January 19, 2007

Remarks of Sen. Christopher J. Dodd to the 10th Annual Operation PUSH Wall Street Economic Summit

It's an honor for me to be invited to speak you today at this, the 10th Anniversary of the Wall Street Economic Summit. Reverend Jackson, you should take enormous pride in the success of this event, and the growth of the Rainbow Push Wall Street Project. Your efforts over the years have helped millions more Americans achieve their dreams and aspirations. These are my first formal remarks since becoming Chairman-elect of the Senate Committee on Banking, Housing, and Urban Affairs. I'm proud and pleased to be delivering them at this gathering. Let me also acknowledge some of the other distinguished speakers and guests who are gathered here this morning, including: Rev. Floyd Flake, a friend and former colleague from the House of Representatives; Reverend Al Sharpton; John Taylor of the National Community Reinvestment Coalition; and Maurice Coleman of Bank of America. I am not unmindful that this summit takes place just six days before our nation will celebrate the 78th birthday of Dr. King. I know of no better way to honor Dr. King's life and legacy than this gathering. Were he here today, I think Dr. King would be pleased, indeed, to see so many notable Americans from so many walks of life joining together to find new ways to bring hope and opportunity to those of our fellow citizens who have known too little of either. When Dr. King and President Kennedy asked young Americans to serve the cause of freedom and justice, I was among those who answered in the affirmative. I joined the Peace Corps as a young man. I lived and worked in a small village in the Dominican Republic. I worked side by side with people who had a different ethnic heritage, a different nationality, and a different language than me. I was very much in the minority. Yet, I was accepted into the community. We all brought different abilities and experiences to our common work. And together, we achieved significant things. We built a road, a school, and several homes. In that small village, I learned many important lessons that have stayed with me during my life in public service. One of those lessons is the power of diversity. America's diversity is one of her greatest strengths. It's one of the reasons I am so confident about the future of our nation. We can compete and succeed in the global economy to the extent that we utilize the diverse talents that lie within our own borders. It is an incredible competitive advantage that our nation possesses in the global marketplace. This summit in many respects mirrors the power of America's diversity. It brings leaders from all walks of life - the faith-based community, the government, Wall Street, and the advocacy community - together in the spirit of cooperation to exchange ideas and build coalitions that seek to expand economic opportunity for those who are often forgotten. It is a model of cooperation -- one that my colleagues in Congress would be well-served to emulate. Voters in November sent their elected leaders a message: put aside the partisan bickering and get to work on meeting our nation's most pressing challenges. I for one couldn't agree more with that message. As the new Chairman-elect of the Senate Banking Committee, I am here to tell you that my commitment to my constituents and to the citizens of our nation is to do all I can to create more prosperity and opportunity for more Americans. That task is of no small importance. Our free nation is in many respects built on our free market economic system. Indeed, the promise of America is that hard work and thrift form the path to progress and prosperity. Therefore, America's financial system should allow all Americans the means by which their work and thrift will build greater wealth and security. It should not strip wealth and lock hardworking men and women into an endless cycle of debt and financial uncertainty. When that happens, people lose a chance to lift themselves up. Worse, they lose faith that our financial system will work for them. And when people lose faith in the fairness of the financial system, they lose faith in the political and social institutions that rest upon that system. They begin to feel excluded from the opportunities that they believe are their rights as Americans. Our capitalist economic system is the most powerful economic force the world has ever seen. Last year, the GDP of the United States was approximately 13 trillion dollars. That is a staggering number B by far the largest on the planet. Through wars, a depression, recession, financial scandal, and terrorist attacks, our national economy has continued to grow. It has allowed countless Americans an opportunity to achieve economic success: to start a business, buy a car, send a child to college, or own a home. We have made enormous progress in our nation B in the form of higher living standards, better health care, greater homeownership opportunities, and other indicators. And many of you in this room are due a measure of credit for that progress. Yet, as we survey this great nation, I don't think anyone can truly say that everything is going well in America, and that we don't need to be concerned about our future. Halfway around the globe, brave Americans are fighting and dying in a war that was based on faulty intelligence. Even the President's own advisors now say that this bungled misadventure in Iraq has made America less safe. That war has now cost three thousand American lives - not to mention hundreds of billions of American tax dollars that we will never be able to invest in health care, schools, lower taxes, and other investments in our nation's future. Here at home, people are working harder, earning less, and paying more for necessities like housing and energy. Too many of our leaders seem to be engaged in political fights with each other - instead of engaged in efforts to bring people together and move the country forward. Across our nation, too many parents look in on their sleeping children and wonder if they will inherit a lesser life in a lesser land. These are not times that cry out for maintaining the status