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Common Cause: Are Financial Bailout Dollars Being Misspent?

February 12, 2009

Washington, D.C. - As CEOs from the nation's largest banks testify before Congress about the almost $200 billion in bailout money they have received, the non-partisan group Common Cause has released a report saying some banks have not used the money as it was intended. The funds were supposed to increase lending to families facing foreclosures or to small businesses trying to stay afloat. According to the report, however, lending by U.S. banks dropped overall by 1 percent in the last quarter of 2008, with the 10 largest bailout beneficiaries seeing a $46 billion drop in their outstanding loans.

Common Cause concludes that instead of bailing out homeowners, the banks spent the money on themselves. Ben Wilcox, executive director of Common Cause Florida, says these banks need to be held more accountable for taxpayer dollars.

"We found the money was used for capital for the banks and in some cases for executive bonuses or for lobbying. However, it was meant to help the people with these mortgages who really need some assistance or they're going to be out on the street."

More than 500,000 foreclosures were filed in Florida in 2008, a more than 400-percent increase since 2006.

Wilcox says local public officials need to get involved to hold banks accountable and to protect Florida families. Spokesmen for banks argue that times are tough for them, and they cannot be expected to bail out people who do not have good credit.

Because banks have tightened their lending rules instead of providing new loans to families facing predatory interest rates and foreclosures, more families are in trouble now, Wilcox says.

"Money is just not available unless you have credit that is so good the banks view it as a win-win situation. That's exactly the problem that the first round of bailout money was intended to address."

Stopping the foreclosures will help halt the nation's financial meltdown, Wilcox says, adding that public dollars should be spent in the public interest.

"Where's the accountability and where have our tax dollars gone? This is a serious economic crisis we're in. We need to hold these people who received this bailout money accountable, and make sure that it is being spent to help real people."

Gina Presson , Public News Service - FL