The Consumer Financial Protection Bureau was created simply to give consumers a fighting chance against rapacious banking practices that trashed our economy and depleted the wealth of countless Americans. It monitors the financial markets for risks to consumers, handles consumer complaints, promotes financial education and enforces existing financial laws.
The sad fact is, here we are five years out since the economy sunk under the burden of toxic loans and other dubious practices. Banks were bailed out; Wall Street is doing just fine now, thank you. But most of us are still living with the wreckage caused in large part by atrocious banking practices: Foreclosures scar numerous neighborhoods, and equity has been drained out of homes.
What we need is a "fighting chance" against the government's rapacious power grab.
I left these comments:
Statist government apologists continue to peddle the Big Lie to power their big government agenda. But, all of the facts point to government as the primary culprit in the financial meltdown.
No, I don't mean alleged "deregulation." I mean the massive regulation and political interference in the banking and mortgage industries. The Fed, FDIC, CRA, Fannie & Freddie and their implied federal mortgage guarantees, the legally protected rating agency cartel, FHA, SEC, FASB accounting regulations, Sarbanes-Oxley, and the politicians' "affordable" housing crusade that pulled it all together into a perfect financial storm are the culprits. Government regulation and political intervention into the markets greatly increased under Clinton and Bush, causing the crisis. Obama's policies exacerbated the problems, dragging out and weakening the recovery.
The idea that "rapacious banking practices"--greed--is to blame is so dopey and childish as to be embarrassing. Greed has always existed on Wall Street, in banking, and every other walk of life. Yet, we are to believe that suddenly and inexplicably, greed rose up in the late 1990s and 2000s to trash the economy, overturning time-tested sound lending standards and turning home mortgages from the soundest type of loan into a crap-shoot. GIVE ME A BREAK! Yet we get more, not less, government control: Dodd-Frank, named after two of the leading culprits!!
Fortunately, the truth is out there. Thomas Sowell (The Housing Boom and Bust) and, especially, John A. Allison (The Financial Crisis and the Free Market Cure) are two good sources. Allison ran BB&T for 3 decades, including through the buildup to and during that entire crisis. It's a fascinating inside account of how politics corrupted and sunk the economy.
Related Reading:
How a Banker Avoided Ruin by Cleaving to Ayn Rand's System of Ethics, by Mark Hemingway
4 comments:
Here's what I heard within the last day or two on NPR about the rating agency cartel.
Decades ago under gvt. protection the cartel gave reliable ratings to those who were considering dealing with financial entities. The cartel was paid by those seeking reliable ratings. Then came the Xerox photocopy machine. The cartel knew everybody would photocopy and share ratings and not come to them for business anymore. So they asked the financial entities to pay then instead. The financial entities said, fine, we'll pay as long as you give us good ratings. So they got good ratings clear into the 'Great Recession'. Good ratings became unreliable only when the financial entities started swindling everybody in the 1990's nd 2000's.
Have you caught wind of anything like that?
Mike: I activated about this just yesterday, and will be posting about it in the next day or two. Briefly, here are the facts. The rating agencies S&P, Fitch, and Moody's operated in a free market until the SEC got involved. Prior to that, these agencies rated securities and charged buyers for their reports. Then, the SEC passed a regulation mandating the agencies to charge only security issuers. The SEC further designated these three as NRSROs ("nationally recognized statistical rating organizations") and mandated institutional investors to use only these NRSROs. The result was an oligopoly shielded from competition coupled with the perverse incentives created by the inverted fee structure. My sources are Allison, Forbes, and Sowell.
To top it off, these agencies must be licensed by government, making them dependent on the government for their survival. In a free market, rating agencies that compromised their integrity and public trust by engaging in behavior that created conflicts of interest (like relying on the issuers of the securities they rate for their fees) would quickly be supplanted by more trustworthy rivals. Even NPR acknowledged that this trio is a government-protected cartel.
Thanks.
I actually wasn't sure I got NPR's stuff straight, listening on the car radio while driving. But NPR DID say the agencies had always been g-p cartels, but paid by buyers, as you said, then went to securities issuers for their grub upon the advent of Xerox and immed. danced the issuers tune, thus, the 'Great Recession'.
This, to me, suggests that regulation is supposed to be good, until private economics start messing it up (in this case, the regs. weren't even there yet, contrary to NPR's claim). Then, we need more regs. to deal with that 'til pvt. econ. messes that up, and on.
This is only one example of why I think it's safe & reasonable to be immed. suspicious upon seeing or hearing the letters, NPR.
Yea, the bureaucrats can do no wrong. After all, they're acting for the "public good." Those greedy private businessmen are always messing up the public servants' grand plans.
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