CLEVELAND -The tidal wave of home foreclosures is rising with no end in sight, witnesses told a Congressional field hearing here June 16, and the flood is devastating cities and rural areas throughout Ohio.

“This has been a murderous unnatural disaster, one that has wiped out decades of patient community development progress, threatened our futures and left thousands of homeowners and renters in the lurch,” said Chris Warren, Cleveland’s Chief of Regional Development. “Call it Hurricane Greed.”

Warren charged that Wall Street banks and investment firms, including Deutsche Bank, Merrill Lynch, Wells Fargo and Goldman Sachs, as well as subprime lenders and “real estate scam artists” were “the main culprits” for the crisis. They encouraged the sale of default-prone subprime loans in economically depressed communities from 2002 until the artificially inflated housing market collapsed in 2007, he said.

“Some people made a lot of money on scams,” Warren told a packed auditorium at Cleveland State University, as he testified before the Subcommittee on Housing and Community Opportunity, chaired by Rep. Maxine Waters (D-Cal).

Rep. Marcie Kaptur, one of five northern Ohio Congresspersons on the panel, called the scams “a Ponzi-like scheme” and asked witnesses for details. Warren said part of the strategy was to foster lending in poor neighborhoods where even if property values doubled it would not be noticed.

The loans based on artificially inflated values were then sold by subprime lenders and brokers and packaged in multi-million dollar bundles with ordinary loans. The packages were given high ratings and turned into securities for Wall St. speculators and hedgefunds.

“The banks knew exactly what they were doing,” he said.

Kaptur said Congress must conduct “a full, independent investigation” with subpoena power to determine exactly who benefited, who made the decisions, who sanctioned the process and how federal regulatory agencies, including the Office of Thrift Supervision, the Department of Housing and Urban Development, the Securities and Exchange Commission and the Federal Reserve failed to block the scams.

She said the crisis had resulted in “the largest washout of private savings in 50 years,” totaling more than $1 trillion nationally with the largest losses suffered by low-income working people.

The Bush Administration acted immediately to bail out Bear Stearns, the Wall Street investment firm, she said, “but there is no relief for private citizens.” The cost in home board ups and demolitions, increased need for police and fire services and declining resources for schools and city services has been shifted to the tax payers.

Rep. Dennis Kucinich said the scams had produced “a massive transfer of wealth from poor, working class people to Wall Street. Some would call it theft.” He displayed charts and maps of Cuyahoga county showing that the schemes had specifically targeted areas with large African-American, Hispanic and Arab-American populations.

“This is a civil rights issue,” he said. “People were targeted who had low incomes and low financial literacy.” Congress, he said, must “investigate how this crisis was engineered” and “find a way to remedy this unscrupulous cheating.”

To loud applause he said, given the evidence of “widespread fraud,” instead of returning properties to banks, “they should be returned to the people.”

Rep. Betty Sutton said foreclosures had increased for 29 straight months, affected a million homes and “there is no end in sight.”

“This is a crisis of historic proportions,” she said.

Frank Ford of Neighborhood Progress, Inc. said a relief program must include a moratorium on foreclosures, a freeze on adjustable rate mortgages (ARMs) and compulsory renegotiation of existing loans.

Edward Kramer, director of Housing Advocates urged that all cities follow the lead of Cleveland and Baltimore which have filed lawsuits against the Wall Street banks and investment firms. “Based on the damages,” he said, “every city has a claim.”

Rep. Waters said she planned to disseminate the information on the suits to the National Conference of Mayors and bring it to the attention of the full Congress. She said cities should use the power of eminent domain to take over vacant properties.

Comments

comments

MOST POPULAR