Mark DeSaulnier has had a rapid ascent through the state legislature and now, potentially, into Congress. Within three years, this former restaurant owner won elections to the State Assembly (in 2006) and the State Senate (in 2008), with a Congressional primary scheduled for September 1. Prior to that, he was a 3-time member of the Contra Costa County Board of Supervisors and the California Air Resources Board. A former liberal Republican in the mold of Edward Brooke, DeSaulnier switched parties several years ago and compiled a liberal voting record in the State Legislature. His first ad of the campaign covered the topic of health care, and I asked him about this and several other issues in an interview conducted last week. Having taken place before the crucial budget vote, I spent a good deal of time asking DeSaulnier about that, and you can see his responses here. Depending on your perspective, he either did or did not fulfill the promise to vote against "most" of the budget, by the way, voting no on 11 of 26 bills, including all of the more controversial ones.
I'll pick up with a paraphrased transcript of the rest of the interview below:
We have less than 50 days until the special election in the 10th Congressional District to replace Ellen Tauscher, who resigned to take a job at the State Department. The candidates include local members of the legislature, the state's Lieutenant Governor, and several candidates with interesting resumes. There's even word that New Age guru and Oprah pal Marianne Williamson may get into the race, although she doesn't have much time to make her decision. The 2nd quarter fundraising totals revealed some interesting outcomes, and the campaign staffs have debated who has the most local support and the most endorsements. There's even a burgeoning controversy about Ellen Tauscher's presence on Sen. Mark DeSaulnier's mailers, which may violate the Hatch Act now that she works in the State Department.
We've heard a lot about strategies, funding and endorsements, but a little less so about where the candidates stand on the issues. So I'm making an effort to interview all the Democratic candidates in the race, to discuss their views on the type of vexing problems that the country faces which they would be expected to deal with in Congress. The first candidate to respond was Adriel Hampton, the former Political Editor at the San Francisco Examiner and an investigator in the SF City Attorney's Office. What follows is a paraphrased transcript of the interview I conducted last week.
People are justifiably worried that credit ratings agencies like Moody's, Fitch and S&P have lowered California's credit ratings to near-junk bond status. The nature of the way we pay our bills means that we will eventually have to access bond markets to borrow, and these low ratings will dramatically increase the cost of that borrowing. I've said often that the risk of default on any bond issue, as a Constitutional matter, is infinitesimal, yet in this case, the rating agencies are being overly conservative and reflecting the fears of Wall Street.
And yet the rating agencies are not independent actors. They are owned by banks who issue the securities they rate, and throughout the financial meltdown, they continued - almost until the end - to rate mortgage-backed securities filled with subprime loans at the highest quality, facilitating the buying frenzy. In fact, the rating agencies structured many of the deals in order to ensure high ratings, intervening in the market for those securities instead of dispassionately assessing them. Now CalPERS, the largest public pension fund in the country, which has been hammered by losses in the stock market, is suing those rating agencies for their gross negligence.
The lawsuit blames the three big Wall Street credit rating agencies - Moody's Investors Service, Standard & Poor's and Fitch Ratings - for effectively luring CalPERS into a series of disastrous 2006 deals by giving the investments "wildly inaccurate and unreasonably high" grades.
The investments have gone bust at a cost of "perhaps more than $1 billion," said the California Public Employees' Retirement System in the suit, filed last Thursday in San Francisco Superior Court.
The losses represent a small portion of the roughly $60 billion CalPERS has lost in the past year due to declines in its stocks, real estate and other holdings. The losses are so steep that CalPERS has served notice that it will demand higher contributions from the state and the local governments that rely on the fund for pensions.
As a large industry actor, CalPERS has some ability to move policy in the financial world. And they are hitting one of the biggest targets here. Barry Ritholtz explains further:
Now, here comes the fun part: Calpers doesn't give a rat's ass about the money. Sure, the financial instruments at hand (Cheyne Finance, Stanfield Victoria Funding and Sigma Finance) have defaulted on their payment obligations. The losses to Calpers are - $1 billion.
But that's not what's going on here: These Left Coasters want their pound of flesh. They don't care for the Ratings Agency folks, and consider them a blight on the investment landscape.
