Thursday, May 08, 2014

Polar Opposites: Jeb Hensarling (R-TX) And Ted Lieu (D-CA)


I'm up to the part in Elizabeth Warren's new book, A Fighting Chance, when she's the chairman of the congressional oversight panel (COP) for TARP. The chapter is called "Bailing Out The Wrong People" and one of the villains is Wall Street shill Jeb Hensarling, a corrupt and backward congressman from Texas' 5th congressional district sprawling out from Garland northeast of Dallas into Lake Highlands and the eastern Dallas suburbs through Mesquite and Balch Springs and southeast down into small towns like Palestine, Athens and Jacksonville. The PVI is a daunting R+17 and Romney won the district 65-34%. Hensarling beat his little known Democratic opponent by roughly the same margins and, though it was a near tie in Dallas County, 42,158 (49%) to 41,652 (48%), Hensarling did win each of the 7 counties in the district, Van Zandt and Wood with 81% each!

It's a safe district and he can get away with murder-- or with selling his constituents out to the banksters. Which is what he does. The Finance Sector has rewarded Hensarling well for his efforts-- chronicled in part by Warren as he did everything he could to disrupt the TARP oversight-- on their behalf. Last cycle he got the 5th largest amount of legalistic bribes from the Finance sector of anyone in the House, $1,321,206. So far this cycle he's already at #3, as you can see in the chart below of the dozen most Wall Street-corrupted members of the House this year:

Warren makes it clear that he's a shameless partisan hack whose only interest in TARP oversight was protecting his Wall Street donors from oversight. His only role on the panel was obstruction and dissent. The banksters rewarded him with more than just cash. The told Boehner to give him the top position on "their committee," House Financial Services in 2013. He now chairs that committee. And the banksters, needless to say, are as happy as pigs in shit. He's there for exactly one reason-- protecting the ability of the banksters to rip off the public with impunity. What's not to like? It's how Wall Street rules.

Reading Warren's hassles with Hensarling reminded me of another political sojourn, one by a California state senator I've gotten to know this year, Ted Lieu, who Blue America endorsed for the Henry Waxman congressional seat. Though Ted first came to our attention for his efforts to stop unconstitutional, warrentless, bulk collection of civilian communications in the state of California, it was his multi-cycle war against the mortgage banksters that helped us envision him as a Member of Congress worthy of Waxman's legacy. In 2007 Ted wrote the following OpEd for the San Jose Mercury News at a time when many people still idolized Fed Chair and sociopath Alan Greenspan. Greenspan eventually ended up apologizing to Congress much later and acknowledged his views were wrong. It was under questioning by Congressman Waxman. Ted's prescient title: Greenspan And His Policies Bear Much Blame In Foreclosure Crisis.
As Alan Greenspan tours the world promoting his memoir, an average of 12,000 Californians and 55,000 homeowners across the nation receive a foreclosure notice every week, the highest in American history. Next year, a record 2 million adjustable rate home loans are scheduled to spike upward nationwide, putting 1.4 million homeowners at risk of foreclosure. We are at the tip of the iceberg in a rapidly accelerating mortgage meltdown, and the prime cause started with the former Federal Reserve chairman's policies.

The roots of the foreclosure crisis can be traced to three deliberate decisions made by Greenspan. First, by reducing the federal funds rate to a mere 1 percent in 2003 and refusing to increase it for a year, Greenspan and the Federal Reserve created the economic conditions for rampant investor speculation and a loosening of loan underwriting standards as lenders frantically competed for market share.

Second, Greenspan shunned increased regulations, even though he has now admitted knowing about abuses in the subprime loan industry. His failure to act has resulted in the mass use of the foreclosure, one of the most inefficient mechanisms in the market. Not only is there a severe human toll to families thrown out on the street, but foreclosures also carry with them massive societal costs, with lenders losing up to 50 percent of the loan value on each foreclosed home.

Third, blinded by the irrational exuberance of surging home prices, Greenspan promoted the non-traditional mortgages that have devastated so many homeowners. In a speech on Feb. 23, 2004, Greenspan stated consumers were paying too much for fixed-rate mortgages and asked lenders to provide "greater mortgage product alternatives to the traditional fixed-rate mortgage." When a person of Greenspan's influence and stature promotes alternative mortgage products, lenders and consumers listen.

