Could deregulation of banks put the 98% in jeopardy again?
By Sparta Live | March 12, 2018 6:40 am
Democratic Dialog – By Debra Wines
In June 2017, the House of Representatives passed legislation that would roll back the rules for the banking industry that were put into place after the financial crisis of 2008. We all heard at the time the words “Too Big To Fail,” while taxpayer funds were used to bail out several large financial institutions. Yes, I know President Obama bailed out the automobile industry with loans using taxpayer funds, and those companies paid the government back every dime. These are two separate issues. The financial industry, which includes banks, mortgage companies, and some insurance companies, along with Wall Street, had a good gambling racket going for several years. Their house of cards finally collapsed, and the people who were hurt the most by this failure were just regular people trying to live the American Dream.
During the time leading up to the 2008 financial crisis, several factors contributed to what happened. The banks and Wall Street were not the only culprits. Major corporations had taken advantage of deregulation of their industries, along with NAFTA, and the ease of shipping jobs to Asia and Central and South America, the American workers suffered the consequences. People who had good-paying jobs, found it relatively easy to get a mortgage or refinance their homes at inflated rates using questionable tactics by mortgage lenders. The housing industry was booming all over the country, but especially in cities and states with viable industries, at least at the time.
Banks and mortgage companies were making money by bending the “rules” so people could afford that new house or refinance the one they had using inflated figures. A great many people were given low interest rates on “special” mortgages with the understanding that after an average period of five years, the interest rate on their loans would “probably” increase, and that would be up to the mortgage lenders’ discretion and the market at the time. Mortgages were being sold left and right to different banks and financial groups. The buyers were being told that it was no big deal but a common practice in the mortgage industry. Yet, to many people it seemed rather odd that within one or two years of getting these loans, the lender could change several times until consumers had no idea who they were working with anymore, and that nice person who wrote up your original loan was no longer involved and couldn’t or wouldn’t answer any questions you had. This situation left a great many people feeling as if they were suddenly swimming in a pool filled with sharks out for blood.
Was the consumer to blame for what was going on? Yes, to some extent. Senator Elizabeth Warren stated the other day on the floor of the Senate, most people buy one, two, perhaps three houses in their lifetime. It is a very unique and often confusing event for the average person. We can educate ourselves, study interest rates, and ask questions, but most people may not know what questions to ask, or they trust their banker or mortgage lender to provide them with current and correct information so they can feel as if they are making informed decisions. In reality, it was more like playing a shell game, and the American consumer was the “mark.” Then, jobs were being lost. People couldn’t sell their homes for what they owed, and their mortgages were “underwater.” The housing bubble exploded.
In the aftermath, Congress passed the Dodd-Frank Bill, in 2010, regulating financial institutions to avoid another financial meltdown and stop the fraudulent handling of mortgages. Some banks and mortgage companies were forced to pay fines, along with paying some customers who were the victims of their actions. Sadly, the damage had been done to those customers, and financial recovery has been difficult. At least, at the time, the federal government was doing something to help those affected and preventing another financial disaster.
As so often happens when government steps in to fix a problem, somewhat successfully, and things improve, the industries that got their hands slapped want to go back to the practices that got them and the consumer into trouble in the first place. The banking industry, financial institutions, and Wall Street still have lots of money and have been making profits, even with these regulations in place, but they want more, and they have been lobbying Congress and the Trump administration to get those regulations removed or, at the very least, reduced. So, here we are again. It has been almost 10 years since the regulations have been in place, and Congress seems to think some of those regulations should be lifted because the lobbyists for the banks, financial companies, and Wall Street are shoving money in their direction.
Republicans and some Democrats are very excited about The Economic Growth, Regulatory Relief and Consumer Protection Act, S.2115 because they consider it a good bipartisan agreement. We haven’t seen a great deal of bipartisan cooperation in the last several years, and I understand the sense of amazement regarding this situation. I’ve read a dozen different articles and opinions about this bill, and I will say there are some things that might be helpful to the smaller/community banks, credit unions, and the consumer that have been written into this bill.
I do have a concern about the Consumer Protection part of this bill. Mick Mulvaney, the director of the Office of Management and Budget (OMB), was recently put in charge of the Consumer Financial Protection Bureau. His comments concerning the CFPB have been extremely negative, and he has been promoting the end of the CFPB because he thinks it is unnecessary. The fact that he has ignored the recommendations of the bureau to limit the interest rates that certain loan companies, like payday loans charge their customers, is disturbing. In many cases, these loan companies are no better than neighborhood loan sharks with no rules or regulations to protect the consumer. I haven’t seen the details of the Consumer Protection part of the bill. If it does the same thing the CFPB is supposed to do, then perhaps it would be redundant to have both. In that case, I would think keeping the CFPB would be better as an independent entity that would include that specific part of S.2115. Unfortunately, with Mr. Mulvaney’s attitude to the 98 percent of Americans, I would not trust him or, for that matter, anyone else in the Trump Administration to head the CFPB.
My problem with this proposed deregulation bill is there are several other situations and hundreds of thousands of human beings who need the immediate attention of Congress, much more than the banking and financial industries, who are still functioning and make record profits. We can’t keep putting infrastructure, immigration, gun control, saving Social Security and Medicare/Medicaid, along with affordable health care, on the backburner. I know these are “hot-button,” issues and those are just off the top of my head.
Our Congress’ approval ratings have been in the cellar for too many years. I believe a major reason for this is because too many of them have ignored the needs and desires of the 98 percent of the American people for far too long and have done nothing but dance around issues during non-election years and do more for the corporations and top donors than they do for the people who have voted them into office. I am not absolving the Democrats because many of them are becoming beholding to their “corporate sponsors,” too.
It is up to the American people to raise their voices and demand our elected legislators listen to us and act accordingly. We can no longer stand by, wring our hands, and pray that the people who work for us, will start doing what is best for US! We need to stop getting distracted by “alternative facts,” a chaotic administration in the White House, certain legislative leaders on both the state and federal level who come up with laws, and new legislation that do nothing to improve our lives, but in essence chip away at the very foundation of not only the “American Dream” but our Constitution and our Bill of Rights.