The goal of the litigation (as I see it) isn't to make the rating agencies pay a financial penalty; rather, it is to publicly try them just as the regulatory rules are being rewritten. I also predict that CALPERS is going to attempt to not just win, but humiliate these agencies, call them out in the most embarrassing way possible, trash the senior executives, and make things very uncomfortable in general for these firms.
They don't want them to merely suffer - they want to destroy their unique position as an Oligopoly, to remove them from having a special status under the SEC rules.
The credit rating agencies are a FRAUD, and I would argue that this downgrading of California bonds regardless of Constitutional dictates represents a furthering of that fraud. CalPERS is fighting back on principle, because the relationship between the rating agencies and the financial industry they are supposed to serve is among the sleaziest on Wall Street.
Under Phil Angelides, CalPERS used its considerable clout to move toward progressive reforms in the financial industry. Bill Lockyer has done less of this. But I'm glad to see the fund standing up on behalf of not only its clients, but every investor, against the near-criminal structure of these rating agencies.
On Tuesday, Moody's Investors Service downgraded the state's general obligation bond rating to Baa1, following a similar move by Fitch Ratings the week before. That's three grades above junk bonds, and the lower the ratings the more it costs California to borrow. It's also less likely investors will deal in California bonds, even though the state has never defaulted or even been late on a bond payment.
As part of an earlier bill, Congress initiated the modern-day analogue to the Pecora Commission of the 1930s, named after its chief counsel Ferdinand Pecora. That commission detailed the origins of the financial crisis that caused the Great Depression, and led to the passage of several banking reforms, including the Glass-Steagall Act, which separated investment banks and commercial banks. The Pecora Commission was credited for the reforms that stabilized the financial system after a 19th century full of depressions. After decades of neglect and deregulation, we needed a new Pecora Commission to examine the breakdowns in the financial system and recommend best practices to ensure it never happens again. And the man who will head this commission is Phil Angelides.
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid today announced six appointments to the 10-member Financial Crisis Inquiry Commission, established by Congress to examine the domestic and global causes of the financial crisis.
Speaker Pelosi and Majority Leader Reid appointed Phil Angelides as chairman of the Commission. The statute requires the House Speaker and the Senate Majority Leader to jointly appoint a commission chair. Mr. Angelides, one of Speaker Pelosi's three appointments to the commission, served with distinction as the elected California State Treasurer from 1999 to 2007. He has earned national recognition as an effective public and private sector leader with broad expertise and accomplishments in the fields of investor protection, housing, finance, and corporate and financial market reform.
The Commission will conduct a comprehensive examination of, and hold hearings on, more than 20 specific areas of inquiry related to the financial crisis, including the role of fraud and abuse in the financial sector; state and federal regulatory enforcement; tax treatment of financial products; credit rating agencies; lending practices and securitization; unregulated financial products and practices; and corporate governance and executive compensation. The Commission will also examine the causes of major financial institutions that failed or were likely to fail had they not received exceptional government assistance. The Commission will provide its findings and conclusions in a final report due to Congress on December 15, 2010.
Obviously this takes Angelides out of the running for any political races in the 2010 cycle. But he'll actually have a far more influential position - determining the causes of the financial crisis and how to fully reform the system. I'm pleased that Speaker Pelosi and Senator Reid went outside of Washington for this task, not to any of the typical high priests of bipartisanship. I hope Angelides can get this job done, and it seems to fit with his skills.
The rest of the Democrats on the commission, including Clinton-era official Brooksley Born (who wanted to regulate derivates in the late 1990s) and former Florida Sen. Bob Graham, can be found at the release.
...The Republicans added a vice-chairman with a California connection: former House Ways and Means Chairman Bill Thomas.
I've seen a bit of confusion in traditional media accounts of California's budget situation, and whether or not the state should receive a federal bailout. This seems to go toward the idea that without federal aid, California will default on its creditors and go bankrupt, and the federal government has a compelling interest in keeping that from happening. You can argue whether or not it would actually make sense for the state to default - it certainly worked pretty well for Argentina, despite neoliberal fuming to the contrary. And as noted by Peter Schrag in the above-linked entry, the Governor has never asked for any help of this kind, and given his status as a born-again Friedmanite, would probably reject it. But Paul Kedrosky, who has read the relevant law, explains in a piece supporting default that California really cannot do so.
