Finance Bill’s Devilish Details

June 23, 2010 05:31


The devil is in the details of the monstrous new regulatory package, which Democrats hope to pass early next month. They reveal plans to reallocate credit and capital to the Democrats’ political base, while empowering race racketeers like Acorn with slush funds and advisory board seats.

IBD Editorials

Subprime Scandal: Much of the 2,000-page draft of the Democrats’ finance reform bill could have been written by Acorn, and probably was. It has more to do with “civil rights” than consumer protection.

The devil is in the details of the monstrous new regulatory package, which Democrats hope to pass early next month. They reveal plans to reallocate credit and capital to the Democrats’ political base, while empowering race racketeers like Acorn with slush funds and advisory board seats.

The “Restoring American Financial Stability Act of 2010” is, in fact, a massive redistribution scheme camouflaged as reform. Far from reforming easy-credit practices, the bill encourages more of the same reckless, politically mandated lending that brought down the entire financial system in the name of “affordable housing.”

Yes, the bill gives Treasury the power to liquidate banks that pose a threat to financial stability. But it essentially exempts minority-owned banks and those approved by Acorn-style urban organizers.

“The orderly liquidation plan shall take into account actions to avoid or mitigate potential adverse effects on low- income, minority or underserved communities affected by the failure of the covered financial company,” it says.

In other words, zombie banks laden with subprime and near-prime loans may be too PC to fail. Democrats call such immunity from reform “impact protections,” but Republicans aren’t buying it.

Sen. Richard Shelby and other GOP conferees moved to strike the language, arguing that making an exception for minority neighborhoods defeats the whole purpose of reform, which is to protect all consumers against systemic risk.

But Sen. Chris Dodd, who’s running the conference committee with his fellow Democrat, Rep. Barney Frank, shot them down by suggesting that they wanted to deny minorities access to credit.

“The same arguments were made against the Community Reinvestment Act,” Dodd bellowed.

Unfortunately, they weren’t made forcefully enough. Studies show that CRA home loans have much higher failure rates. Such politically mandated lending regardless of creditworthiness is the whole reason we’re in this mess.

Another section of the bill requires the proposed Financial Stability Oversight Council (headed by the Treasury secretary) to consider a zombie institution’s “importance as a source of credit for low-income, minority or underserved communities” before winding it down. So prudent lending is important in the bank exam — unless it conflicts with Democrats’ social goals.

FULL STORY



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