This is a follow up diary to one I did yesterday based on a BusinessWeek article: How Banks Are Worsening the Foreclosure Crisis. I just wanted to include some quotes regarding some of the politics that was occurring while people were losing their homes. What is very clear is that bank lobbyists played a vital role in protecting the interest of their clients but who was protecting our interests???
In early 2008, after it was apparent the "Hope Now" program that President Bush touted in late 2007 was not working to slow down the rate of foreclosures, Democrats were looking for a better solution and who did they contact - surprise, surprise bank lobbyists.
Many of those ideas came from the industry. Lobbyists and congressional aides referred to one concept as "the Credit Suisse plan." Another, "the Bank of America plan," would allow borrowers to refinance mortgages with loans guaranteed by the Federal Housing Administration. Representative Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, had solicited BofA's advice via an old Boston acquaintance, Anne Finucane, the bank's chief marketing executive and a politically active Democrat. He assigned several aides, including Michael M. Paese and Rick Delfin, to work out the details.
The result was a bill called "Hope for Homeowners" but it was structured in a way to favor the banking industry.
In the end, the program included stiff up-front and annual fees and a requirement that homeowners pay the government 50% of any future appreciation in the property's value -- all of which made it much less attractive to borrowers. Moreover, the banks' participation was made entirely voluntary; there was no way to pressure them to cooperate.
The outrageous thing was the industry and people in Washington knew that Hope for Homeowners would not work, especially Senator Richard Shelby, a banking industry hack.
Shelby, for his part, never expected Hope for Homeowners to accomplish much, according to Republican Senate aides. He agreed to it to gain Dodd's support for greater regulation of Fannie and Freddie -- and only when assured the program wouldn't drain tax dollars. "My consistent aim throughout this crisis has been to protect the American taxpayer," Shelby told BusinessWeek in a statement. He accepted $565,000 in contributions from the financial-services industry in 2007-2008.
He uses protecting the American taxpayer as cover for protecting his benefactors in the banking industry.
As for those legislative aids (Paese and Delfin) that Rep. Barney Frank assigned to negotiate a bill with BofA, well you guessed it, they are now industry lobbyists but of course they are observing the one year ban on contacting their former boss. So no harm no foul. Oh, BTW, Rep. Barney Frank received $948,000 between 2007-2008 from the financial services industry.
Surprise, surprise the politics continues today. Sen. Durbin is trying to pass legislation that would allow bankruptcy judges to modify mortgage loans - cutely referred to as bankruptcy cramdown legislation. But of course banks hate this and their lobbyists are working overtime to kill this idea. And guess who the are targeting? "Moderate Democrats" such as Sen. Bayh.
As I said yesterday, right now the profit/survival motives of the financial conglomerates are in direct conflict with the interests of taxpayers. We lose if the status quo is maintained. The status quo is maintained if there are no serious consequences to these financial conglomerates, including their management, for their extremely risky and incompetent actions.