A New Face

The Washington Times reported on Thursday that Kathy Kraninger has been confirmed as the Director of the Consumer Financial Protection Bureau (CFPB) and will serve for the next five years.

The article concludes:

Meanwhile the CFPB is still facing major legal hurdles.

Some federal judges have ruled that by placing so much power — including an independent budget that Congress doesn’t control — in a single director, the CFPB violates the Constitution. But a ruling earlier this year by the full U.S. Circuit Court of Appeals for the District of Columbia upheld the singe-director structure.

Let’s take a look at the inception of the CFPB. The CFPB is the brainchild of Massachusetts Senator Elizabeth Warren. It was passed as part of the Dodd-Frank Act. The Dodd-Frank Act was Congress’ way of dealing with the housing bubble that caused the recession of 2008. However, the congressional solution was aimed at banks and Wall Street. It made no mention of the role that Congress had played in creating the housing crisis and made no effort to take responsibility for their actions or prevent a repeat of the problem.

In 1995 The Community Reinvestment Act (CRA) was changed, allowing Fannie Mae to purchase $2 billion of “My Community Mortgage” Loans, pilot vendors to customize affordable products for low and moderate income borrowers. Some of the things done to make the loans more affordable were low (or no) down payments and variable interest rates. Fannie Mae guarantees mortgages and then sells them to banks and investors. Banks were forced to issue sub-prime mortgages or pay large penalties. As more people took out mortgages, the price of houses rose quickly.  In 2005, 91 percent of Fannie Mae loans were variable rate loans. In 2004, 92 percent of Fannie Mae subprime loans were variable rate loans. Interest rates rose, gas prices increased, and people could not pay their mortgages. The subprime market collapsed, and foreclosures increased rapidly. Banks stopped making mortgage loans.

There were efforts made to stop this train. On September 11, 2003, The New York Times reported:

Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

…a new agency would be created within the Treasury Department to assume supervision  on Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The Democrats opposed the reform. Barney Frank, a Democrat from Massachusetts, said that it would mean less affordable housing. Melvin Watt, a Democrat from North Carolina, said that it would limit the ability of poor families to get affordable housing.

In 2005, John McCain warned of a coming mortgage collapse. He sponsored S.190 (109th), Federal Housing Enterprise Regulatory Reform Act of 2005. The Democrats blocked it. It was again brought up and blocked in 2007.

Opensecrets.org lists campaign contributions to politicians. Fannie Mae gave generously to insure that it would not be regulated. Some Democrats and Fannie Mae executives had ‘sweetheart’ loans from mortgage companies that were heavily involved in sub-prime mortgages.

So where am I going with this? The housing bubble was created by bad legislation. Bad legislation continues. In August 2016, The New York Post reported:

The Obama administration is doing its best to give the nation another mortgage meltdown.

As Paul Sperry recently noted in The Post, Team Obama has pushed mortgage lenders to offer home loans to folks with shaky credit, setting up conditions for another housing-market collapse.

Wasn’t the last one bad enough?

Credit scores of approved borrowers, for example, have been trending down, even as their debt levels have grown.

The Federal Housing Administration and government-sponsored “independent” lenders Fannie Mae and Freddie Mac have been demanding lower credit standards — just as the feds did starting under President Bill Clinton, in pursuit of the same “affordable housing” goal.

Some borrowers need only put 3 percent down to get a Fannie Mae loan — even if the downpayment is a gift. Fannie also has started up a new subprime lending program.

The Office of the Comptroller of the Currency recently warned that mortgage underwriting standards have slipped and now reflect “broad trends similar to those experienced from 2005 through 2007, before the most recent financial crisis.”

The Consumer Financial Protection Board (and Dodd-Frank) were not related to the cause of the 2008 recession–the recession was the result of bad laws. Both the CFPB and Dodd-Frank need to go away. They are nothing but a blatant example of government overreach.

Small Business Growth Was Killed Under Dodd-Frank

On Friday, Investor’s Business Daily posted an editorial about the impact of the Dodd-Frank Bill on the growth of small businesses in America.

The editorial reports:

A new study released by the National Bureau of Economic Research (NBER), the quasi-private think tank that serves as the referee for deciding U.S. upturns and downturns, shows the damage done by Dodd-Frank to small businesses was severe.

The study, “The Impact of the Dodd-Frank Act on Small Business,” by economists Michael D. Bordo and John V. Duca, goes a long way toward explaining why GDP growth under Obama was a mere 2%, a full third slower than the long-term average.

It’s based on a long-term and well-known dynamic. Small businesses grow faster than large ones, and account for over two-thirds of all U.S. jobs growth. Dodd-Frank’s damage was substantial and persistent.

The editorial explains how the regulations impacted small businesses:

Dodd-Frank made making loans to large companies far more attractive. They did so by new compliance rules that treated small and startup loans as inherently more risky than big-business loans.

In economic terms, Dodd-Frank increased the fixed cost of making a loan to smaller companies. So banks simply stopped lending to them. Overnight, businesses that once had lines of credit lost them. Many closed. Startups could get nothing.

This may sound like a wonky debate, but it isn’t. Dodd-Frank’s destructive lending restrictions destroyed millions of jobs and kept entrepreneurs from creating thousands and thousands of new, wonderful businesses.

And it also explains why, with a few deft strokes of his presidential pen, cutting both regulations and taxes sharply, President Trump has been able to offset Dodd-Frank’s growth-killing rules and restored 3% growth to the economy.

The cutting of regulations and the tax cuts created the economic atmosphere that has resulted in stunning economic growth in the past year. Now if the Federal Reserve will be very careful as it raises interest rates to reasonable levels, we should be able to come out of the slump we were in during the Obama administration smoothly.

