Monday, May 24, 2010

Financial Reform Bill Will Cause the Next Crisis

In a CNBC interview today,  Sen. Judd Gregg (R-N.H.) said almost exactly what I said in a blog post over the weekend:
"The bill is a disaster because it doesn’t address the fundamental underlying causes of the economic issue, which were real estate and underwriting,” he said. “This bill became, ‘I want to score the most points against Wall Street.’ Most of the initiative of this bill wasn’t directed at solving the problem, but it was directed at scoring political points.”
The new Financial Reform Bill actually enshrines the practice that CAUSED the meltdown.  It establishes a new organization that will force banks to make loans to people who can't pay the money back, in the name of "social justice", setting the stage for a new much larger crisis.

“You’ll basically have a consumer protection agency which decides to go out and in the morning and say, ‘well everybody who’s XYZ should have a loan, even though the local community bank says XYZ shouldn’t have a loan, because if we give them a loan, we know they’re not going to pay back,’” he said. “It’s going to become an agency that defines lending on social justice purposes instead of safety and soundness purposes.”

As I said yesterday:
[The collapse] was actually caused very simply by poor loan underwriting that was a direct result of government mandates to artificially provide homes to people who could not pay for them.  Wall Street simply tried to sell off the bad loans.  Everyone assumed that the government -- through Fannie Mae, etc., would guarantee them as promised.  Surprise:  They didn't, because they couldn't come up with the huge amount of cash to do so.... Note that the current Financial Regulatory Reform Bill does absolutely nothing to address the true cause of the 2008 collapse.  Nothing.  Nothing at all.
Now, the government is "doubling down" to create even more bad loans -- on purpose.  Not only are they doing nothing to fix the problem, they are making the problem much much worse.  It is like they want the economy to fail again.

Here is the interview:

If 0bama were trying to destroy the United States, what would he be doing differently?


1 comment:

  1. Truthfully he is going about it ina very rapid and efficient manner. Shortly before he was elected I thought we might survive another 30 60 years; now I think it is more like 20 30.