[Congressional Record (Bound Edition), Volume 154 (2008), Part 9]
[House]
[Pages 12814-12815]
[From the U.S. Government Publishing Office, www.gpo.gov]




 FORECLOSURE PROBLEMS AND SOLUTIONS: FEDERAL, STATE, AND LOCAL EFFORTS 
               TO ADDRESS THE FORECLOSURE CRISIS IN OHIO

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
  Ms. KAPTUR. Madam Speaker, yesterday the Housing and Community 
Opportunity Subcommittee of Financial Services held a major hearing in 
the City of Cleveland, Ohio. The subject was the foreclosure crisis 
facing the American people.
  I want to thank Congresswoman Maxine Waters of Los Angeles, 
California, who did such a phenomenal job, all the Members who attended 
and certainly Chairman Frank, the chairman of the full committee, for 
allowing this proceeding to occur outside of Washington.
  Cleveland, without a doubt, is ground zero in the mortgage 
foreclosure crisis facing Ohio. Although every quadrant of our State is 
suffering from rising foreclosures, the crisis is most acute in 
Cuyahoga County where nearly 15,000 new foreclosures occurred in 2007, 
a 350 percent increase compared to 10 years ago. Over 85,000 Ohioans 
have faced foreclosure, and we expect those numbers to increase as we 
look across our country and see homeowners nationwide just in the next 
2 years lose nearly $356 billion on their property values with no end 
in sight. Some estimate the crisis will cost our country over $1 
trillion.
  Almost 9 million homeowners now owe more on their mortgage than their 
home is worth, the largest share since the Great Depression. If we 
really look at what has been happening, for the first time since World 
War II in the critical home mortgage sector, our largest form of an 
average family's net savings, net home equity is now negative. That is 
below 50 percent. As a whole, Americans owe more on their homes than 
they are worth.
  This enormous loss of wealth affects not just homeowners but our 
Nation as a whole. We are a net debtor country, both publicly and 
privately. There have been inferences of a taxpayer bailout to prevent 
the financial collapse of major Wall Street banks and brokerages such 
as Bear Stearns, and Merrill Lynch and Lehman Brothers are waiting in 
the wings, probably, for life support there too.
  Most often, when a homeowner can't make ends meet, they lose their 
home. But when a giant firm like Bear Stearns can't make ends meet, the 
Chairman of the Federal Reserve and the Secretary of the U.S. Treasury 
get involved and billions of dollars of capital, much of it now from 
foreign places like Abu Dhabi, are found to fill the gap.
  Mergers of banks are approved expeditiously and, just in case, the 
Federal Reserve opens its New York window with our taxpayers becoming 
the insurance company of last resort, pledging the full faith and 
credit of the United States to the big banks, and now, for the first 
time in history, to brokerages, to investment firms. Will ordinary 
homeowners in our Nation ever be afforded equal attention by both the 
Federal Reserve and the Treasury?
  It does not appear to be so with the rate of foreclosures and 
bankruptcies rising every month. There remains much Congress does not 
know about what got us here. An old professor of mine at the Harvard 
Business School used to say, ``If you want to know the way the world 
operates, follow the cash.''
  Yet Congress has not really followed the cash. It has not 
investigated the paper trails of firms, brokerages, regulatory boards, 
government bodies and key individuals who initiated and carried out 
these risky subprime and internationalized security practices. An 
equity washout of this magnitude does not happen by spontaneous 
combustion. It was willed to happen.
  Specific people in specific places set the pieces in place to allow 
it to proceed. Many have been handsomely rewarded. America needs to 
know who they were and are.
  It is incumbent that Congress authorize a full independent 
investigation of the tools of the roots of this crisis that trace back 
to the unstable period following the savings and loan crisis in the 
late 1980s. The development of the internationalized mortgage security 
instrument itself deserves more attention.
  In effect, it became a clever and high-risk credit device, with 
little

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transparency, that acted like a bank. It created money, or at least the 
illusion of it, in a Ponzi-like scheme. It did so without the normal 
regulatory restraints of full accounting and proper examination.
  How could the regulators have let that happen? America should know 
the individuals and organizations that allowed these risky instruments 
and practices to proceed.
  One of the first institutions to embark on subprime lending was 
Superior Bank of Hinsdale, Illinois. That bank had a return on assets 
7\1/2\ times the industry average, a CAMEL rating of only 2. Yet its 
executives were financially rewarded for presiding over ruin.
  Where was the Office of Thrift Supervision?
  I am going to place in the Record many questions the American people 
need to know answers to in order to figure out who is responsible for 
this crisis and to prevent further raids on the private savings of the 
American people.

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