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CBC flexes muscle on bailout vote

POSTED: October 01, 2008, 12:00 am

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As the Senate gears up to vote today on a new version of the mortgage bailout legislation, Speaker Nancy Pelosi has her work cut out for her in convincing members of her own caucus to support the bill once it moves over to the House. A key voting bloc within the Democratic caucus is the Congressional Black Caucus (CBC) and it showed its relevance on Monday when 13 of its members opposed H.R. 3997, sending the bill down in defeat 228-205. It was one of the clearest indications yet of the influence the CBC, now with 43 members, has in the majority in the House.

CBC members voting against the bill were Rep. Andre Carson (D-IN); Rep. William Clay, Jr. (D-MO); Rep. Emmanuel Cleaver (D-MO); Rep. Al Green (D-TX); Rep. Jesse Jackson, Jr. (D-IL); Rep. Sheila Jackson-Lee (D-TX); Rep. William Jefferson (D-LA); Rep. Hank Johnson (D-GA); Rep. Carolyn Cheeks-Kilpatrick (D-MI); Rep. Donald Payne (D-NJ); Rep. Bobby Rush (D-IL); Rep. Bobby Scott (D-VA); and Rep. David Scott (D-GA).

The members of the CBC who opposed the bill did so for a variety of reasons but the one that is most clear is the fact that their constituents, many of them poor and in dire financial straits, were vehemently opposed to the idea of bailing out billion dollar financial firms that had been poorly managed and perceived as “greedy” in the manner they conducted business. Many constituents of CBC members are the very individuals who were taken advantage of by mortgage lenders who peddled risky, high-interest subprime mortgages to new homeowners who now face foreclosure. The impact in the Black community will be devastating since for many Blacks their homes are their primary investment vehicle and the one instrument that has been a dependable means by which to create relative financial security within families. The mortgage fallout, along with the credit crunch and high rates of unemployment and joblessness, has created the perfect storm in Black communities that now threaten to destabilize entire communities across the country.

And the downturn is impacting both poor and middle class Black communities, as even homeowners in the latter were shuffled off into the risky subprime market and are now facing the possible loss of their homes. In the Washington, D.C. region Prince George’s County, Maryland, long held up as a model Black middle class community, is in the midst of a mortgage meltdown. It is the single hardest hit area of the region and the one in the Washington area that is eligible for the largest share of federal dollars in the community block grants that were part of the housing rescue package approved during the summer.

In opposing the bill, Rep. Jesse Jackson, Jr. stated, “This crisis started because of the home mortgage market, yet this legislation merely suggests that the Treasury Secretary implement a plan to mitigate foreclosures and to encourage servicers of mortgages to modify loans. There is no explicit directive to actively restructure mortgages. Furthermore, the bill does not allow bankruptcy judges to restructure troubled mortgages.” Rep. Bobby Scott of Virginia voiced concern over the nature of securities the bill would have allowed the federal government to bailout. Scott noted, “Some of the assets we will be asked to buy are options, derivatives, and other speculative investments that may be in fact worthless. There is no public policy rationale to bail investors out of speculative securities that did not pay off. Since there is no commitment to calculating a fair value price, and to paying no more than that price, this is a bad deal for the American people, because we will undoubtedly overpay for these assets. Therefore, the worthiness of the deal rises or falls on the commitment to limit payments to a fair value.”

Speaker Nancy Pelosi will have to contend with the concerns raised by CBC members if the legislation is to have any chance at passing in the House. Since President Bush initially proposed the $700 billion package, members of the Congressional Black Caucus voiced concern that individual homeowners should be first in line for relief in any bailout and that additional oversight of the mortgage industry and financial services sector be a precondition in any legislation. Several members of the CBC have also advocated for a moratorium on foreclosures until homeowners have had a chance to restructure their mortgages. Also, the impact on renters who occupy homes that are in danger of being foreclosed is one of the quiet crises that are brewing that will hit the Black community hard. During a Town Hall Meeting on the mortgage crisis at the recent Congressional Black Caucus Foundation Annual Legislative Conference, Rep. Maxine Waters (D-CA) also expressed her concern over the behavior of firms that service mortgages and spoke to on that issue after her appearance on the panel.

As the speaker makes her rounds in calling upon members of her Caucus to support the bailout it will be a classic case of political bartering as the 13 members of the CBC who currently oppose the plan will be in position to seek not only concessions in the current package but for some future consideration of personal priorities. The positioning of the CBC has been decades in the making and represents a new milestone in the evolution of Black political representation in Congress.

Statement of Rep. Jesse Jackson, Jr. (D-IL)

Statement of Rep. Robert C. "Bobby" Scott (D-VA)

Statement of Rep. Andre Carson (D-IN)

Statement of Speaker Nancy Pelosi (D-CA)

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