FinReg's Cheerleaders
Invesyor's Business Daily
Posted 07/26/2010 07:11 PM ET
Media Bias: FinReg is 2,319 pages of unintended consequences for the economy. Yet the media have suspended any critical analysis to cheer "another huge milestone for President Obama," as CBS News gushed.
As with health reform, troubling details of the financial overhaul are leeching to the surface, percolating through the filter of rosy Democratic talking points parroted by the media. Still, the public's been told maybe a third of what lurks inside the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The law — named in a cynical twist after the two lawmakers most responsible for creating the financial crisis — creates a web of councils, bureaus, offices and programs within an already complex structure regulating the finance industry.
It's the biggest change to bank oversight since the Depression, and it's already having negative consequences. Credit ratings agencies have refused to let bond issuers use their ratings until they can get a better handle on their legal exposure under the new law.
When the Associated Press moved a long story called "A piece-by-piece guide to financial overhaul law" across the wires, we held out hope the mainstream media were finally mining details in the law for a critical review. But AP's definitive coverage was in fact incomplete and misleading. The story makes the breezy — and risibly false — conclusion that "the law revamps the mortgage system to protect consumers and discourage risky lending."
In fact, the only thing it really protects is Fannie Mae and Freddie Mac, the congressionally chartered mortgage giants at the heart of the subprime scandal, and Democratic darlings Barney Frank and Chris Dodd, the House and Senate banking panel heads who authored FinReg.
Their bill doesn't include a fix for Fannie or Freddie, which together bought more than $1 trillion in subprime and other high-risk mortgages from lenders and resold them to investors, spreading the risk to Wall Street. When their socially engineered junk loans went bust, the government had to step in and bail them out. Taxpayer liability for cleaning up their toxic books could run as high as $1 trillion.
As for discouraging "risky lending" with new mortgage standards, the law is full of qualifiers and exceptions, such as: "In issuing regulations, the Bureau (of Consumer Financial Protection) shall take into account the need to provide originators adequate incentives to originate affordable and sustainable mortgage loans."
The bureau's real mission is clear: providing "access to fair and affordable credit for traditionally underserved communities."
Tough new underwriting criteria? Please. The law directs the Fed to "revise, add to, or subtract from the criteria that define a qualified mortgage upon a finding that such regulations are necessary or proper to ensure that affordable mortgage credit remains available to consumers."
So you see, the goal of the law is not to mitigate risk through tougher standards. It's still to ensure the "underserved" have access to easy credit, even after all the turmoil "affordable" lending caused.
. |
