Although February 14 is typically remembered for Valentine Day, this year that date brought new findings on the cumulative costs of the Great Recession – $13 trillion in cumulative losses in household wealth and high unemployment are the result of the Great Recession, according to a new Government Accountability Office (GAO).
Earlier research by the Center for Responsible Lending found that the spillover effects of foreclosures wiped out nearly $2 trillion in family wealth. From 2000-2010, African-American family wealth dropped 53 percent, and Hispanic families lost 66 percent. By comparison, average White household wealth dropped only 16 percent. The foreclosure crisis and resulting economic downturn have turned back the clock on previous wealth gains, especially in communities of color.
The GAO report was performed at the request of the Senator Tim Johnson (SD), chair of the U.S. Senate Banking Committee, and Rep. Michael Capuano (Mass., the ranking member of the House Subcommittee on Housing and Insurance.
Responding to the report’s findings, Capuano said, “I thank the GAO for this comprehensive report. Millions of Americans lost their homes to foreclosure, Millions more lost retirement savings and too many Americans found themselves unemployed. . . Any costs associated with implementing Dodd-Frank pale in comparison to the trillions of dollars in losses that have already occurred. Congress must ensure that Dodd-Frank is implemented comprehensively and effectively so that the tools are in place to prevent another crisis.”
Despite the independent, non-partisan GAO findings, Consumer Financial Protection Bureau (CFPB) opponents insistently call for changes to Bureau, the centerpiece of Dodd-Frank Reform. These critics either do not know or are ignoring how the Bureau returned $425 million in consumer refunds and levied another $70 million in fines for abusive financial practices.
Nor would these critics likely acknowledge that new CFPB rules will ensure that no mortgage borrower will be given an unaffordable and unsustainable loan. Thanks to CFPB, each lender is now required to determine and verify borrowers’ ability to repay before the loan is issued. Additionally, consumer-friendly changes in mortgage servicing means borrowers will no longer incur costly surprises with their loans or be given a runaround by a servicer.
Had CFPB and these mortgage rules existed before the housing crisis hit, communities of color would not have been financially devastated. Every consumer can be encouraged by the Bureau’s actions to increase greater transparency in financial services, coupled with common sense rules of the road. America’s families need nothing less.
Responsible businesses have recently begun speaking up in defense of CFPB. For example, John Arensmeyer, founder and chief executive of the Small Business Majority, recently said, “The financial industry wrote its own rules for too long. Honesty and transparency are not too much to ask from institutions that helped run the economy into the ground. Lawmakers – many of whom talk a lot about protecting small businesses – should be the first in line asking for more accountability.”
The U.S. Senate is charged to advise and consent on presidential nominees. On Valentine’s Day more than half – 54 in all – wrote to President Obama to express their strong support for the CFPB and Director Richard Cordray, advising, “One of the most basic lessons learned from the Great Recession was that the failure to adequately protect American consumers has consequences not only for individuals and families, but also for the health of America’s economy. . . A bipartisan majority of Americans support the agency as currently constituted, and so do we.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at: Charlene.email@example.com.