The Folly of Financial Reform

I come bearing bad news.  Reform of our financial services industry is going to be a failure.  Leave aside the preconceived notions that politicians will come up with faulty or halfhearted regulations, that they are writing bills in cahoots with the big banks or conversely ACORN & Co. or that the Obama administration in general is anti-business.

While these ideas may all have merit, the reason that financial reform will be disastrous is that all legislation points towards dealing with symptoms rather than addressing the root causes of our financial collapse. While of course the narrative in the MSM centers on greedy “fat cat” bankers taking big risks and predatory lenders taking advantage of hapless borrowers, the fact of the matter is that in every aspect of this crisis government was the major enabler.  Ironically all financial reform centers around giving government more power.

Consider housing.  As we know, under the CRA and due to the “activities” of ACORN and subsidization from our taxpayer-owned siblings Fannie and Freddie, banks granted mortgages to borrowers far riskier than they would have in an uninhibited mortgage market.  That one of the innovations to meet the demand for mortgages was, for example, the adjustable-rate mortgage which reset to sky-high rates after a specified amount of time was not predatory but rather the natural way for banks to compensate for the massive incremental risk being taken by lending to uncreditworthy borrowers.

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Tags: ACORN, bailouts, Barney Frank, Chris Dodd, CRA
Posted Feb 13th 2010 at 8:16 am in ACORN, Congress, Economics, Politics | 7435880 Commentshttp://biggovernment.com/amellon/2010/02/13/the-folly-of-financial-reform/The+Folly+of+Financial+Reform2010-02-13+16%3A16%3A35Andrew+Mellon

Support for Big Government a Bad Bet for the GOP

Following a positive reception at the 2009 Conservative Political Action Conference (CPAC), the Poker Players Alliance, a million-member strong poker advocacy group, has announced plans to return to CPAC this year.  This announcement mirrors and complements the ongoing ascendancy of limited government conservatism within the conservative movement, and it bodes well for the future of conservatism.

From the late 1990s until 2006, the conservative movement was increasingly influenced by some who wished to expand the power of the then-GOP-controlled federal government.  These big government “conservatives” wanted to use the power of the federal government to address various social issues, including even stopping Americans from playing online poker.  Fortunately, rank-and-file conservatives have been working overtime since the 2006 and 2008 election losses to restore conservatism’s true soul — liberty, free markets, and less regulation — and this is leading to a resurgence in the movement.

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Tags: Big Government, House Financial Services Committee, limited government, Poker, Poker Players Alliance
Posted Jan 4th 2010 at 3:03 pm in Congress, Culture, Economics, Politics | 51418155 Commentshttp://biggovernment.com/rmuny/2010/01/04/support-for-big-government-a-bad-bet-for-the-gop/Support+for+Big+Government+a+Bad+Bet+for+the+GOP2010-01-04+23%3A03%3A34Rich+Muny

The Permanent TARP: Too Big to Fail as Permanent Federal Policy

A must read piece by Peter Wallison in today’s Wall Street Journal:

It’s hard to imagine a worse piece of financial regulatory legislation than the bill Barney Frank and the administration put before the House Financial Services Committee last month. But Sen. Chris Dodd’s effort, introduced last week, clears this hurdle

Much attention has focused on the fact that his “Restoring American Financial Stability Act” differs from the administration and Frank proposals by creating an entirely new agency to function as a “systemic regulator” of nonbank financial institutions, instead of the Federal Reserve. Far more important, however, is the regulatory and bailout powers it gives to the government. Here the Dodd bill follows the same flawed ideas advanced by the administration and Mr. Frank, but in some ways make things worse.

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Tags: Barney Frank, Chris Dodd. financial services regulation, Fannie Mae, federal guarantee, financial bailout
Posted Nov 17th 2009 at 1:07 pm in Congress, Economics, Justice/Legal, News, Politics | 3247022 Commentshttp://biggovernment.com/publius/2009/11/17/the-permanent-tarp-too-big-to-fail-as-permanent-federal-policy/The+Permanent+TARP%3A+Too+Big+to+Fail+as+Permanent+Federal+Policy2009-11-17+20%3A07%3A55Publius

Exclusive Book Excerpt: Fannie and Freddie’s Starring Role in the Housing Debacle

Despite the few voices of caution, risk and leverage had become a national fixation, embraced both on Wall Street and in government. The SEC and the Fed, the main regulators in charge of monitoring the buildup of risky assets on the banks’ books, together with the rating agencies, were the modern-day equivalents of Nero fiddling as Rome burned.The fire in this case was the massive and rapid buildup of mortgage debt on the balance sheets of the banks; by 2006 it was approaching $1 trillion and heading higher without so much as a peep from the traditional watchdogs.

Still, the risk taking and leverage went beyond the brokerage houses and the banks. The GSEs, Fannie Mae and Freddie Mac, were in the game as well. By now, Fannie and Freddie had fully and completely conceded their original mandates to the whims of the Washington political class, which demanded “affordable” housing for all, even those who couldn’t afford it. The politicians were giddy with Fannie and Freddie’s conversion from staid mortgage banks to subprime lenders that would make Angelo Mozilo, the CEO of the largest subprime lender in the markets, Countrywide Financial, envious.

It was an evolution that took years in the making. As HUD secretary, Andrew Cuomo boasted in one report in the late 1990s that the new mandates he was imposing on Fannie and Freddie to ramp up subprime lending “could be of significant benefit to lower-income families, minorities, and families living in underserved areas.”

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Tags: 'Friend of Angelo', adjustable rate mortgages, Alan Greenspan, Andrew Cuomo, Angelo Mozilo
Posted Oct 29th 2009 at 5:45 am in Congress, Economics, Exclusives, Featured Story, History, Politics | 2239445 Commentshttp://biggovernment.com/cgasparino/2009/10/29/exclusive-excerpt-fannie-and-freddies-starring-role-in-the-housing-debacle-inflate-housing-bubble/Exclusive+Book+Excerpt%3A+Fannie+and+Freddie%27s+Starring+Role+in+the+Housing+Debacle2009-10-29+12%3A45%3A25Charles+Gasparino

Did SEIU Throw ACORN Under the Bus?

On Wednesday, the House Financial Services Committee held a hearing on the proposed Consumer Financial Protection Agency (example #12,567 that government’s solution to any problem is more government.) Appearing on a panel of self-appointed ‘consumer advocates’ was Anna Burger, political director for SEIU, a.k.a ACORN’s big brother.

Rep. Patrick McHenry (R-NC) used his question time to ask Ms. Burger about ACORN. She drops a stunner, “SEIU has cut all ties to ACORN.” Watch the video below:

Of course, don’t believe SEIU has actually ‘cut ties’ with ACORN. Their operations are simply too interwoven for that to be true. Still, you know ACORN’s in trouble when SEIU has to publically dissociate itself from them. Kind of like your big brother or sister saying, “Yeah, I grew up with him and he was a pretty good kid at times. But, I don’t talk to him now.”

Anyway you parse it…Ouch!

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Tags: ACORN, acorn scandal, Anna Burger, consumer advocates, Consumer Financial Protection Agency
Posted Sep 30th 2009 at 8:37 pm in ACORN, Big Labor, Congress | 1071842 Commentshttp://biggovernment.com/capitolconfidential/2009/09/30/did-seiu-throw-acorn-under-the-bus/Did+SEIU+Throw+ACORN+Under+the+Bus%3F2009-10-01+03%3A37%3A10Capitol++Confidential