To fight the tightening of credit that has left many families and businesses without the means to pay their bills, Congresswoman Maxine Waters (D-CA) introduced H. Res. 553 today. The resolution calls on Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner to use their authority and encourage financial institutions to increase consumer and business access to credit.
Congresswoman Waters is particularly concerned that banks and credit card companies have been reducing credit availability to longtime customers who hold accounts in good standing.
Congresswoman Waters said, "Banks were bailed out with the expectation that they would pass that funding along to consumers and businesses in the form of additional loans and lower interest rates. Instead banks have done the opposite. They have tightened credit standards and slashed credit lines, even for customers who are in good standing. This is unacceptable."
Congresswoman Waters cited higher unemployment rates, the rising price of goods, and the need to stretch paychecks further as reasons why consumers need access to credit now more than ever. The Congresswoman is particularly upset that financial institutions are curtailing credit in light of the recent Treasury Department and Federal Reserve banking stress test results. According to the data from the Supervisory Capital Assessment Program, all 19 bank holding companies surveyed have sufficient capital to resume normal lending activities.
"The stress tests gauged whether our nation's largest banks have the necessary capital to lend. According to regulators, all of the banks passed. That means they have the capacity to resume normal lending activities, which entails making additional loans and extending more credit. There are no more excuses. It is time for the banks to start lending again," said Congresswoman Waters.
Original co-sponsors of H. Res. 553 include Louis Gutierrez (D-IL), William Lacy Clay (D-MO), Al Green (D-TX), Keith Ellison (D-MN) and Alan Grayson (D-FL).
Since the initial credit contraction of August 2007, banks and credit card companies have received more than $1 trillion in government assistance, including $750 billion through the Troubled Assets Relief Program (TARP) and nearly $700 billion more through liquidity programs such as the New York Federal Reserve Bank's commercial paper funding facility and the Federal Deposit Insurance Corporation's temporary liquidity guarantee program.
According to the most recent loan survey from the Federal Reserve, consumer and business access to credit has tightened over the past 24 months. Banks have concurrently slashed consumer credit limits and raised the minimum required credit scores on new account holders. These actions penalize consumers who have seen their credit scores reduced as a result of discriminatory lending tactics such as credit profiling.