Ask Yourself Why Congress Didn’t See the Financial Crisis Coming
Lending industry’s $31 million in contributions and lobbying in just last year helped keep Congress away during financial crisis
Today, Common Cause releases a report that looks at how campaign contributions and lobbying by the mortgage finance industry have played a major role in blocking measures that would have addressed the present financial crisis in a timely manner, and helped American families instead of Wall Street. The report, “Ask Yourself Why.. They Didn’t See This Coming,” also spotlights the story of the nation’s two largest housing lenders, Fannie Mae and Freddie Mac, their lobbying and campaign activities, and how the government bailout contrasts with how legislators approached the crisis for average people.
“The story of the housing bubble and meltdown that now threatens the homes and communities of literally millions of Americans is largely about political power. The financial services industry focuses its lobbying efforts around its immediate desires, and for more than the past decade, this focus has been on relaxing regulation of the mortgage lending and securitization market,” the report says.
At the national level, the top five spenders among mortgage brokers and bankers paid more than $31 million in lobbying fees and in political contributions since the beginning of last year. The two largest home-loan companies that have been bailed out by Congress, Fannie Mae and Freddie Mac, spent roughly $180 million on lobbying and campaign contributions since the 2000 election cycle.
Across the country, an estimated 20,000 families are losing their home every week. Estimates of total foreclosures run about 3 million during 2007 and 2008. There are about 2.3 million vacant homes on the market – the highest rate ever recorded. Most of these figures have not been seen since the Great Depression. Most troubling, analysts predict a second wave of foreclosures still coming.
“Even unscrupulous lenders responsible for steering people into predatory loans have escaped government intervention because the lending industry has so much influence in Washington, thanks to their incredible lobbying and campaign spending,” Common Cause President Bob Edgar said. “The inability of Congress to break through the wall of money built by the financial services industry in order to directly help struggling families in this country is striking.”
Yet there are proposals to help average Americans. The report describes one supported by many consumer advocates and economists which would allow bankruptcy judges to adjust the mortgages of families to reflect the current value of their home. Hundreds of thousands of families now owe more than their home is worth because of the housing market collapse. The lending industry opposed this approach and successfully killed it.
Congress will now have another chance to revisit this helpful reform, in the far-reaching Wall Street bailout legislation that is being debated this week. But already the financial industry has lined up in opposition with their lobbyists and millions in campaign dollars.
“Congress’ unwillingness to aid ordinary borrowers entangled in the mortgage crisis is no surprise given the lending industry’s deep-pockets lobbying and campaign spending,” says Edgar. “It will take clean elections- financing federal campaigns with public funds- to ensure the public interest is served.”
Read the full report.