HAMILTON COUNTY COMMUNITY REINVESTMENT GROUP1823 Andina Ave, Cincinnati, Ohio 45237
(513) 641-5446 hccrg05@aol.com
December 1, 2008
Hon. Barney Frank, Chairperson
House Financial Services Committee
US House of Representatives
2252 Rayburn Building
Washington, DC 20515
Hon. Christopher Dodd, Chairperson
Senate Banking Committee
US Senate
448 Russell Building
Washington, DC
RE: Economic Bail Out of Taxpayers/Homeowners
Dear Chairman Frank and Chairman Dodd:
The purpose for this letter is to encourage Congress and the Administration to spend taxpayer dollars to bail out the taxpayers/homeowners and secure their assets and wealth.
The Hamilton County Community Reinvestment Group (HCCRG), located in Cincinnati, Ohio, has as its mission, to increase fair and equal access to capital, credit, and financial services. Based on this mission, HCCRG sends this letter to you because of the central roles you play in influencing the economic legislation, regulations, and programs relative to the foreclosure crisis, the “bail out,” and all of the issues which led up to both. This letter is also sent to you because legislative leaders represent those constituents who voted them in, and Congressional leaders state “they represent the best interest of all American taxpayers and voters.”
Families have lost their homes, their greatest asset. Whether they were owners or tenants, they have also lost most of their personal belongings, their self esteem, and have lost their trust in their government’s willingness to protect them from gauging and other economic crimes. As HCCRG’s representative to the National Community Reinvestment Coalition (NCRC), I have met many times with bank executives, regulatory leaders, and congressional leaders, as well as with you and/or your lead staff. I am satisfied that enough facts have been presented on a number of unethical and illegal practices of Main Street Banks, Wall Street Banks, Government Services Enterprises (GSEs –Fannie Mae/FreddieMac), Mortgage Bankers, and others which have significantly contributed to this deep recession.
Mr. Frank and Mr. Dodd
Page 2
12/01/08
We have also shared our data relative to the lack of regulatory enforcement by the Federal Reserve, the Comptroller of the Currency, the Department of Housing and Urban Development, and the Justice Department. We have expressed our views concerning the poor functioning of mortgage rating agencies, as well as an ineffective Securities and Exchange Commission that is suppose to ensure transparency in the financial markets and protect investors from the corporate fraud and other insider manipulations identified in Congressional briefings. Therefore, I won’t detail their failures in this letter.
However, government money (taxpayer money) has been, is being, and will be used to bail “failed financial institutions,” and individual rich investors out of financial difficulty, so that their assets and wealth are secured. So, HCCRG raises the question, why won’t Congress and the Administration spend taxpayer dollars to bail out the taxpayers/homeowners and secure their assets and wealth?
This recession begin out of the financial markets (lenders, securitizers, appraisers, raters, regulators, etc.) from which too many loan, securitization, and other financial policy and program decisions were made that have been called everything from, unethical to illegal. We now know that too many homes were over appraised, and the interest rates assigned were higher than the assessed risk required. We now know that “risk-based pricing” was higher to create a wider investment opportunity for lenders, Wall Street, and rich investors. These high cost loan terms had nothing to do with real risk of the borrower. Why should homeowners be required to pay for corporate attorneys or even their own lawyers when the crisis was induced by the lenders and investors at many levels far away from the original loan? Congress can provide additional protection by amending bankruptcy provisions so that homes cannot be lost because of this recession.
HCCRG understands that liquidity for financial institutions is necessary. But, the determination of how much tax money to give away should be determined after you first, spend “bail out” dollars (taxpayer dollars) to restore liquidity to taxpayers who are homeowners in foreclosure; homeowners in default; and other homeowners with predatory mortgage terms. A moratorium on foreclosures and deep restructuring of predatory loans will go far to stop the bleeding at the core of our economy; provide liquidity to lenders through restored mortgage payments; and most important, keep families in their homes. A large number of these homeowners may ultimately become the first in their family to leave a home, a valued fixed asset, to their children as an inheritance.
