Dear Representative:
As you consider a Wall Street rescue plan, Consumers Union, the publisher of Consumer Reports, urges you to ensure that the concerns of consumers and taxpayers are kept at the forefront of any final bailout package. Regulators were asleep at the switch when this crisis was in the making. Investment banks and financial institutions made decisions based on fee revenue and bottom line profits rather than sound financial practices. Yet this rescue plan could create an even greater financial burden on millions of Americans who are already struggling with the downturn in the economy.
This crisis on Wall Street-–and the proposed multi-billion dollar rescue plan–have families across the country worried about their financial futures. It is essential for Congress to make certain that the rescue plan not only work for Wall Street, but also for all American consumers, homeowners, and taxpayers across the nation. Consumers Union recommends that any proposed bailout of the financial sector include the following key protections for consumers:
Help homeowners at risk of foreclosure: Prevent people from losing their homes due to foreclosures. Any financial institution that benefits from the bailout, and any mortgage in which the federal government purchases an interest with taxpayer dollars, must be subject to a mandatory, fast, effective restructuring process. These loans should be designed to keep consumers in their homes and help strengthen neighborhoods.
Give bankruptcy courts power to prevent foreclosures: Give bankruptcy courts the power to alter all mortgages owed by homeowners who are in bankruptcy to help people keep their homes.
Protect neighborhoods hit by foreclosures: Help stabilize neighborhoods already hard hit by foreclosures by rehabilitating vacant homes and revitalizing communities.
Stop Excessive Executive Compensation: Executives whose actions have caused the bailout should not reap the benefit of bad decisions. There should be strict limits placed on the severance, bonuses, and stock options and grants these executives receive.
Prevent Bailout Abuse: Grant the government warrants to purchase stock in companies taking advantage of the bailout. This would let taxpayers share in the benefit if companies stock prices go up.
Be sure we aren’t just postponing the problem: When the government sells these assets back into the market, there should be restrictions on how the debt can be collected, so it doesn’t become a new form of outdated debt.
Make sure everyone who profits from a loan also takes responsibility: We have to change the way mortgages are made and sold so that everyone who gets a fee also keeps some of the risk of future nonpayment. Everyone getting a fee and passing the buck to the investor was a big part of the current crisis.
Require greater transparency: For businesses that benefit from the bailout, Congress should require greater transparency of financial firms’ risk management and other business practices.
Oversight: Ensure that there is strong oversight of this bailout process by persons independent of the financial services industry.
Real mortgage reform: We also need a more long-term plan that provides strong and effective regulations and enforcement to avoid future mortgage and credit meltdowns.
Curb abusive credit card practices: Give taxpayers a break too by including credit card reform. Cash-strapped consumers shouldn’t continue to be gouged by excessive credit card rates and fees by the same financial institutions that will benefit from this bailout.
We look forward to working closely with you in the days ahead to ensure that consumers and taxpayers are protected as you debate this rescue plan.
Sincerely,
Jim Guest