House Democrats Introduce “Equal Employment For All” Legislation

By Learned Foote- Talk Radio News Service

House Democrats on Tuesday introduced H.R. 3149, otherwise known as the “Equal Employment For All Act,” which aims to reduce the burden of unemployment on individuals with poor credit scores.

The bill would prohibit employers from using credit reports to guide hiring decisions and from asking applicants to voluntarily provide this information.

Rep. Steve Cohen (D-Tenn.), who wrote the legislation, said that 43% of employers use credit checks during the hiring process.

Rep. Luis Gutiérrez (D-Ill.), a co-sponsor of the bill, called such credit checks “unnecessary barriers to employment.” Rep. Cohen cited a study by the American Psychological Society, and said that unless the job “involves significant financial responsibility,” these credit reports have “no relevance to a person’s qualifications or ability to do jobs.”

Some employers would be exempt from the legislation, including financial institutions and some governmental agencies.

The congressmen argued that bad credit reports often result from factors that cannot be controlled by the individuals in question, including medical issues and job loss during troubled economic times. Rep. Cohen cited studies emphasizing that racial minorities often have worse credit report ratings than whites. “We shouldn’t allow for credit reports that don’t help employers, but only aggravate circumstances in parts of the communities most hurt,” he said.

Rep. Gutiérrez said that “too many Americans are caught in the preventible cycle of debt.” He said that “they’ve fallen into bad credit and as a result they cannot do the one thing that would enable them to climb out: get a job, work hard, and earn a better score.”

The bill has 31 cosponsors, most of whom are members of the Congressional Progressive Caucus.

Is The Recovery Act Really Helping?

By Celia Canon- Talk Radio News Service

Secretary of the Treasury Timothy Geithner

Treasury Secretary Timothy Geithner testified on the financial situation and on the American Recovery and Reinvestment Act today.

Geithner said that “There are important indications that our financial system is starting to heal.”

Signs that we are on the right path include ”New securities issuance has started to revive, Spreads for AAA credit card receivables asset-backed securities (ABS) have fallen about 330 basis points from there peak. There has been more issuance of consumer ABS in the past two months than in the preceding five moths combines,” said Geithner.
loans of similar types, duration and interest rates.”

Starting with the subprime mortgage crisis in 2007, “Unexpected losses experienced by major banks on mortgage-back securities set off a vicious cycle” as Geithner describes.

As a result, the government implemented the American Recovery and Reinvestment Act (ARRA) in February 17, 2009.

The act provides transparency and accountability so that taxpayers know where every dollar is going. Additionally, the ARRA “is giving 95% of working Americans a tax cut, creating or saving 3.5 million jobs, providing nearly 4 million students with a new higher education tax and helping 1.4 million Americans purchase their first home by providing $6.5 in tax credits,” said Geithner.

In terms of lending, which was significantly cut as banks lost their capital, Geithner said “The recovery program included any substantive increasing guarantees and a reduction in fees for small businesses lending programs, and we’ve seen lending under those programs increase 25% since the Recovery Act was passed.”

Sen. Christopher Dodd (D-Conn.), Chairman of the Senate Banking Committee, mitigated these arguments by saying, “I think the picture remains mixed after losing some 5.1 million jobs since the recession began.”

Geithner concurred, and added “In many parts of the country, many people don’t feel it’s getting better yet, they don’t really feel that the availability of credit is improving.”

“Treasury is continuing to look into additional metrics that gauge the markets more broadly, as well as additional economic metrics, to determine the effectiveness of the current strategy and whether additional or different steps are needed,” Geithner said.

The Budget: A "Transformative Package"

by Christina Lovato, University of New Mexico-Talk Radio News Service

This afternoon, on the eve of President Obama’s 100th day in office, progressive leaders addressed the budget and how it will improve health care, clean energy and education.

The campaign to Rebuild and Renew America Now!, a coalition of 116 national and over 700 state and local progressive, labor and advocacy organizations working together to pass the President’s budget held a press conference this afternoon and said they are confident that Congress will do what is best for the American people, and that is to pass it.

Alan Charney, the Program Director for US Action said that the budget is “transformative.”

“This blueprint totally reverses the failed economic policies of the past and sets us on a road to long term recovery,” said Charney

Tom McMahon, the Acting Executive Director of Americans United for Change criticized the Conservatives and blamed them for leading our nation into one of the most deepest recession in decades.

“Their best and in fact, only prescription for this ailing economy is more and more tax breaks for big corporations that have outsourced American jobs and more tax breaks for multi-millionaires that never manage to trickle down to anyone else and more short change investments in things that will actually grow the economy, like health care and education,” said McMahon.

The coalition members said that a clean energy legislation, health care reform and education are the most pressing issues that they hope the budget will improve.

“Congress now has the choice to stand up for our students and vote for a budget that works or they can continue to play into the pockets of the student lenders,” said Carmen Berkley, the President of the United States Student Association (USSA) and the United States Student Association Foundation (USSAF).

Berkley said that student lenders are ruining credit and dreams of students who are wanting to go to college.

Berkley also said that by eliminating programs that don’t work, like the family federal education loan program, it will put $94 billion more into the Pell grant program for students.

“We know that Congress will make an investment in students this week that works for students and their families,” said Berkley.

Credit card spending linked to addiction

By Kayleigh Harvey - Talk Radio News Service

Credit cards could be considered a type of addiction like drugs, the House Subcommittee on Commercial and Administrative Law heard today, when discussing “Are Credit Cards Bankrupting Americans?”

