Black Caucus: Predatory lending caused meltdown

WASHINGTON — “A crisis of credit, housing and jobs” is confronting the country today, warned Marc Morial, president of the Urban League, at a Congressional Black Caucus town hall meeting here Sept. 25. Headlined “Foreclosure Crisis: Repercussion, Reasons, and Real Solutions,” the meeting drew several hundred community leaders, officials and members of Congress.

“What we need is a program to rebuild America, a Marshall Plan to rebuild cities, bridges and infrastructure,” Morial declared.

Over 2 million homes are now in foreclosure with no end in sight.

Panelists tied the origins of the current worldwide banking crisis to “predatory loans” deliberately directed at Black and Latino homebuyers. The speakers defined predatory loans as loans at interest rates 3 percent higher than the rates banks normally offer. Such loans initially begin with low interest payments that balloon after a short period to much higher rates, with big penalties for early repayment. “Banks take advantage of the ‘financial illiteracy’ in the Black community,” said one panelist, who went on to indicate that many prospective buyers don’t read the fine print.

The subprime crisis has precipitated the largest wealth loss among African Americans and Latinos in our nation’s history. According to Mike Calhoun, president of the Center for Responsible Lending, recent studies show “almost half of all African American family mortgages are subprime mortgages.”

“These subprime mortgages go into foreclosure at 21 times the normal rate, commented panelist Kenneth Wade, chief executive officer of NeighborWorks America, a nonprofit established by Congress in 1978.

Jarvis Tyner, CPUSA executive vice chair, who was in the audience, remarked, “We used to always say, racism was the Achilles’ heel of capitalism. With the subprime crisis causing an international banking meltdown, we can see why.”

Former McCain campaign co-chair Phil Gramm, still close McCain adviser, was intimately involved in the deregulation of the banking industry that began these loan-sharking practices. The 1999 Gramm-Leach-Billey Act repealed the previous regulation that had governed banking. However, Gramm’s role didn’t end there. notes, “A year after the Gramm-Leach-Billey Act repealed the old rules Swiss Bank UBS gobbled up brokerage house Paine Weber. Two years later, Gramm settled in as a vice chairman of UBS’s new investment banking arm.”

Panelists noted that George W. Bush’s much-touted “ownership society” was the slogan under which the banking schemes were manipulated.

Now, Morial cautioned, the Bush/Paulson talk of economic disaster could be a kind of October surprise seeking to help McCain in November: “King” Henry Paulson dropped “an economic nuclear bomb 40 days before the election,” Morial said. “We don’t want to find out that we are victims of ‘financial mustard gas,’ a mirage.”

The Urban League president concluded, “We have to have the highest turnout in our history in the midst of this crisis. Some will use deceit to try to discourage the vote. It is really important to register before the deadline.”

The town hall was part of the 38th annual Congressional Black Caucus Legislative Conference, Sept. 24-27. It was “right in the heart of what’s going on,” said Rep. Corrine Brown (D-Fla.). The subprime crisis and health care were two major themes.

But the conference was not limited to economic issues.

A high point was a panel discussion on public financing of elections, sponsored by Rep. Barbara Lee (D-Calif.). Only seven states now have public financing. However a major step was taken in this direction with the election of Gov. Janet Napolitano in Arizona with a publicly financed campaign.

Among the panel participants were recently elected Rep. Donna Edwards (D-Md.), California State Assembly Speaker Karen Bass, United Farm Workers union leader Dolores Huerta, and Hillary Shelton of the Washington, D.C., NAACP.

“Something is wrong when you have to spend so much time raising money for a campaign,” said Edwards. “It doesn’t feel right.” Edwards added that the day after her Feb. 13 primary victory, she woke up on Valentines Day having to immediately start raising money for the general election.

Huerta asked, “How can we build a democracy, if we don’t have control of our election process?” Bass spoke of the enormous challenge of fundraising in California politics. “It used to cost $400,000 to run for a seat in the State Assembly — now it’s $2 million.”

”This has to be a major issue in the next Congress,” Lee commented as she rushed off to a congressional briefing on the financial bailout. “We have to keep fighting. When working people have to bail out Wall Street, something is wrong. This is a definitive moment.” Among the bills being considered by Congress is The Fair Elections Now Act.

As the legislative weekend concluded with its annual awards dinner, Barack Obama came to accept the Harold Washington prize, named for Chicago’s first African American mayor, elected by a grassroots alliance of labor, African Americans and Latinos.

Obama had just appeared at two 20,000-strong campaign rallies in Greensboro N.C., and Fredericksburg, Va. Building on momentum attained over the past week in response to the Wall Street meltdown and a toe-to-toe victory over Republican John McCain in the first presidential debate, Obama reminded voters that his opponent never mentioned the phrase “working people” or “middle class” in the debate.