"This past Friday, the Federal Deposit Insurance Corporation (FDIC) shuttered another four US banks," notes Neil Hrab in the Washington Examiner. "That makes 90 bank failures so far in 2010. If bank failures continue at the same rate for the rest of 2010, you can expect perhaps 200 in total to fail this year. That would represent a jump over 2009, when the FDIC closed 140 failed banks. In 2008, just 25 US banks were closed by the FDIC. (To keep the number of failures in perspective, we need to remember that the US has about 8,000 banks in total.)"
The so-called financial "reform" bill that now looks certain to pass Congress will make matters worse. It will impose useless, burdensome regulations on banks, while doing nothing to prevent another financial crisis. The bill "imposes race and gender employment quotas on the financial industry -- at a time the job market is stalling and economic growth is slowing," writes economist Diana Furchtgott-Roth in the Washington Examiner. Its "Section 342 states that race and gender employment ratios must be observed by all government agencies that regulate the financial sector, as well as private financial institutions that do business with the government." This unconstitutional requirement is the brainchild of Los Angeles Congresswoman Maxine Waters, the Castro-loving, left-wing ideologue who earlier praised the Los Angeles race riots that destroyed scores of Korean-owned businesses as an “uprising” against injustice. Waters once told a CEO in a public Congressional hearing, "This liberal will be all about socializing . . . .uh, uh . . . would be about, basically, taking over and the government running all of your companies."
That bill contains little "reform," reinforcing the very features of the status quo that spawned the financial crisis. Earlier, Congressional Democrats blocked reform of the corrupt government-sponsored mortgage giants, Fannie Mae and Freddie Mac, and the Obama Administration lifted a $400 billion limit on bailing them out. (Even though administration officials admitted that they were at the “core” of “what went wrong” in our financial system.) At the direction of the Obama administration, Freddie Mac ran up more than $30 billion in losses to bail out mortgage borrowers, some of whom have high incomes. Federal regulators sought to make Freddie Mac hide the resulting losses from the SEC and the public.).
Meanwhile, the Administration has backed a new tax on productive private banks that did not receive bailouts at taxpayers' expense.
Government pressure on banks to make loans in economically-depressed neighborhoods was one of the causes of the mortgage crisis. That pressure will increase under the financial “reform” legislation. Legislators approved Obama’s proposal to create a new consumer “protection” agency. “The agency would be in charge of enforcing the Community Reinvestment Act, a law that prods banks to make loans in low-income communities.” It would do so with little regard for banks’ financial safety and soundness, even though the Community Reinvestment Act was a contributor to the financial crisis.
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Comments
Lots of complaints about what's wrong. Any constructive solutions? What would YOU do to prevent another financial crisis?
The blame for the current financial crisis, including bank failures, more likely is the result of Bush Administration policies and eight years of the republican dominated, Wall Street owned congress and their laissez-faire policies.
The far right is quick to blame the Community Re-Investment Act for the current meltdown with absolutely no facts to back up that claim. The cause is more likely the repeal of Glass-Steagall in 2003, and the inability for the Feds. to regulate hedge funds and derivatives, both occurring under Bush and the Republican congress.
The Community Re-Investment Act became law in 1977. I challenge anyone to produce the actual amount of losses in dollars traced to comply with the C.R.A., and those losses on the failure of any and all failed banks.
"Everyone is entitled to his own opinion, just not his own facts." Daniel Patrick Moynihan
What laissez-faire, Steve? Aside from getting American embroiled in two land wars in Asia, Bush also expanded regulation of the financial sector, including signing the Sarbanes-Oxley law, widely viewed by U.S. and foreign observers as a classic example of regulatory overreach. Bush himself called it the biggest expansion of federal oversight of business since the New Deal. The Sarbanes-Oxley regulations drove so much business overseas that bankers in London suggested erecting a statue in honor of the law's sponsors, Sarbanes(D) and Oxley(R).
Don't blame those of us who like laissez faire for Bush's incompetence. Obama is continuing most of Bush's policies anyway. If his ego were smaller, he would learn something from Bush's failures -- and his own.
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