Statements on Introduced Bills and Joint Resolutions

Floor Speech

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - November 17, 2008)

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By Mr. DURBIN:

S. 3690. A bill to help struggling families stay in their homes and to ensure that taxpayers are protected when the Secretary of the Treasury purchases equity shares in financial situations; to the Committee on the Judiciary.

Mr. DURBIN. Just before the Congress paused for the elections, we passed one of the most historic--and contentious--pieces of legislation in my 26 years in Washington. We gave the Treasury Department the authority to spend $700 billion in taxpayer funds to prevent the complete meltdown of the financial system, which in turn would hopefully prevent the overall economy from descending into a deep and painful recession.

I didn't like voting for that bill, but I joined the majority of my colleagues in doing so because not voting for it was even worse. I hope in the end that we were right.

However, there are two areas that I do not believe were adequately addressed in that legislation: helping families save their homes from foreclosure and protecting taxpayers from the misuse of their dollars by the bankers that receive them. Today I am introducing legislation--the Homeowner Assistance and Taxpayer Protection Act--to address both concerns.

For far too long the Bush administration has relied on the voluntary efforts of the mortgage servicers to rework millions of troubled mortgages on a case by case basis. These voluntary efforts have been and still are insufficient. There aren't strong enough incentives for the servicers to pursue work-outs. Servicers aren't equipped to handle the huge volume of mortgages at risk. Far-flung investors who own pieces of many mortgages, and who often refuse to let servicers rework mortgages even in the cases where the servicers would like to help, present legal obstacles. And the mortgage industry has failed to take strong action against foreclosures, even if it is in their own best interests. The $700 billion rescue bill encouraged the administration to take stronger steps to help homeowners, but did not require the Government to do so.

My bill would bring real hope to families who fear that they will lose their homes, by doing three things. First, it would require Treasury, the Federal Reserve, the FDIC, and FHFA to restructure all loans that meet the criteria established in the Hope for Homeowners program to make the mortgages affordable. That means mortgages these regulators own or in which they have a controlling interest must be restructured if a reworked mortgage can be paid by the homeowner and is viable economically for the creditors. The Emergency Economic Stabilization Act as it is currently written only encourages the regulators to restructure those loans, rather than requiring them to do so.

Second, it would require servicers to restructure all loans that qualify for the Hope for Homeowners program, rather than simply encouraging them to do so as the Housing and Economic Recovery Act is currently written.

And, finally, it would allow bankruptcy judges to modify mortgages on primary residences. As I have argued for months now, this is the single most important thing we can do to spur nationwide systematic mortgage restructurings.

The financial crisis will not ease, and the economy will not begin to recover, until we address the root cause of the crisis: the failed mortgage market. My bill would do just that.

The rescue bill also failed to put in place enough taxpayer protections. Congress meant for banks to use the money provided by the Treasury to lend to qualified borrowers, rather than enriching their shareholders and executives. Recent reports indicating that AIG will lavish more than a half billion dollars on its employees at the same time that it receives an even larger $152 billion taxpayer bailout than originally announced speaks loudly to this problem.

My bill would try to address this concern. The bill would bar banks participating in the Capital Purchase Program authorized by the Emergency Economic Stabilization Act from increasing common share dividends as long as the Government owns preferred shares. It also would require participating banks to reduce the next year's dividends in an amount equal to the compensation paid to the top five executives in excess of $500,000.

The bill would not bar companies receiving assistance from the Treasury from paying their executives, nor would it bar them from paying dividends. But it would ensure that financial institutions think carefully before redirecting taxpayer-injected dollars away from lending for the good of the economy towards compensation for the good of its own executives and shareholders.

The debate on how to help stabilize the financial sector will certainly continue into the 111th Congress, and I intend to continue to fight for homeowners and for the taxpayers so that we get our economy moving again as quickly as we can, and as prudently as we can.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

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