The root issue, of course, is that California is insolvent, and irritating people like S&P analysts keep noticing. The state -- let's call it Latvia by the Pacific -- has a $24-billion budget gap that must be closed for it to continue operating (and I use that word advisedly). Without a clear sense of how that will happen rational creditors are going to be increasingly skittish about filling the hole. Now, does that mean California can't sell enough bonds to backfill the gap this time? You bet it can, and it will. This is part Schwarzenegger/Lockyer Financial Theater, and partly a laughably transparent attempt to demonstrate budgetary semi-competency in hopes of a few basis-points of relief on the inevitable bond sale. That's all.
Because California has $5.7-billion in debt servicing obligations. And while that will grow, debt occupies pride of place in California's constitution -- only education must be paid off before the next slug of cash goes to creditors. Get that? Healthcare, prisons, and other frivolities can all go to rack and ruin, but creditors must be paid, constitutionally speaking. That means, if you're looking at this through the gimlet eyes of muni-bond ghouls, that California has something like $50-billion in budgetary space to make its $5.7-billion in payments. It's pretty easy to calculate that California can make the payment nut, even if it has to close hospitals, release prisoners and stop patrolling the highways to do it.
Now, Kedrosky thinks this is theatrical and should not be rewarded. I say it's the perfect reason for California, and actually all states with this kind of constitutional arrangement, to receive those federal loan guarantees to stop gouging from Wall Street for short-term bonds. Not only do Schwarzenegger and Lockyer know we have to pay back all out debt, so do the bondholders and the rating agencies. It's almost literally impossible for us to default on those bonds, short of the entire state's residents spontaneously getting fired at once. If those loans will obviously get paid back, the interest shouldn't be set at payday-loan rates. And the federal government could very easily remedy that situation, at no cost and probably at a profit, as they reaped from the loans to New York City in the 1970s.
Is it a problem that California operates at the mercy of its creditors? In a sense. Is there a remedy? At the least, there's a way to get some equitability into the process so that we aren't blowing money on Wall Street firms who have been bailed out by those same Feds ten times over. In addition, this kind of thing weakens the municipal bond market, and the federal government has an interest in keeping credit flowing through that.
...H/t to John Myers for tracking down the obviously dubious story about Washington rejecting California officials clamoring for a "bailout". Nobody was doing any such thing. They were asking for loan guarantees, which they've been doing for months and months. Horrible reporting from WaPo.
When the traditional media followed the lead of the Hooverists on the right and started calling California's desire for federal loan guarantees to secure short-term borrowing a "bailout," which it isn't, support for the measure collapsed. But not only was California seeking a solution to being gouged by bankers and investors, but other localities would like the option as well, putting the lie to the notion that California seeks "preferential treatment." In fact, other localities want a simple payback to cover losses to their municipal bonds from the Lehman Brothers meltdown, which would cost far more to the Feds than a loan guarantee program. Moody's has downgraded the ENTIRE muni bond sector, not just California, so the costs have gone up across the board. Overall, there is an acknowledgement that the recession has made borrowing costs too exorbitant, and backing from the Feds could save municipalities billions at no cost to the government.
All of the proposals are meant to help struggling state and local governments that are facing a cash-flow squeeze. The economic downturn has eaten into their tax bases as local businesses shut, houses are lost to foreclosure and there is a resistance to raising taxes. The risk to the federal government is that it could lose money if things get worse for municipalities and states. Although backing debt with a guarantee does not require an immediate outlay of funds, the federal government could have to cover losses if there are defaults - which could be substantial if the economy weakens or states and municipalities cannot bring their budget deficits under control. Nonetheless, these overtures by state and local officials reflect a sense - perhaps just a hope - that municipalities suffering from a downturn in revenues and creditworthiness may find some relief in Washington beyond the stimulus money the federal government already is spending.
Emphasis there on "could." Those who know the market and understand it admit that California, and all the other states, would certainly repay the bondholders. The state has never missed a payment in its history, and bond repayment has a stronger priority in the California constitution than most other states. All the bond analysts I've seen say uniformly "California's not going to default." Not to mention the fact that the savings from being rescued from out-of-control interest rates would leave more money available to aovid cuts.
"There's simply no better stimulus than guaranteeing state and local bonds, particularly those that are being used to get through the crisis and avoid layoffs," said Rep. Brad Sherman, one of 15 Democrats in California's House delegation who signed a letter earlier this month asking for the federal loan guarantee.
