Civil Rights Groups: Bail Out Main Street Too
Feature Story by Tyler Lewis - 9/25/2008
As Congress furiously puts together legislation to shore up Wall Street, the civil rights community is calling for the addition of a provision that will allow millions of families to keep their homes.
Congress' intervention comes after the U.S. Treasury's $85 billion bailout of American International Group Inc. (AIG) on September 16 failed to stabilize world markets. AIG is the 18th largest company in the world, according to Forbes' annual Global 2000 list of the biggest public companies.
On September 21, U.S. Treasury Secretary Henry Paulson proposed a controversial plan to buy up $700 billion worth of bad debt from the financial industry. Civil rights groups argue that the plan doesn't fix the real problem: the foreclosure crisis.
"The Paulson $700 billion bailout simply will not work to stabilize the economy if it does not address the underlying problem of home foreclosures and falling home prices," said Martin Eakes, founder and head of Self Help and CEO of the Center for Responsible Lending.
Civil rights groups say that a provision that will give bankruptcy judges the ability to adjust mortgage payments for struggling homeowners is critical to strengthening the economy and must be included in any bailout legislation passed by Congress.
"Wall Street will continue to lose money as long as American families are losing their homes. By helping Americans meet their mortgage obligations and keep their homes, we can also make Wall Street healthier," said Nancy Zirkin, executive vice president of the Leadership Conference on Civil Rights.
Civil rights groups have been urging Congress to pass the homeowner bankruptcy provision all year. It was dropped from legislation in the Senate aimed at slowing the foreclosure crisis earlier this year, due to opposition from the lending industry, who argue that the provision would create more instability in the market and make credit more expensive.
Supporters of the provision contest that assertion, pointing out that the market is already severely unstable, mostly because millions of people cannot afford the loans they were already given.
"[T]here is a lot of talk these days about how some institutions – most recently AIG – are just too big to be allowed to fail. That may be true. But this country is made up of millions of small homeowners who can't be allowed to fail either. These millions of small homeowners make up the country, contribute to its economic well-being and underpin the mortgage-investments Wall Street trashed," said Zirkin. "But if the taxpayers … are going to bail out Wall Street, then they should be given the opportunity to bail themselves out as well."
Congress had planned to finish the bailout legislation by the end of the week, but many details are still unresolved.