You Need To Identify A Problem Correctly In Order To Solve It

Yesterday Investor’s Business Daily posted an article about the slow economic growth  we are experiencing in America.

The article explains:

Republicans, eager to hit the ground running if a Republican president is elected in November, have crafted a plan to fix what the current president broke: the banking system. By replacing the failed Dodd-Frank financial reform with something that works, they’ll go a long way toward fixing our ailing economy.

Dodd-Frank, the massive, 2,300-page law passed in 2010 after the 2008 financial crisis and global market meltdown, was intended to punish Wall Street for its excesses, which supposedly had caused the crisis in the first place. Instead, it ended up putting a wet blanket over the entire financial industry and the economy.

In 2008 YouTube posted a video entitled, “Burning Down The House.” I am embedding the video here in case you have not seen it:


The video explains that the meltdown in the housing market was not caused by greedy banks–it was caused by Congressmen who accepted benefits from people they were supposed to be overseeing. Please watch the video if you have not seen it.

The article at Investor’s Business Daily sums up the solution to the sluggish economy:

So what is the Republicans’ plan? It’s pretty simple.

It would end too-big-to-fail by creating a new kind of bankruptcy for very large banks having more than $50 billion in assets, instead of bailouts. Government loan guarantees would go away. In order to be competitive, larger banks would have to raise more capital — meaning, they would be risking their money, not taxpayers’, when they make loans.

Yes, it would tighten punishments and boost fines for fraud, insider trading and other financial violations. But it would also neuter the Consumer Financial Protection Bureau, which has turned into an oppressive, inefficient regulator of the entire consumer financial market.

Hensarling gets it. He understands that the left’s entire reason for imposing stiff regulations over banking is about control — not about preventing another meltdown.

“The ultimate goal of the left is to turn our large, money-center banks into the functional equivalent of utilities so that Washington can politically allocate credit,” Hensarling said.

The stakes of this reform are enormous. Indeed, many economists believe that the main reason for the economy’s growth path shifting downward, from 3% before 2008 to less than 2% currently, is Dodd-Frank.

Peter Wallison, who sat on the national commission that investigated the 2008 crisis, noted in a report last year that Dodd Frank’s heavy regulatory costs and restrictive lending standards on small banks had “reduced the ability of these banks to finance small businesses, particularly the startup businesses which are the engine of employment and economic growth.”

A report last year by the American Action Forum estimated that Dodd Frank could cost the economy nearly $1 trillion in GDP over 10 years. Reforming Dodd-Frank, it seems, would be a big shot in the arm for the economy.

The voters will decide in November if they want prosperity.

Overregulation And The Little Guy

The Wall Street Journal posted an editorial this morning about the 2010 Dodd Frank law. The law is a mass of overregulation put in place after the financial crisis of 2008 that actually does nothing related to the cause of the financial crisis of 2008. (If you still believe the mainstream media about the financial meltdown of 2008, I suggest you watch the this video.) Dodd Frank is sheer legislative mush that accomplished nothing, written and sponsored by some of the people who caused the problem in the first place. Well, wait a minute, it actually did accomplish something.

The Wall Street Journal reports:

Liberals like Sen. Elizabeth Warren (D., Mass.) are treating the 2010 Dodd-Frank financial law as holy writ because she says it punishes the big banks. But then why is Lloyd Blankfein so content? On Tuesday at an investor conference, the Goldman Sachs CEO explained how higher regulatory costs are crushing the competition.

“More intense regulatory and technology requirements have raised the barriers to entry higher than at any other time in modern history,” said Mr. Blankfein. “This is an expensive business to be in, if you don’t have the market share in scale. Consider the numerous business exits that have been announced by our peers as they reassessed their competitive positioning and relative returns.”

The real problem with overregulation is that it leads to crony capitalism. Dodd Frank is another example of the government passing laws that make it harder for the average American to create and run a business.

Crony Capitalism At Work

It is not news that the Obama Administration practices Crony Capitalism, but sometimes it is news to see how far the Administration will go to destroy a business or industry they have decided they do not like.

Breitbart.com posted a story today about the Obama Administration’s war on the private lending industry: third party payment processors (“TPPPs”), payday lenders, and online lenders. The war, referred to in the Administration as ‘Operation Choke Point,’ is designed to destroy these three industries.

The article at Breitbart.com explains:

According to the Wall Street Journal, the federal initiative now known as ‘Operation Choke Point’ is an outgrowth of the President’s Financial Fraud Task Force, established by President Obama by Executive Order in 2009. It also appears to have been kicked off in secret by the Department of Justice, FDIC, and the CFPB in early 2013 without the requisite statutory authority. Officials at the Department of Justice have withheld information about the program from Congress, though they have eagerly shared details with federal financial institution examiners authorized to supervise and discipline the nation’s banks and related financial institutions.

…The members of Congress warned Holder and Gruenberg that these actions were undertaken by their respective agencies without statutory authority. “Your actions to ‘choke off’ short-term lenders by changing the structure of the financial system are outside your congressional mandate,” they wrote. “With the enactment of the Dodd-Frank Act, Congress acknowledged the need for short-term credit products and did not try to limit online lender’s or storefront operators’ ability to offer such products.”

The article goes on to explain some of the efforts by Congress to obtain information on the program and to fulfill their constitutional responsibility of oversight. Generally speaking, they have been blocked at every turn.

The article concludes:

The Obama administration, by treating Congress with disdain and failing to provide evidence of the statutory authority for its actions, is signaling that it has no intention of stopping. Up next for the administration is the expansion of the tactics used in ‘Operation Choke Point’ to a whole host of industries the Obama administration does not like and has identified for targeting, including manufacturers of guns and ammunition.

When will we get our real constitutional government back?

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