Posted on 09/14/2009 5:27:35 PM PDT by Kaslin
Regulation: A year after Lehman Bros. went bankrupt, Washington plans sweeping new reforms of the financial markets. Based on what's been revealed so far, our leaders have learned nothing from that crisis.
Yes, Wall Street made mistakes — real doozies, as it turned out. And Lehman wasn't alone in taking risks it shouldn't have. But calls to "reregulate" the financial markets, as made Monday by the White House, are wrongheaded. Bad government, not Wall Street,caused the crisis — not a popular sentiment, but true nevertheless.
The crisis had its roots in innocent-sounding changes made to the Community Redevelopment Act during the Clinton administration. Those changes not only encouraged banks to lend to credit-unworthy customers, they basically forced them to do so. Those that didn't meet CRA standards could be denied the right to expand their lending — or even to merge with another company.
The CRA used Fannie Mae and Freddie Mac, two government-sponsored enterprises that funded the Democrats' massive homeownership scheme, to boost homeownership among the poor.
(Excerpt) Read more at ibdeditorials.com ...
“Any bank that didn’t take part could find itself in big trouble.”
....they would be accused of “racism”
The best way to regulate anything is to simply let them suffer the consequences of the decisions they make. With kids it’s call tough love. As long as a kid, or a bank, or a stock firm thinks they will be bailed out they will make decisions that are markedly different from what they would have made without that assurance.
They set a terrible precedent when they chose to bail out some failing enterprises and not others. We’ve yet to see the outcome of their meddlesome interventions.
Lenders were threatened by ACORN, and by civil lawsuits, and even by some threat of criminal action, to MAKE BAD LOANS!
However, the lenders were assured that Freddie and Fannie would absorb most of the risk, a short time after origination of the loan.
Then, Freddie and Fannie went broke.
Then, everyone else started to go broke!
I explained this to a Wall street “economist” type, who came in as an invited guest of a variable annuity company.
His response?
“There is PLENTY of blame to go around!”
“Oh, really?” I asked, “Then why do you not mention what I just mentioned, if it is true, and why do you not refute what I just mentioned, if it is not true?”
Wall Street, in large measure, is in the back pocket of the Democrat Party.
This from a CFP and Series 7 broker.
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