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Published: September 2008

Main Street principles should guide Wall Street rescue

Coalition: Mortgage

In a letter to key lawmakers in both the U.S. House of Representatives and the Senate, Consumer Action and its coalition members urged Congress to consider the public interest above private interests in the government's planned financial bailout.

Below is a summarized excerpt from the letter:

The draft proposal being circulated by the administration on the financial bailout provides too little oversight of the Department of Treasury as it implements the rescue plan, too little accountability for Wall Street firms that participate in the plan, and too little assurance that the taxpayers who have footed the bill for this rescue will share in any profits of Wall Street firms that benefit from the plan. It also fails to ensure assistance for homeowners facing foreclosure and neighborhoods needing stabilization.

1) The final provision must include Chapter 13 judicial modification relief and a mechanism for ensuring loan modifications.

Voluntary loan modifications are not working, as the mounting crisis attests. Today, homeowners are barred from applying for loan changes through the bankruptcy courts if the loan is on their one and only home. Bankruptcy courts provide an existing infrastructure for supervising court-ordered loan modifications and addressing the many hurdles that prevent voluntary modifications.

2) The final law must protect taxpayers.

Financial institutions should be forced to endure the bulk of the losses with taxpayer funds only to be used where absolutely necessary to sustain the orderly operation of the financial system. Toward that goal, we support inclusion in the plan of a provision granting the government a warrant to purchase stock in companies that take advantage of the bailout.

3) The new law must severely restrict executive compensation at any companies that directly benefit from the bailout and include a claw-back provision to reverse ill-gotten gains.

4) The bailout must be designed to minimize the opportunity for gaming and should be designed to minimize moral hazard. Congress must put a brake on Wall Street’s inclination to take inappropriate advantage of the opportunity the bailout offers to privatize profits and socialize risks.

5) The bailout must include greater oversight than the Paulson plan provides for.

Congress should create an oversight board so that Treasury actions are reviewable and require monthly reporting for the purpose of transparency.

6) The bailout must include greater transparency in financial transactions and rescue operations than the Paulson plan provides for.

Congress should require that firms brought down by the crisis provide enhanced disclosures of their risk management practices as well as of their exposure to credit derivatives, loans, including subprime mortgages, and mortgage-backed securities.

Lead Organization

U.S. Public Interest Research Group

Other Organizations

ACORN | Association of University Women | American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) | Center for Responsible Lending | CDFI Coalition | Consumer Federation of America | Consumers Union | Dēmos: A Network for Ideas & Action | Essential Action | The Lawyers’ Committee for Civil Rights Under Law | Leadership Conference on Civil Rights | National Association of Consumer Advocates | The National Association of Consumer Bankruptcy Attorneys | National Association for the Advancement of Colored People (NAACP) | National Community Reinvestment Coalition | National Consumer Law Center (on behalf of its low-income clients) | National Housing Institute/Shelterforce | National Fair Housing Alliance | National Training and Information Center | National Policy and Advocacy Council on Homelessness (NPACH) | Opportunity Finance Network | Public Citizen | SEIU | U.S. PIRG | Woodstock Institute

More Information

Download the letter, entitled "Public Interest/Main Street Principles To Guide the Wall Street Rescue"

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