By definition, net income is what workers have to spend. Given our economy, “cured” mortgages should be no more than 24-30% of net income. This provides an (emergency) cure for the largest number of homeowners (taxpayers), and the amount of dollars saved each month can be spent in other sectors of the economy. To achieve this, principal and interest rates must be cut; adjustable rate mortgages must be converted to 30-40 year fixed rates; balloons must be significantly reduced or eliminated. Late charges, other penalties, and even legal fees must be waived. If these terms are not treated as many have recommended, our observation suggest that most of these families will be in default again within a year.
In addition to “bail out” dollars, money should be recaptured from a minimum of five years of excessive executive bonuses, executive salaries and “retirement and other parachutes.” These dollars should be invested in financial instruments that provide the capital for major system restoration of all homes wherein loans were/are modified and restructured. This type of bail out will create jobs in all housing crafts, create and sustain jobs of suppliers and for manufacturers. The capital from these jobs will provide
Mr. Frank and Mr. Dodd
Page 3
12/01/08
additional liquidity for banks through deposits from contractor/worker incomes, and from consumer and business expenditures. Homeowners will gain instant equity (which we should freeze); they will gain an improved standard of living; and they will regain their self-esteem. Surrounding properties will regain value, and the investment grade quality of mortgages and mortgage backed securities will be strengthened. Income taxes, property taxes, and sales taxes will be generated for government services, and all of these funds, when deposited, will provide even more liquidity for banks.
It is HCCRG’s position, that in addition to Federal Reserve member banks borrowing capital at an extremely low cost at the “Fed Window” and having access to FDIC insurance to help banks attract deposits, the Congress and Administration also have many other tools to do more than just “encourage” banks to solve the problems they created. Giving taxpayer money to Wall Street Banks enables them to buy again from Main Street Banks. Giving taxpayer money to Main Street Banks enables them to buy again from Mortgage Banks, and loan, at great rates, to the upper middle classes and the rich and wealthy. By definition they are alright and will be better off once the economy at the bottom is restored. Massive foreclosures and subsidized corporate bailouts that have created false “buy low, sell high” market opportunities at the cost of working and middle class homeowners are the reasons why so many have called this a “class war” on Americans.
Many media sources and even many legislators flee from the idea of a class war. We heard continuing stories for the Wall Street Banks and Main Street banks to get a government bailout. But, where are the continuing stories about the taxpayer being bailed out? I participated in the S&L bailout discussions on Capital Hill, and watched all the rich investors and financial institutions “made whole.” But, working and middle class homeowners hurt during that crash, got little or no financial compensation from that bailout…and here we are again. This time, homeowners, who are also taxpayers, must benefit from their own money, otherwise the Congress and the Administration will really, only represent the rich investors and “too large to fail” businesses, while the majority of Americans and small business are left to their demise.
While the above steps can provide an immediate boost to the economy, infrastructure repair (roads, bridges, streets, fresh water pipelines, etc.) and green strategies (energy, clean air and water) will not only begin to restore our country and strengthen our future, these additional steps will generate hundreds of thousands of well paying jobs that cannot be sent overseas; feed families and businesses, including the automobile and other industries. All of these steps combined will enable workers to obtain private sector health and educational benefits until other slower steps can be implemented. Nevertheless, if the Congress intends to keep scores of other businesses from failing, extended unemployment benefits must be authorized, and a $2,000 stimulus check must be issued, which would allow for savings, debt reduction and consumer spending. Although these are pass through monies that provide individuals some cash flow (liquitity) and support, these monies go directly to banks before they are spent and provide liquitity to all consumer based businesses.
Even though HCCRG’s primary focus is Hamilton County and America, through NCRC, we participate in global banking, workforce development, and production considerations as well. In this regard, HCCRG recognizes that another component of any economic recovery is the degree to which the American government, corporations and citizens can achieve profits from outside America.
Mr. Frank and Mr. Dodd
Page 4
12/01/08
Bank and environmental regulators who enforce, as well as establish consumer protection rules; and a justice department that aggressively litigates against fraud, race discrimination, and other violations are clear necessities given America’s experiences with the S&L scandals and bailout, and now these scandals and “Bank Bailout.”
There is a lot in this short letter, but a lot must be done now, simultaneously. By the time President-Elect Obama takes office, too many families will have lost their homes and jobs, and too many small businesses will have closed. Recovery for them will almost be impossible. As time is of the essence, the only responses HCCRG requires are your actions.
