OPEN LETTER TO OHIO US FEDERAL ELECTED OFFICIALS: PROTECT TAXPAYERS BY ENFORCING THE FEDERAL PROMPT CORRECTIVE ACTION LAW

From the Northeast Ohio American Friends Service Committee
April 22, 2009

Many of the largest banks in the nation are effectively insolvent. They continue in existence only because they have received hundreds of billions of taxpayer dollars. The proposed FY 2010 federal budget contains upwards of $750 billion to bailout insolvent banks and other financial institutions. This is in addition to the $700 billion in emergency funding approved by Congress last year plus another $3.3 trillion the executive branch approved in loans and leverages.

The Prompt Corrective Action Law (Title 12, Chapter 16, Section 1831o) was created following the bailout of the Savings and Loan crisis to protect taxpayers. The law mandates that severely undercapitalized banks be promptly put into receivership (i.e., nationalized or democratized).

William K. Black, former senior regulator during the 1980’s savings and loan crisis and current Associate Professor of Economics and Law at the University of Missouri, asserts that both the Bush and Obama administrations have consciously and deliberately violated this law by not taking over insolvent banks. By not doing so, the US continues to pour billions of taxpayer dollars down the bank bailout drain.

We ask that you call on the Obama Administration to enforce the Prompt Corrective Action Law. We ask that you communicate this message through your legislative powers — write a letter, speak out on the floor of Congress, call or organize a congressional hearing, and/or introduce legislation.

Earlier this week, Neil Barofsky, the Inspector General of the Troubled Asset Relief Program (TARP) concluded that federal bank bailout program is “tilted in favor of private investors.” Taxpayers are the losers.

JP Morgan Chase, Bank of America, Citibank, Goldman Sachs, and Wells Fargo Wachovia, the five major US-based banking corporations, hold the vast majority of all known toxic assets. Their speculative financial gambles have imperiled the overall economy, citizens and taxpayers. The Prompt Corrective Action Law should be applied first and foremost to any or all these banks if they are proven to be insolvent.

Present US taxpayers and their descendents cannot afford to bailout insolvent banks. Our federal budget priorities demand that our tax dollars should be spent helping the real economy and real people through investments in jobs, health care, education, alternative energy, and infrastructure.

Laws meant to protect our institutions and society in general should be enforced, not ignored. That includes the Prompt Corrective Action Law.