Analysis: Financial Reform Good News for Blacks
Michael H. Cottman | 7/16/2010, 11:59 a.m.
Austan Goolsbee, a senior economic advisor for the Obama administration, took a seat behind the hardwood table in the West Wing of the White House and praised a sweeping financial regulatory bill designed to protect Americans - and African-Americans, in particular - from unscrupulous mortgage lenders and shady neighborhood check cashing centers.
"This is a very big triumph for the president and the American people," Goolsbee told several black journalists at the White House, including a correspondent from BlackAmericaWeb.com.
"There was no group more hard hit by the dubious practices in mortgage lending than the African-American community," Goolsbee said this week.
The Senate on Thursday passed a landmark regulatory package, the most comprehensive restrictions on banks and Wall Street since the 1930s. President Barack Obama is expected to sign the legislation into law next week and Democrats are hailing the measure as a major victory for the president who has been criticized over the past few months for his management of the economy and the BP oil spill.
"With today's vote in the Senate, the United States Congress has now passed a Wall Street reform bill that will bring greater economic security to families and businesses across the country," Obama said Thursday.
"And that's why I'm about to sign Wall Street reform into law - to protect consumers and lay the foundation for a stronger and safer financial system - one that is innovative, creative, competitive and far less prone to panic and collapse," Obama said.
Meanwhile, Goolsbee said the administration's creation of the Consumer Financial Protection Agency - a key part of the overall legislation - will offer more transparency and better safeguard Americans from dubious practices in banking and other related institutions.
"The majority of African-Americans, some 53 percent, [in 2005] got mortgages that were not standard mortgages. They were sub-prime mortgages and it allowed ... widespread abuse by financial institutions ... and exploited people's lack of understanding of these so-called financial innovations," Goolsbee said.
Goolsbee said mortgage and credit card companies have taken advantage of black consumers more than any other financial institutions, but he insisted that the scheming ends now.
"There have been misleading and abusive practices with credit card companies that made $25 billion a year from penalty fees," he said, "so they turned sneaky practices into a business model."
Under the government's new consumer protection agency, Goolsbee said, "Financial institutions will be held accountable."
Goolsbee added that Obama's new agency will help shield black residents from greedy check cashing centers that charge as much as 20 percent to cash checks for customers - even when some checks are tax refunds from the IRS.
"It's been fairly outrageous," Goolsbee said. Recent studies show that nearly one third of African-Americans with bank accounts also use check cashing centers, and one in five black households don't have bank accounts.
The 2,300-page bill that Obama championed is designed to address regulatory problems blamed for the 2008 financial crisis that triggered the worst recession since The Great Depression of the 1930s. The new agency would simplify financial documents for consumers and help consumers better understand their rights. It will also increase consumer protection against lending abuses.
Obama had a lot riding on the financial regulatory overhaul. He must find ways to convince voters that his ideas are helping Americans improve the quality of their lives as voters prepare for the crucial midterm elections, when Republicans could take control of the House and block large parts of Obama's economic agenda.
It may still be an uphill climb for the president.
According to a new Washington Post-ABC News poll, "public confidence in Obama has hit a new low," with nearly six in 10 voters saying they lack faith in the president to make the right decisions for America and a majority not approving of how he is managing the economy.
The poll said only 43 percent of all Americans now say they approve of the job Obama is doing on the economy, while 54 percent disapprove. Even a third of Democrats are now giving him negative marks.