Plus, supporters of the idea note that Washington stands to make a profit from loan fees as it did after bailing out New York City in 1975, a move that brought the city back from the brink of ruin [...]
"We are not asking for a bailout," said state Assembly Speaker Karen Bass, a Los Angeles Democrat. "We're asking for the federal government to step in where commercial banks can't this year because of the crisis within the financial industry."
In other words, the state didn't create the economic crisis, they didn't create the financial crisis, and they shouldn't be unable to secure normal short-term borrowing because of either.
Also contrary to the myths in the media, the federal government has NOT foreclosed this option whatsoever. The Treasury has been somewhat noncommital on the specifics, but agreed in broad terms that the municipal bond market needs to work better than it does today. In addition, Tim Geithner had this warning for the wordsmiths on the right and in the media:
But, according to a Bloomberg News account of the speech, Mr. Geithner cautioned: "I wouldn't use the word bailout."
Late last week, Democrats temporarily shelved a bill that would allow bankruptcy judges to modify the terms of mortgages on primary residences (also known as "cram-down"). Moderates who put the hold on this legislation, particularly former Wall Street investor Ellen Tauscher, crowed about it to the media.
This hardly amounts to a breakthrough win for party moderates - or a major concession by the speaker. But it was a consequential moment in the minds of moderate leaders who often find themselves marginalized in a caucus dominated by liberals.
"It shows we have bench strength, and it shows we can flex," said California Rep. Ellen O. Tauscher, who chairs the New Democrat Coalition and played a central role in negotiations over the bankruptcy bill [...]
Moderates worry Pelosi is routinely staking very liberal positions to push House versions of big bills as far to the left as possible to enhance their standing in negotiations with the historically centrist Senate. This might be a smart tactic, but it often hurts Democrats who rely on Republican votes to win reelection. Put bluntly, it makes them look too liberal [...]
That prompted lawmakers, like Tauscher, to limit the scope of the bankruptcy bill as much as possible, even though this measure is only loosely related to the president's broader proposal.
Tauscher's New Democrat Coalition teamed with their natural allies in the Blue Dog Coalition to impose 10 significant changes, including requirements that bankruptcy judges use federal guidelines to determine the fair market value of a home and that modified loans must be "unaffordable and not just underwater" to prevent wealthy homeowners from taking advantage of the process, according to a widely distributed e-mail from Adam Pase, executive director of the New Democrat Coalition.
This, of course, angered some liberals. "The New Dems' position is the banks' position," a senior Democratic aide involved in the bankruptcy negotiations complained on Friday. "New Democrats are shills for the banks."
It's confounding that any New Democrat thinks their constituents give a ring-a-ding about banking industry concerns, and are not in fact the very people struggling to keep their homes that this legislation would help.
More, including Tauscher staffers lying to bloggers, on the flip...
Chris Bowers advises that the House will be going ahead with housing legislation tomorrow that would allow bankruptcy judges to modify the terms of mortgages to reflect current home values and allow homeowners to avoid foreclosure (commonly known as "cram-down". As I discussed with Rep. John Conyers, the author of this bill, this would not encourage bankruptcy but help people avoid it, giving them a level playing field to get banks to follow through with loan modifications. While practically every other property someone owns can have the terms rewritten by a bankruptcy judge, primary residences are excluded. That is arbitrary and wrong, and changing it would reduce foreclosures and homelessness and bring some stability to the housing market. This legislation is supported by the President and included in his housing plan, but a change in the law like this should be passed by the Congress to make it a federal statute.
Bowers writes:
Tomorrow, the House will vote on Representative Conyer's bankruptcy cram down. The whip count is unclear right now, but some Blue Dogs and New Democrats, including Melissa Bean (D-IL), Dennis Moore (D-KS), and New Democratic chair Ellen Tauscher (D-CA), are working on behalf of the financial services industry to water down the legislation. Tauscher in particular is problematic, both because of her leadership role in one of the ideological caucuses, and also because rumors are that she has organized up to two dozen members thus far. It is about time that Tauscher, and the Representatives she is organizing, stop listening to industry lobbyists who do not have the public interest in mind.
So, let's make Representative Tauscher listen to someone else right now. Contact Ellen Tauscher, and urge her to stop organizing other Democrats to water down HR 200. She needs to listen to honewoners, not to the financial industry that got us into this economic disaster.
