Dodd Frank Update

AJC 5/28/18 article Page B-1, reports “New banking law draws support, some criticism in Georgia”, Congress rewrote The Dodd Frank Banking Bill and Trump signed it into law last week. One criticism is that the new law fails to ensure against “discrimination” in lending and it doesn’t prohibit banks from making bad loans.

In the old days, when all of this worked, banks would limit what they loaned based on the borrower’s ability to pay off the loan. Banks were not under the gun to ensure that racial quotas were met. The cause of the 2008 Mortgage Meltdown was the Community Reinvestment Act of 1993 that required banks to lend to “unqualified buyers” if they were minorities. This worked with HUD Rules that also demanded racial parity. Obama worked as a lawyer attacking banks for possible racial discrimination. This is the scam that resulted in the Meltdown.

The capital requirements in Dodd-Frank were satisfied by low to no interest QE going to banks and lent to day traders to prop up the stock market after the 2008 crash. Dodd-Frank also codified bank bailouts with “wind-down” provisions. None of this was good news for taxpayers, but politicians are famous for gouging taxpayers in favor of special interests like banks.

Congress should have noisily repealed the Community Reinvestment Act of 1993 and I assume Trump has already ended HUD non-discrimination rules. But I’m sure the “Deep State” would keep copies of these for later when we aren’t looking.

The real reason community banks went under was the economy crashed from 2008 to 2016. Obama was “fundamentally transforming” the US into a third-world country. The FHA controlled all the mortgage lending. Small banks had been lending to regional corporate customers who were expanding and after 2008 everything in the private sector contracted.

The federal government still owns Fannie Mae and Freddie Mac to buy all the bad loans from whatever banks. Nothing will change until these lending organizations are privatized and the federal government gets out of the mortgage insurance businesses. Nothing has been done to mitigate the prospect of future mortgage crashes or bank bailouts.

US banking and insurance are caught in the same political trap as healthcare, retirement and education. Costs will rise and there will be no accountability for mistakes, corruption and fraud and individuals will continue to not be responsible for themselves.

The laws of economics dictate that the costs of lending and insuring need to be based on valid risks. If the borrower is not creditworthy they should not be granted any loans. The same is true with healthcare. If the patient can’t or won’t pay their bill, the hospital should be able to release the patient to a charity subsidized hospital. 

Norb Leahy, Dunwoody GA Tea Party Leader