TARP Reform and Accountability Act of 2009

Floor Speech

TARP REFORM AND ACCOUNTABILITY ACT OF 2009-- (House of Representatives - January 15, 2009)

Mr. DAVIS of Illinois. Mr. Chair, I rise in strong support of the TARP Reform and Accountability Act. This bill greatly strengthens the safeguards for using taxpayer dollars for the TARP program. Two provisions promise to provide critical aid to Chicago. Requiring the Treasury to direct $100 billion to foreclosure mitigation provides hope to the hundreds of thousands of Chicagoans and families across the Nation who are struggling with foreclosure. Moreover, directing the Treasury to use TARP funds to benefit small financial institutions will help strengthen these financial institutions that play such an important role in Chicago. Hundreds of community banks in Chicago are teetering on collapse. These companies provide important support to small businesses and minorities, and, as of yet, they have not received aid from the Treasury.

I especially want to thank Chairman Frank for including language that highlights the importance of considering consumer protections when determining which classes of consumer loans to support. Congresswoman Yvette Clarke and I have worked actively along with 16 other Members to urge the Treasury and Federal Reserve to proceed cautiously when using taxpayer funds for the student loan industry, ensuring that both financial and consumer protections are considered. We strongly support ensuring that students have the money they need to attend institutions of higher education. However, we must make certain that any such plan aids students and does not simply line the pockets of for-profit lenders.

Certain groups of students require private student loans to attend school. Unlike Federal student loans, private student loans typically lack any form of consumer protection (such as fixed interest rates, income-contingent and income-based repayment options, or debt discharge in the case of disability or death). Moreover, private student loan lenders enjoy Federal protections from bankruptcy that other consumer creditors do not. Specifically, unlike other types of consumer debt, private student loans are protected from discharge during bankruptcy except under extreme circumstances. Thus, an individual who accumulates thousands of dollars in debt for purchases of cars or luxury goods can obtain relief via bankruptcy; however, a teacher with private student loans cannot.

Given these circumstances, we hope the Treasury and Federal Reserve will construct its student loan plan carefully to mitigate against adverse consequences for private student loan borrowers, especially in light of current economic conditions. Should taxpayer money be used to support private student lenders of non-federal loans, we strongly urge that the Treasury and Federal Reserve require consumer protections similar to those afforded to Federal student loans as a condition of receipt of Federal rescue funds. Federal student loans have consumer protections; private student loans subsidized by the Treasury-Fed plan should have such protections as well. Further, we recommend instituting steps to assess the underwriting standards of lenders who seek Federal relief to determine if the GPO's PDF lenders extended credit to particularly vulnerable consumers and whether credit was extended with onerous terms or conditions. Similar to the executive compensation restrictions of the Treasury-Fed plan, these restrictions would help focus Federal dollars on stimulating lending while protecting taxpayers and borrowers.

I thank Chairman Frank and House leadership for developing this bill, and I urge my colleagues to support its passage.

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