The Hamilton County Community Reinvestment Group (HCCRG), located in Cincinnati, Ohio, has as its mission, to increase fair and equal access to capital, credit, and financial services. Based on this mission, HCCRG sends this letter to you because of the central roles you play in influencing the economic legislation, regulations, and programs relative to the foreclosure crisis, the “bail out,” and all of the issues which led up to both. This letter is also sent to you because legislative leaders represent those constituents who voted them in, and Congressional leaders state “they represent the best interest of all American taxpayers and voters.”
Families have lost their homes, their greatest asset. Whether they were owners or tenants, they have also lost most of their personal belongings, their self esteem, and have lost their trust in their government’s willingness to protect them from gauging and other economic crimes. As HCCRG’s representative to the National Community Reinvestment Coalition (NCRC), I have met many times with bank executives, regulatory leaders, and congressional leaders, as well as with you and/or your lead staff. I am satisfied that enough facts have been presented on a number of unethical and illegal practices of Main Street Banks, Wall Street Banks, Government Services Enterprises (GSEs –Fannie Mae/FreddieMac), Mortgage Bankers, and others which have significantly contributed to this deep recession.
Mr. Frank and Mr. Dodd
Page 2
12/01/08
We have also shared our data relative to the lack of regulatory enforcement by the Federal Reserve, the Comptroller of the Currency, the Department of Housing and Urban Development, and the Justice Department. We have expressed our views concerning the poor functioning of mortgage rating agencies, as well as an ineffective Securities and Exchange Commission that is suppose to ensure transparency in the financial markets and protect investors from the corporate fraud and other insider manipulations identified in Congressional briefings. Therefore, I won’t detail their failures in this letter.
However, government money (taxpayer money) has been, is being, and will be used to bail “failed financial institutions,” and individual rich investors out of financial difficulty, so that their assets and wealth are secured. So, HCCRG raises the question, why won’t Congress and the Administration spend taxpayer dollars to bail out the taxpayers/homeowners and secure their assets and wealth?
This recession begin out of the financial markets (lenders, securitizers, appraisers, raters, regulators, etc.) from which too many loan, securitization, and other financial policy and program decisions were made that have been called everything from, unethical to illegal. We now know that too many homes were over appraised, and the interest rates assigned were higher than the assessed risk required. We now know that “risk-based pricing” was higher to create a wider investment opportunity for lenders, Wall Street, and rich investors. These high cost loan terms had nothing to do with real risk of the borrower. Why should homeowners be required to pay for corporate attorneys or even their own lawyers when the crisis was induced by the lenders and investors at many levels far away from the original loan? Congress can provide additional protection by amending bankruptcy provisions so that homes cannot be lost because of this recession.
HCCRG understands that liquidity for financial institutions is necessary. But, the determination of how much tax money to give away should be determined after you first, spend “bail out” dollars (taxpayer dollars) to restore liquidity to taxpayers who are homeowners in foreclosure; homeowners in default; and other homeowners with predatory mortgage terms. A moratorium on foreclosures and deep restructuring of predatory loans will go far to stop the bleeding at the core of our economy; provide liquidity to lenders through restored mortgage payments; and most important, keep families in their homes. A large number of these homeowners may ultimately become the first in their family to leave a home, a valued fixed asset, to their children as an inheritance.
By definition, net income is what workers have to spend. Given our economy, “cured” mortgages should be no more than 24-30% of net income. This provides an (emergency) cure for the largest number of homeowners (taxpayers), and the amount of dollars saved each month can be spent in other sectors of the economy. To achieve this, principal and interest rates must be cut; adjustable rate mortgages must be converted to 30-40 year fixed rates; balloons must be significantly reduced or eliminated. Late charges, other penalties, and even legal fees must be waived. If these terms are not treated as many have recommended, our observation suggest that most of these families will be in default again within a year.
In addition to “bail out” dollars, money should be recaptured from a minimum of five years of excessive executive bonuses, executive salaries and “retirement and other parachutes.” These dollars should be invested in financial instruments that provide the capital for major system restoration of all homes wherein loans were/are modified and restructured. This type of bail out will create jobs in all housing crafts, create and sustain jobs of suppliers and for manufacturers. The capital from these jobs will provide
Mr. Frank and Mr. Dodd
Page 3
12/01/08
additional liquidity for banks through deposits from contractor/worker incomes, and from consumer and business expenditures. Homeowners will gain instant equity (which we should freeze); they will gain an improved standard of living; and they will regain their self-esteem. Surrounding properties will regain value, and the investment grade quality of mortgages and mortgage backed securities will be strengthened. Income taxes, property taxes, and sales taxes will be generated for government services, and all of these funds, when deposited, will provide even more liquidity for banks.
