Most families we talk to aren't following the debate over derivatives or the Volker Rule. True, these are important areas of the banking reform effort. However, many average Americans are living paycheck to paycheck, and many are without a job entirely. For them, banking reform will mean little if the bill fails to include provisions that speak to their daily struggles. Within the 1,974 pages of the bill, there are hundreds of legislative measures. Three of them in particular stand to directly improve a family's chances of achieving financial recovery: bolstered community-based financial planning services, extended assistance for unemployed homeowners, and a sound Neighborhood Stabilization Program (NSP). The latter two are up for a vote today.
Although many economists now point to signs of recovery, millions of unemployed workers and homeowners in foreclosure wait for the tide of relief to reach them. And many of these families are losing confidence, believing the worst is yet to come. In fact, a new report released last week by the Center for Responsible Lending estimates that Latino home-ownership will shrink by 17% by the time we feel the full effects of the recession.
Many of these foreclosures are driven by stubborn unemployment rates. The fallout from financial crises and the Great Recession makes a strong case for banking reform. Reform must change the way financial institutions do business, reducing their incentives to gamble and expose the entire economy to systemic risk, leaving workers jobless and families homeless.
We must also seize the opportunity to put families back on the path to financial security. It's not only the right thing to do for families paying the price for the excesses of Wall Street, it is necessary to making the benefits of banking reform tangible and clear to affected workers and families.
Thanks to the hard work of Senator Robert Menendez (D-NJ) and Representative Luis Gutierrez (D-IL), a key program that will arm communities with free financial planners is in the bill. With retirement accounts and home equity taking a hit, parents are rethinking financial plans for themselves and their children. Sound financial advice will give them the tools they need to make informed choices for their families.
Two provisions will come up for a vote today. The first would create a bridge loan program for unemployed homeowners while they look for a job. Foreclosure prevention counselors estimate that 58% of loan modification requests are denied because of lack of income or unemployment. Avoiding unnecessary foreclosures will shore up neighborhood housing markets and curb the evaporation of wealth from entire communities. The second is additional funding for the NSP to support state and local efforts to purchase and redevelop foreclosed and abandoned homes. Properly targeted, NSP can aid rehabilitation efforts and create jobs in hard-hit communities.
The ink is almost dry on the banking reform bill, "Restoring American Financial Stability Act of 2010." As the House and Senate combine their bills for a final vote, lawmakers should keep a focused eye on the needs of workers and families still awaiting recovery. We should not be left wondering what all this work to break down "too big to fail" banks amounted to in the end.