THE GREENLINING INSTITUTE
A Multi-Ethnic Public Policy, Research and Advocacy Institute
Contact: Bruce Mirken, Greenlining Institute Media Relations Coordinator, 510-926-4022; 415-846-7758 (cell)
Letter Calls For Treasury’s Share of Settlement to Go to Principal Reduction, Mortgage Counseling, Reclaiming Foreclosed Homes as Affordable Housing
BERKELEY, CALIFORNIA – In a letter sent Friday to President Obama and Secretary of the Treasury Timothy Geithner, a coalition of 19 organizations led by the Greenlining Institute call the just-announced settlement between the Securities and Exchange Commission and Goldman Sachs “disappointing,” arguing that it “does nothing for struggling homeowners.” The letter calls for the Treasury Department’s $300 million share of the proceeds to be used for principal reduction for borrowers who are “under water” due to crashing home values, grassroots mortgage counseling for struggling homeowners, and to allow local nonprofits to purchase and repair foreclosed homes for use as affordable housing.
The settlement as announced contains no aid for homeowners struggling to avert foreclosure.
$550 million, the total settlement amount, represents just one day’s revenue for the giant Wall Street firm, the letter notes. And while acknowledging a need to compensate investors who were victims of fraudulent practices, the letter adds, “It is galling for the most vulnerable victims of this crisis to be ignored while investors — most of whom are in no danger of losing their homes — get paid off.”
The full text of the letter follows:
S.E.C. Settlement Does Nothing for Struggling Homeowners
Dear President Obama and Secretary Geithner,
We are a diverse coalition of community leaders that are working hard to stabilize communities battered by our current recession.
We were surprised to see that the S.E.C. settled with Goldman Sachs for the small sum of $550 million. $550 million is a modest price to pay for the near-destruction of the U.S. economy, especially considering the following:
• Goldman Sachs may have received more than $550 million in bailout funds from the AIG rescue alone.
• $550 million represents just one week’s revenue at Goldman Sachs.
• The CEO of Goldman Sachs made over $100 million — one fifth of the settlement amount — in 2008 and 2009 alone.
Since Goldman Sachs potentially faced a $1 billion penalty, this $550 million settlement appears to save the company half a billion dollars. Given that Goldman’s stock soared when the settlement was announced, investors seem to agree.
While it is too late to undo this disappointing settlement for American homeowners, actions can and must be taken to maximize benefits from it. Therefore, we urgently propose that the U.S. Treasury devote the $300 million it received from the settlement to home preservation efforts aimed at keeping working Americans in their homes. We propose the following allocation of these settlement funds:
1. Half to principal reduction programs for homeowners who are “under water.”
2. One quarter to grassroots homeowner counseling efforts.
3. One quarter to the acquisition and repair of foreclosed homes by non-profit organizations in the hardest hit communities, for use as affordable housing.
In addition, given the extent of harm inflicted on American communities by the housing crisis, we will ask that Goldman Sachs match this $300 million fund to stabilize neighborhoods.
While this $550 million settlement may represent the largest SEC penalty ever paid by a financial institution, it does little to benefit the average American still suffering from greedy Wall Street practices. Not only is it quite small when viewed in context, it does nothing to help America’s homeowners that were victims of Goldman’s fraudulent practices. While it is reasonable that investors be compensated for their losses due to Goldman’s dishonest actions, it is galling for the most vulnerable victims of this crisis to be ignored while investors — most of whom are in no danger of losing their homes — get paid off.
For these reasons, we hope that you will consider our request. In the meantime, we are also requesting a congressional hearing to investigate why the S.E.C. agreed to this sweetheart deal.
Jackie Dupont Walker