It is HCCRG’s position, that in addition to Federal Reserve member banks borrowing capital at an extremely low cost at the “Fed Window” and having access to FDIC insurance to help banks attract deposits, the Congress and Administration also have many other tools to do more than just “encourage” banks to solve the problems they created. Giving taxpayer money to Wall Street Banks enables them to buy again from Main Street Banks. Giving taxpayer money to Main Street Banks enables them to buy again from Mortgage Banks, and loan, at great rates, to the upper middle classes and the rich and wealthy. By definition they are alright and will be better off once the economy at the bottom is restored. Massive foreclosures and subsidized corporate bailouts that have created false “buy low, sell high” market opportunities at the cost of working and middle class homeowners are the reasons why so many have called this a “class war” on Americans.
Many media sources and even many legislators flee from the idea of a class war. We heard continuing stories for the Wall Street Banks and Main Street banks to get a government bailout. But, where are the continuing stories about the taxpayer being bailed out? I participated in the S&L bailout discussions on Capital Hill, and watched all the rich investors and financial institutions “made whole.” But, working and middle class homeowners hurt during that crash, got little or no financial compensation from that bailout…and here we are again. This time, homeowners, who are also taxpayers, must benefit from their own money, otherwise the Congress and the Administration will really, only represent the rich investors and “too large to fail” businesses, while the majority of Americans and small business are left to their demise.
While the above steps can provide an immediate boost to the economy, infrastructure repair (roads, bridges, streets, fresh water pipelines, etc.) and green strategies (energy, clean air and water) will not only begin to restore our country and strengthen our future, these additional steps will generate hundreds of thousands of well paying jobs that cannot be sent overseas; feed families and businesses, including the automobile and other industries. All of these steps combined will enable workers to obtain private sector health and educational benefits until other slower steps can be implemented. Nevertheless, if the Congress intends to keep scores of other businesses from failing, extended unemployment benefits must be authorized, and a $2,000 stimulus check must be issued, which would allow for savings, debt reduction and consumer spending. Although these are pass through monies that provide individuals some cash flow (liquitity) and support, these monies go directly to banks before they are spent and provide liquitity to all consumer based businesses.
Even though HCCRG’s primary focus is Hamilton County and America, through NCRC, we participate in global banking, workforce development, and production considerations as well. In this regard, HCCRG recognizes that another component of any economic recovery is the degree to which the American government, corporations and citizens can achieve profits from outside America.
Mr. Frank and Mr. Dodd
Page 4
12/01/08
Bank and environmental regulators who enforce, as well as establish consumer protection rules; and a justice department that aggressively litigates against fraud, race discrimination, and other violations are clear necessities given America’s experiences with the S&L scandals and bailout, and now these scandals and “Bank Bailout.”
There is a lot in this short letter, but a lot must be done now, simultaneously. By the time President-Elect Obama takes office, too many families will have lost their homes and jobs, and too many small businesses will have closed. Recovery for them will almost be impossible. As time is of the essence, the only responses HCCRG requires are your actions.
For additional comments and clarity, I can be reached at 513-641-5446 and/or at the addresses appearing on this letterhead.
Sincerely,
Morris Williams
Convener
CC: HCCRG Advisers
John Taylor, CEO, National Community Reinvestment Coalition
President George Bush
President-Elect Barack Obama
Henry Paulson, Treasury Secretary
Hon. Nancy Pelosi, US House of Representatives
Hon. Harry Reid, US Senate
Hon. Steve Driehaus, Ohio State Representative, US House of Representatives-Elect
Hon. George Voinovich, US Senate
Hon. Eric Kearney, Ohio State Senator
Hon. Tyrone Yates, Ohio State Representative
Hon. Todd Portune, President, Hamilton County Commissioners
Hon. Mark Mallory, Mayor, Cincinnati, Ohio
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