Not Just a Credit Crisis (Rep. Keith Ellison)
March 31st, 2008
After nearly a year and a half of turmoil, over 2 million homes foreclosed upon, and the worst financial crisis to hit the world since the Great Depression, I would like to applaud the Bush administration for finally realizing that there is truly something wrong with our nation’s financial services regulatory structure. For far too long this administration has allowed Wall Street to pursue the politics of greed, the true cost of which we can now see in the form of devastated communities, homeless families, and shattered neighborhoods.
While the debate over new regulatory structures will last for the next few years, more immediate steps must be taken to address another issue at the heart of this financial crisis: how to help our families pay their mortgages and stay in their homes. This is the problem that lies at the very heart of the crisis and MUST be addressed immediately.
We are not dealing with just a credit crisis; but a crisis in confidence. If this were merely a credit crisis, the Federal Reserve’s efforts to stimulate increased liquidity in the markets by lowering short-term interest rates, opening the discount window to more firms, and signaling that they’re willing to bailout (at least temporarily) investment firms that are about to go under would have had a more significant effect on the markets by now. Instead, banks and firms are unwilling to lend to each other because they are still extremely skeptical that the securitized mortgages they are purchasing or originating will still be valuable investments in the future. At the root of their skepticism is the belief that our families cannot repay the mortgages that so much of our economy is based on today.
We need to provide real and substantive aid to families through encouraging cheaper refi’s of underwater mortgages, allowing them to write down mortgage debt if they are going through bankruptcy, and increasing the amount of grants and loans directly available to homeowners to get out of bad mortgages. Only if we can restore investor confidence not only in our financial markets but also in our neighborhoods and communities, can we expect to weather this crisis.
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