Government Shifts Focus to Homeowner Stability - Black Enterprise
Black Enterprise Magazine January-March 2019 Issue

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Now that the Treasury Department aims to use the remaining $400 billion of the bailout funds on debt-entangled consumers and the institutions that can help them reduce their financial burden, less emphasis will be placed on relieving investment banks of devalued securitized mortgages.

In a press briefing Wednesday, Treasury Secretary Paulson said that the Treasury plans to support the capital needs of the non-bank financial institutions that are not eligible for the current capital program, increase availability of car loans, student loans, and credit cards, and achieve more aggressive mortgage modification standards.

This new edict could be beneficial to credit card companies such as American Express Co., which won approval from the Federal Reserve to become licensed as a bank holding company. Although American Express owns two banks already (American Express Centurion Bank, an industrial loan bank chartered in Utah, and American Express Bank FSB, a federal savings bank) this latest approval will give them greater access to bailout funds, allow them to lend more freely, and possibly acquire a deposit-taking bank.

“Given the continued volatility in the financial markets, we want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions,” said Kenneth I. Chenault, chairman and CEO at American Express.

Restructuring debt on Main Street instead of Wall Street is a sentiment that has already caught on in the banking community. On Tuesday, Citigroup Inc. announced they will increase assistance to homeowners who are not currently behind on their mortgage but who are likely to face extreme economic distress.

“In today’s economic environment, Citigroup continues to build on its longstanding efforts to develop new ways to help our customers remain in their homes,” said Sanjiv Das, CEO of CitiMortgage, in a statement.

Citigroup increased its commitment to loss mitigation by reaching out to 500,000 families whose mortgages the company owns. Since 2007, the company has already helped to avert 370,000 foreclosures, representing $35 billion in loans. The company expects this new attempt will result in workouts of an additional $20 billion in underlying mortgage balances.

“It is better to provide debt relief for the homeowners. In the most recent [economic crisis] corporations engaged in the process of pushing loans on potential homeowners,” says William Darity, a professor of economics at Duke University.

Now that the Treasury is shifting gears away from these companies, some of them may actually go under, Darity says. “We need that to happen because that creates a disincentive on the part of banks misbehaving again. The financial sector corporations that created the crisis ought to pay a price, and they should pay a more severe price than the individuals that took out home loans.”

Since many of the problems with the economy revolve around the housing crisis, these measures may be the remedy to head off further problems.

“Property values will decrease further if foreclosures continue to run rampant,” says Muhammad Mustafa, a professor of economics at South Carolina State University. “Freezing foreclosures will have a positive impact on

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Marcia Wade Talbert

Marcia is a multimedia content producer focusing on technology at Black Enterprise Magazine. In this capacity she writes and assigns stories to educate readers about social media; digital integration; gadgets, apps, and software for business and professional development; minority tech startups; and careers in STEM (Science, Technology, Engineering, and Mathematics). In 2012, she received two Salute to Excellence Awards from the National Association of Black Journalists and was recognized by Blacks in Technology (BiT) as one of the Top 10 Black achievers in the tech arena for 2011 at SXSW in Austin, Texas. She has spoken about technology on panels for New York Social Media Week, at The 2012 Rainbow/PUSH Wall Street Summit, as well as at Black Enterprise’s Entrepreneurs Conference and Women of Power Summit. In 2011, chose her as one of 28 People of Color Impacting the Social Web, and through crowdsourcing she was listed as one of BlackWeb2.0's/HP's 50 Most Notable African American Tastemakers in Social Media and Technology for 2010. Since taking on the role of Tech editor in September 2010, she has conceived and produced five cover stories on Technology and/or STEM and countless articles, videos, and slideshows online. Before joining as an interactive general assignment reporter in 2008, she freelanced with Black Enterprise beginning in 2003 while working as the technical editor at Prepared Foods magazine. There she further honed her writing skills and became an authority on food ingredients, including ingredients used in food fortification and enrichment. Meanwhile, her freelancing with Black Enterprise and helped her stay current on issues pertaining to the financial and business welfare of African Americans. As a general reporter for Black Enterprise she attended and reported on the Democratic and Republican National Conventions, where she interviewed Valerie Jarrett, senior advisor and assistant to President Barack Obama and U.S. Attorney General Eric Holder. Marcia has a Bachelor of Science degree in Agriculture with an emphasis in food science from the University of Minnesota, and a Master of Science degree in journalism from Roosevelt University in Chicago. En route to her secondary degree, she served as the editor-in-chief of the Roosevelt University Torch, a weekly, student-run newspaper. An avid photographer and videographer, Marcia is one of several employees at BLACK ENTERPRISE who interned for the publishing company as a college student. She lives in New Jersey with her husband, a food scientist; her seventeen-month-old daughter; and “The Cat”, but still considers Chicago home.