LAS VEGAS (AP) - Nevada has quickly deteriorated from a boomtown
to a community on the brink of economic disaster, and a federal bailout of financial institutions has done little to reverse the trend, banking and housing experts and politicians told a congressional panel Tuesday.
"In short, our economy has gone from the fastest growing in the
nation to amongst the worst," state banking commissioner George
Burns testified at a meeting of a panel charged with reviewing the
use of the $700 billion Wall Street rescue fund.
The meeting was the first outside Washington for the five-member
panel. It comes a week after the group released a report raising
questions about the effectiveness of the treasury's bailout program
and its lack of transparency.
The members said they chose to travel to Las Vegas at the urging
of Sen. Harry Reid, D-Nev. Few places have been hit as hard by the
credit squeeze and the foreclosure crisis. Only the Democratically
appointed members traveled; Sen. Judd Gregg, R-N.H., and Rep. Jeb
Hensnarling, R-Texas did not attend.
"We need to know how the Wall Street bailout looks from here.
Has it worked?" asked panel member Damon Silvers, associate
general counsel for the AFL-CIO.
The answer from those in attendance was a solid no.
In her comments, Rep. Shelley Berkley, D-Nev., of Las Vegas says
"there is no discernible impact" in Nevada from the bailout
She said regulators are "over compensating" for years of lax
lending by tightening requirements for borrowers. Consumers with
good credit and steady incomes cannot get loans, choking off home
purchases as well as auto sales, she said.
Regulators are "putting their thumbs down on the banks," she
A $250 billion capital injection program has not yet helped
small, community banks that could be in a strong position to begin
lending money, said Bill Uffelman, president of the Nevada Bankers
The program hasn't decided on appropriate guidelines for
eligibility for the funds. Uffelman said smaller institutions
weren't getting the assistance so quickly offered to the large
financial institutions whose near-failure prompted the federal
"It seems to be a matter of too big to fail versus too small to
matter," he said.
Uffelman assured the panel that banks were trying to work with
distressed homeowners to modify the terms of mortgages and prevent
However, homeowners in the audience and two experts pointed to
the tangled process of modifying loans as a primary source of
Gail Burks, the president of Nevada Fair Housing Center, said
her nonprofit receives 600 calls a day from homeowners seeking help
avoiding foreclosure. She said a typical loan modification takes
about 200 hours of staff time.
Burks said such modifications should be streamlined and made
mandatory for lenders that accept federal aid money.
Reid later told reporters he supported mandatory modifications.
He also endorsed a 90-day moratorium on foreclosures to give
homeowners, "breathing room."
The experts said they expected Nevada's economy to get worse
before it gets better. University of Nevada, Las Vegas economics
professor Keith Schwer said he expected the state's 7.6 percent
unemployment rate to continue its climb, likely reaching 10
Schwer also noted that approximately half of Nevada homeowners
owe more on their home than its current value. If these conditions
persist, it's a recipe for more foreclosures.
"That's a great risk, if the economy does not pick up," he
(Copyright 2008 by The Associated Press. All Rights Reserved.)