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Issue Position: Economy and Banking

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"We need strong action to fix our economy that will help put people back to work, ensure needed assistance is available to keep families afloat in these turbulent times and reform our financial system so that a similar economic crisis can never happen again." -- Congressman Adam Schiff

Creating Jobs and Stimulating the Economy

Congress passed the American Recovery and Reinvestment Act on February 13, 2009 and was signed into law by the President on February 17, 2009. It will create jobs and get commerce moving again through a combination of tax cuts, infrastructure spending and other fiscal stimulus, so that families can maintain their income, standard of living and health care.

Rep. Schiff supported this legislation because he believes we need strong action to help put people back to work and to ensure needed assistance is available to keep families afloat in these turbulent times. Of the $787 billion package, 36 percent is dedicated to tax cuts that puts money in the hands of families and businesses to spread throughout the economy, while 64 percent is targeted to job-creating investments. The bill is expected to create or save 3.5 million jobs nationwide, including 7,700 jobs in the 29th Congressional District alone.

The affect of the bill is being felt throughout the nation. In the first 100 days of the Recovery Act over 150,000 jobs were created or saved. Effective in February, families have been receiving at least a $65 dollar per month increase in their monthly take-home pay as the stimulus reduced the required withholding amounts, benefitting an estimated 12.6 million California families.

For more information on this legislation, view Rep. Schiff's press release by clicking here. You may also visit the http://www.recovery.gov and California's website on the Recovery Act for more detailed and up to date information on how these funds are being spent.

Housing and Preventing Foreclosure

Rep. Schiff is deeply concerned about the current housing crisis and believes that we must find a way to better inform future homebuyers of the risks involved with certain loans and prevent current homeowners from facing foreclosure. Families around the country, and especially in California, are being hard hit by the current housing crisis.

Compared to the rest of the nation, California still has high property values, but foreclosures will cost Californians a total of $67 billion in lost property values, an average individual loss of more than $8,000 and the state ranks 4th highest in the number of foreclosures. The problems surrounding the subprime mortgage markets have pushed the housing market into its worst slump in 16 years -- weakening the American economy and making American families less secure.

This is why Rep. Schiff supported the Helping Families Save Their Home Act (H.R. 1106) which strengthens the country's housing market. The bill makes crucial changes to the HOPE for Homeowners Program to encourage more lenders to participate in this program that has helped keep millions in their homes. The legislation strengthens the mortgage insurance market by restricting predatory lending firms from participating in the Federal Housing Authority's mortgage insurance programs.

The House version of the legislation allowed for judicial modification of the mortgage terms involving primary residences. Homeowners facing foreclosure would have been required to attempt to notify the lender and work out a loan modification before applying for judicial modification. Bankruptcy judges could have extended an applying homeowner's mortgage repayment period and reduced exorbitant mortgages interest rates to keep the mortgage affordable over the long-term. This is the same power bankruptcy judges have for all other types of debt. Unfortunately this provision was not included in the final version of the bill, which was signed into law on May 20, 2009.

Last year, Rep. Schiff supported legislation to make it easier for homeowners to refinance. The American Housing Rescue & Foreclosure Prevention Act (H.R. 3221) which improved upon the FHA program so many borrowers in danger of losing their primary residence can refinance into lower-cost government -insured mortgages they can afford to repay. It also strengthens regulation of Fannie Mae and Freddie Mac and raises the loan limits so families can more easily purchase single family homes in high cost areas, such as California.

Protecting Consumers Rights Regarding Financial Products

Congressman Schiff is proud to be a cosponsor of the Credit Cardholders' Bill of Rights (H.R. 627), legislation to give consumers the rights and information about credit cards that will help them make educated decisions about their financial lives and could save some families thousands of dollars.

Credit-card debt in the U.S. has reached a record high --nearly $1 trillion -- and almost half of American families currently carry a balance, and their average balance was $7,300 in 2007. One-fifth of those carrying credit-card debts pay an interest rate above 20 percent. In 2008, credit-card issuers imposed $19 billion in penalty fees on families with credit cards.

This legislation applies common-sense regulations that would ban unfair rate increases and forbid abusive fees and penalties. For example, it will prohibit retroactive interest rate hikes on existing balances, double-cycle billing (charging interest twice for balances paid on time), and due-date gimmicks. It will also require 45-days' advance notice of interest rate, fees, and finance charges hikes, and requires payments to be applied fairly to the highest interest rate balance first. By providing consumers with clear information and transparency, families will be better equipped to manage their finances in these difficult times.

Rep. Schiff was present at the White House when President Obama signed the Credit Cardholders' Bill of Rights into law on May 22, 2009.

Mortgage Lending Reform

Subprime and predatory lending practices were at the heart of the current financial crisis. Rep. Schiff strongly supported much needed reform to prevent these bad loans from being made in the first place when the House considered the Mortgage Reform and Anti-Predatory Lending Act of 2009 (H.R. 1728).

The bill establishes a simple federal standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold. For refinancing, the bill will require that all loans provide a net tangible benefit to the consumer rather than merely putting money in the pockets of the lender. The legislation prohibits the financial incentives for subprime loans that encourage lenders to steer borrowers into more costly loans and mandates strong new federal rules to require creditors to retain an economic interest in a material portion (at least 5 percent) of the credit risk of each loan, to make sure creditors have a stake in ensuring their loans will not default.

California Budget Crisis

California has one of the highest unemployment rates in the country. Unemployment in California rose to 11.2% in March, the highest level since the state began keeping records in 1976. What's more, the number of people out of work for almost a year rose by 9.4%, double the amount in 2008. Families are turning more and more to public services to help them get through the hard times, but the State can no longer afford to provide some of the most basic services at a time when they are needed most.

A recent budget review by the non-partisan Legislative Analyst's Office estimated that if the California budget propositions failed, which most of them did, the state faces an over $100 billion deficit over the next 5 years. Due to these cash problems, Standard & Poor's lowered its rating on general obligation bonds in February, making California's bond rating lower than any other state in the country.

The short-term municipal bond market conditions are freezing liquidity, sapping investor confidence and shrinking the market for municipal issuers' bonds which burdens taxpayers with substantial costs and worsens the state's budget woes. These dire financial circumstances leave the state few options for finding the short-term cash flow that is needed to run day-to-day operations.

As you know, California is facing a budget deficit of $24 billion dollars over the next fiscal year, and barely is able to pay bills for day-to-day expenses. The state estimates it will need to borrow $13-15 billion in short-term bonds this year, compared to $3-5 billion in a normal year, and they will need the money in July or face drastic cuts in state programs. It is unlikely that the financial markets in their current state could even bear such a large short-term need, but if the state cannot find the money somewhere it will likely be forced to stop all public work projects, cutting crucial infrastructure jobs, stop paying its contracts and even cut off cash to localities who perform state services, potentially forcing municipal bankruptcies at cities and towns around the state.

Congressman Schiff expressed his concern about how California will be able to provide essential services to its residents while protecting its credit rating for future years with Treasury Secretary Tim Geithner when he testified before the Appropriations Subcommittee on Financial Services and General Government. While most of the tough decisions need to be made at the state level, but Rep. Schiff will continue to work in Congress to make sure that the state receives its fair share of government funds through formula programs for housing, transportation, education and healthcare. California on the whole, pays more in federal taxes than it receives in federal benefits, and with the state struggling to meet its basic obligations, we must fight for our fair share of the pie.


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