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

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.

One cannot say with any certainty whether the more important cause of the current housing crisis was affordable-housing mandates or the actions of investment banks and ratings agencies. There can be no doubt, however, that both contributed. With that in mind, the best way to make sure that we don’t repeat our mistakes is to examine — and change — both… If the Community Reinvestment Act must stay in force, then regulators should take loan performance, not just the number of loans made, into account. We have seen the dangers of too much money chasing risky borrowers.

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Howard Husock, New York Times.

Legislation likely to result in higher interest rates for consumers is not the answer. [This bill] would broadly constrain the ability of financial institutions to price risk, likely resulting in less access to credit and in higher interest rates for consumers.

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The Bush White House’s statement, CreditCards.com.

The Community Reinvestment Act (CRA) did the same thing with traditional banks. It encouraged banks to serve two masters -- their bottom line and the so-called common good… By pressuring banks to serve poor borrowers and poor regions of the country, politicians could push for increases in home ownership and urban development without having to commit budgetary dollars. Another political free lunch.

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Russell Roberts, Wall Street Journal.

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.