How Congress Can Respond to America's Economic Crisis

The Problem:

•    Communities across the country are being devastated by a national and international economic crisis. Low and moderate-income communities are being hit especially hard.
•    Homeowners are facing foreclosures, tenants are facing evictions, workers are facing layoffs, and vacant houses are dotting neighborhoods across California and the nation. At the same time, the cost of food, gas and other necessities continue to increase dramatically.
•    Small and mid-size businesses are in danger of closing due to the economic slowdown and lack of access to bank credit.
•    The federal government has responded by passing a huge, $700 billion “bailout package” (the Emergency Economic Stabilization Act of 2008) for banks and investors, with no accountability. 
•    Banks are exploiting this economic disaster by increased acquisition and consolidation with no regulatory oversight or public scrutiny. A next step for the federal government must be a strong regulatory oversight structure to avoid this crisis occurring again.
 
A Few Key Steps toward Solutions:

•    Six Month Moratorium on Foreclosures: The federal government should enact an immediate moratorium on foreclosures; the moratorium should be in effect for at least 180 days to allow borrowers to work with counselors, loan servicers and lenders to modify the loans and make them affordable through adjustments in interest rates and reduction of principal.  Currently, servicers are not modifying loans and homes are being emptied by foreclosures. 
•    Save Neighborhoods Not Banks: The government should ensure that the funds invested in banks are used to offer credit to small businesses, consumers and home owners.  The economy is choking on a lack of credit from banks; these funds must be used to allow small businesses, consumers and home owners to continue their everyday lives.
•    Keep People in their Homes: Mortgage companies must modify predatory loans so that people can stay in their homes.  Home owners need fixed rate, 30 year loans at affordable rates. The federal government must make this happen now because they are major owners of mortgages as major shareholders in financial institutions and own Fannie Mae and Freddie Mac.
•    Give Bankruptcy Judges Authority to Solve Problems: Many borrowers have been driven into bankruptcy by predatory loans. The Bankruptcy Code needs to be reformed so that bankruptcy judges can modify all home loans and solve the problems caused by foreclosure -- vacant homes and homeless families.