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.
Cry Wolf Quotes
…in an attempt to increase homeownership-particularly among minorities and the less affluent-an attack on underwriting standards has been undertaken by virtually every branch of the government since the early 1990s.
There are also subsidies to certain types of mortgages. The Community Reinvestment Act bans so-called ‘red lining’ -- requiring banks to offer mortgages in the entire geographic area in which they operate, not just to do business in suburbs. Loans in profitable areas were then used to subsidize loans in areas where banks were losing money.
…the government has used regulatory and political pressure to force banks and other government-controlled or regulated private entities to make loans they would not otherwise make and to reduce lending standards so more applicants would have access to mortgage financing… the CRA was used to pressure banks into making loans they would not otherwise have made and to adopt looser lending standards that would make mortgage loans possible for individuals who could not meet the down payment and other standards that had previously been applied routinely by banks and other housing lenders... a law that was originally intended to encourage banks to use safe and sound practices in lending now required them to be innovative and flexible--a clear requirement for the relaxation of lending standards.
The bill would, for instance, prohibit card companies from changing the rates they charge ‘at any time, for any reason.’ Translation: instead of a borrower’s interest rate varying up and down, it will just stay up. Or fees will rise, to offset issuers’ loss of pricing flexibility.