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Consumer Financial Protection Gone Awry

Posted on Thursday, April 14, 2022
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by Outside Contributor
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The crises of recent years tend to erase from memory those that preceded them.

One, as you may recall, was the financial collapse of 2008 — a collapse deemed by many as the worst since the Great Depression.

That collapse swept into power a government like the one we have now — the White House and both houses of Congress controlled by Democrats.

Newly elected President Barack Obama appointed then-Rep. Rahm Emanuel as his chief of staff, who made popular the saying, “Never let a serious crisis go to waste.”

Indeed, the new Democrat administration followed this advice and used the financial crisis as an opportunity for a major expansion of government.

Democrats wasted no time ascribing the financial collapse to business greed and insufficient regulation of banks and other financial institutions. In 2010, the 2,300-page Dodd-Frank Act was passed — with no Republican votes in the House and three in the Senate — adding 400 new regulations on financial institutions.

Included in this tsunami of new financial regulation was the creation of a new independent agency — the Consumer Financial Protection Bureau. The agency, originally the brainchild of Sen. Elizabeth Warren, was conceived with her view, shared by Democrats on the far left, that disparities in financial results between different communities must be due to racism and discrimination. So, needed, in their view, was an all-powerful bureaucrat in Washington to level the playing field.

Now our financial institutions — banks, securities firms, credit unions, payday lenders, etc. — fall under the purview of the Consumer Financial Protection Bureau and must submit to its scrutiny and oversight.

The CFPB has just announced sweeping new changes in its “supervisory operations to better protect families and communities from illegal discrimination.”

Firms must make available to the CFPB “their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups.”

We might summarize this as financial markets gone woke.

Can a government bureaucrat really determine why a banker did or did not make a loan, and should the heavy hand of government be involved here?

Can it be the same thing when government intervenes in how financial institutions do their business as when government intervenes regarding who sits at a lunch counter?

We can learn something about this from the financial crisis of 2008.

According to the work of the American Enterprise Institute’s Peter Wallison, the crisis was not the result of insufficient regulation of business but of government excess.

It all started, according to Wallison, with government-mandated Affordable Housing Goals in 1992. These mandated that the two giant government-backed mortgage companies — Fannie Mae and Freddie Mac — set a quota of 30% of all mortgages they acquired from mortgage originators to be targeted to low- and moderate-income borrowers.

By 2008, this was up to 56%.

In order to meet these quotas, lending practices were dramatically relaxed. Down payment requirements dropped from 10% to 3%; credit score requirements were relaxed, as were debt-to-income requirements for borrowers.

By 2008, according to Wallison, just before everything collapsed, “More than a majority of all mortgages in the U.S. financial system was sub-prime, required low or no down payment, or were otherwise risky.”

With the collapse of lending standards, housing demand and prices went through the roof, and the bubble exploded.

Who suffered the most in the ensuing recession? According to Pew Research, “Blacks and Hispanics have borne a disproportionate share of both job losses and housing foreclosures.” Low-income Americans that the government most wanted to help were those who were hurt the most.

Today, Democrats are back at it.

CFPB Director Rohit Chopra is gearing up to use his almost unilateral power to show he knows better than business and the marketplace what is good for consumers.

Surely, once again, those who will suffer the most will be our struggling, low-income citizens.

Star Parker is president of the Center for Urban Renewal and Education and host of the weekly television show “Cure America with Star Parker.”

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Kendall
Kendall
2 years ago

Demoncrats NEVER learn, NEVER. They are as useless as a pile of manure. Then again at least manure helps things grow if used correctly. They make everything worse and the growth they cause are the weeds, aka: government, bureaucracies, bad laws, ETC.

