RTC Mortgage Blog

Financial Reform! Or not?

All the talk in mortgage circles this week is about the sweeping Financial Regulation Bill that was passed yesterday in the Senate by a margin of 60-39 and will be signed by President Obama and become law.  The Bill calls for a new consumer protection agency and prohibits Banks from taking risky bets. 

From everything I read, this legislation.over 2000 pages worth.amazingly does nothing to address the core reasons for the financial collapse.  Past political policies promoting higher percentages of homeownership appear to have been misguided, but this new legislation pushes that agenda even further.  Fannie Mae and Freddie Mac are completely left out of this legislation.  The credit rating agencies, which may have played the largest role in the financial collapse, go unmentioned.  The legislation gives unions and politicians much more power.  Sadly, a very cursory view of this legislation appears to illustrate that the vast majority of this reform has far less to do with fixing the financial problems, and much more to do with pushing the political agenda of its authors, Barney Frank and Chris Dodd. 

What Greenspan said when asked on CNBC last week about the 2300 page FINREG Bill..was that this was the first time the Fed was not asked to write this regulation, and that it was basically written by junior staffers that have no clue about the complexities of these financial entities that they are trying to regulate.Greenspan said there are unintended consequences in every page of this bill.  He said that any banker dealing with Washington is very familiar with what is known as the 25 Cubed Rule..basically that the government is run by 25 year old staffers that are making $25,000 a year and work 2 5 hours a day...and a majority of them have never even financed a car.let alone a home, yet we are handing our regulatory oversight to these 25 year old staffers.

This is scary stuff. If anyone reading this has any other opinions, I'd like to hear them.

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