Rehabilitating the economy-wrecking Community Reinvestment Act.
We need more bureaucrats to strong-arm banks into doing the stupid things that got America and the rest of the world into this colossal financial mess in the first place, argues the Obama administration.
Well, the administration didn’t use those words exactly, but in the interests of greater governmental transparency maybe it should have.
That’s because there is no doubt that the Carter-era Community Reinvestment Act (CRA) and other boneheaded government policies helped to create the subprime mortgage bubble that violently burst and that continues to wreak havoc on the world’s financial markets. CRA allowed activists to blackmail lenders into handing out mortgages to people with little regard for their ability to keep up payments.
Yet the Obama administration is now demanding that the bank-killing CRA, which in practice has been used to emphasize a largely race-based version of financial so-called social justice at the expense of sound banking practices, be strengthened.
The administration laid out its counterintuitive position in the Treasury Department’s new white paper, “Financial Regulatory Reform: A New Foundation,” which calls for the creation of a new super-duper-regulator, the Consumer Financial Protection Agency (CFPA).
My American Spectator colleague Joseph Lawler, who has his own doubts about the destructive power of the CRA, has a delightfully simple way of summing up the problems with the law:
“[T]he CRA was either potentially harmful or useless. Does it make sense to include provisions for expanding a harmful or useless measure in a regulatory overhaul?”
When and if the proposal finds its way into draft legislation, its sponsors should consider naming the bill the No Banking Bureaucrat Left Behind Act. Such a title would make sense because apparently the armies of government employees at the Securities and Exchange Commission (SEC), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Commodity Futures Trading Commission (CFTC), Federal Trade Commission (FTC), National Credit Union Administration (NCUA), Office of Thrift Supervision (OTS), along with state and local prosecutors and watchdog agencies and the U.S. Department of Justice aren’t sufficient to protect the nation’s consumers. We must need more pencil pushers.
Another possible name for the measure could be the ACORN Activist Full Employment Act. The name would make sense because such legislation would help to keep the venal poverty predators at ACORN and similar groups such as the Greenlining Institute, National Council of La Raza, Neighborhood Assistance Corporation of America (NACA), and the RainbowPUSH Coalition busy, busy, busy.
The name is also appropriate because activist groups were encouraged to agitate by the CRA, which enshrined in law a kind of lending protection racket. Banking regulators were given the power to make trouble for banks that failed to lend enough money to so-called underserved communities. Spurred on by community organizers, banks that paid enough –whatever that means— got left alone, but banks that didn’t, got their legs broken.
How much money is enough to satisfy the law? Even the Federal Reserve Board can’t say for sure. From the Fed’s online summary of the Act:
“The CRA requires that each depository institution’s record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution’s application for deposit facilities.
Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution’s individual circumstances.”
The Obama administration wants to take this federal law, which is the very definition of arbitrary and capricious, and push it even harder.
Not surprisingly, bureaucrats don’t want to believe that the programs and laws they enforce hurt society. The white paper asserts that “[r]igorous application of the Community Reinvestment Act (CRA) should be a core function of the CFPA” and dismisses critics who say the statute must be weakened to promote financial stability. Critics’ “claims and arguments are without any logical or evidentiary basis,” it says.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online