Category — Mortgage Crisis

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.

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.