Klein Discusses South Florida Economy with Treasury Secretary Timothy Geithner

Press Release

Klein Discusses South Florida Economy with Treasury Secretary Timothy Geithner

At a hearing of the House Financial Services Committee held this morning, Congressman Ron Klein discussed the South Florida economy with national leaders such as Treasury Secretary Timothy Geithner.
This morning's hearing, titled "Regulatory Perspectives on the Obama Administration's Financial Regulatory Reform Proposals-Part Two," included as witnesses Geithner, Federal Reserve Chairman Ben Bernanke and FDIC Chair Sheila Bair.

Klein's full statement, as submitted for the record, follows.

July 24, 2009

Thank you, Chairman Frank, for holding this important hearing, and thank you, Secretary Geithner, for being here today.

Our financial regulatory structure has clearly failed, and it is essential that we reform the current financial regulatory framework to meet the challenges of an increasingly complex and international economy. We have learned that without proper regulation, financial institutions can build up an inappropriate amount of systemic risk which can endanger the entire economy, and I look forward to working with this committee and the Administration as we develop a smarter, more efficient regulatory structure to prevent similar economic crises in the future.
However, I am concerned about the current state of the economy in Florida, and there are several issues that need to be addressed immediately.

In South Florida, and in many places across the country, there are still serious problems in the housing market, and I constantly hear from constituents that banks are refusing to work with struggling homeowners, even those that are current on their mortgage payments.
In addition, banks are taking too long to complete short sales, meaning that homes with willing buyers are instead being foreclosed, with negative consequences for housing prices and the entire economy. Further, there is turmoil in the commercial real estate market, with many investors and developers struggling to refinance many loans that are coming due over the next few years.

I am also concerned that the money the government spent to stabilize the banks, and the other government programs that provide these banks with cheap funds, is not getting to Main Street and the people that really need it. The Troubled Asset Relief Program (TARP) passed last fall has helped to stabilize credit markets, and there is no doubt that the economy would be in worse shape without this government program. Yet I've heard repeatedly from constituents who are unable to get loans from banks that have received TARP funds, despite some who have impeccable credit, profitable businesses and plenty of assets. And a recent report by the Special Inspector General for the TARP program, Neil Barofsky, shows that many banks used TARP money to build up capital cushions, repay outstanding loans, invest in mortgage-backed securities, and make acquisitions of other banks. We must hold these banks accountable to the American people.
I understand that loans would naturally be reevaluated in a downturn, and a certain contraction of credit is expected. And we certainly want these banks to succeed and make positive contributions to the economy. But if banks are unable or unwilling to lend to creditworthy borrowers, then Congress and the Administration should take concrete action to ensure that businesses can obtain the credit that is essential to the successful operations of their enterprises. As you know, small businesses tend to lose jobs faster as the country enters a recession, but they also tend to recover faster than larger businesses from a recession. If we can find a way to provide substantial help to small businesses, it is more likely that we can return to robust economic growth in a more timely fashion.

Mr. Secretary, I look forward to working with you to address these concerns.

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