Here is the contact information:
Email form (California residents only)
D.C. office: 202.225.1880
Ellen Tauscher's New Democrat ways haven't surfaced much since the threatened primary challenge in 2007, but torpedoing this bill would bring that back all over again. She needs to know that people are watching her and want to be sure that she is protecting homeowners and not the big banks and lenders.
The Senate passed the bailout bill, with 2/5 of the DeFazio plan embedded - the raising of FDIC insurance limits, which was long overdue, and the ability for the SEC to suspend mark-to-market accounting, which is some kind of fairy tale. It also includes all kinds of other legislation, like a tax package which is mainly focused on renewable energy tax credits, the only - I repeat, only - provision through all of this which could grow the manufacturing sector and reindustrialize the country (which is, you know, the key to America's economic survival). It actually RAISES taxes for oil companies as well. I don't think "Exempt from excise tax certain wooden arrow shafts for use by children" needed to be in there, but hey, it's Congress!
The Senate jammed the House pretty good on this one, and I think they'll eventually comply.
My Senators, Boxer and Feinstein, both voted for it, which shows that this cuts across ideological lines. And yet I can't argue with a word Russ Feingold says here:
"I will oppose the Wall Street bailout plan because though well intentioned, and certainly much improved over the administration's original proposal, it remains deeply flawed. It fails to offset the cost of the plan, leaving taxpayers to bear the burden of serious lapses of judgment by private financial institutions, their regulators, and the enablers in Washington who paved the way for this catastrophe by removing the safeguards that had protected consumers and the economy since the great depression. The bailout legislation also fails to reform the flawed regulatory structure that permitted this crisis to arise in the first place. And it doesn't do enough to address the root cause of the credit market collapse, namely the housing crisis. Taxpayers deserve a plan that puts their concerns ahead of those who got us into this mess."
This is all true, and this was ultimately a bad plan, but I respect the opinion of hold your nose caucus as well. I would have preferred a short-term fix with a vote giving a popular mandate to the solution.
Because right now the public opinion situation is very muddled. People absolutely believe this is a crisis and they might not want to bail out Wall Street but they are adamant that something be done. This is acute in California. The state, with its emphasis on selling bonds and borrowing, is currently unable to pay its bills. Bonds for highway construction, schools, housing and water projects cannot be sold. The credit crunch has real-world effects. This is why the Governor wrote the Congressional delegation and urged passage. This is also why you don't run a government based on borrowing, but there you go.
And so you have the fascinating and strange situation where Democratic challengers in Congressional races are hammering their incumbent opponents for voting yes AND voting no on the House plan. On the side of "how could you vote for this" are Bill Durston (who rushed out an ad hitting Dan Lungren for voting yes) and Ed Chau (who slammed Gary Miller in a press release). On the side of "I can't believe you didn't vote for this" are Nick Leibham, who couldn't have been more exercised about Brian Bilbray's no vote (calling it "totally irresponsible") and Charlie Brown, who defended the need to do something against nutjob free market fundamentalist Tom McClintock.
And then you have Russ Warner, who cited David Dreier's hypocrisy while saying he would have voted for the bill as well:
Warner's campaign pointed to a conflicting statement on Dreier's website, where the 13-term incumbent writes, "I believe we need to empower families to make sound economic choices and avoid taxpayer funded bailouts."
While Warner says he would have voted for the bailout bill as well, his campaign attacked Dreier for changing his position.
The point is that no politician has any idea what the people want, and the decision-making process is exceedingly complex. Those who are taking principled stands are likely to be rewarded and those taking political ones punished, but even that is unclear. I would steer clear of making definitive statements about the public mood; chances are they don't even know what they think.
(You guys are awesome. Thanks so much for getting us to our goal. But there's still more work to be done before midnight; we need to get $500 raised for each candidate. Right now 4 of our 5 candidates need a little more. Visit our ActBlue page and donate!)
Calitics Match candidate Charlie Brown is facing California's Alan Keyes, perennial candidate Tom McClintock, in the most hotly contested Congressional race in the state. And I think the pressure is getting to McClintock.
He put together a website called "Vets for Tom" which has a page with a list of resources for veterans. There is substantial evidence that McClintock's team plagiarized the resource list from Charlie Brown's website.
