Foreclosure Problems and Solutions: Federal, State, and Local Efforts to Address the Foreclosure Crisis in Ohio
FORECLOSURE PROBLEMS AND SOLUTIONS: FEDERAL, STATE, AND LOCAL EFFORTS TO ADDRESS THE FORECLOSURE CRISIS IN OHIO -- (House of Representatives - June 18, 2008)
The SPEAKER pro tempore. Under a previous order of the House, the gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
Ms. KAPTUR. Madam Speaker, yesterday the Housing and Community Opportunity Subcommittee of Financial Services held a major hearing in the City of Cleveland, Ohio. The subject was the foreclosure crisis facing the American people.
I want to thank Congresswoman MAXINE WATERS of Los Angeles, California, who did such a phenomenal job, all the Members who attended and certainly Chairman Frank, the chairman of the full committee, for allowing this proceeding to occur outside of Washington.
Cleveland, without a doubt, is ground zero in the mortgage foreclosure crisis facing Ohio. Although every quadrant of our State is suffering from rising foreclosures, the crisis is most acute in Cuyahoga County where nearly 15,000 new foreclosures occurred in 2007, a 350 percent increase compared to 10 years ago. Over 85,000 Ohioans have faced foreclosure, and we expect those numbers to increase as we look across our country and see homeowners nationwide just in the next 2 years lose nearly $356 billion on their property values with no end in sight. Some estimate the crisis will cost our country over $1 trillion.
Almost 9 million homeowners now owe more on their mortgage than their home is worth, the largest share since the Great Depression. If we really look at what has been happening, for the first time since World War II in the critical home mortgage sector, our largest form of an average family's net savings, net home equity is now negative. That is below 50 percent. As a whole, Americans owe more on their homes than they are worth.
This enormous loss of wealth affects not just homeowners but our Nation as a whole. We are a net debtor country, both publicly and privately. There have been inferences of a taxpayer bailout to prevent the financial collapse of major Wall Street banks and brokerages such as Bear Stearns, and Merrill Lynch and Lehman Brothers are waiting in the wings, probably, for life support there too.
Most often, when a homeowner can't make ends meet, they lose their home. But when a giant firm like Bear Stearns can't make ends meet, the Chairman of the Federal Reserve and the Secretary of the U.S. Treasury get involved and billions of dollars of capital, much of it now from foreign places like Abu Dhabi, are found to fill the gap.
Mergers of banks are approved expeditiously and, just in case, the Federal Reserve opens its New York window with our taxpayers becoming the insurance company of last resort, pledging the full faith and credit of the United States to the big banks, and now, for the first time in history, to brokerages, to investment firms. Will ordinary homeowners in our Nation ever be afforded equal attention by both the Federal Reserve and the Treasury?
It does not appear to be so with the rate of foreclosures and bankruptcies rising every month. There remains much Congress does not know about what got us here. An old professor of mine at the Harvard Business School used to say, ``If you want to know the way the world operates, follow the cash.''
Yet Congress has not really followed the cash. It has not investigated the paper trails of firms, brokerages, regulatory boards, government bodies and key individuals who initiated and carried out these risky subprime and internationalized security practices. An equity washout of this magnitude does not happen by spontaneous combustion. It was willed to happen.
Specific people in specific places set the pieces in place to allow it to proceed. Many have been handsomely rewarded. America needs to know who they were and are.
It is incumbent that Congress authorize a full independent investigation of the tools of the roots of this crisis that trace back to the unstable period following the savings and loan crisis in the late 1980s. The development of the internationalized mortgage security instrument itself deserves more attention.
In effect, it became a clever and high-risk credit device, with little transparency, that acted like a bank. It created money, or at least the illusion of it, in a Ponzi-like scheme. It did so without the normal regulatory restraints of full accounting and proper examination.
How could the regulators have let that happen? America should know the individuals and organizations that allowed these risky instruments and practices to proceed.
One of the first institutions to embark on subprime lending was Superior Bank of Hinsdale, Illinois. That bank had a return on assets 7 1/2 times the industry average, a CAMEL rating of only 2. Yet its executives were financially rewarded for presiding over ruin.
Where was the Office of Thrift Supervision?
I am going to place in the Record many questions the American people need to know answers to in order to figure out who is responsible for this crisis and to prevent further raids on the private savings of the American people.
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