By Rep. Adam Schiff
Pasadena Star-News
Op-Ed
In Frank Capra’s iconic film, It’s a Wonderful Life, Jimmy Stewart rescues the Bailey Savings and Loan after the 1929 stock market crash caused panicked customers to withdraw their deposits. While they may not make many movies that good anymore, our banks and savings are generally in better shape than they used to be. From 1929, until the Federal Deposit Insurance Corporation (FDIC) was created in 1933, about 9,000 banks were forced to close. By comparison, since 2000 only 32 financial institutions have failed, and these were sold or taken over by the federal government without customers losing any of their insured savings.
But with the collapse of IndyMac Bank of Pasadena, the present weakness of our financial markets has hit painfully close to home. On July 11, 2008, the FDIC took over IndyMac, now titled the IndyMac Federal Bank, to preserve its assets and protect insured depositors until a final resolution can be made.
These changes have left customers with many questions about how their accounts were affected. It is important that account holders know that IndyMac branches are open and available for regular service to customers, including ATM and checking capabilities. Loan customers should also understand that no changes to their loans have been made and they are advised to continue to make payments. Deposits less than $100,000 are guaranteed by the federal government, and 50 cents of every dollar over $100,000 is being advanced to IndyMac customers by the FDIC. However, all IndyMac customers must contact the bank in the next 18 months to ensure their account stays active.
Last week, I met with the new IndyMac CEO, FDIC Chief Operating Officer John Bovenzi, to discuss how the takeover is affecting customers, what depositors can expect to recover, and what circumstances led to the bank’s collapse. Mr. Bovenzi has agreed to attend an economic roundtable discussion I am hosting that will be moderated by KNX radio’s Business Hour host Frank Mottek. The panel will discuss IndyMac, the volatility of the stock market, oil prices, housing issues and more, and will be held at the Pasadena Senior Center on August 20, 2008 from 7 - 8:30 p.m. I encourage anyone with questions or ideas on these topics to join us.
IndyMac customers can also contact the FDIC toll-free assistance hotline at 1-866-806-5919 from 8:00 a.m. to 8:00 p.m. I also want to make sure constituents know that my staff and I are available at 626-304-2727 to help answer any questions about the IndyMac takeover or assist those who have been unable to receive answers from the FDIC.
To help get the economy moving again, as well as prevent further bank failures, I believe the financial industry must be better regulated and that we must do more to reinvigorate the housing market. The problems at IndyMac and those at Fannie Mae and Freddie Mac are not unrelated: it was IndyMac’s heavy reliance on “no-paper” Alt-A mortgages that was a primary driver of its economic collapse, just as faltering home prices have caused drastic declines in the value of Freddie and Fannie. The problems surrounding the subprime mortgage markets have pushed the housing market into its worst slump in 16 years – weakening the American economy, and making American families less secure.
Last Wednesday, I strongly supported a housing package, the Foreclosure Prevention Act of 2008 (H.R. 3221), which passed the House on a strong bipartisan vote. H.R. 3221 will take important steps to stabilize the housing and mortgage markets, assist families facing foreclosure, and better protect Americans from future market failure.
The bill improves oversight of Fannie Mae and Freddie Mac by instituting a new federal regulator and giving the Federal Reserve a supervisory role to ensure they do not take on unnecessary risk. It also includes emergency provisions to keep them financially sound by increasing the government’s line of credit to the mortgage giants and allowing the U.S. Treasury to purchase their stock to restore market confidence.
The legislation also expands a program to help borrowers at risk of losing their homes refinance to government backed lower-cost mortgages, and provides financial counseling to these homeowners. It provides a refundable tax credit of $7,500 to first-time homebuyers to spur home-buying and stabilize the market, and a tax credit for construction of low-income housing to create new rental opportunities for struggling families.
While the President had threatened to veto the Foreclosure Prevention Act, it now appears he will sign it once the measure passes the Senate. The bill will not be a panacea for all our economic problems, but it is an important step towards greater financial stability, and it will help millions of Americans enjoy the dream of home ownership and a “wonderful life.”