Tuesday, April 26, 2011

Newsday Friends Dodd/Frank

Newsday continue to paint banks as bad guys. Now they are being chastized for havingthe gall to lobby against the Dodd/Frank bill.

It is demonstrable that Levin, Frank and Dodd were key players in engineering our current financial situation.

Frank: "I would like to get Fannie and Freddie more deeply into helping low-income housing... I want to roll the dice a little bit more in this situation towards subsidized housing." House Financial Services Committee hearing, Sept. 25, 2003

Dodd: "This is not a time to be panicking about this. These are viable, strong institutions," July 2008 press conference about Fannie Mae and Freddie Mac.

Carl Levin is now leading the charge to point fingers at everyone except the culprits and Newsday’s editors are buying it (see Point two fingers of Recessionary Blame). Having these guys make the new rules for banks while they completely ignore Fannie Mae and Freddie Mac and their own culpability is a measure of their cluelessness and true aims. The fox is in the hen house.

Among their solutions to a situation that has its roots with Freddie Mac and Fannie dropping all pretense of lending guidelines to meet their social goals is to have the government determine what constitutes a reasonable and fair cost for a transaction. In their world, price controls, contrary to fact that price controls have failed every time they have been imposed, will solve part of some unrelated problem. These culprits seem to believe that something is inherently wrong when a business passes along its costs to the end customer. There is also part of the Dodd/Frank mess that allows borrowers to sue the lender for making a loan that borrower doesn’t pay back. Somehow, is supposed to facilitate prudent lending but is clearly a cookie for the trail lawyers.

Financial institutions are quite correct to lobby against this law – another one where we will see what is in it when it takes effect. There is clearly need for some reform but a populist campaign to divert attention from the real culprits and basic causes will only make things worse.

The blame game is helpful when it correctly points at the culprits, and helps to develop corrective measures that have some basis in economic practicality. That is not what is happening.

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