As forecasters offer their new year’s predictions of a struggling economy, it is past time to be asking how a federal bailout of our financial institutions can equal no relief for consumers in accessing credit.
The front page of the Chicago Sun-Times on Sunday, December 28, 2008 ran the following opening sentence:
Jim and Cindy Ranallo’s home equity line of credit went from $44,000 to zip, zero, nada in one month…and with it the money for their son’s education.
This article by Kara Spak brings home how the financial crisis is striking households throughout the country. In the Ranallo’s case, it was Chase freezing their credit just weeks before college tuition was due. But as Spak notes:
The Ranallos’ situation is a familiar one for hundreds of thousands of Americans who have found their home equity credit lines frozen or reduced this year. Their struggle to send their children to college also is familiar to parents patching funds together for higher education, constantly worried they will come up short. Chase froze 200,000 home equity lines this year, a bank spokesman said.
Elizabeth Warren, the chairwoman of the new oversight panel created as part of the $700 billion Troubled Asset Relief Program (TARP), was quoted last month in a New York Times interview on that:
Meetings with Treasury officials so far have made her question whether they understand that “household financial health is profoundly tied to the economic health of the nation,” she said. “You cannot repair this economy if you can’t repair those families, and I’m not sure the people directing the bailout see that as their job.”
And how about that Green Economy we are expecting from an Obama White House? Not so fast, if you expect credit from those TARP bankers. The day after running the Ranallo’s bad new year story, the Chicago Sun-Times ran a December 29 business story on how fast credit is drying up for the emerging wind-power industry.
Guess who were among the biggest investors? AIG, Lehman Brothers, and Wachovia.
The green economy seeking financing for its 2009 growth is likely to be another victim of Wall Street greed in exotic mortgages and predatory loans. To paraphrase Elizabeth Warren, you cannot build a green economy if you can’t develop alternative energy, and it sure doesn’t look like the people directing the bailout see that as their job.
For the sake of the Ranallo’s throughout the country and for a green for all future, we need to make it our jobs in 2009 to map out a new road to a financially inclusive society.
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Thanks for the post, Ted. This is a perfect illustration of the continuing relevance of the Community Reinvestment Act. Banks have an obligation, by law, to meet the credit needs of the communities they serve. But real regulation has become such a foreign concept during this administration that the bank regulators can’t be counted on to even raise an issue about this kind of pull back in lending.
We have our work cut out for us with the new Obama Administration to get the regulators back on track. The National Community Reinvestment Coalition’s annual conference (“Roadmap to a Financial Inclusive Society” -March 11-14 in D.C.) will be a good place to network and brainstorm about how the progressive housing and community economic development organizations can work together on these issues. I’m looking forward to seeing you there.