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Lincoln leery of bailout plan; homeowner advocates call for safeguards Wednesday, Sep 24, 2008 By Jason Wiest Arkansas News Bureau LITTLE ROCK - The proposed $700 billion bank bailout under consideration by Congress lacks federal oversight and leaves too much on the table for banking executives, U.S. Sen. Blanche Lincoln, D-Ark., said Tuesday. Lincoln, who sits on the Senate Finance Committee, said in a letter to colleagues on the panel that draft legislation did not include enough oversight and accountability, and she criticized executive compensation provided in the plans. "From my perspective, it is contrary to our American value system that we would put at risk the future of low-income working families at the same time that we are asking them to subsidize generous benefit packages for the heads of companies being bailed out by their taxpayer dollars," Lincoln wrote. The Arkansas senator was among lawmakers who remained insistent in the face of dire predictions from Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson about the consequences if Congress balks at the administration's proposal to rescue tottering financial institutions. At a sometimes contentious daylong Senate hearing, Paulson and Bernanke warned that without the bailout, loans for businesses and consumers alike would dry up and the world's largest economy would grind to a virtual halt. In Arkansas, homeowner advocates echoed Lincoln's concerns about the administration plan. ACORN Arkansas said among other safeguards, the plan should include aid for distressed homeowners. Officials of the Association of Community Organizations for Reform Now said financial institutions that participate in the bailout should be required to provide automatic loan modifications to homeowners facing foreclosure, similar to the loan modification program recently enacted by the FDIC. Additionally, the organization called for an amendment to the bankruptcy law that would allow homeowners to restructure their mortgages in bankruptcy court to save their homes. "Right now, you can restructure the loan on your yacht if you're in bankruptcy, but you can't restructure the loan on your home," said Neil Sealy, ACORN's lead organizer in Arkansas. The group said beneficiaries of the bailout also should be required to reinvest in low- and middle-income communities with affordable loan products through an updated Community Reinvestment Act. The meltdown of the U.S. financial markets began with subprime and adjustable rate mortgages. As early as 2005, Americans were encouraged to assume difficult mortgages with easy initial terms by an acceleration in rising housing prices and the belief that they would be able to quickly refinance under more favorable terms. Later, housing prices started to drop and refinancing became difficult. Foreclosures and defaults accelerated as initial loan terms expired and home prices failed to rise as anticipated, affecting mortgage lenders and institutions that bought up the bad debts. ------- The Associated Press contributed to this article |
