About seven months ago, while trying to enact real bankruptcy reform, Senator Dick Durbin explained why change would be an uphill battle. He summed it up in one phrase: when it comes to Congress, banks "frankly own the place."
In the months following Durbin’s statement, I decided to run for U.S. Senate. And I decided to do it the right way. I’m refusing contributions from corporate PACs and federal lobbyists that "own the place," precisely because we need people in Congress who understand that government belongs only to the citizens it serves.
And, as we all know, now is when Americans need their government to step up and enact the policies that will move this country forward and away from the failed Bush economic policies of the past.
While we’ve seen some indicators that the hemorrhaging of job losses has stalled, other statistics remind us that we still have enormous, immediate economic problems on our hands.
A startling figure was released this week that speaks to how much more we have ahead of us in terms of getting our economy back on track. As the Wall Street Journal reported, one out of every four homeowners in this country owes more on their mortgage than their home is worth:
The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.
Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.
These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market.
In Las Vegas, nearly 70% of homeowners are underwater on their mortgage. Here in Illinois, nearly 1 in 5 households have "negative equity".
What happens when your home price falls below your mortgage balance? It’s a gut-wrenching situation for millions of families across our country:
"I'm to the point where I feel I will never get my head above water," said Mr. Lunsford, a retired state trooper who works for an insurance company. He said his bank won't modify his loan because he can afford his payments, and he's unwilling to walk away, he said: "We're too honest." [...]
Many borrowers are so deeply under water that they can't take advantage of lower rates and refinance their mortgage. "We're declining hundreds of loans each month," said Steve Walsh, a mortgage broker in Scottsdale, Ariz. "The only way we will make headway is if we allow for a streamlined refinance where the appraisal is irrelevant."
That’s why I was here back in June, before the numbers got this bad, expressing my strong support for judicial mortgage modification, or cramdown legislation which would allow courts to modify the terms of certain mortgages.
Families in Illinois and across the nation couldn’t foresee this recession and the real estate collapse that precipitated it. But the fact remains that we need to address this mortgage crisis, before more families find themselves drowning under a sea of negative equity. As I wrote back in June:
Good bankers understand that foreclosures don't help our banks or communities thrive, and they don’t help keep the American dream alive. And frankly, it doesn't help their bottom line.
Banks renegotiate the terms of mortgages outside of court to give homeowners a second chance all the time.But since the subprime mess, many banks haven’t been as kind. That's why I supported this amendment; [the Helping Families Save Their Homes Act] it only applied to lenders that failed to do the right thing by not offering loan modifications outside of court in the first place.
But the power players in the financial industry disagreed, and they certainly didn’t want to cede control of their business decisions to bankruptcy courts. They claimed the amendment would lead to more bankruptcy filings and prompt more homeowners to use bankruptcy as a threat to negotiate lower monthly payments, which would force lenders to raise interest rates.Those arguments fall short.Homeowners do not want to risk long-term damage to their credit rating. Housing advocates dispute the higher interest rate claim and estimate the amendment would save hundreds of thousands of homeowners from facing foreclosure. In my experience, fewer foreclosures mean fewer bankruptcies.
But the Senate caved to powerful banking lobbyists when it gutted the amendment. And, to make matters even more frustrating, those lobbyists were paid for with money from the same banks that have received billions of dollars in subsidies from taxpayers in order to escape a financial firestorm of their making.
When I ran for State Treasurer years ago, I said I was running to do something, not be something. We've done a lot for Illinois families and small businesses since I got elected, and we'll touch on that in diaries over the next several weeks.
But I'm writing here today because now more than ever, we need people in Washington who are men and women of action, not just words.
Everyone sitting here today knows that our system is broken. Our elected officials claim to the cameras that they'll work for the middle class and then on the chamber floor they vote against middle class interests. That’s why Senator Durbin’s cramdown amendment failed to pass. Because when it was time to walk the talk, so many refused to stand with those who needed Congress to act.
A large part of that problem is that policy in D.C. is dictated not by common sense, not by compassion, but by the amount of corporate contributions in campaign bank accounts.
I have a fundamentally different belief of the way government should operate.
That's why, as State Treasurer, my very first act was to sign the most sweeping ethics order in the history of my office. That's why, as a candidate, I was the first Senate candidate in Illinois history to refuse contributions from corporate PACs and federal lobbyists. And that's why, as a Senator, I won't look to a campaign calendar or a contributor list to decide how I should vote. I'll look at the facts, I'll listen to American families, and I'll continue to fight for their interests.
Because if we know anything during these turbulent economic times, it’s that middle class families need someone not to just stand with them on the campaign trail, but to stand up for them on the floor of the U.S. Senate. Someone to lend out an outstretched hand and help pass the legislation that will help families keep their heads above water, and that will ultimately help them to weather this economic storm.
Too many families are drowning in debt to settle with the status quo any longer.