American Elephants


CFPB: Forget Prudent Banking Rules, Expand “Fair Lending” Or Else! by The Elephant's Child

Richard-Cordray

The Consumer Financial Protection Bureau (CFPB) was formed as a new (and unnecessary) independent agency of the government responsible for ‘consumer protection’ in the financial sector by the much criticized Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act’s passage in 2010 was a misguided response to the financial crisis of 2007-2008 and the subsequent “Great Recession.” It is an independent agency that is part of the United States Federal Reserve. Investors explains:

In a stunning repeat of the conditions that led to the mortgage crisis, banks are increasing their loan risk to reduce government risk as President Obama steps up “fair lending” enforcement.

The Consumer Financial Protection Bureau has issued a fresh warning to lenders who aren’t making enough prime loans to low-income minorities, to take “corrective action” or face discrimination charges.

Meanwhile, there’s new evidence the quality of loans underwritten by the nation’s largest banks is deteriorating, as lenders weaken credit standards under threat of prosecution.

The bureau has put out a 48-page “Fair Lending Report” which urges banks to review home, automobile, business and student lending data for racial “disparities in pricing (and) underwriting.” It also advises putting staff through racial sensitivity training and to aggressively market loans in recession-torn urban areas. The report mentions “discrimination” no fewer than 51 times, Investors says. It also warns lenders that CFPB regulators, working with federal prosecutors , are launching “targeted reviews” of their loan practices by race  looking for violations of “disparate impact.” I don’t know if they have their own SWAT team yet.

CFPB Director Richard Cordray implied that lending discrimination is rampant.

We are working to remove unnecessary obstacles that too many Americans face in the consumer financial marketplace,” he said in the report. “This includes ferreting out discrimination in credit markets, including the markets of home mortgages and auto lending.”

Examinations are “data-driven exercises,” the report stressed, so lenders had better get their numbers right. “Different out comes” by race are a red flag.

Strange. When Obama was inaugurated, it was widely believed that his administration would be acting to bring the races together. Instead, as the most politicized presidency in history, they have sought to keep their base in line by insisting that anything negative in life is caused by racism. Inequality, they insist is rampant, and due to racism.

The Dodd-Frank bill was widely criticized because it did nothing to address the problem of “Too Big To Fail” bailouts. All those “toxic assets”we heard about were loans made to people who could not afford to repay them, because of Democrat demands that bankers ignore the rules of prudent banking and overlook minimum credit scores to increase home ownership among minorities.

The Justice Department has already filed a $175 million lawsuit against Wells Fargo for alleged lending discrimination based on disparate impact. Wells Fargo has eased their minimum credit scores on some home loans to ‘expand access to credit for low-income home buyers.’ Been there, done that. With unpleasant results, as we all know.

The American Bankers Association has issued a “fair lending toolbox” to its 5,000 members to help them avoid disparate impact probes. It suggests they give a second look to rejected loans to minorities. Credit Unions are also worried. It no longer matters if you have a sound credit-scoring system, or follow prudent banking rules.  What matters is what might be perceived as disparate impact. And politics is about perceptions, not facts.

If minorities have trouble getting loans, the response should be— help in raising credit scores and living within your means— not forcing banks to make riskier loans. That would seem to be common sense.



Are We Sheep, Or Are We Not? by The Elephant's Child

Now pay close attention. Liberals tell us that regulation creates jobs. Pause and allow that to sink in. In the endless debate about how to put unemployed Americans back to work, there is one solution —deregulation— that never gets mentioned by the media, yet if implemented correctly, could provide an almost cost-free stimulus of a trillion dollars or more.  According to the Small Business Administration (SBA), the regulatory burden on our economy is a staggering $1.75 trillion annually.

Last October, Barbara Boxer explained carefully that not only do EPA rules protect the environment, they are an engine of economic growth. Somebody has to do the work of complying with the rules and “industries that provide environmental protection” Boxer’s report says, have “created more than a million jobs.” 54.000 jobs will result from tougher auto fuel economy standards, and as an added bonus, EPA rules provide “business with the opportunity to develop, construct and sell new and cleaner products.” Is that perfectly clear?

On September 30, the Washington Times reported that new greenhouse gas regulations from the EPA will, according to court filings, require the hiring of 10,000 new state level bureaucrats to process permit applications.  At the federal level, it is estimated that 230,000 new hires will be required. Liberals don’t understand why federal jobs don’t count. They have never understood that there in no government money, but only taxpayer money. Government money has no real limits. If they need more, they just raise taxes. You see how it works.

The CEO members of the Business Roundtable were in the nation’s capitol just this last week, trying to explain to members of Congress that regulations were a problem that weighed heavily on business. They listened, but they did not hear. Businessmen have been bringing this message to Washington for nearly four years now, but it does not compute.

During its first three years in office, the Obama Administration unleashed 106 major regulations that increased regulatory burdens by more than $46 billion annually, and nearly $11 billion in one- time implementation costs.  This is about five times the amount imposed by the Bush administration in their first three years. Hundreds more pages of regulations are being added to the Federal Register which stem from the dreadful Dodd-Frank financial regulation statute and from metastasizing ObamaCare.

The regulatory burden harms everyone.  Each regulation involves costs and consequences that are poorly understood by the issuer. Neither Congress nor the Administration keeps track of the number of regulations, their cost, nor their economic impact. During 2011 the Obama administration completed a total of 3,611 rulemaking proceedings, according to the Federal Rules Database maintained by the GAO, of which 79 were classified as “major” meaning that each had an expected economic impact of at least $100 million per year. Regulations adopted in 2011 cost Americans around $10 billion in new annual costs. They don’t have a department for getting rid of excessive regulations, nor anyone in charge, nor any interest in doing so.

Maybe if each new rule had to come back to Congress and be voted on before they took the force of law, something would change.Maybe they need a formal committee for getting rid of regulations. Keep this in mind, and next time you have a chance let your legislators know that you are aware of the problem and looking for action. We can’t just be sheep standing around getting wrapped up in more and more constricting bonds. We’re getting painfully sheared, and we need to take notice.




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