Valley View vs. Greenville
Cars and Parts Springfield Swap Meet
Carroll Commencement
Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2009 > September > 08 > Entry
Guest column: Bankers are tying us to railroad tracks again
This column is written by Richard Stock, director of the Business Research Group at the University of Dayton.
If you own a home or saved for retirement, you got hit by a train this last year when the collapse in the financial markets destroyed housing and stock values.
The collapse in the financial markets was linked to uncertainty regarding the true value of subprime mortgage loans. As of August 2009, more than two-thirds of all foreclosures are still tied to those subprime loans. Fifteen percent of subprime loans are in foreclosure, while just 3 percent of all prime mortgage loans are in foreclosure.
For years, consumer groups had warned that fraudulent practices in the subprime mortgage market were creating problems for the borrowers and the neighborhoods in which they lived. They proposed modest common-sense reforms at both the state and federal levels.
Here in Ohio, and at the national level, bankers successfully stopped those reform efforts. Like the villain in the silent movies, they tied the consumer to the train tracks and walked away. They did so because they were making money hand over fist on those mortgage products.
Today, the Consumer Financial Protection Agency Act is pending in Congress. This legislation would streamline financial consumer protection that is currently fractured between seven federal agencies (and regulated by more than 20 laws) into one office, the Consumer Financial Protection Agency.
The protection agency’s sole mission would be to protect consumers by preventing discriminatory, deceptive or fraudulent loans; ensuring products are fair and suitable to the buyer; and providing transparent, uniform enforcement. The agency would examine the safety of credit products, features and practices, no matter what kind of lender offers them.
This is the kind of oversight that would have stopped the reckless lending that has scarred the Dayton area. It is what we needed five years ago, and it is what we need now.
President Barack Obama put the basic rationale for the act quite simply: “When you buy a toaster, if it explodes in your face, there is a law that says your toasters need to be safe. But when you get a credit card, or you get a mortgage, there is no law on the books that says if it explodes in your face financially, somehow you are going to be protected.”
These days, bankers are once again battling against the reform effort. They argue that the proposed relationship between state and federal regulation will make compliance costly and complex. They used this same argument to stop state legislation in the past, arguing they preferred regulation at the national level.
Now that regulation would be at a national level, it is somehow “too complicated.” Further, the bill is structured so that states have flexibility in putting an end to unsavory practices before they can even reach the national level, thus protecting all of us.
Bankers are saying the proposed agency creates another layer of bureaucracy that we don’t need. Actually, the proposal would consolidate and streamline consumer protection. It would have consumer protection staffers from relevant federal agencies working in one place.
Putting the consumer protection staff and functions into one agency would reduce the burden on banks, not increase it.
So here we are again. We are lying on the train tracks, waiting to be hog-tied by the same financial interest groups that brought us the Great Recession of 2009, waiting on the train to run us down. It’s time to be your own hero. Call your representative in Congress and tell him or her to vote for the Consumer Financial Protection Agency Act.
Permalink | Comments (8) | Post your comment | Categories: Economy, Guest Columns
Comments
By Brian
September 8, 2009 8:58 AM | Link to this
When you buy a toaster, if you stick a fork into it and it explodes in your face, there should not be a law requiring the toaster to be safer. Similarly, when you get a credit card, if you abuse it, there should not be a law on the books that protect you. Most of the people whose credit cards exploded in there faces abused their cards. Teach these people to not use credit cards unless they have the cash available to pay the bill.By John
September 8, 2009 10:08 AM | Link to this
What Brian says is probably true. But, his comments don’t refute what Dr. Stock was commenting on. Yes, there are those that don’t use financial products wisely. That is a different, and relevant, conversation than the important conversation Dr. Stock brings up about lenders who target the consumers with low teaser rates to get them in a loan which will eventually have rates that jump to a high and unaffordable rate which was not revealed to the consumer at the time of purchase. That is fraud. Like the splurge who uses credit cards unwisely, this should be stopped. Second, the conversation about irresponsible consumers should not put the conversation Dr. Stock brought up about saving taxpayer dollars through a concerted effort to “consolidate and streamline consumer protection.” in the dark or out of the way. I hope to see more of all these conversations: the need to have a good oversight mechanism for purveyors of money and a way to “teach”, as Brian says, people who don’t use credit wisely, a better way to handle their finances.By kurt
September 8, 2009 3:53 PM | Link to this
The banking crises was caused the the social enginers of the democrat party, that believe that everybody should own a house, even if your on welfare. Bush and McCain warned them, but Dumbama and Barney Frank said no, if your job is collecting a shopping cart full of cans, then you get a house.By bobby
September 8, 2009 5:39 PM | Link to this
Dr. Stock makes good points. The amount of money the financial industry has given to Congress as campaign contributions and lobbying is ludicrous.By Bill
September 8, 2009 7:15 PM | Link to this
kurt - that isn’t true. It in fact was G.W. Bush that made home ownership a pillar of his domestic agenda. And if you’ve lived out west in the past five years you’d know that it was the tens of thousands of brand new homes that were being built and then bought by novice investors who thought the music would never stop on all of their flips. Not to mention the tens of thousands of homes being built that never stood a chance at being bought and lived in since the supply was allowed to grossly outpace demand. Quit blaming things on one political party - both were negligent in their inaction and willingness to allow this to spiral out of control; both parties have succumbed to special interests and lobbyists - all in the name of greed.By Philman
September 8, 2009 7:53 PM | Link to this
Bill you must be living in a Cave constructed out of old Dayton Daily newspapers, go to u-tube and put in subprime coverup, and see foryourself Barney Franf, Chris Dodd, & Maxine Waters LYING about Fannie Mae & Freddie Mac, saying they are doing just fine, during the debate when the Republicans are trying to put some corrective measures thru,to stop the impending CRASH. don’t trust me see the c-span video yourself…By Bill
September 8, 2009 10:31 PM | Link to this
^ and you must not get out of Dayton much. You didn’t acknowledge anything I just said as you’re apparently blinded by your one-sided ideology that doesn’t allow you to see all sides. You are naive if you think a few people who couldn’t really afford their $100k mortgages are to blame for the real estate meltdown. They certainly played a part but their role pales in comparison to the over-developed areas out west. Typical of the small-mindedness I’ve experienced in this little town.By riverat
September 9, 2009 7:38 AM | Link to this
Seven hundred billion in TAXPAYER bailouts the TAXPAYER should be stockholders in the banks that were bailed out!! How much is the next bailout going to cost?? Here we go again!