Groups urge that final bailout bill protect consumers

As Congress debates the Treasury Department’s proposed $700 billion bailout of the financial services industry, consumer groups are pressing legislators to protect homeowners and taxpayers as they seek to stabilize the roiling stock and credit markets.

The legislation would allow the federal government to purchase bad mortgages and other troubled assets held by shaky financial institutions. The hope is that the infusion of cash into the financial system would ease the credit crunch facing businesses and consumers and prevent further economic declines. Critics of the measure argue that the plan would place the burden of the failing financial system on American taxpayers while providing scant relief to struggling homeowners and communities wracked by foreclosures. 

“Millions of Americans have been struggling with the downturn in the economy and now this crisis on Wall Street has families across the country worried about their financial futures,” said Jim Guest, president of Consumers Union, the nonprofit publisher of Consumer Reports, in a press release.

Consumers Union joined more than 30 advocacy and community development groups representing 10 million members to send a message to Congress that the bailout plan promoted by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke will be unfair and ineffective if it fails to address the foreclosure crisis. The groups urged that the final bailout plan include a provision that would give bankruptcy courts the power to alter mortgages of homeowners who otherwise would lose their homes to foreclosure.

In addition, Consumers Union recommended that financial institutions benefiting from the bailout, and mortgages in which the federal government purchases an interest with taxpayer dollars, be subject to a mandatory, fast, effective restructuring process. These loans should be designed to keep consumers in their homes and help strengthen neighborhoods.

Consumers Union also called for greater transparency of financial firms' risk management and other business practices; strict limits on severance, bonuses, and stock options to executives in financial services companies; and reform of abusive credit-card practices.

“There must be more reform in the financial and mortgage markets so that this never happens again,” said Guest. “We need to ensure that there is vigorous oversight of this bailout process, but we also need a more long-term plan that provides strong new rules and enforcement to avoid future mortgage and credit meltdowns.”

Comments

[Paul Simmons]

We might have money in mutual funds that have invested in "safe" bonds from the companies that are being rescued. Similarly insurance companies might have the money to pay our claims in the rescued institutions.

I am all for eliminating stockholder equity.

We should not let companies or their officers off the hook if they have made false financial statements or based statements on conjecture. I believe that false or unsubstantiated financial statements will be the second phase of the scandal.

[Marc]

Consumers Union/Report should not be supporting the bailout. We members are 85% OPPOSED to the bailout! The politicians despise democracy, and we know they represent big banks & not us, but CU is SUPPOSED to be on OUR side! SHAME!