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
Why #OccupyWallStreet?
Cry Wolf Quotes
Dodd’s misbegotten bill would reduce competition and raise costs for the consumer—all so his office can generate press releases that say things like ‘Dodd Fights Card Companies.’ In fact, his fight will end up hurting his own constituents.
The Community Reinvestment Act does not appear to have had any positive effect on lending to residents of LMI neighborhoods. In fact, it appears to have had a negative effect on CRA lenders and LMI residents alike… While both CRA- and non-CRA lenders have increased the number of loans to low-income borrowers, the financial soundness of CRA-covered institutions decreases the better they conform to the CRA.
The Community Reinvestment Act should be repealed--not reformed or restricted but repealed! For no conceivable set of regulations on a bank is consistent with the objective of the Act to meet ‘the credit needs of its entire community, including low and moderate-income neighborhoods, consistent with safe and sound operation of such institution.’ The Community Reinvestment Act was the wrong solution to a genuine problem, for the most part created by other government regulations. Until recently, federal restrictions on interstate banking and state restrictions on intrastate branching severely restricted bank competition in local markets and the potential for geographic diversity of loan portfolios. These restrictions have been substantially reduced, promising a more competitive banking system that is more responsive to the interests of both depositors and borrowers and less vulnerable to adverse economic conditions in specific regions...Don't try to fix the Community Reinvestment Act. It can't be done. Repeal it.
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.
Related Laws and Rules
Evidence
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Banking Lobby's Warnings About CARD Act Disproven
What happened after credit card reform bill passed Congress in 2009 (it worked).
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The Successes of the CARD Act
The Consumer Financial Protection Bureau describes exactly what the act did and what the effects were one year later.
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.
