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StumbleSUN EDITORIAL:
Standing up to banks
New consumer financial protection agency needs a tough-as-nails leader
Sunday, Aug. 1, 2010 | 2:01 a.m.
By allowing mortgage lending to get out of control, the nation’s financial institutions were key culprits in the economic meltdown that left Southern Nevada’s housing market in tatters. With the nation on the brink of a monetary collapse, Congress in 2008 issued $700 billion in federal bailouts to keep banks afloat through the Troubled Asset Relief Program. The banks have begun to regain their health but millions of Americans paid a terrible price for the financial folly on Wall Street by losing their homes, their jobs or both.
The resulting Great Recession made it clear that the country’s financial system was in dire need of reform to protect consumers from predatory loans, hidden fees and other nefarious banking practices that helped produce record home foreclosures and credit card debt. While many consumers brought financial problems on themselves by buying homes or purchasing automobiles they couldn’t afford, the banks did their part to stoke this atmosphere with shady lending practices that were allowed to continue because there was no oversight.
Thanks to sweeping financial services reform legislation that President Barack Obama signed into law in July, such oversight is about to become reality. A centerpiece of the legislation is creation of an independent Bureau of Consumer Financial Protection that is intended to make sure that loans extended to Americans — whether for homes, cars, college or other goods and services — are based on fair and reasonable lending principles.
Many players in Washington have given credit for the idea of a consumers bureau to Harvard Law School professor Elizabeth Warren, an authority on bankruptcies. Warren’s name should be familiar to Southern Nevadans because she was appointed by Senate Majority Leader Harry Reid to the Congressional Oversight Panel monitoring the bank bailout, which she chairs. When she and some of her panel colleagues attended a hearing in Las Vegas in December 2008 to determine whether the bailout was helping local economies, they heard a resounding “no” from those in attendance.
By then Warren was used to hearing horror stories about the banking industry. She had already been recognized as an expert on the damage predatory lending could do to consumers. She once told The Wall Street Journal that “student-loan debt collectors have power that would make a mobster envious.” She told the Senate Banking, Housing and Urban Affairs Committee in 2007 that the credit card market was broken. “A growing number of card issuers increase their profits by loading their credit cards with tricks and traps so that they can catch consumers who stumble or mistake those traps for treasure and find themselves caught in a snare from which they cannot escape,” she told the committee.
She had equally astute comments later that year when she told The New York Times why consumers needed better financial protection. “We have basic safety regulations for nearly every product a consumer can buy, except the ones that ruin them financially,” she said. “We would not be where we are today with home mortgage foreclosures and millions of families in bankruptcy or on the brink of economic collapse if we had had better regulation of financial products.”
It is no wonder that Warren has been tough on banks while on the oversight panel. This is the kind of vigor on behalf of the public that the leader of the new consumers bureau should bring to that position. It is a key reason why Obama should nominate Warren to be that leader and why the Senate should confirm her if she is nominated.
The president should not be swayed to bypass Warren simply because banks and many Republican senators don’t care for her. Warren has proved that she is, in the words of Obama senior adviser David Axelrod, “a great, great champion for middle-class consumers across the country.”
The middle class, which by many accounts is shrinking nationwide, sorely needs a strong, independent advocate to protect consumers so we have a better chance of avoiding a repeat of the recession we find ourselves in today.
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FOS: Good PROGRESSIVE line rant.
Reid has done too much to hurt Nevada and the Country. Its time to get rid of him maybe there is an independant running, but anyone who hasnt had time to go corrupt will do.
And where do you think Harry got his checks.
This article sounds like a Mugabe or Stalin speech.
Why isn't Professor Warren heading up this agency? Better, since this White House regime seems to be big on appointing czars she should be appointed to clean up Big Finance for consumers!
"...I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." -- Thomas Jefferson in his May 28, 1816, letter to John Taylor
Well, I'm a "yellow dog" Democrat and while I don't think Financial Regulatory Reform went as far as it might have in less contentious Congressional days, it's a solid start and I think it'll evolve into a great piece of legislation over the next few years...and I'm hopeful another disaster doesn't hit before then.
