The people who live and work in the 35th Congressional district of California are thousands of miles from the financial district of New York City. Many of my constituents are working-class and middle-class blacks and Latinos, certainly not Wall Street moguls and in many cases not even investors or stockholders. However, the actions of stockbrokers, traders, bankers and fund managers have profound effects on the families that I represent.
The evidence is clear that minority communities were targeted by predatory lenders and that subprime loans and foreclosures have disproportionately affected minorities. African-Americans and Latinos were more likely to receive loans with higher interest rates and loans with prepayment penalties. They more frequently received subprime loans even when they qualified for prime loans, and they paid more for their loans, with African-Americans paying an average additional up-front charge of $474 and Latinos paying an additional $580.
One much-needed aspect of the Wall Street Reform and Consumer Protection Act (H.R. 4173) is the establishment of an Office of Minority and Women Inclusion at each of the federal banking agencies to promote diversity and inclusion. Expanding opportunities for female and minority professionals is the right thing to do, not only out of fairness but also to best serve the needs of our diverse population. Drawing on the talents, skills, knowledge and experience of all Americans will enable us to end the "old boys' club" mentality of Wall Street and the business atmosphere and practices that have resulted in financial harm to our country. Promoting inclusion and enhancing consumer protection will ensure that never again will minority communities be targeted.
Consumer financial protection is a vital component of financial reform and is necessary to protect against disparate effects on racial and ethnic minorities. We must crack down on abusive, deceptive and predatory products — ranging from home loans to credit cards — that have victimized millions of Americans. I have been a vocal supporter of an independent, stand-alone agency as established in the House bill. While there has been much public discussion over where the consumer financial protection is housed, just as important is the question of who would manage and oversee it.
My amendment to H.R. 4173 established that the Consumer Financial Protection Agency Oversight Board be composed, in part, of five members selected specifically from the fields of consumer protection, fair lending and civil rights, depository institutions that primarily serve underserved communities, or representing communities significantly affected by higher-priced mortgage loans. Without these additional members, the Oversight Board would have no racial or ethnic minorities and only two women, given the current makeup of our financial regulatory officials. Including such diverse experts and advocates in addition to officials from government agencies is necessary to ensure that the CFPA understands the perspectives of communities most threatened by the abusive and unfair practices that the agency is meant to police.
Because the nation's housing crisis was the central cause of the financial meltdown, we must help communities hit the hardest and prevent future foreclosures. H.R. 4173 included $1 billion for the Neighborhood Stabilization Program, which assists states and localities revitalizing neighborhoods plagued by blighted, abandoned and foreclosed homes, and $3 billion in loans to assist unemployed homeowners in avoiding foreclosure, modeled after a successful program in Pennsylvania.
We must also adopt effective and reasonable standards for new mortgage loans to protect homebuyers from predatory lending. For example, we must ban the abusive compensation structures like "yield spread premiums" that create conflicts of interest or reward lenders and brokers who steer borrowers into high-cost mortgages not in their best interest.
The crisis in the financial markets, caused by risky schemes of the big banks and investment firms, has cost Americans 8 million jobs and wiped out trillions of dollars that families were counting on to pay for college or retirement.
Passing legislation to reform how Wall Street does business, protect consumers from unfair mortgages and abusive credit card company practices, and end taxpayer-funded bailouts is essential to our economic recovery. We must make sure that the new regulations are strong and effective enough to prevent another financial collapse — and that they are vigorously enforced. We must also make sure that our policies promote fairness and provide assistance to the most vulnerable.
As a senior member of the House Financial Services Committee and the chairwoman of the Subcommittee on Housing and Community Opportunity, I helped shape financial regulatory reform legislation that provides a solid foundation for these objectives. Standing up to fierce resistance from the banking industry, their lobbyists and their Congressional allies, House Democrats passed the Wall Street Reform and Consumer Protection Act without a single Republican vote.
After the Senate's consideration of a range of amendments to this comprehensive reform package, we will move to reconcile our different versions of the legislation, and I will be focusing on elements that I believe are essential for meaningful, effective reform that promotes fairness and provides all Americans with greater economic opportunity.
Financial reform presents a clear choice for Congress: to side with Wall Street banks and their lobbyists or to protect our constituents from the abusive, predatory, risky practices that resulted in a financial crisis.
Rep. Maxine Waters (D-Calif.) is chairwoman of the Financial Services Subcommittee on Housing and Community Opportunity.