The Economic Summit IV at The Edgewater
Federal bailout perspective
Federal bailout perspective
take the default swaps, the estimates range from $60 billion to $3 trillion just with the swaps. That is quite significant. You’re talking about something that is deep
and broad and wide relative to our financial industry. The bad is that it appears the Bernanke-Paulson approach doesn’t strike at the heart of the problem, the
root of the problem, which I believe to be the homeowners, the subprime lending, which precipitates the debt default. It’s a little difficult to see the good other
than I know as of today, they are beginning to see some thawing around the edges of the credit market. There may be some opening up of credit, particularly
between banking institutions. That might be the best good I can discern thus far.
The Hues: In what ways are minority businesses participating in the bailout effort?
Robinson: It’s not a lot, but I can suggest it is good at this point. They are certainly impacted, probably disproportionately relative to the credit crunch. It makes
access to capital that much more difficult and it has always been difficult. This just exacerbates that problem. The rules that would normally be in place to
mandate minority participation have been waived. So although the legislation does provide for Secretary Paulson to put in place a program for minority
businesses, that is so far down on his agenda at this point, it isn’t being meaningfully discussed in any quarter. There are movements by minority business groups
to organize themselves to weigh into the process. But there is no policy mandate.
The Hues: Are they taking a top down approach to the crisis?
Robinson: It is strictly a top down approach. That is the bad that I was speaking of. Instead of going to the root of the problem, which would be a bottom up
approach and dealing directly with the homeowners themselves and then let that trickle up, they are going top down. It’s going to get up to these banks anyway.
But at least you would stem the hemorrhaging that is taking place in the foreclosure market and the broader real estate market generally, which has been such
an engine to the American economy. They are looking at a Homesteading provision with the FDIC wherein they could start by allowing the homeowners to lease
the properties and then roll them over into a 30 year fixed-rate mortgage. That’s the kind of approach that seems to be gaining some currency right now in
Washington.
The Hues: What impact is the crisis having on communities of color?
Robinson: The foreclosures are having an adverse impact on communities of color. Most of the subprime lending took place in minority communities. So that
would cause a disproportionate impact relative to foreclosures in that particular community. This was a huge money maker for financial institutions. They made
money by getting people into these subprime mortgages, even people who could have otherwise qualified for fixed rate mortgages. I know people who are pretty
well off who were given all kinds of crazy loans and just didn’t think it would catch up with them. It was like a pyramid game where the bottom fell off and
everything is collapsing. And the big issue is how do you quantify how huge of a problem it is. And they have yet to get their hands around that.
The Hues: Are there any steps that homeowners can take to protect themselves from foreclosure?
Robinson: I am certain that lenders will be open to renegotiating. The larger banks might be approachable at this point by homeowners for more realistic
mortgage terms, the Bank of America and folks like that because they are flush with cash. They’ve had a lot of cash pumped into their system now. They very
well could be ripe for discussions about how to refinance their mortgages. People should shop around, particularly to the larger banking institutions in their area.
and broad and wide relative to our financial industry. The bad is that it appears the Bernanke-Paulson approach doesn’t strike at the heart of the problem, the
root of the problem, which I believe to be the homeowners, the subprime lending, which precipitates the debt default. It’s a little difficult to see the good other
than I know as of today, they are beginning to see some thawing around the edges of the credit market. There may be some opening up of credit, particularly
between banking institutions. That might be the best good I can discern thus far.
The Hues: In what ways are minority businesses participating in the bailout effort?
Robinson: It’s not a lot, but I can suggest it is good at this point. They are certainly impacted, probably disproportionately relative to the credit crunch. It makes
access to capital that much more difficult and it has always been difficult. This just exacerbates that problem. The rules that would normally be in place to
mandate minority participation have been waived. So although the legislation does provide for Secretary Paulson to put in place a program for minority
businesses, that is so far down on his agenda at this point, it isn’t being meaningfully discussed in any quarter. There are movements by minority business groups
to organize themselves to weigh into the process. But there is no policy mandate.
The Hues: Are they taking a top down approach to the crisis?
Robinson: It is strictly a top down approach. That is the bad that I was speaking of. Instead of going to the root of the problem, which would be a bottom up
approach and dealing directly with the homeowners themselves and then let that trickle up, they are going top down. It’s going to get up to these banks anyway.
But at least you would stem the hemorrhaging that is taking place in the foreclosure market and the broader real estate market generally, which has been such
an engine to the American economy. They are looking at a Homesteading provision with the FDIC wherein they could start by allowing the homeowners to lease
the properties and then roll them over into a 30 year fixed-rate mortgage. That’s the kind of approach that seems to be gaining some currency right now in
Washington.
The Hues: What impact is the crisis having on communities of color?
Robinson: The foreclosures are having an adverse impact on communities of color. Most of the subprime lending took place in minority communities. So that
would cause a disproportionate impact relative to foreclosures in that particular community. This was a huge money maker for financial institutions. They made
money by getting people into these subprime mortgages, even people who could have otherwise qualified for fixed rate mortgages. I know people who are pretty
well off who were given all kinds of crazy loans and just didn’t think it would catch up with them. It was like a pyramid game where the bottom fell off and
everything is collapsing. And the big issue is how do you quantify how huge of a problem it is. And they have yet to get their hands around that.
The Hues: Are there any steps that homeowners can take to protect themselves from foreclosure?
Robinson: I am certain that lenders will be open to renegotiating. The larger banks might be approachable at this point by homeowners for more realistic
mortgage terms, the Bank of America and folks like that because they are flush with cash. They’ve had a lot of cash pumped into their system now. They very
well could be ripe for discussions about how to refinance their mortgages. People should shop around, particularly to the larger banking institutions in their area.
By Jonathan Gramling
Anthony Robinson has seen a lot in his 23 years of being on the front-line of promoting
opportunities for minority businesses as the president of the Minority Business Legal Defense and
Education Fund, a public interest law firm based in Washington, D.C. And he is looking at the current
$700 billion bailout of Wall Street investment banks with his eyes wide open. Robinson was in Madison
October 22 to speak at The Economic Summit IV at the Edgewater Hotel.
After his remarks, Robinson sat down to talk with The Capital City Hues about the current crisis.
The Hues: What is the good, the bad and the ugly of the current financial crisis?
Robinson: Certainly the ugly is the extent of the crisis itself. It appears that we are facing an economic
challenge that we have not seen since 1929 and the Great Depression. I’m not suggesting this is a
depression at this point. But those things that precipitated the Depression, some of those same forces are
at work now. Part of the ugly right now is the inability to quantify how much of a problem it is. If you just
Anthony Robinson is president of the Minority
Business Legal Defense and Education Fund
Business Legal Defense and Education Fund