I thank the writer of this editorial for being "spot on"
The USA needs tens of thousands just like Elizabeth Warren to investigate, charge, try, and convict those that have destroyed 20% of America's total net worth that had taken over 200 years to create and will take 40 years to recover if the powers in charge do the right thing for the right reason to the right people.
Over 1,100 people went to jail for the Savings and Loan Fraud that cost the taxpayers $140,000,000,000 and will not be fully paid for until 2013.
Very few people have been arrested and convicted over the attempted world's Greatest Fraud. Why?
If government is bad, why doesn't Mr. Angle refuse his BLM retirement check? People who worked for the steel industry and the airlines didn't get their pensions in many cases, or the retirement medical care, but people get their "government" social security and medicare. The private sector failed and government worked.
The lies by the "Liebertarian" columnist for the Arkansas Headquartered paper that: "banks were forced to loan money to poor people, and that created the financial meltdown" is typical talk radio drivel. Lake Las Vegas and countless high rise condos are in BK because of "poor people?" I guess ACORN floated all sorts of loans out there? It is typical of the racist talk radio crowd to blame the poor, minorities etc. for Wall Street's failings. Only one of the top 8 banks bailout was subject to the Community Reinvestment Act. Secondly, financial institutions wanted to loan money to low income people, they weren't forced to as the Hannity's of this world claim. (Pawn shops and payday loan stores in poor neighborhoods? They are there because they can make money there.)
The average foreclosure is a first or second time move-up home, not a "ghetto home."
Who do you want to believe, a house painter like Hannity or a PhD Noble prize-winning economist like Krugman?
I love it. The banks want a say in who is going to head the bureau established to protect consumers from being taken advantage of by the banks. Talk about the wolf guarding the hen house. But you know Ms.Warren is the right person for the job when the banks object so strenuously to her running the bureau.
Hot! Ronald Reagan's Budget Director: GOP policies "Have wrecked our economy." Approximate4ly 30 minutes ago.
VidiVeritas -- amen!
"mred" would agree that it is (was) the responsible choice, in the world of personal finance, to get a mortgage if it was at all possible. For if you had not, the mortgage boat was leaving you behind.
What...no mention of Fannie Mae & Freddie Mac??
That's the proximate cause of the mortgage meltdown...politicians who "own" Fannie Mae & Freddie Mac plus the Community Reinvestment Act of 1993. Follow the corrupt money source to get to the root cause of the whole mess.
The Fannie Mae & Freddie Mac corporations are known in Washington as "the Democrat piggy bank." Just ask Harry Reid and his buddies Chris Dodd & Barney Frank.
-----------------------------------------------
Since government policies are responsible for the current recession / depression. The government should reverse those policies, but that would not bring social justice or rather shared poverty. Since raising taxes has already happened for everyone in the country, all tax rates should be cut in half or the income tax suspended for at least 2 years.
The left that understand national economics know the answer. It is clear, the publisher of this paper is willfully ignorant on the subject of money and taxes. The other alternative is really distasteful. IF we need more regulation then who will tuck the president into bed at night. As the nanny state the government will necessarily be a worse creditor, just look at the abuses of people by the IRS.
JanK writes:
"What...no mention of Fannie Mae & Freddie Mac?? That's the proximate cause of the mortgage meltdown...politicians who "own" Fannie Mae & Freddie Mac plus the Community Reinvestment Act of 1993. Follow the corrupt money source to get to the root cause of the whole mess."
Jan--that's only if you get your talking points from Rupert Murdoch and from nowhere else.
From factcheck.org:
"The Real Deal
So who is to blame? There's plenty of blame to go around, and it doesn't fasten only on one party or even mainly on what Washington did or didn't do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault:
The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.
The U.S. economy is enormously complicated. Screwing it up takes a great deal of cooperation. Claiming that a single piece of legislation was responsible for (or could have averted) the crisis is just political grandstanding. We have no advice to offer on how best to solve the financial crisis. But these sorts of partisan caricatures can only make the task more difficult."
AP
JanK, Barry Ritholz at www.ritholz.com, will pay you or anyone else $100,000 if proof is furnished that Fannie and Freddie caused the financial collapse.
Jump on that JanK and see how you make out. Maybe, you could give "lemons to lemonade Angle" a large political donation.