|This is one half of the Democrats’ brain trust
that came up with the punishing, poorly
thought through legislation known as Dodd-
Frank. Two thoughts: (1) what makes Democrats
think this guy thinks about anything other than
where his next meal’s coming from and (2) Barney
the Purple Dinosaur could’ve written a better law.
‘Puter came across this article in American Banker on the Dodd-Frank legislation’s unintended
consequences. Actually, ‘Puter didn’t come across the article so much as have it pointed out to him by the super-awesome @MushKat, whom you should follow on Twitter if you’re not already doing so.
The Heritage Foundation’s Diane Katz neatly sums up what ‘Puter’s been incoherently rambling about since Dodd-Frank passed, authorizing creation of the horribly misnamed Consumer Financial Protection Bureau. ‘Puter says “misnamed” because CFPB provides consumers protection in the same manner that magnifying glasses protect your retinas from the sun.
You really, truly ought to read Ms. Katz’ thorough and well-written article in full, but ‘Puter figured he could add a little flavor since he’s worked for over 15 years evaluating and purchasing subperforming and nonperforming commercial debt, mostly real estate secured, in the secondary market. ‘Puter seen just about every error an originating lender can make, and he’s got a well-developed sense of what lenders did and did not do wrong in the run up to the Great Financial Debacle of 2008.
So, without further ado, here’s some of ‘Puter’s random thoughts on well-intentioned government regulations that go horribly wrong:
Dodd-Frank is an example of government’s default position that “something must be done,” regardless of whether the something that gets done actually addresses the problem at hand.
After 2008, Democrats turned on Wall Street and banks like coyotes on a wounded rabbit. It didn’t matter whether the Democrats’ legislation actually addressed the crisis’ actual cause so long as Democrats could use the crisis as an excuse to force banks to favor Democrats’ constituencies.
All you need to know about the CFPB is that President Obama initially nominated Elizabeth Squanto Mankiller Hiawatha Warren (Squaw-MA) to be its chairman.
The CFPB was and is nothing more than a convenient mechanism to install hardcore leftist ideologues (most of whom have no clue how the financial industry operates) with power to punish banks and financial companies, not to mention the power to enact soul-deadeningly stupid regulations.
As Ms. Katz notes, CFPB put forth new consumer mortgage regulations which include the concept of a “qualified mortgage” or QM. To be a QM, the mortgage loan must meet strict standards, such as proof of a borrower’s ability to repay.
While the QM regulations do not expressly prohibit lenders from making loans that do not fall within the definition of QM, the regulations have that effect. If a loan meets the definition of QM, the lender gets safe harbor from regulators and outside litigants, meaning it’s nearly impossible to have any liability.
So, put yourself in a lender’s shoes. Would you make any loan that isn’t squarely within the definition of a QM? If you would, you’d be inviting lawsuits from shareholders as well as increased regulatory scrutiny.
CFPB’s consumer mortgage regulations will cause banks to be even tighter with consumer loans. If your credit is at all blemished, you can forget about getting a good interest rate, and if you’re credit history, employment situation or collateral position is at all suspect, you won’t be able to find money anywhere, at any interest rate.
Whom does this affect the most? The selfsame Democratic core constituencies (e.g., minorities, women) that Democrats ostensibly sought to benefit.
Since women and minorities are generally poorer than whites and men, they will disproportionately suffer from this unnecessary constriction of available capital.
Ms. Katz sagely notes that both CFPB and Obamacare are “attempts by Washington to control a complex and dynamic sector of the economy,” and that “both will produce far more harm than benefit.” Exactly right, Ms. Katz.
Democrats should avoid legislating in areas where they have no experience (e.g., business, economics, etc.) and stick to what they do best: spending other people’s money, legalizing weed and enabling freeloaders.