Campaign manager Todd Stenhouse said that not only did a list of resources on the site exactly match what was on Brown's site, but one link that was broken on Brown's site had the same problem on McClintock's site.
When visitors clicked on the "AmVets" link on McClintock's site, Stenhouse said, the broken address took visitor to a site with an address from Charlie Brown's site, in what Stenhouse called "a smoking gun."
"Everything he's learned about veterans and the military, he's apparently learned from Charlie Brown," Stenhouse said, referring to Brown's criticism of McClintock, a state senator, for voting against legislation related to veterans. McClintock established the veterans' site late last week.
There's really not much more to say on that. Some people lead and others follow.
Meanwhile, Brown and McClintock are strating to meet in forums and debates. Last week Brown called into a Sacramento radio show where McClintock was appearing, and last night they discussed the financial industry bailout. As expected, McClintock favors the exact same failed solutions which brought us to this crisis in the first place, like suspending the capital gains tax. Brown's position is more nuanced, supporting enforceable standards on executive compensation and returning proceeds from selling assets to taxpayers, while concerned about the consequences of doing nothing (which is McClintock's specialty).
The larger point is that McClintock is an enthusiastic supporter of the failed policies of the past, while Brown would reliably represent the future and lead on key issues.
There are conflicting reports on a bipartisan deal on the Wall Street bailout, but I want to focus on a couple of our Democratic lawmakers who are doing a great job on this so far.
Brad Sherman, who has been a leading voice against the piece of crap Paulson plan, reports that phone calls are running 300 to 2 against the bailout. His plan calls for a much smaller price tag, along with homeowner aid. Sherman notes:
Interpreting the twisted political ways of Washington, Sherman said the plan is so unpopular that the only way it will pass is if Congress pushes it through this weekend -- before members return to their districts and realize how hated the bailout is.
It is unacceptable for Democrats to carry this bill forward and be stuck with the political consequences. It's completely unclear whether or not it will work, and without serious changes it's basically a gift to Wall Street executives with nothing for those who are struggling. Keep the pressure on by letting your lawmakers know that they need to be showing leadership like Reps. Sherman and Stark.
...UPDATE: Asm. Ted Lieu has a good statement too, connecting this to the need for the Governor to sign AB 1830, the mortgage bill. I'll also put that on the flip.
The big story today continues to be the Bush/Paulson bailout bill, which is now being debated on Capitol Hill. In calling my representatives yesterday, Rep. Waxman seemed very wary of giving away $700 billion dollars to the Treasury Dept. without oversight or judicial review. Sen. Boxer's statement still buys into the "need for speed" that is accelerating this legislation in an effort to sneak through something very bad, but she does hit the real genesis of the crisis.
In addition, we must get to the root of the housing crisis and work to keep people in their homes through refinancing; if we don't, housing prices will continue to freefall and we will still be in a mess.
In California, we have more foreclosures than any other state-in August more than 101,000 Californians received foreclosure notices and more than 33,000 lost their homes.
If the American taxpayers come to the rescue in this financial crisis, you have to provide assurances that they aren't just taking on bad debt and further jeopardizing their future.
The housing crisis is the first mover here. Lenders and financial industry actors had an extreme need to get people into mortgages, no matter their income or ability to pay, and they sweet-talked them into teaser rates and ARMs with no money down and low opening monthly payments. The idea was to accumulate as many mortgages as possible to package them into mortgage-backed securities to sell overseas. It was a bad bet predicated on perpetual growth in the housing market, and when it crashed there was no flight to safety.
The most important protection for taxpayers comes with protection from the types of lending schemes we saw in the housing market, and that starts not just on Wall Street, but in the states. Aggressive regulation of the housing market in California will go very far to protect against such a crisis from happening again. The legislature passed AB1830 to address exactly this issue, and today Asm. Ted Lieu, the author of the bill, writes Governor Schwarzenegger urging him to sign it.
As you have said in advocating for budget reform, "Enough is enough!" Similarly, the past few years have shown the consequences of a system that failed to effectively regulate and reign in the out of control subprime mortgage industry. The laissez-faire policies previously advocated by much of the industry have turned out to be disastrous. As with budget reform, we need effective mortgage reforne. "Enough is enough!"
