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Consumer protection expansion hides effort to grow government
The financial collapse of 2008, while perhaps far from most Americans’ minds today, was considered then the worst economic downturn since the Great Depression.
Yet unfortunately, it was that collapse that swept into power a government like the one we now have where the White House and both houses of Congress are controlled by Democrats.
Back then, newly elected President Barack Obama appointed then Representative Rahm Emanuel as his chief of staff. And Rahm Emanuel was known for making the statement, making the popular statement: Never let a serious crisis go to waste.
Very popular at that time because they never let a serious crisis go to waste. At one of those crises this New Democrat administration followed, their advice was the financial collapse. They used the financial crisis as an opportunity for a major expansion of government.
In 2008, Democrats wasted no time to ascribe the financial collapse to business greed and insufficient regulation of banks and other financial institutions, at least that’s what they said.
By 2010, the 2300 page Dodd-Frank Act was passed with no Republican votes in the House and only three in the Senate.
It added 400 new regulations on financial institutions included in the tsunami of these new financial regulations was the creation of a new independent agency, the Consumer Protection Financial Bureau.
This agency originally the brainchild of Senator Elizabeth Warren, was conceived with her view shared by most Democrats on the far left, that any disparities in financial results between black and white Americans must be due to racism and discrimination.
As always, in the view of progressives to fix any and every problem is that an all powerful bureaucrat somewhere here in Washington, DC is needed to level the playing field.
Thus from the passage of Dodd-Frank till today, our financial institutions, banks, securities firms, credit unions, payday loans, etc., etc. all fall under the purview of this Consumer Financial Protection Bureau, which we can call the CFPB, and they must submit to its scrutiny and its oversight and now never let a crisis go to waste.
Those philosophers of “we don’t let any serious crisis go to waste” are back in power and the CFPB, has just announced sweeping new changes, sweeping new changes in what they call in quotes.
“Supervisory operations to better protect families and communities from illegal discrimination.” So now firms that are under the purview of this CFPB, they must make available to the agency. They’re in quotes, again, “processes for assessing risk and discriminatory outcomes, including documentation of consumer demographics and the impact of products and fees on different demographic groups.”
We might summarize this as financial market oversight gone woke totally woke because we have to ask ourselves, can a government bureaucrat really determine why a banker did or did not make a loan?
And we have to ask ourselves, should the heavy hand of government be involved here at all?
Maybe we should remind ourselves of some of the realities from the financial crisis of 2008.
According to the work of American Enterprise Institute, Peter Wallison, the crisis was not the result of insufficient regulation of businesses, but government excess. It was too much government.
Wallison identified government mandated affordable housing goals in 1992 as part of the problem that we experienced in 2008.
Those 1992 mandates that the two giant government-backed mortgage companies, Fannie Mae and Freddie Mac, that they had to set a quota of 30% of all mortgages that they acquired from mortgage originators to be targeted to low and moderate income borrowers.
And they began then to lax the processes: the rules over lending. By 2008 these quotas were up to 56% and in order to meet the quotas, lending practices were dramatically relaxed: down payment requirements dropped from 10% to 3%. Credit scores didn’t even matter. In fact, it really didn’t matter, the worse your score. It seems like the more money you got.
And so the debt to income requirements for borrowers were also relaxed.
And with the collapse of lending standards, housing demand and prices went through the roof.
And then the bubble exploded. But who suffered the most? Well, we know. And per Pew Research, they had a headline. Blacks and Hispanics have borne the disproportionate share of both job losses and housing foreclosures.
During that time, the low income Americans that government keeps saying that they want to help the most are the ones that keep getting hurt the most. When people keep thinking that the answer is to expand government. And now today, Democrats are back at it.
The new CFPB director is gearing up to use his almost unilateral power to show he knows better than business. He knows better than the marketplace. He knows what’s good for consumers. So surely, once again, those who will suffer the most will be those that are struggling, those that are low income citizens. Those that need access to capital most.
Well, that’s who will suffer unless, of course, Republicans win the House and the Senate in November. And they stop these insidious new rules from ever being enacted.
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