quo. On the contrary, they call for new and bold solutions to persistent problems. In the area of financial services, meeting the challenge of change means first and foremost strengthening the fundamentals of economic growth. By that I mean ensuring that financial institutions are run in a safe and sound manner; promoting fiscal and monetary policy that is geared for long-term growth and stability; and working to ensure that our capital markets remain the most transparent, fair, liquid, and competitive in the world. But these steps, taken alone, are not enough to rekindle America's economic promise. We must address what I call the "opportunity gap" that keeps millions of Americans from fully and fairly participating in our free market economy. This gap is of no small consequence. It goes to the heart of who we are as a country, and where we want our country to go in the 21st century. I view it as a moral imperative that every America citizen be given the opportunity to improve his or her life-condition by improving their economic condition. But we can only do that by first acknowledging that the playing field is not level for every one. We must acknowledge that individual success in our economy requires more than just strong, transparent capital markets, a resilient financial service industry, and market forces. It requires access and it requires opportunity. I believe in capitalism, and I believe in free and fair markets. But the mechanics of our markets - much like the mechanics of our government - do not always work efficiently or effectively. And when the market fails to work as it should, it creates outcomes that can adversely affect our nation by adversely affecting certain segments of our population. In our financial services markets, that adverse impact is demonstrated by the continuing lack of access millions of Americans have to mainstream financial services, products and capital. Most people take for granted their ability to bank at an insured depository institution. But for many Americans, going to a bank or credit union is a luxury they=ve never known. In fact, the FDIC estimates that as many as 10 million households have little or no relationship to banks, thrifts, or credit unions. The financial "mainstream" for these customers is the check cashing shop down the block, the payday lender at the neighborhood strip mall, or the money-wiring location in the back of the convenience store. These businesses overwhelmingly tend to be found in lower-income neighborhoods or in minority-communities that are underserved by mainstream financial institutions. For the residents of these neighborhoods, the lack of access has staggering costs. The price to obtain basic financial services - getting a hard-earned paycheck cashed, sending money to a loved one back home, or paying a gas or electricity bill - can cost certain customers more - thousands of dollars over the course of a lifetime -- because of where they live and because they lack access to mainstream, lower-cost, high quality financial products and institutions. Those extra dollars could otherwise go towards retirement savings, the down payment on a first home, paying a child=s tuition or purchasing a car to get to and from work. This "opportunity gap" also exists in the mortgage lending industry. Nothing is more emblematic of the fulfillment of the American Dream than buying a home. Homeownership means more than just securing a financial asset; it=s a symbol of achievement. It's the source of financial security and stability that also heightens one's sense of community, religious and civic involvement. In communities throughout America, millions of hard-working, bill-paying, law-abiding residents can't find a mortgage they can afford - if they can find one at all. According to the Center for Responsible Lending, 2.2 million families with subprime loans made since 1998 have faced or will soon face foreclosure because of predatory mortgage lending practices. In best-case scenarios, victimized homebuyers end up paying thousands of dollars more than they should due to unnecessarily high rates and fees and hidden back-end costs. In the worst instances, homebuyers are slowly robbed of their homes= equity until they, and their families, end up in default and foreclosure. In fact, foreclosures will cost homeowners as much as $164 billion in lost wealth, mostly in home equity that has been or will be stripped away. For these consumers, the American Dream can truly become a nightmare. And again, the costs of this kind of "sub-prime" and "predatory" lending are disproportionately borne by minority and lower-income homebuyers. Home Mortgage Disclosure Act (HMDA) data revealed that in 2005 almost 55% of black home buyers and 46% of Hispanic borrowers were issued high-cost mortgages. By comparison, 17% of whites got such high cost loans. Even after accounting for factors like credit history, analysts still cannot explain these disparities. What we do know, however, is that many of those who were issued high-cost mortgages were qualified for more affordable, market-rate loans. By one estimate, 14 to 20 percent of those who obtain high-cost mortgage would qualify for a better-priced lower cost mortgage product. And Freddie Mac has calculated that 30% of sub-prime borrowers whose loans they hold could have qualified for a standard, prime mortgage. But the opportunity gap does not just exist in terms of the provision of financial services and products. It also exists in how our financial assets are managed. In the corporate context, Wall Street and corporate America remain captive to an institutionalized culture that undermines access and opportunity. The glass ceiling may not be as low as it once, but sadly it remains. In some places the term "promoting diversity" seems more a catch phrase than an actual call to action. Last year, the GAO released a study on trends in management-level hiring and diversity initiatives in the financial services industry. The report revealed that over the 11-year period from 1993 to 2004, African-Americans seeking to break into the management of U.S. financial services firms had increased by just a single percent B to a