Financial Overhaul Bill passes the Senate…and the buck.
With the help of Republicans Scott Brown, Olympia Snowe and Susan Collins, the Senate passed its financial regulatory bill today. While I haven’t read it yet, the bill is described by the Wall Street Journal as such:
The 1,500-page bill includes an array of curbs on banking and finance, aimed at creating new consumer protection rules, providing more scrutiny of big bank operations, and insulating taxpayers from future bailouts of financial companies. Opponents argued throughout lengthy debate that the measures will over-regulate the financial industry.
While it might address some of the problems that lead up to the financial collapse, it appears to have completely ignored one huge issue: the Community Reinvestment Act. Lest we forget, the root cause of the collapse, before the banks traded anything relating to mortgages, were home loans made to people during the housing boom that could never pay them back. The Community Investment Act, originally signed into law by Jimmy Carter, was created to pressure banks into extending credit to low income individuals. If it is not significantly modified, along with Fannie and Freddie, the primary cause of the collapse will not have been addressed.
Look, no one likes the banks. That’s a given. But the amount of vitriol being spewed at them is disproportionate to their responsibility. Like it or not, their only purpose is to make a profit. The government’s role, however, is to simply legislate the rules that banks operate under. In direct contrast to that role however, the govt. has been actively manipulating the private housing market for decades, in an effort to make sure everyone owned a home. With the passing of the CRA, what used to be the American dream suddenly became a right. Simply put, nothing good happens when the government goes beyond its simple rule-making function and begins to directly influence how the actors play the game. That’s exactly what happened here. Instead of addressing the problem though, the govt. appears to do what it does best: pass the buck.