Just now, in some serious high-drama action usually reserved for reality TV, the U.S. House of Representatives just rejected (OK, Simon, you called it) the proposed $700 billion proposal to bail out the nation's financial markets.
And more bad financial news keeps rolling in: the New York Times reported earlier today that, "Citigroup has reached an agreement early today to acquire the banking operations of the Wachovia Corporation after making a daring bid that pulled the deeply troubled company from the brink of collapse."
Whether Congress ultimately passes the bailout or not, NDN strongly believes that Congress' work has just begun.
Nearly two weeks ago, NDN launched an effort to ensure that the actual cause -- the massive destabilization of the U.S. housing market -- was addressed. Michael, Rob, Simon and Jake have said it much more eloquently, but the bottom line is that faulty financial products were at the bottom of the financial cave-in. An excellent article in yesterday's Washington Post explains why you and I now own millions of properties across America.
For that reason, and because lawmakers should make every effort to help homeowners as much as they are helping Wall Street, Simon, Rob and Michael today issued the following statement:
While we applaud the bipartisan effort by Congress and the White House to craft a response to the turmoil in the American financial markets, we are concerned that this package does not address critical issues causing the current problems and will not be effective unless additional steps are taken.
First, Congress and the President must do much more to stabilize the housing market by helping people keep their homes. This crisis began when the home mortgages that had been securitized with massive leverage began a precipitous decline. As housing prices fell and more mortgages defaulted, the decline in the value of the only real assets in this financial house of cards began to pull down the highly leveraged securities and their derivatives. The financial crisis will continue so long as the housing market declines.
A real solution to this crisis, therefore, must include far-reaching measures to break this vicious cycle and end waves of foreclosures. Last week Senator Obama, Senator Clinton, NDN and others argued that an effective response to the financial crisis must include a mechanism for rapidly renegotiating the mortgages of Americans facing imminent foreclosure, or a direct federal loan facility to help those Americans stay in their homes.
After Congress finishes with this bill, it should turn immediately to legislation designed to keep people in their homes. Further, if the new legislation fails to restore confidence in financial institutions, as we believe may well be the case, Congress and the Administration should also come together to consider approaches other than a massive bailout to provide stability to the financial sector.
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