Banking and Credit

Banking and Credit

Since the Great Depression, Congress has passed a series of laws to preserve stability in the banking and credit industries, protect consumers from unfair and deceptive practices and make affordable credit available to middle class and low-income families and small businesses.  Beginning in the 1980s, the deregulation of financial institutions has fed speculative booms and devastating busts. Privatization of low-cost government credit for student loans and mortgages and weaker consumer protections has driven up the cost of credit and put consumers at risk.

Commentary

Information is power… and that’s the problem

May 02, 2012

Why #OccupyWallStreet?

October 07, 2011

The Truth in Lending Act, 1968: Don't Confuse People With Information

May 18, 2011
Debt burden

Credit Card Sharks Crying Wolf

May 20, 2009

Cry Wolf Quotes

If you compare what the card industry looked like 20 years ago to how it looks today, you’ll be astonished at how much better a deal consumers are lately getting. And government regulation isn’t what drove the improvement; free-market innovation and competition, did. Twenty years ago, all consumers paid the same interest rate—and it wasn’t low (19.8%).

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Thomas Brown, financial columnist, Bankstocks.com.

In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants; this allowed various studies to be ginned up that seemed to validate the original accusation… bank regulators required the loosened underwriting standards, with approval by politicians and the chattering class. A 1995 strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money.

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Stan Liebovitz, New York Post.

CRA has enabled special interest groups to collect billions of dollars from banks under agreements that are kept secret. Even the citizens that these groups purport to represent have no way of knowing how the groups spend the money they get from banks. That s why I hope the Senate will approve a sunshine amendment that will add accountability to this process and bring these agreements into, the light of day.

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Senator Phil Gramm , Chairman of the Senate Committee on Banking, Housing and Urban Affairs.

The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites. The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods." Lenders responded by loosening their underwriting standards and making increasingly shoddy loans.

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Jeff Jacoby, Boston Globe.

Evidence

Backgrounders & Briefs

A Timeline of the CARD Act

An interactive timeline of credit card reform.

Resources

The National Community Reinvestment Coalition works against unfair lending and banking practices, particularly those targeted towards low and middle income families.