Senator Gregg confirms our suspicions on Finance Reform
We offered our two cents on the Financial Reform bill which passed the Senate last week. Our conclusion: it ignores the underlying cause of the collapse: mortgages being given to people that couldn’t pay them back. Senator Judd Gregg agrees:
“The bill is a disaster because it doesn’t address the fundamental underlining causes of the economic issue, which were real estate and underwriting,” he said. “This bill became, ‘I want to score the most points against Wall Street.’ Most of the initiative of this bill wasn’t directed at solving the problem, but it was directed at scoring political points.”
Providing additional bank regulation won’t keep a collapse from happening again, as long as banks are compelled to issue mortgages to credit risks. In fact, Gregg believes the new regulations will make these types of loans all the more common,
“You’ll basically have a consumer protection agency which decides to go out and in the morning and say, ‘well everybody who’s XYZ should have a loan, even though the local community bank says XYZ shouldn’t have a loan, because if we give them a loan, we know they’re not going to pay back,’” he said. “It’s going to become an agency that defines lending on social justice purposes instead of safety and soundness purposes.”
Sounds like a great plan.