Congress is debating a financial regulation bill. Why is Congress ignoring the gorilla in the room? Why is Congress not seeking regulation reform for Fannie Mae and Freddie Mac? These quasi governmental institutions were the leading cause of our current recession.
The recession started with the housing crisis which was caused by sub prime mortgage loans. Fannie Mae and Freddie Mac, along with Congress, encouraged and enabled these loans. Starting with the Community Reinvestment Act of 1977 and extended by such bills as the Federal Housing Enterprises Financial Security + Soundness Act of 1992 banks were required to grant risky loans to people who could not afford them. By 2001 over fifty percent of home mortgages had to meet the requirements set in these acts. It was inevitable that the housing market would collapse.
Yet most in Congress do not think Fannie Mae or Freddie Mac need to be further regulated. Some in Congress say that these institutions will be regulated at a latter date. When Congress kicks the can down the road that means they will never do it.
When Fannie Mae and Freddie Mac granted outrageous bonuses to their executives, Congress ignored it. These institutions have been guaranteed endless bailouts. They are rife with incompetence and corruption. People have protested this for many years. Nothing was done.
Any financial regulation reform is meaningless, if Fannie Mae and Freddie Mac are not included in the bill.
Signed,
The Electorate
Showing posts with label mae. Show all posts
Showing posts with label mae. Show all posts
Monday, April 26, 2010
Tuesday, April 20, 2010
Areas of Concern on Financial Reform
The proposed financial reform bills have four main areas that need to be addressed before there is a final vote on the bill.
A vital part of needed reform is missing from the proposed financial reform bills. Reforms for Fannie Mae and Freddie Mac are not addressed. These two institutions played a major role in our current recession. It would be foolish in the extreme not to include them in a financial reform bill. It would be like going on a diet without addressing your caloric intake.
Wall Street is going to love the proposed liquidity fund. It provides for a permanent revolving bailout. It will encourage risky financial behavior. Risk will not frighten them, because they will not have to face the consequences of their risky behavior. This provision does not prevent bailouts – It creates them!
Some members of Congress are proposing to again separate commercial banks from investment banks. This is actually a good idea. The Glass-Steagall Act (1933) established this separation. The Gramm-Leach-Bliley Act (1999) removed this separation and allowed banks to combine commercial, investment, and insurance services. This created banks that were recently deemed “to big to fail”.
The most alarming part of the proposed legislating is the amount of power that Congress cedes to the Executive branch. Without the approval of Congress, the administration can take over any company that IT deems to be at risk. This is not limited to banks. The Administration would control the operations of these companies. It would set policies, salaries, and the very existence of these companies. I would like to ask Congressional Democrats a question. Would you have granted these vast new powers to the Executive branch if George Bush were still President?
I ask Congress to further consider what needs to be included in a financial reform bill. Do not rush this. Our economy is at stake.
Signed,
The Electorate
A vital part of needed reform is missing from the proposed financial reform bills. Reforms for Fannie Mae and Freddie Mac are not addressed. These two institutions played a major role in our current recession. It would be foolish in the extreme not to include them in a financial reform bill. It would be like going on a diet without addressing your caloric intake.
Wall Street is going to love the proposed liquidity fund. It provides for a permanent revolving bailout. It will encourage risky financial behavior. Risk will not frighten them, because they will not have to face the consequences of their risky behavior. This provision does not prevent bailouts – It creates them!
Some members of Congress are proposing to again separate commercial banks from investment banks. This is actually a good idea. The Glass-Steagall Act (1933) established this separation. The Gramm-Leach-Bliley Act (1999) removed this separation and allowed banks to combine commercial, investment, and insurance services. This created banks that were recently deemed “to big to fail”.
The most alarming part of the proposed legislating is the amount of power that Congress cedes to the Executive branch. Without the approval of Congress, the administration can take over any company that IT deems to be at risk. This is not limited to banks. The Administration would control the operations of these companies. It would set policies, salaries, and the very existence of these companies. I would like to ask Congressional Democrats a question. Would you have granted these vast new powers to the Executive branch if George Bush were still President?
I ask Congress to further consider what needs to be included in a financial reform bill. Do not rush this. Our economy is at stake.
Signed,
The Electorate
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