But is the patchwork really the “biggest shortcoming” or even such a “big culprit”? Are federal regulators really so powerless? Hell, no.
Other good reporting over the summer revealed Fed regulators to be simply unwilling to use the powers they have. Craig Torres and others at Bloomberg did well writing about government reports and studies, including this dispatch from June:
The U.S. agencies that supervise more than 8,000 banks haven’t censured any them for violating fair-lending laws, three years after Federal Reserve researchers began assembling data showing blacks and Hispanics are more likely to be saddled with high-priced home loans
No violations. Zero.
In October, Bloomberg reported on Congressional testimony that the FDIC gave failing grades in only .3 percent of compliance reviews of bank lending in low-income neighborhoods. When banks don’t lend where they take deposits, as required by law, subprime outfits fill the vacuum.
The FDIC even gave passing grades to banks that the Justice Department later sued for redlining, Bloomberg reports.
Listen, it’s easy to be a critic and hard to make editorial and resource-allocation decisions in real time.
But I think rank-and-file business reporters and editors need to rethink certain assumptions that are, in fact, conservative biases in disguise.
Yes, business reporters harbor conservative economic biases.
This is not so surprising when you think about it, and it’s understandable. Most business reporters and editors now in senior jobs grew up in an era of conservative anti-government ascendance and liberal pro-government retreat, of Prop 13, Thatcher, Reagan, Nafta, Rubinomics, etc. For this generation (my generation), there really hasn’t been another way to run the economy: less government, more markets.
Hooked to an emotion-detector, it’s fair to say, most business journalists would respond positively to words like “markets,” “free trade,” and “deregulation,” and negatively to words like “government program,” “government agency,” and “regulation”
Hey, having a journalistic class aligned intellectually with its sources may be a good thing. The trouble is, commonly accepted assumptions have left reporters disarmed in the face of a story like subprime.
My point is simple: markets don’t always work. That’s why we have regulators. And since we have them, cover them.
1. Dow Jones News Service
23 May 2007
2. Robert J. Shiller, professor of economics and finance at Yale and co-founder and chief economist of MacroMarkets LLC, is a leading housing expert.
3. REVIEW & OUTLOOK (Editorial)
Spitzer Meets His Match
1 June 2005
4. Bank Regulator Cleans House —- New Comptroller of the Currency Makes Supervision a Priority
By Michael Schroeder
19 August 2005
5. Lending Oversight: Regulators Scrutinized In Mortgage Meltdown —- States, Federal Agencies Clashed on Subprimes As Market Ballooned
22 March 2007
6. Some subprime woes linked to hodgepodge of regulators ; ‘Fragmented’ setup can slow response to trouble
USA Today
16 March 2007
We own real estate and have paid off loans and then refinanced several times over the past 20 years. Our credit rating has always been above 700 and we have a substantial net worth. In spite of these factors, we have always felt harassed by lenders always wanting more information, then additional supporting documentation, and then further information on top of the additional documentation. Typically, we have submitted our income tax documents only to have brokers ask for verification of income using pay checks. Seemingly unaccounted for cash assets required documentation where it came from. If we obtained funds from parents for down payments, lenders wanted proof. I'm baffled that anyone could obtain a home loan without jumping through myriad hoops...unless loan officers or mortgage brokers were unethical or crooked. What is perhaps more astonishing is that purportedly competent government officials placed in charge of regulating banking express outrage that those involved in lending could possibly place the prospect of making short term profits over the welfare of their clients/customers.
This begs the question what will it take before Americans realize that as difficult and unfair as government can be, its behavior pales in comparison to that of the general business community. Late 19th century and pre Depression history teaches us that if given the opportunity, American business will always opt for short term profit even if it means cheating their clients, patrons, or customers, and, even it means hurting society as a whole, which is why America needs strong government regulations. Americans understand that government doesn't always act in the public's interests but many forget that it is therefore necessary to pay attention to the actions of elected representatives.
As long as business interests can purchase political favors, America will have the best government money can buy. Therefore, even before we consider business re-regulation, we must remove business from the political process. Several Supreme Court justices claim to be strict constructionists who believe the Constitution immutable. If these justices aren't merely hypocritical, if they aren't merely the paid mouth pieces of corporations, they should lead efforts to end the practice of treating corporations like individuals, which is non-Constitutional, since this is the key to getting businesses out of politics. Unless this occurs, any efforts at re-regulation are likely to prove short term: The business class never fully acquiesced to regulation before 1912 and during the administration of FDR, and, they won't do it today.
Posted by RogerHWerner
on Wed 26 Dec 2007 at 09:06 PM
God forbid a lender who risks thousands of dollars should have the nerve to ask personal questions of lenders!... GASP!... WHERE is the government to fend off these capitalist selfish pigs?!....
Government regulaton just doesn't work.. Fines and sanctions simply become the cost of doing business... Whether it's a utility in violation of the Clean Air Act to make a profit, or a local trucker running overweight to earn money for groceries...
Subsidies, on the other hand, work great... And that is what we have... Subsidies disguised as "regualtion" of industry...
You guarantee solvency on the credit of the taxpayers (like the FSLIC did in the '80s and like the FDIC is doing now) and you'll have businesses tripping over themselves to get "regulated"...
I worked for the federal government (in three different agencies) for years.. And my own learned opinion is that it doesn't make ANYTHING better...
As our founders knew... Government is a necessary evil... And it should be restricted and regarded with suspicion by any free society. A careful reading of the powers expressly granted to the government by the Constitution shows just how smart our founders were.
The Department of Education doesn't educate anyone... The Department of Transportation doesn't transport anybody.... And the Department of Housing and Urban Development doesn't house anyone...
All the government can do is to throw money at problems without solving any of them (remember that with a national debt of $9 TRILLION, every new American born faces a per capita $30,000 debt from they day he or she enters the world).
Posted by padikiller
on Thu 27 Dec 2007 at 11:17 PM