial Political Fund
    • Chicago Board of Options Exchange PAC
    • Citigroup, Inc. PAC
    • Consumer Bankers Association PAC
    • Federal National Mortgage Association PAC
    • Financial Services Institute PAC
    • Goldman Sachs Group, Inc. PAC
    • J.P. Morgan Chase & Co. PAC
    • LaSalle Bank Corporation Federal PAC
    • Morgan Stanley PAC
    • Mortgage Bankers Association PAC
    • National Venture Capital Association PAC
    • New Century Financial Corporation PAC
    • New York Stock Exchange, Inc. PAC
    • Securities Industry and Financial Markets PAC
    • Washington Mutual PAC 

    I don’t know the answer, but stay tuned.