Hearing of the House Commitee on Financial Services Subject: Recent Events in the Credit and Mortgage Markets

Statement

HEARING OF THE HOUSE COMMITTEE ON FINANCIAL SERVICES
SUBJECT: RECENT EVENTS IN THE CREDIT AND MORTGAGE MARKETS AND POSSIBLE IMPLICATIONS FOR U.S. CONSUMERS AND THE GLOBAL ECONOMY

REP. MAXINE WATERS (D-CA): Thank you very much.

I want to thank Chairman Frank and Ranking Member Bachus for holding today's hearing.

I believe this hearing is timely because of the recent turmoil in financial markets here and abroad related to subprime mortgage-backed securities.

Let me just say, Chairman Frank and members, about a year and a half ago I was in Cleveland, Ohio, in Stephanie Tubbs -- Congresswoman Stephanie Tubbs Jones' district. There was a big town hall meeting there, and at that town hall meeting the citizens described that there were blocks and blocks of boarded-up housing and that those who remained were at great risk because the boarded-up housing was under control sometimes of criminals, that the deterioration of those homes was causing the price of their homes to go down -- on and on and on.

And none of us really understood what was going on, and surprisingly, none of our regulators were able to understand what was going on and to try and inform us so that we could at least try to provide some assistance to people who were getting into some of these subprime loans who did not understand what they were getting into.

Now what is so disturbing about all of this is this: For those of us who have worked for years to try and open up opportunities for people who have been locked out of the mortgage market, folks that we really believe that, given a chance -- they may not be able to have a down payment; they may have even had some credit problems, but people who work every day, who pay their rent, who pay their electric bills, we've always wanted them to have an opportunity.

And we fought with the financial services industry in order to do this. And we welcome subprime, and we agreed that subprime did not have to be predatory, that there was a case to be made, that people who presented some risk -- not extraordinary risk -- should be afforded a mortgage and that they should be expected to pay on time, and that the subprime market could charge them a little bit more for that loan.

We all agreed to that, and we thought that the regulators not only were watching what happened with loans that were delinquent that were on the books of these financial institutions, we thought that they would know when something went wrong.

And evidently they did not know, and we're all kind of surprised to find out that once the originators discovered that they could package anything and have it packaged and securitized and the investors would put money into it, that they could just throw anything into the package.

And so all of these exotic products -- and it's not simply no down payment, but we're talking about products where you don't even verify the employment of the individual, particularly with some of these jumbos that were going out. And we still don't know today how they would get a handle on these products that came into being that has created this unsettling of the market.

And so I remember when Federal Reserve Chairman Bernanke was here with testimony to the full committee in 2007 on the midyear monetary policy report and I raised these concerns; he did not have any answers.

So the bottom line is it seems for those of us who fight for opportunities for people who should have loans, it's either feast or famine. So now we're going to get to a point where nobody's going to be able to get a loan, and I really want our regulators to tell us why didn't they know, and what can be done about it, and how we don't have to, you know, revert to drying up the opportunities for everybody because we've gone into this situation.

I yield back the balance of my time.

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