February 11, 2009
To:The Hon. Barney Frank
From: Rev. Jesse L. Jackson, Sr., Rainbow PUSH Coalition
Re:Transparency, Accountability and Objective Assessment of Performance
Thank you for the opportunity to provide comments at your timely hearings on TARP accountability.
I would state from the outset that accountability cannot be achieved without transparency, clearly defined strategic goals and measurable outcomes, and enforceable penalties for non-inclusion. Without these elements, it will be impossible to assure integrity and appropriate use of the billions of dollars in public funds allocated by Congress to TARP and the upcoming economic stimulus plans.
Private corporations and public entities that have received, or will receive, government funds should be required (retroactively if need be) to report and disclose specifically how they have utilized public funds and validate that such funds are being used for their defined purposes.
It is the position of the Rainbow PUSH Coalition that, in its essence, TARP and future economic stimulus programs should serve the “least of these.” By that we mean that those families that have lost homes due to job loss or were targeted for poorly-conceived mortgages must receive direct relief and a path back to mainstream financial security. Specifically, Congress must devise stringent regulation and initiatives to fulfill these oft stated but yet to be implemented goals:
1. Mitigate the home foreclosure crisis. 2.8 million foreclosures took place in 2008, up 80% from 2007, 225% since 2006. 10% of homeowners are now behind in mortgage payments, and another 2 million foreclosures are projected for 2009. It is time to permit homeowners facing foreclosure to modify their mortgages as a matter of right in Chapter 13 bankruptcy. This is the only system that has the capacity already in place to provide relief in a timely, equitable manner. The Congress is also urged to allocate significant funds to implement pubic and private proposals to restructure and modify loans, including the plans of Shelia Bair and the FDIC.
Rainbow PUSH strongly endorses the NCRC’s proposals to pass H.R. 703, and “the need for a broader-scale loan modification program, the need for the federal government to exercise its authority to purchase troubled assets in an effort to stem the foreclosure crisis, and the need for enhanced consumer protection through comprehensive anti-predatory lending legislation.” [NCRC]
Congress must provide incentives that motivate and ensure that TARP recipients--and future recipients of government funding--use allocated public funds for aggressive home foreclosure mitigation and restructure and modify the loans of millions of American families facing the loss of their homes.
2. Open up the credit markets and lending to individuals and businesses. A prevailing rationale for TARP and the public funds provided to financial institutions was to open up the credit markets and lending to businesses. Business, especially small and minority businesses, rely on the credit markets to meet their monthly payroll and operating expenses, and for acquisitions to expand their businesses. Many are being thrown out of business or frozen in the tracks of the credit freeze. Instead of opening up lending and the credit markets, banks are using public funds to acquire other banks, or hoarding and holding the public funds they received.
The Congress must devise legislation and effective measures to require or ensure that financial institutions open up the credit markets, and throw a lifeline to businesses and consumers in need. The nation cannot afford to discard an entire generation of business owners and consumers as financially unworthy. We must begin to build a bridge back to the financial mainstream for those individuals and businesses that bore the brunt of the nation’s economic crisis through no fault of their own.
3. Student Loans. In today’s economic recession, many youth are unable to go to school or stay in school due to the high cost of education and the dearth of Pell Grants and student loans. Those that do receive student loans – now tagged at between 4%-8% - are burdened with paying off these loans for decades into their adult lives.
Yet, today, the federal government is lending to banks and large financial institutions at interest rates of 1% or less. If banks can receive government loans at 1%, so should our nation’s students
4. Minority participation. Section 106 of the TARP legislation called for “inclusion and contracting to the maximum extent possible, minority and women-owned businesses.” There is no indication of any significant participation or inclusion of minority accountants, financial services firms, or other businesses in the TARP related contracting and sub-contracting. Inclusion of minority firms among TARP contractors is not only fair, but it is necessary and important because a diverse contractor base:
a. Assures that the most qualified firms participate, regardless of size (we have painfully learned that size alone is no guarantee of competence.)
b. Results in a more competitive bidding process and fairer contract fees, terms and conditions.
c. Guarantees that nimble, “hungry” contractors who will put the government’s business first improve the performance of all contractors.
d. Neighborhoods and communities that need economic stimulus most actually receive it.
The Treasury Department, and TARP recipients such as Bank of NY Mellon, JP Morgan Chase, Citi, Bank of America, and others have received comprehensive information about qualified minority firms.
Congress should enact measures, and firms should act voluntarily, to forge partnerships to implement a strategic program, as outlined in HR 384, to ensure minority participation in management, employment, contracting and business activities under TARP; and in the management of mortgage and securities portfolios, making of equity investments, and the sale and servicing of mortgage loans. Equally important are the monitoring, compliance and reporting requirement to collect real data on minority participation.
5. Stabilization of the Automobile Industry. Since December, there has been a 4.4% decline in the overall manufacturing workforce, and minority employment has declined 18%. We are faced with the virtual extinction of small businesses operated by minority dealers and suppliers. It is imperative that there is Automotive Industry Inclusion of Minority Dealers and Suppliers. There is a need to restructure and amend the U.S. Small Business Administration (SBA) Act to assist minority dealers and suppliers that are socially and economically disadvantaged and have suffered massive economic injury as a direct result of the current economy, financial market collapse, bank credit freezing and current state of auto industry.
e. Provide working capital assistance that is allocated specifically to socially and economically disadvantaged businesses of dealers and suppliers.
f. Funding for job training and retraining, job retention and recruitment.
g. Refinancing of indebtedness, support loans and loan guarantees, and an infusion of federal aid stipulated for dealers and suppliers.
h. Consumer tax credits and empowerment zone tax credits.
6. Greater Need for Transparency and Oversight. While Federal Reserve Chairman Ben Bernanke and then Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight, the Treasury has entered into “non-disclosure” agreements with the entities to which it allocated the funds, specifically, the Custodian Bank - Bank of NY Mellon.
Congress should enact measures requiring, as outlined in HR 384, the disclosure of this information to ensure transparency and accountability in the TARP. All efforts must also be made to encourage private firms to act voluntarily to disclose how they are using TARP funds.
Government oversight monitor Elizabeth Warren reported that Treasury lacks "a clearly articulated vision" for TARP and "has made limited progress in ... communicating an overall strategy" for it; that “it has not yet developed a strategic approach to explain how its various programs work together to fulfill TARP's purposes or how it will use the remaining TARP funds.”
We applaud the passage of HR 384, led by Congressman Frank, to tighten accountability rules under TARP, assert oversight and diligent reporting requirements, direct investment to stem the tide of foreclosures, facilitate bridge loans to the auto industry, and establish an Office of Minority and Women Inclusion at the Treasury Department to ensure minority participation in TARP contracts.
In absence of regulation and congressional legislation, we urge private corporations and leaders to voluntarily act on these principles outlined above.
It is now time for change.