mere 6.6% of the management of those firms. What the report really revealed is the obvious - that there are still far too few Stanley O'Neals, Ken Chennaults, and Bob Johnsons in the executive suites and board rooms of Wall Street and corporate America. The lack of access and opportunity for minority participation at the highest levels of management within our financial services community has its own costs. It's at the management level of these firms that the key investment management, marketing, subcontracting and minority outreach decisions are made. Diversity within the management ranks can increase opportunities for minority money managers to land public pension fund dollars, improve small business lending opportunities for aspiring minority entrepreneurs and assist minority business owners seeking procurement opportunities. So diversity among the ranks of management in the financial services sector is not only the right thing to do. It's also the smart thing to do. Because it's good for business. My friends, as I said earlier, I am a believer in the free market system. And just as equally, I believe that our free market system can be a tremendous engine for creating a prosperous and secure future for our people. But these times demand more than business as usual. They require a candid assessment that we urgently need to reform our nation in critical respects. We need to reform the way we educate our children. We need a sensible energy policy that does not pollute the planet or rely on oil from unstable and hostile nations. And we need economic and financial policies that give each and every American who is willing to work hard a stake in our nation's financial future. America is still the best place in the world to make money. If we can discover and open new markets in the farthest corners of the globe, then sure we can find a way to successfully do business in the untapped markets that lie within our borders. That is why I am pleased today to be joining with Reverend Jackson and others in establishing a working group on how we can work together as Americans to close the opportunity gap. This summit is invaluable. But we need to do more. We need to come together - from the private sector, the public sector, houses of worship, and elsewhere - and really focus our energies on how to expand opportunity. And as the incoming chairman of the Senate Banking Committee, I pledge to do more. The time is long past for business as usual. I intend to use the chair and gavel with which I have been entrusted to try to help do that. In that regard, I want to announce a series of measures aimed at reducing the "opportunity gap" and expanding access and opportunity. First, I plan to establish a working group on "Ways to Expand Capital Access and Opportunity." This group will bring together public and private community leaders B corporate executives, civic leaders, state officials, and some of America's best and brightest minority business leaders B to discuss and decide upon steps that we can take together to expand opportunity and access in our economy. Because as Americans we can all agree that the only barriers to advancement that should exist in this great land of ours are the limits of one's dreams. Second, I intend to hold a hearing in the coming months on diversity in corporate America and the positive impact that diversity can have on companies= bottom lines. That hearing will look at what, if any, progress has been towards promoting diversity in the executive suites and boardrooms of our country and also examine the opportunity minority money managers have manage public pension funds, the prevalence of subcontracting and procurement opportunities to qualified minority businesses, and public and private efforts to promote business lending to minority entrepreneurs. I also intend - as I have said on previous occasions - to hold a hearing on a host of issues that affect not only lower-income Americans and those in minority communities, but all American consumers. In particular, I intend the Committee to examine credit card and mortgage lending practices, wage and salary stagnation among working families, disparity issues, affordable housing, and financial literacy, to name just a few. Finally, I intend to encourage my colleagues in the Congress, particularly those within Democratic leadership, to make issues of access, opportunity and economic empowerment a central theme of our efforts in this new Congress. The notion of expanded access and economic opportunity should not merely be a focus of the Senate Banking, Housing and Urban Affairs Committee, but instead of all committees under Democratic leadership. I pledge to work with each and every one of you in this room who share my commitment to creating a deeper, broader prosperity for all Americans. I want to learn from you about what we can do together - lenders, regulators, religious institutions, and non-profits -- to give people the financial skills they need to become better financial shoppers. I want to work with you to ensure that products like credit cards help consumers get ahead rather than shackle them with endless debt. I want to join you in asking if our regulatory agencies are doing all they can to protect borrowers from usurious rates and pernicious terms for credit. And I want to hear from you about whether statutory changes may be necessary to close this opportunity gap that is keeping America from moving forward as it should. In closing, allow me to make just one more point: change is not easy. Change is hard. Dr. King surely knew that. But as Reverend Jackson himself once said, nothing ever worth accomplishing is easy. And believe me, closing the opportunity gap by creating a more inclusive financial system is a goal very much worth accomplishing. It is, in my view, a matter of vital national importance. Closing this gap is not a Democratic or Republican goal. It is not a goal of the public sector or the private sector. It is not a goal of the political left or right. It is a goal we all share and cherish as Americans. And working together - as Americans - I have no doubt at all that it is a goal we can achieve in our time. Thank you.