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A Renewed Call for Mortgage Reform in California

In this Democratic weekly radio address, Assemblymembers Ted Lieu (D-Torrance) and Kevin de León (D-Los Angeles) say Assembly Democrats are unhappy with the Governor’s decision this week to veto legislation that would reform the state’s mortgage industry (Lieu’s AB 1860) and help protect homeowners and renters caught in the mortgage crisis through better notification procedures (Assemblymember Torrico’s AB 2586 and 529). In the radio address they say, “We need to reform a broken mortgage system. While this colossal taxpayer bailout (being considered by Congress) addresses the symptoms of the foreclosure crisis, it does nothing to cure the root cause: the unregulated selling of risky and unsuitable mortgage loans across America.”

You may listen in English or Spanish. The transcript follows.

Ted Lieu.jpg Hello, this is Assemblymember Ted Lieu.

Apparently there is something more dysfunctional than the two-thirds vote requirement to pass a budget in California, and that is the lack of laws reigning in Wall Street’s out of control actions during the mortgage boom.

As a direct result of industry players foisting risky and unsuitable loans on homeowners, a massive wave of foreclosures occurred that has devastated our economy and state and local governments.

Approximately $4 billion of California’s budget deficit this year is attributable to the foreclosure crisis, caused in large part by the actions of the Wall Street firms that the Bush Administration now wants to bail out.

If the federal government gives Wall Street executives the largest taxpayer gift in the history of the free world, then it certainly ought to consider giving states and local governments the aid we need to help struggling everyday citizens.

More fundamentally, we need to reform a broken mortgage system. While this colossal taxpayer bailout addresses the symptoms of the foreclosure crisis, it does nothing to cure the root cause: the unregulated selling of risky and unsuitable mortgage loans across America.

At the very least, we can reform California’s own mortgage industry so that a crisis of this magnitude does not happen ever again in California. Enough is enough.

This is Assemblymember Ted Lieu. Thank you for Listening.

Spanish:

“Qué tal, les habla el asambleísta Kevin de León.”

“Aparentemente si existe algo más disfuncional que los dos tercios del voto para aprobar un presupuesto en California, fue la falta de leyes reinantes para regular las acciones sin control de Wall Street durante el auge de las hipotecas.”

“Como directo resultado de los protagonistas de la industria que endosaban préstamos poco idóneos y de alto riesgo para los dueños de casa, ocurrió una masiva ola de embargos que ha desvastado nuestra economía y a los gobiernos locales y estatales.”

“Aproximadamente 4 mil millones de dólares del déficit del presupuesto de California pueden ser atribuidos a la crisis hipotecaria, causada en gran parte por las acciones de las firmas de Wall Street que la administración Bush pretende rescatar de la crisis financiera.”

“Si el gobierno federal entrega el regalo mas grande de la historia del mundo occidental a los altos ejecutivos de Wall Street de parte de los contribuyentes de la nación, entonces ciertamente debería considerar entregar una ayuda monetaria similar a los estados y gobiernos locales que lo necesitan para ayudar a sus residentes mas necesitados.”

“Y lo mas fundamental, es que nosotros necesitamos cambiar este sistema de prestamos hipotecarios. Aunque este rescate financiero es el resultado de los síntomas de la crisis hipotecaria, no hace nada para curar la raíz del problema: la venta irregular de préstamos hipotecarios poco idóneos a lo largo y ancho de la nación.”

“Por último, lo único que nos queda por hacer es reformar nuestra propia industria de préstamos hipotecarios para asegurarnos que una crisis de esta magnitud no ocurra nunca más en California. ¡Ya basta!”

“Gracias por su atención. Les habló, su servidor, el asambleísta Kevin de León.”

Posted on September 27, 2008

Comments

Better notice is a start.
The selling of risky mortgages is only a problem if the risks cannot be foisted off on others. Congress (look up the players on the internet) reduced the risk for issuers by encouraging Fannie Mae to buy sub prime loans, creating part of the moral hazard that in large part resulted in the current mess.
It is to be hoped that someone will identify the factors, primary and intermediate - corruption in congress, corruption at the top of Fannie Mae and Freddie Mac, lack of due diligence at those agencies, pre-emption of state laws on mortgage fraud by congress, lack of enforcement of violations of laws by the FBI, lack of due diligence by investment banks and rating agencies, poor oversight by the SEC, etc. - and connect those factors in a coherent explanation of the cause of the current mess. Just look into the payments made to key members of congress by Fannie Mae and the Banking Industry. Look at what happened to the attempts at greater regulatory oversight during the past two decades.
After Obama accused McCain of shredding regulations, McCain did not come back with his 2005 efforts, including a strong letter to Bush, to more strictly regulate Fannie Mae. Look up John Dingell's 1999 "too big to fail" speech on the GRAMM-LEACH-BLILEY ACT! Look up the efforts of Dodd, Obama, Frank and others to thwart efforts in 2005 by Shelby, Dole, et al in 2005 to reform Fannie Mae, and the thwarting of attempts at greater regulation by certain members of congress, including many democrats. There is more. Much more.
Wall Street only took advantage of the opportunity provided by congress.
Everyone gets the government that some people deserve.
Looking for Mr. Lieu's more comprehensive analysis. Lets help him by sending him factoids on key members of congress from the web.

Posted by: Erik Kengaard at September 27, 2008 02:54 PM

Clarification:
Issuance of risky mortgage is a problem for the lender if she cannot foist the risk off on someone else, such as the public or a foreign investor. If she can do that, her actions become someone elses problem.

Posted by: Erik Kengaard at September 27, 2008 02:58 PM

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