Rep. Maxine Waters on Easing Consumer Debt

When President Obama signed his economic recovery bill in Colorado on Tuesday, it brought the amount of government spending and bailout-loan packages to nearly $2 trillion since last summer, roughly two thirds of the annual federal budget. Obama's focus, of course, has been to stimulate the economy by funding broad expansion and job creation. And the Troubled Assets Relief Program (TARP)—two installments of $350 billion—was designed by the Bush administration and Congress to juice the credit markets and prevent even more foreclosures.

So where is all that money going? That's a little tough to comprehend let alone answer. At the micro level, homeowners are the ones being foreclosed on or, at best, seeing their house values drop. They're watching credit dry up for big purchases like cars, the price of education climb and their debt grow even as they lose their jobs. All of which makes the dollar signs coming out of Washington nice to look at, but it will be a while before that money materializes into actual relief.

Hoping to speed up that process is the outspoken Rep. Maxine Waters. "The taxpayers of America are very, very upset about the fact that they allowed the banks to borrow their money, the taxpayers' money, in unprecedented amounts, billions of dollars," she told the CEOs of the eight Wall Street banks as they testified before Congress last week. She, along with several other members of the financial services committee, accused the executives of having little to show after all the TARP funding. Waters spoke with NEWSWEEK's Daniel Stone about what else the government might do to help average Americans. Excerpts:

NEWSWEEK: Will the wads of government spending, including the latest round of TARP loans, be able to provide tangible relief to consumers?
Maxine Waters:
Yes, it will. But I'm worried that it won't be enough. I'm worried that whatever is done with the TARP, there won't be enough done to reduce interest rates and loan principals. And I think the TARP should come with protection against rates and fees. Consumers need more protection.

What else can you do?
We'll need to have additional legislation that gets back to all that predatory-lending legislation that was never successful in Congress.

What will that legislation look like?
Well, now that the stimulus package has been signed and attention is being returned to the TARP, what we're doing is trying to convey our concerns to institute [more] protection. One member has a credit-card bill of rights and there are several predatory-lending bills that haven't been quite good enough. Also, following the TARP allocation, banks sent out notices limiting credit-card amounts. That's something we're talking about now, too, as we discuss how effective the full TARP allocation will be.

If the goal is really to halt foreclosures immediately, why not use that money directly to keep people in their homes?
Well, the economists are convinced that until you make these banks whole and confident, they won't unlock credit. That argument doesn't really sell to consumers because they don't understand that. Consumers do understand a moratorium [on foreclosures], but the whole Banking Committee and people who know how this works, claim that an approach like that would undermine the whole credit market. If you help people individually and tell them that they don't have to pay, then the banks go further into the hole, locking credit even tighter. And when that happens, there will be no credit for automobiles, student loans, nothing. So the idea of a blanket ongoing forgiveness program or moratorium is not something there's a lot of support for.

What approach do you use when advising constituents?
I'm telling people that they need to fight to save their home by getting a loan modification. The only people I can't help stay in their homes are the ones who have lost their jobs and have no income. Some can't [stay in their homes], so we're fighting to get more low-income housing that's rental and ownership. That's all you can do. You have to talk about it in plain English and in ways that people get it.

How do you do that?
When I'm in committee, I try to frame my question in a way the consumer can understand. I try to talk in a language where people can say, "Yes, that's what happened to me!" because they're the people who need to understand. Other members [of Congress] look to me when their constituents call and say they lost their home. Those are the people my staff is talking to. I have devoted one person full time, as well as my own time to talk, to people just like that. Many people were affected by [predatory lending], so getting them to understand exactly what happened has to be part of the solution.

Do you find members of Congress aware of the micro level—how this spending is affecting individual consumers?
Most members understand there's a foreclosure problem that's hit so many communities. I find that most legislators want somebody to do something about it because they don't know what to do. They don't know what to do when somebody calls them and says, "I'm losing my home." They don't understand the depths and details of how it happened.