Wall Street followed Greenspan's call and designed a whole range of risky, alternative adjustable rate mortgages, including those with low teaser rates that spiked after two to three years. These risky loans were sold-- sometimes fraudulently-- on a mass scale to a public ill-informed about their significant risks. The regulatory system also allowed mortgage brokers to receive monetary incentives to place a borrower in a higher interest, adjustable-rate subprime loan even though the borrower would have qualified for a fixed-rate prime loan.

California and the nation are now suffering the consequences of Greenspan's policies. As the first large wave of adjustable rate mortgages started to spike earlier this year, hundreds of thousands of homes went into foreclosure when homeowners were unable to pay the increased monthly payments. Some of these borrowers could have saved their homes by refinancing but were unable to because of significant prepayment penalties.

My colleagues and I recently proposed a set of reforms in the mortgage industry that will be introduced as bills in January. We propose to: ban kickbacks to the broker for putting a homeowner in a higher interest rate loan; ban prepayment penalties; and mandate that the lender evaluate the borrower's ability to repay the loan based on the entire length of the loan and not just the initial teaser rate. We also call for increasing counselors and financial literacy, and making loan terms easier to understand. The intent is to ensure this crisis never happens again, regardless of what the Federal Reserve and Wall Street might think up in the future.

President Bush recently set forth a proposal in which some lenders and loan servicers will voluntarily agree to freeze the interest rates for up to five years for non-delinquent borrowers on certain subprime adjustable rate loans. The Center for Responsible Lending estimates the Bush plan will reach 7 percent of homeowners.

For many homeowners, especially the hundreds of thousands that have already defaulted, there will be very little the state or federal government can do. They can thank Greenspan. Maybe he can donate the profits of his book to those families who have already lost their homes.
It took Ted 3 sessions of the legislature to pass his bill. The mortage banksters fought ferociously but he never gave up. It actually passed the second time by Gray Davis, a corporate whore from the Republican wing of the Democratic Party, vetoed it. The next year many progressives sat on their hands when the execrable Davis was recalled and replaced with Republican Arnold Schwarzenegger. Eventually, Republican Arnold Schwarzenegger signed Ted's bill into law-- after first vetoing it-- when both house of the legislature passed it on his third try. In 2008-- and sounding a lot like Elizabeth Warren-- Ted wrote that "during the mortgage boom, industry players became addicted to the drug of high-yield, adjustable rate subprime mortgages that they foisted on borrowers. Raking in massive quarterly and annual bonuses, corporate executives didn't care if borrowers could repay the mortgages a few years later. It was greed on speed, the future be damned, and now all of us are suffering the consequences." AB 1830, his legislation was a comprehensive subprime mortgage reform bill banning predatory subprime loan practices and exotic, overly risky and unsuitable loan products. Ted:
If the Bush Administration wants to use your hard-earned money to bail out Wall Street, then taxpayers should demand major industry reforms. First, industry should agree that they will no longer fight mortgage reforms such as those contained in AB 1830. Second, industry should agree to fix executive compensation so that the Gordon Geckos of Wall Street are not incentivized to place short-term profits above long-term financial health.

Third, we need to slow down the number of foreclosures and stabilize home prices or the problems will get even worse. This can be done by granting bankruptcy judges the ability to modify loans on the borrower's place of residence, and by following the Federal Deposit Insurance Corporation's lead of imposing a foreclosure moratorium.
Ted's persistence eventually overcame the banksters' dogged opposition. He beat them. But they weren't done. They went to the corrupt Democratic leadership in Sacramento, the same way they had gone to Boehner in DC to tell him to appoint Hensarling to chair the House Financial Services Committee. But in this case, they demanded that Ted be removed as Chairman of the Banking Committee. He was duely "promoted" to the Chair of the Assembly Rules Committee. Ted has already shown he'll be part of the Elizabeth Warren team for working families. If you'd like to see him in the House as a counterbalance to the wretched Jeb Hensarling, please consider contributing to his campaign here.

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