“For some reason, some Republicans in Congress are still waging an all-out battle to delay, defund and dismantle these common-sense new rules.” That was, in a recent weekly address
, President Barack Obama’s all-or-nothing defense of the 2,600-page Dodd-Frank financial “reform” rammed through Congress just after Obamacare was in 2010.
Yet, almost by the day, even members of the president’s own party are coming to realize Dodd-Frank is actually toughest on smaller financial institutions while institutionalizing "too big to fail" for large ones.
Take this Oct. 12 exchange on HBO’s “Real Time With Bill Maher,” not a place where you expect a conservative or libertarian critique on regulation. Certainly not from a Democratic officeholder. Here are the exact words of Montana’s outgoing Democrat Gov. Brian Schweitzer on the show:
“Banks that actually did their job, like in Montana — where we didn’t have banks go upside down, because they made you bring your financials in and they’d only loan you money if they understood your business plan — now, they are the ones that are being penalized. They now have more regulation on them, and it’s more difficult for them to make the loans. The very banks that were doing their job are having a tougher time because of the banks that are too big to fail.”
Fellow panelist Rep. Darrell Issa, R-Calif., who was there to represent conservatives, replied with a grin to Schweitzer, “I knew there was something I liked about you.”
Yet, remarkable as his words were in such a prominent liberal venue, Schweitzer is far from the only community banking advocate, and not even the only Democrat, criticizing Dodd-Frank’s provisions.
As real estate columnist Ken Harney writes
in Inman News, the proposed regulation implementing Dodd-Frank’s Section 941, which stringently defines criteria for a “qualified residential mortgage” — criticized in the first debate by GOP presidential nominee Mitt Romney — also has attracted opposition from “bipartisan groups of 160-plus members of the House of Representatives and 40 members of the Senate.”
This and a similar regulation, now being revised by the Consumer Financial Protection Bureau (CFPB) and other bank regulators, are causing great uncertainty in the mortgage market as the final rules have been delayed until 2013.
Sen. Kay Hagan, D-N.C., stated
at a press conference, “The strict, inflexible restrictions proposed by banking regulators could put home ownership out of reach for many credit-worthy American families.”
To illustrate the diverse opposition to the qualified residential mortgage rule, Hagan and other lawmakers were flanked not just by groups representing banks and credit unions, but also by groups such as the NAACP and National Urban League, which stood united in opposition to the rule as drafted.
And the proposed regulation also shows the flip side of Dodd-Frank, the protection of too-big-too-fail financial institutions. Dodd-Frank has been rightly criticized for hitting just about every business except for the two main entities that we can fairly say did the most to get us into this mess: Fannie Mae and Freddie Mac.
To compound this gross oversight, the “qualified residential mortgage” rule actually tilts the playing field toward them — and the big banks they partner with — by deliberately exempting any mortgage bought by Fannie and Freddie and saying it is de facto “qualified.” Incredibly, the proposed rule suggests a 20 percent down payment for most mortgages, but no specific down payment for those bought by Fannie and Freddie!
The amazingly circular rationale of Dodd-Frank and the regulators is that there is no risk these loans will sour a financial institution since Fannie and Freddie already have the taxpayers at their back. But all this really means is that the qualified mortgage regulation simply diverts even more risk to taxpayers, setting the stage for another crisis.
There has also been bipartisan opposition to Dodd-Frank’s Durbin Amendment, a particularly regressive set of price controls that benefit some of the nation’s wealthiest retailers
at the expense of consumers. The price controls on what banks might charge merchants to process debit cards has resulted in the virtual extinction of free, minimum-balance checking accounts.
And legislation to repeal it has even attracted the co-sponsorship
of Democrats such as Obama’s own hand-picked chairman of the Democratic National Committee, Rep. Debbie Wasserman Schultz, D-Fla. Kind of hard for Obama and his supporters to argue that she is a Wall Street shill!
Yet the Obama administration rigidly refuses to concede that any provision of the law needs to be repealed or eased. The closest it came to any relief from Dodd-Frank was when Obama signed the Jumpstart Our Business Startups (JOBS) Act in April, slightly broadening exemptions from some of Dodd-Frank’s provisions that apply to publicly traded companies.
And no matter the bipartisan opposition from Congress, bureaucracies in Dodd-Frank — such as the CFPB, the Financial Stability Oversight Council and the Orderly Liquidation Authority — are specifically designed to lack accountability to Congress.
The CFPB, for instance, bypasses congressional oversight by getting its funding directly from the Federal Reserve, another government entity not regarded as a paragon of transparency and accountability.
To top it off, Obama denied the Senate even minimal say over the CFPB by illegally installing
its director, Richard Cordray, into power in a so-called “recess” appointment in January while the Senate was in pro forma session.
This is why my organization, the Competitive Enterprise Institute, along with the 60 Plus Association and the Texas community bank State National Bank of Big Spring, have filed a lawsuit
to restore this oversight required by the U.S. Constitution.
Even Democrats are recognizing that until Dodd-Frank is reined in, the American economy will never be restored to its full potential.
John Berlau is director of the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute. He is the author of the book “Eco-Freaks.” Read more reports from John Berlau — Click Here Now.
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