The following letter from Senator Barack Obama to Bush appointees Ben Bernanke, Chairman of the Federal Reserve, and Henry Paulsen, Secretary of the Treasury, supposedly entrusted with guarding the integrity of the U.S. financial system, and sent off over one year ago was prophetic and beyond wise in its call to avert the catastrophe we are witnessing today. It's dated March 22, 2007.The letter has been up at TPMCafé for a couple of days but no one else, it seems, has picked up on it.
Dear Chairman Bernanke and Secretary Paulson,
There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.
March 22, 2007
The Honorable Ben Bernanke
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551
The Honorable Henry Paulson
Secretary
U.S. Department of Treasury
1500 Pennsylvania Ave, NW
Washington, D.C. 20220
Dear Chairman Bernanke and Secretary Paulson,
There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.
We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes. And while neither the government nor the private sector acting alone is capable of quickly balancing the important interests in widespread access to credit and responsible lending, both must act and act quickly.
Working together, the relevant private sector entities and regulators may be best positioned for quick and targeted responses to mitigate the danger. Rampant foreclosures are in nobody's interest, and I believe this is a case where all responsible industry players can share the objective of eliminating deceptive or abusive practices, preserving homeownership, and stabilizing housing markets.
The summit should consider best practice loan marketing, underwriting, and origination practices consistent with the recent (and overdue) regulators' Proposed Statement on Subprime Mortgage Lending. The summit participants should also evaluate options for independent loan counseling, voluntary loan restructuring, limited forbearance, and other possible workout strategies. I would also urge you to facilitate a serious conversation about the following:
* What standards investors should require of lenders, particularly with regard to verification of income and assets and the underwriting of borrowers based on fully indexed and fully amortized rates.
* How to facilitate and encourage appropriate intervention by loan servicing companies at the earliest signs of borrower difficulty.
* How to support independent community-based-organizations to provide counseling and work-out services to prevent foreclosure and preserve homeownership where practical.
* How to provide more effective information disclosure and financial education to ensure that borrowers are treated fairly and that deception is never a source of competitive advantage.
* How to adopt principles of fair competition that promote affordability, transparency, non-discrimination, genuine consumer value, and competitive returns.
* How to ensure adequate liquidity across all mortgage markets without exacerbating consumer and housing market vulnerability.
Of course, the adoption of voluntary industry reforms will not preempt government action to crack down on predatory lending practices, or to style new restrictions on subprime lending or short-term post-purchase interventions in certain cases. My colleagues on the Senate Committee on Banking, Housing and Urban Affairs have held important hearings on mortgage market turmoil and I expect the Committee will develop legislation.
Nevertheless, a consortium of industry-related service providers and public interest advocates may be able to bring quick and efficient relief to millions of at-risk homeowners and neighborhoods, even before Congress has had an opportunity to act. There is an opportunity here to bring different interests together in the best interests of American homeowners and the American economy. Please don't let this opportunity pass us by.
Sincerely,
Barack Obama
United States Senator
This is what "presidential" foresight and wisdom looks like. Of course, now that the housing crisis has come to a head and threatens to topple the entire Wall Street house of cards, now that enough blue-collar voters' lives are being destroyed by a crisis that Sen. Obama saw coming a year ago (just as he saw the Iraq disaster coming before the war was even launched) Hillary is pushing the "summit idea". The most glaring difference between these two candidates, and what their respective campaigns have proven over and over again, is that Hillary Clinton can't think farther than the next news cycle, whereas Barack Obama takes the long view, with one eye trained over the horizon. One keeps getting caught unawares by unforeseen developments (the very "no one could have foreseen" approcach to events typified by the Bush administration) while the other consistently exhibits a comprehensive, strategic and analytical brand of forward thinking that used to be called "vision" (before George Bush senior and his spawn, backed by an army of small-minded spinmeisters, brought that term into disrepute). Governor Richardson is right. Barack Obama is a once-in-a-liftime leader. Please, Americans, get this man in the White House, not just for yourselves, but for all of us others out here in the world, who also suffer the consequences of your leaders" bad decisions!
UPDATE As suggested by Mother of Zeus below in the comments: "Actually, Obama has introduced the STOP FRAUD Act not once, but twice, and continued to work and push for its passage. http://obama.senate.gov/...
He knows what he's doing. And I think this is a great time for a brief respite. The reality is that Hillary has at most a 5% chance of winning this primary and that will only be if the Superdelegates allow this to happen to the party." Amen.