Barney Frank

Jake is out today, so I thought I'd take a shot at the Friday NDN Backgrounder. It addresses a critical question that most of us face everyday: whether to spend or save?

With consumers reeling from the recession (and many forced to turn to credit cards to make ends meet), President Barack Obama signed bipartisan legislation today instituting the most significant credit card reforms in 40 years.

The banking industry isn't exactly popular these days, and with so many Americans struggling, Congress finally acted to reign in some of the worst abuses, including massive rate hikes and hidden fees.

The credit card crackdown and Americans' soaring credit card debt is part of a larger question that Simon, Rob and the rest of the team have been asking: to spend or save? Today's NDN Backgrounder provides some of our analysis and commentary on this very important issue:

• The Economic Conversation Enters a New Phase: Putting Consumers Front and Center Now by Simon Rosenberg, Huffington Post, 5/14/09 - Rosenberg writes that the Administration's turn in the national economic conversation from the plight of big institutions and the financial system to what is perhaps the most important part of the story of the Great Recession still is not adequately understood - the weakened state of the American consumer prior to the recent recession and financial collapse.
• Why Obama Is Right to be Focusing on Credit Card Debt by Simon Rosenberg, 5/11/09 - Rosenberg raises a fundamental question NDN has been addressing for months: what is the best course for consumers now? should they borrow and spend, helping fuel a recovery, or should they pay down their debts and clean up their own balance sheets? The answer will help determine how deep and long the Great Recession will be.
• The Housing Crisis and Our National Attititudes Toward Saving by Dr. Robert Shapiro, 4/17/2009 – Shapiro observes that, as a result of the burst of the housing bubble, the Millennial generation will likely be more interested in saving than investing in homes.
• Spend? Save? The debate continues by Simon Rosenberg, 2/11/2009 - Building on a previous post, Rosenberg follows the growing debate about whether American families should be focusing on saving.
• Spend? Save? What Is the Right Course for Everyday Americans? by Simon Rosenberg, 2/3/09 - Rosenberg asks that while there has been much discussion about the need to put money in people's pocket so they will go out and spend, accelerate economic activity and help end the recession, is this really the best course for American families now?
• A Stimulus for the Long Run by Simon Rosenberg and Dr. Robert Shapiro, 11/14/2008 – This important essay lays out the now widely agreed-upon argument that the upcoming economic stimulus package must include investments in the basic elements of growth for the next decade, including elements that create a low-carbon, energy-efficient economy.
• Making the Struggle of Every Day People the Central Focus of the National Debate by Simon Rosenberg, 8/17/2008 - As the 2008 presidential campaign entered a crucial phase, Rosenberg argued that political leaders must focus on raising the wages and incomes of Americans.

According to Congressional Quarterly yesterday, House Democrats are gearing up to demand more TARP funding for foreclosure prevention. House Speaker Nancy Pelosi and House Financial Services Chairman Barney Frank have been collaborating on a bill that would close a loophole found in the original bailout language. This bill would take much needed steps towards redirecting funds and keeping people in their homes.

House Speaker Nancy Pelosi said Monday she has directed House Financial Services Chairman Barney Frank , D-Mass., to write a bill that would enforce language in the bailout law intended to keep people in their homes.

“It was very clearly spelled out in the initial legislation that funds would be used for mortgage foreclosure forbearance,” Pelosi said, adding that the foreclosure language was essential for winning Democratic support to pass the broader bailout bill.

But when Treasury Secretary Henry M. Paulson Jr. abandoned the asset purchase program, instead favoring capital injections for banks, the foreclosure prevention language also fell by the wayside. So far, Paulson has resisted calls to do more to offer direct help for struggling borrowers. 

Pelosi emphasized that some of the last batch of potential TARP funding should be provided to mortgage foreclosure relief, but she added that she had set no set goal for how much should be provided to help homeowners. “As much as is needed,” Pelosi said. “Because that is really what is going to get to the core of the financial crisis. . . . People are losing their homes. . . . Communities are affected.”

Many Democrats are outraged with how TARP bailout funds have been handled by the Treasury. While the bailout language states explicitly that efforts must be made to prevent housing foreclosures, Treasury Secretary Henry Paulson has largely ignored it and focused on capital injections for banks. NDN applauds Pelosi and Frank for undertaking this effort, as we have argued since September that keeping people in their homes is essential to abating the financial crisis. For more on NDN’s campaign to keep people in their homes, click here.

As he has through much of the financial crisis, Prime Minister Gordon Brown is again exerting impressive leadership, this time on staunching foreclosures.

On the BBC:

Many people hit by the downturn will be able to defer part of their mortgage interest payments for up to two years under plans unveiled by Gordon Brown.

The plan is designed to give those who lose their jobs or suffer a big cut in income extended breathing space if they are facing repossession.

The scheme will cover mortgages worth up to £400,000, the BBC understands.

The lender and homeowner will agree on the proportion of payment to be deferred, but it could be up to 100%.

NDN remains impressed by Brown's leadership in the face of these financial and economic crises and depressed by the Bush Administration's complete abdication of leadership. For more on NDN’s campaign to Keep People in Their Homes, click here.