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GOP Legislation To Blame For Financial Crisis

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By KATHY CASTOR

Special to the Tribune

Published: September 22, 2008

The woes of Wall Street have caught up with the crisis on Main Street.
Lehman Brothers crumbled. Bank of America absorbed a failing Merrill Lynch. Last Tuesday we as taxpayers bailed out insurance giant AIG. Last month the federal government backed up housing agencies Fannie Mae and Freddie Mac. The stock market plunged more than 800 points in two days.

As Wall Street suffers, I know my neighbors in the Tampa Bay area have been feeling the effects of a down economy for a long time. Hundreds of area residents turned out for two foreclosure workshops I held this summer. I know first-hand how hard you are working to make ends meet and how concerned so many are that they might be on the brink of losing their homes.

How did we get here?

Early in the 1990s Congress played an active role for families borrowing money to buy homes. The Home Ownership & Equity Protection Act of 1994 included consumer protections for mortgages and required the Federal Reserve to issue rules against abusive lending practices. Under the Republican-controlled Congress, these regulations to protect all of us were never enacted.

The heart of our present problem dates to legislation passed in 1999. Sponsored by then-U.S. Sen. Phil Gramm, the bill obliterated the long-held walls between banking and commerce. The new rules, championed by congressional Republicans, allowed for the excesses of banking and securities firms and insurance companies that culminated in last week's crash and the ongoing crisis in our housing markets.

Gramm, R-Texas, said he was proud of the Gramm-Leach-Bliley Act. During his closing comments on the Senate floor, he said: "The question is not how proud we are of this bill today. The question is, how will it look 50 years from now when it has gone from infancy to maturity?"

We didn't have to wait 50 years. We know right now. In Tampa, in St. Petersburg, on Wall Street, it's just not working. An unbridled, unchecked system just doesn't cut it.

The deregulation and a lack of oversight for the past 10 years led to today's foreclosure crisis, which is especially acute in Florida. Our state posted the second-highest number of foreclosures in August, according to RealtyTrac. One in every 194 Florida properties received a foreclosure filing. Hillsborough County reported 1,895 new foreclosures last month - Pinellas, 2,061.

As we worry about our homes, we also worry about our retirement. Old-fashioned pension plans largely have gone by the wayside. Now our retirement accounts are more personal, more private. And those accounts - our 401(k)s - are suffering too.

Remember that the next time you hear someone talking about privatizing Social Security.

U.S. Rep. Kathy Castor, D-Tampa, represents the 11th District. She is seeking re-election.

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