While the answer did not resound with a deafening yes, it seems that credit cards and the confusion surrounding the rules and regulations that go with credit cards definitely do not help with the growing number of bankruptcy cases.

Adam Levitin from Georgetown University Law Center said, “It’s possible to drastically simplify credit cards. Most of the of the complexity of credit cards is not to serve any particular consumer desire or need...instead credit cards are complicated for complications sake.”

Levitin added, “There is nothing particularly surprising about high credit card debt correlating with bankruptcy. People who are in bankruptcy have debt. What is important to note is that debt, dollar for dollar, credit card debt has a much higher correlation with bankruptcy than any other type of debt.”

Noting that he was not a psychological expert, Levitin stated that there was a connection between consumer addiction and consumer credit. He said, “It is like drug use in this sense. There is definitely an addictive quality to credit...there definitely are parallels between the way consumers use credit and what we see with addictive products.”

Angered at the current actions taken by credit card companies, who grant loans to people already in high debt, Congressman Bill Delahunt (D-Mass.) said, “Not only does it enhance if you will, the pain for the bankrupt, but it disadvantages other unsecured creditors and hurts the retailer, because they are receiving a diminished pro-rata share. If your interested about the retailer in America, if you’re interested in commerce in America, you’ve got to take and put this issue into this equation. It isn’t just about the credit card industry. It’s about business in America.”

Fed called to answer for bailout of Bear Stearns

Why did you bail out Bear Stearns? It was the resounding question heard over and over in the Senate Banking, Housing, and Urban Affairs Committee hearing on "Turmoil in U.S. Credit Markets: Examining the Recent Actions of Federal Financial Regulators." Federal Reserve Chairman Ben Bernanke, SEC Chairman Christopher Cox, United States Treasury Under Secretary Robert Steel, and President of the Federal Reserve Bank of New York Timothy F. Geithner, all attempted to answer that question to Congress.

In his opening statement, Senator Chris Dodd (D-CT), said the stunning fall of Bear Stearns was matched only by the sweeping response to its collapse put together by the New York Fed and the Federal Reserve Board of Governors, which, with the support of Treasury, "exercised powers in some instances that had not been used since the Great Depression." However, he said, people on 'Main Street' are struggling to pay their mortgages, and so was the rescue of Bear Stearns justified to prevent a systemic collapse of financial markets, or was it a $30 billion taxpayer bailout for a firm on Wall Street?

Yes, but how big do you have to be, to be too big to fail? Senator Jim Bunning (R-KY) posed that question in his opening statement. Why, exactly, was it necessary to stop the invisible hand of the market? That is Socialism, he said, adding that he was very troubled by the failure of Bear Stearns. A big question, he said, was who let our financial system become so fragile?

Chairman Bernanke said the that pressures in the short-term bank funding markets have increased, and many lenders have been reluctant to provide credit to counterparties, especially leveraged investors, and they have increased the amount of collateral they required to back short-term security financing agreements. Credit availability is restricted, and some key securitization markets (including those for nonconforming mortgages) continue to function poorly if at all.

Bernanke, nearly at the end of his prepared statement, arrived to the explanation as to why they had assisted Bear Stearns. The news that Bear Stearns would have to file for bankruptcy, he said, raised difficult questions of public policy. "Normally, the market sorts out which companies survive and which fail, and that is as it should be. However, the issues raised here extended well beyond the fate of one company." He said that our financial system is extremely complex and interconnected, and Bear Stearns participated extensively in a range of "critical markets." The damage caused by a default by Bear Stearns "could have been severe and difficult to contain."

The chaotic unwinding of Bear Stearns could have cast doubt of the financial positions of some of Bear Stearns' thousands of counterparties, Chairman Cox said. But a question remained on whether or not investors were at risk. Despite the run on the bank to which Bear Stearns was subjected, Cox said, its customers were fully protected. At no time during the week of March 10-17th were any of the customers of the Bear Stearns's broker-dealers at risk of losing their cash or their securities.

Under Secretary Steel gave an explanation as to why Bear Stearns was assisted, saying a strong financial system is vitally important for all Americans. When our markets work, he said, people throughout our economy benefit, and when our financial system is under stress all Americans bear the consequences. The focus was more on the strategic concern of the implication of a bankruptcy. The failure of a firm that was connected to so many corners of the market would have caused financial disruptions beyond Wall Street.

The risk has its protections, Geithner said. There is a substantial pool of professionally-managed collateral that was valued at $30 billion, the agreement on the part of JPMorgan Chase to absorb the first $1 billion of any loss that ultimately occurs in connection with this arrangement, and a long-term horizon during which the collateral will be safe-kept.

In the written statement of James Dimon, Chairman and Chief Executive Officer of JPMorgan Chase, he said they got involved in the matter because the collapse had the potential to cause serious damage to the financial system. They could not, and would not have assumed the risks of acquiring Bear Stearns without the $30 billion facility provided by the Fed, and that the transaction is not without risk for JPMorgan. However, they informed the New York Fed and Treasury that the risks were too great for JPMorgan to buy the entire company on their own. The statement also explains the reason for bailing out Bear Stearns: a Bear Stearns bankruptcy could have touched off a chain reaction of defaults at other major financial institutions, and the consequences could have been disastrous.

The repeated phrase by each and every witness was that the failure of Bear Stearns was a result of a lack of confidence. According to the written statement of Alan Schwartz, President and CEO of the Bear Stearns Companies, even though the firm was adequately capitalized and had a substantial liquidity cushion, "Unfounded rumors and attendant speculation began circulating in the market" that Bear Stearns was in the midst of a liquidity crisis. The unfounded rumors grew into fear and there was a run on the bank.