Political Odd Couple Kucinich And Westmoreland Remain Skeptical About TARP

By Tom Baxter
Southern Political Report

(11/3/09) Rep. Dennis Kucinich (D-Ohio) and Rep. Lynn Westmoreland (R-Ga.) are a political odd couple if there ever was one, but they do have one thing in common. Both voted against the Troubled Asset Relief Program (TARP) bill, and both remain profoundly skeptical of the remedies put in place to extricate the nation from its banking problems, as they made clear at a congressional field hearing in Atlanta Monday.

Joined by Rep. David Scott (D-Ga.), the very liberal Ohioan and the very conservative Georgian heard from 14 witnesses who outlined, often in stark terms, the impact of the ongoing cycle of foreclosures and bank failures in Georgia.

“What we are creating is a snowball,” Westmoreland warned during the hearing into the impact of the real estate-banking crisis before the Domestic Policy subcommittee of the House Oversight and Government Reform Committee, which Kucinich chairs.

He said the new requirements on small banks to reduce their real estate positions while increasing their capital holdings – measures that were intended to stabilize the banking system – have had the effect of forcing these banks to sell real estate at firesale prices and making them unable to compete with the larger banks which have been the beneficiaries of the TARP bailout. One of the remedies he favors is increasing from 90 days to 18 months the period in which banks have to reduce their real estate portfolios.

Kucinich agreed with Westmoreland that the impact of legislation so far has been to advantage the banking giants over their smaller rivals.

“I am very concerned that the instrument of government is being used to take the wealth of the nation – and even some pretty good-sized banks, collapse it and force it upward,” Kucinich.

Georgia leads the nation in bank failures, and according to Georgia Tech professor Dan Immergluck, the foreclosure crisis which struck the rest of the nation in late 2006 and early 2007 came much earlier in the Atlanta Metro area, appearing as early as 2002.

While the metro area overall hasn’t seen the same roller coaster in property values as other regions of the country, some neighborhoods like Pittsburgh and West End have seen boom-bust cycles even more severe than in cities like Las Vegas or Phoenix, Immergluck said.

Burt Manning, chief appraiser for the Fulton County Board of Assessors said the effect of these foreclosures on revenues for the county have been “devastating” and are likely to linger for years.

Residential sales in the county declined from 40,771 in 2006 to 29,923 in 2008, to only 12,071 so far in 2009, according to Manning’s figures. Commercial sales declined from 1,128 in 2006, to 795 in 2008, to 343 so far in 2009. During that period, he said, valid or “arm’s length” sales have declined sharply while distressed sales have soared. Over the next couple of years, the fallout in the commercial market could be even more severe than in residential housing, he said.

Those who testified included former Atlanta Mayor and UN Ambassador Andrew Young, state Sen. Vincent Fort, bankers, builders, government officials and academics. But one of the most affecting testimonies was given by Saqirah Redmond, who detailed for the panel how she descended from a good job, a happy marriage and a 30-year, fixed interest loan into a pit of mounting debt, divorce and job loss, marked by balloon loans and deceptive terms from several lenders.

“My Lord,” Kucinich said when she had finished her story, directing her to get in contact with his staff. “We’re going to go deep into those people who have led you down that path.”

Redmond’s testimony pointed to one of the ironies of the state’s predicament: the crisis which has come to overwhelm both lenders and borrowers began with the predatory lending practices which were severely curtained in 2002 by the Georgia Fair Lending Act, which was subsequently preempted by the federal Treasury Department and gutted after Republicans gained a majority in the legislature.

Fort, one of those who fought for the anti-predatory legislation, said the big banks which have benefited from TARP were directly culpable in the corruption of the subprime lending market, and should not be given federal money until they have changed their lending practices.

Westmoreland said giving the big banks money has had the unintended consequence of making them less, rather than more, cooperative with their distressed mortgagees.

“Had they not had these funds to balance their books, I believe they would have been more willing to work with mortgage holders to work things out,” he said.