Congress Must Get it Right on Bailout Plan

• by Common Cause of New York

NEW YORK, NY (09/24/2008)(readMedia)-- Congress must consider alternative bailout plans from independent economic experts - not just the special interest industry experts who brought Wall Street and the US economy to the brink of financial disaster - before approving a legislative fix for the economic meltdown, said Susan Lerner, executive director of Common Cause New York.

"Congress must do this right," Lerner said Wednesday morning outside a Lehman Brothers office building in Midtown Manhattan, releasing a new Common Cause report which examines the lending industry's use of generous campaign contributions and lobbying to stop Congress from taking bold steps to prevent, and now counter, the meltdown of the housing and mortgage markets. "Congress is supposed to recess Friday so members can go home and start campaigning. But this issue is far too important to put aside. Common Cause calls on Congress to stay in Washington through next week to thoughtfully consider plans that are in the public's best interest. Too much is at stake for hasty decisions."

Common Cause also called on Congress not to grant the level of immunity and unprecedented power that the Bush Administration wants to include for the Treasury Secretary in its bailout plan. "Do not cut the Secretary of the Treasury a $700 billion check without providing assurances of accountability, oversight and protections for the taxpayers," Lerner said.

The new Common Cause report, "Ask Yourself Why They Didn't See This Coming," examines the major role of campaign contributions and lobbying in blocking measures that would have helped more American families in a timely manner. The New York economy alone will lose $36 billion as a result of foreclosures on homes financed with subprime loans, according to the report.

"The sheer scale of the economic crisis should be a wake-up call that we need to fundamentally reshape our financial system in this country," said Sarah Ludwig, Co-Director of the Neighborhood Economic Development Advocacy Project, based in New York City. "Not only does the Administration's plan utterly fail to address root causes, but it seeks a bailout for wrongdoers, while doing nothing for distressed homeowners and communities. The Administration is trying to railroad its proposal through Congress without meaningful debate."

The report also spotlights the story of the nation's two largest housing lenders, Fannie Mae and Freddie Mac, their lobbying and campaign activities, and how the government bailout contrasts with how legislators approached the crisis.

The top five spenders among mortgage brokers and bankers paid more than $31 million in political contributions and lobbying fees since the beginning of last year. Fannie Mae and Freddie Mac, the largest home loan companies that have been offered a bailout package by Congress, have spent roughly $180 million on lobbying and campaign contributions since the 2000 election cycle. In the first three months of 2008 alone, the two companies spent a combined total of about $3.5 million on lobbying and hired 42 outside lobbying firms.

"Even unscrupulous lenders responsible for steering people into predatory loans have escaped government intervention because the lending industry has so much influence in Washington, thanks to their incredible lobbying and campaign spending," Common Cause President Bob Edgar said. "The inability of Congress to break through the wall of money built by the financial services industry in order to directly help struggling families in this country is striking."

Roughly 20,000 families are losing their home every week. Estimates of total foreclosures nationwide run about 3 million during 2007 and 2008. There are about 2.3 million vacant homes on the market - the highest rate ever recorded. Most of these figures have not been seen since the Great Depression. Most troubling, analysts predict a second wave of foreclosures still coming.

One proposal supported by many consumer advocates and economists would allow bankruptcy judges to adjust the mortgages of families to reflect the current value of their home. Hundreds of thousands of families now owe more than their home is worth because of the housing market collapse. The lending industry opposes this approach and has successfully killed it. To date, Congress has relied exclusively on voluntary participation among lenders to help struggling families.

"It's amazing how little Congress is doing for people who are clearly in need right now," said Edgar. "This industry's deep pockets has enabled it to stop Congress from taking steps to help average Americans hit by this market crash. Until we break the link between money and politics, the public interest will take a back seat to private interests like those of the lending industry."

"Ask Yourself Why They Didn't See This Coming," the new Common Cause report, will be available on its website, and through both the New York and Washington D.C. offices (www.commoncause.org/ny).

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