Senator questions Treasury Secretary on impact of the foreclosure crisis and growing student loan debt on economic recovery
WASHINGTON, D.C.–(ENEWSPF)–March 28, 2012. Assistant Senate Majority Leader Dick Durbin (D-IL) chaired a hearing today to review the FY2013 budget request for the Department of the Treasury and to discuss the impact of the foreclosure crisis and our nation’s growing student loan debt on the economic recovery. President Obama’s FY2013 budget request for the Treasury Department is $14.072 billion which includes funding for the Internal Revenue Service and the Community Development Financial Institutions Fund. Treasury Secretary Timothy Geithner testified before Durbin’s Financial Services and General Government Appropriations Subcommittee.
“It’s clear in hindsight that the foreclosure crisis was closing in on the American economy long before we started taking aggressive steps to limit its impact. In addition to programs designed to soften the blow of the crisis, spur economic recovery, and make meaningful reforms to the financial system, we also must focus more intently on preventing future financial crises,” said Durbin.
“I’m concerned that students are being lured into high-interest private loans that will prevent them from participating fully in our economy. Similar to credit card debt, the growth in student loan debt makes it difficult for young Americans to enter the housing market. The housing market cannot fully recover if the next generation of homeowners can’t qualify for mortgages.”
Last week, Durbin chaired a hearing in a Senate Judiciary Subcommittee about the impact that student loan debt – and in particular private student loan debt – has on borrowers. For the past decade, private student loans have been the fastest growing and most profitable part of the student loan industry. The interest rates and fees on private loans can be as onerous as credit cards. There are reports of private loans with interest rates of at least 15% and higher rates are not unheard of. Private student do not come with consumer protection like federal loans such as loan forgiveness and forbearance and flexible repayment options, putting a tremendous burden on borrowers.
In addition to reviewing the budget requests for FY2013, Durbin and Geithner discussed funding for Community Development Financial Institutions (CDFI) Fund which supports community development by providing credit and financial services in targeted unserved and underserved communities (e.g., mortgage financing for low-income homebuyers and non-profit developers). The CDFI Fund awards competitive grants to qualified applicants that demonstrate the best capacity to help distressed communities through sound investment and leveraging of private sector capital.
“I’m pleased to see that the budget request continues to prioritize CDFI Funds,” said Durbin. “Last year this subcommittee held an in-depth hearing on how CDFIs are leveraging small amounts of federal funds to develop affordable housing, retail, small business lending, and other essential community infrastructure in our nation’s most distressed communities. I’ve seen firsthand the tremendous impact CDFIs are having on neighborhoods in Illinois, and I look forward to continuing to work with the Administration to support this important program.”
Durbin and Geithner also discussed the Department’s Financial Crimes Enforcement Network (FinCEN), which investigates financial crimes including identity theft, terror financing, organized crime and Ponzi schemes. The budget requests an additional $21.7 million for FinCEN to complete a major IT investment that will enhance law enforcement’s ability to track criminal financial activity. The project is on-time and on-budget and will be complete by the end of FY2013.