To much of the industry's credit, many within the industry and Wall Street recognize that they need better regulation. That is why the following major industry institutions (collectively representing thousands of financial institutions) have all gone neutral on this bill and many of them have contacted your office asking you to sign this bill: The California Bankers Association, California Mortgage Bankers Association, California Independent Bankers, California Credit Union League, and the California Financial Services Association [...]
AB 1830 provides consumer protections for subprime loans while maintaining access to credit and homeownership. This carefully crafted bill is the product of dozens and dozens of meetings and discussions with industry and consumer groups over an eight month period. Through our efforts to craft a balanced approach the leading organizations in the financial and banking industry have gone neutral on this bill. Although a minority of groups still oppose, such as the mortgage brokers and realtors, we have taken several of their suggestions and have worked hard to try to accommodate their concerns.
AB1830 would put mortgage brokers themselves on the hook for their predatory practices, imparting to them a fiduciary duty which would subject them to potential civil suits and loss of license were they not to put the economic interest of the borrower first. It would end the practice of yield spread premiums, which actually financially incentivized brokers to put borrowers into riskier and more costly mortgage options. It would prohibit steering prime borrowers into subprime loans, a common practice. It would ban "negative amortization" loans that would cost the borrower more for the loan even after their initial payments. It would increase enforcements, put caps on prepayment penalties, and go very far to prevent the kinds of abuses that led to this crisis in the credit markets.
It's essential to the future of your stock portfolio as well as the future of the state's economic picture to pass AB1830. The Governor should do so as soon as possible.
Democratic MEMBERS Meeting on Bailout Plan, TODAY, Room 2220, 2:30-3:30pm
From: The Honorable Brad Sherman
Date: 9/22/2008
Skeptical About the
Administration's $700 Billion Bailout Plan?
Democratic Members Meeting
Room 2220
2:30-3:30 P.M.
Dear Democratic Colleague:
Are you skeptical about the $700 billion bailout bill? Let's meet in Room 2220 on Monday, September 22, 2008 at 2:30 PM. Come to the first and perhaps only meeting of the Skeptics Caucus to discuss President Bush's $700 billion bailout bill. Democratic Members and Senior Staff only.
Bring specific legislative proposals. I will be bringing legislative proposals to carry out the principles set forth in the letter below. If you have questions about this meeting, please contact me or my Legislative Director and Counsel, Gary Goldberg, at xyz.
Sincerely,
Brad Sherman
Member of Congress
I would expect this out of a Barbara Lee or Maxine Waters, but coming from Sherman, this means that rank and file Democrats are very wary of getting steamrolled by the Bush Administration and let a major chunk of the Federal treasury flow out of their control. Sherman is pretty middle-of-the-road as Democrats go, squarely in the mainstream of the party if not to the right of the mainstream, not a guy who's out in front a lot and not (to my knowledge) a member of the Progressive Caucus. I've met him a couple times out here in California and he seemed OK, but not exactly the guy I'd expect to go to war with. If Sherman is marching (pardon the pun), there's a very large skeptic's caucus, I'd gather. And Sherman's prescriptions for a better bill (available at the link) are really good.
"We must take action to keep our whole economy from collapsing. But if the plan by the Treasury which has leaked out today is genuine, then it's unclear if the plan will work at all.
"Add in a massive transfer of authority to the executive branch, with no congressional oversight or judicial review, and this plan should be dead on arrival.
"Handing over taxpayer money to the government with no oversight is always a bad idea and it's especially rotten given the current administration's track record."
And Rep. Hilda Solis, traveling with netroots favorite Annette Taddeo in South Florida, released a great statement as well, connecting this fiscal crisis to the effort to privatize Social Security:
"Three years ago, President Bush and rubberstamps in Congress like Ileana Ros-Lehtinen fought hard to privatize Social Security. From the floor of Congress, Ros-Lehtinen said that she "applauded the President for his strong leadership and vision" and that she wanted to "reform Social Security to include private accounts. Had George W. Bush and rubberstamps in Congress had their way, today's financial crisis would be a full-blown emergency. Tens of millions of seniors around the country, including hundreds of thousands here in South Florida, would have lost their pensions overnight."
It's time for an "all-hands-on-deck" approach. Call your Representatives and tell them you don't want to give a blank check for $700 billion dollars to the guys who messed up Iraq and the response to Hurricane Katrina.
