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Inouye on American Financial Stability Act

Sen. Daniel Inouye issued the followed statement Thursday, May 27:

I am pleased to share with you that the U.S. Senate passed the Restoring American Financial Stability Act last week to dramatically reshape our nation’s financial system in favor of consumers, small businesses and working families. This represents the most dramatic overhaul since the 1930’s.

Our goal, in concert with President Obama, was to tackle the financial abuse and unchecked greed and recklessness of Wall Street which two years ago, shattered millions of American lives, eliminated about eight million jobs and trillions of dollars in savings and investments.

Hawaii was, by no means, immune – the economic disaster, created by Wall Street’s cavalier actions, was upon us like a tsunami. Our unemployment rate went from 4.1 percent in 2008 to 6.7 percent in 2010, and our foreclosure rate more than doubled over the past year.

Family savings were lost, and familiar businesses – large and small – shut their doors. Hotel occupancy rates dropped, resulting in decreased state revenues and a record-breaking 2-year deficit of $3.3 billion. Social services were curtailed. Government employees and school children were furloughed. Although the origin of the “bad acts” was more than 5,000 miles away, it wreaked havoc on all aspects of our local economy. Something had to be done.

The Restoring American Financial Stability Act will hold Wall Street accountable, instituting strong consumer protections, preventing reckless risk-taking and ending taxpayer bailouts.

It includes:

Strong Consumer Protections: A new Bureau is established to provide consumers with information to make smart financial choices.

* It requires banks and credit card companies to provide clear, understandable information/terms for credit cards, loans, and IRA’s. It prohibits abusive practices by payday lenders, and hidden fees and penalties on credit cards. Consumers will no longer be forced into arbitration when they have a dispute with their lenders. And, the fees charged to small businesses for accepting debit cards must be reasonable and proportional to the costs incurred.

* Homeowners will receive additional protections against incomprehensible mortgage/loan contracts with punitive “fine print” clauses. They can now receive free credit reports which will include credit scores. It will also prohibit mortgage lenders and loan originators from accepting “hidden” payments for steering homeowners into high-cost loans, and will create strong underwriting standards to ensure borrowers have the ability to repay their loans.

No Taxpayer Bailouts: Taxpayers will be protected from bailing out large financial institutions, and will force Wall Street to pay for its own mistakes.

Advanced Warning System/Transparency: The measure creates an advanced warning system to be on the lookout for troubled financial institutions and systemic risks posed by large investment firms to help prevent our nation from being brought to its economic knees again.

* It will protect taxpayers and buffer the financial system from excessive risk-taking in the derivatives market.

* It will provide investors with more protections and give shareholders a greater voice. Tough new transparency rules will be implemented for credit rating agencies to better protect investors and businesses.

These past two years have been difficult for Hawaii’s families, who until the economic bottom fell out, knew how to save for a home. You’d save to send your children to college, plan for retirement, even save for a trip to Disneyland or Las Vegas. It’s been a struggle.

With the passage of this measure, and the infusion of federal stimulus resources into Hawaii’s economy, I am optimistic that as our economy begins to rebound, brighter days are just over the horizon.

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