Scott
Scott
2 years ago

Very hard for citizens to plan how to take care of themselves financially when bureaucrats are always changing the rules. While they expect us to pay our share, they skim monies from us and grow the deep state that is unaccountable to the electorate since congress abdicated their rule making authority to bureaucratic agencies run at the whim of the in power party director. When parties in power change, the bureaucrats slow processes down to wait out the current administration wanting change, that may include limitations on the agencies power, until a more bureaucracy favorable administration comes back into power. My question is why 1984, Animal Farm and Atlas Shrugged are not required readings in K-12? I surmise the answer is that we no longer teach civics and true history. You can get a college degree in history and not take a single U.S. history class. Where is John Gault hiding?

Paul
Paul
2 years ago

More harassment from the Left!

Becky
Becky
2 years ago

Yes. Another government bureaucracy to close down and fire everyone.
DemonRat Communists need deported!

Steve M Weidert
Steve M Weidert
2 years ago

The Democratic Party (Demon-Rats) have continually undermined everything sacred in this Country. It started with Bill Clinton, and they have continually asserted their disillusioned beliefs into the changing of laws, and rights. They have to be evicted immediately.

Philip Hammersley
Philip Hammersley
2 years ago

Liberals (Marxists) tried this before. Loaning money to people who can’t pay it back is not smart. That’s why there was a collapse during Bush’s reign. Pressured by the feds, banks loaned money to people who had enough to make mortgage payments ONLY UNDER IDEAL CONDITIONS. Life doesn’t work that way! Banks sold their loans and those who bought them defaulted just in time (coincidentally) to swing the election!

AlC
AlC
2 years ago

I thought this originated during Carter’s term, but was boosted during Clinton’s. Stupidity just repeats what never worked before. Just like the HEW and other useless federal unconstitutional agencies. One’s definition of insanity: trying the same response to a perceived problem that didn’t work before, and expecting a different outcome.

Carol
Carol
2 years ago

Democrats never learn from their mistakes cuz they never think they can make one! And when the people get hurt, they just keep blaming everyone else! I pray that folks are finally waking up to this immature and incompetent party! Everything the Democrats do leads to destruction and insanity!

Sean Richman
Sean Richman
2 years ago

The democRATS only care about votes and people that will vote for them to keep them in power.Their plan is marxism and the destruction of the real AMERICA,don’t doubt it.

John S.
John S.
2 years ago

The cure for stupidity is the ballot box .

Karen
Karen
2 years ago

Do the Dems do anything right? Absolutely NOT! It’s so obvious they are only interested in power and $$$$$$. They can’t take it with them. Hey Dems, read your history books. This kind of thinking never, never works out. You’re going down!!!!!!

Kendall
Kendall
2 years ago

Demoncrats NEVER learn, NEVER. They are as useless as a pile of manure. Then again at least manure helps things grow if used correctly. They make everything worse and the growth they cause are the weeds, aka: government, bureaucracies, bad laws, ETC.

Scott
Scott
2 years ago

Very hard for citizens to plan how to take care of themselves financially when bureaucrats are always changing the rules. While they expect us to pay our share, they skim monies from us and grow the deep state that is unaccountable to the electorate since congress abdicated their rule making authority to bureaucratic agencies run at the whim of the in power party director. When parties in power change, the bureaucrats slow processes down to wait out the current administration wanting change, that may include limitations on the agencies power, until a more bureaucracy favorable administration comes back into power. My question is why 1984, Animal Farm and Atlas Shrugged are not required readings in K-12? I surmise the answer is that we no longer teach civics and true history. You can get a college degree in history and not take a single U.S. history class. Where is John Gault hiding?

Paul
Paul
2 years ago

More harassment from the Left!

Becky
Becky
2 years ago

Yes. Another government bureaucracy to close down and fire everyone.
DemonRat Communists need deported!

Steve M Weidert
Steve M Weidert
2 years ago

The Democratic Party (Demon-Rats) have continually undermined everything sacred in this Country. It started with Bill Clinton, and they have continually asserted their disillusioned beliefs into the changing of laws, and rights. They have to be evicted immediately.

Philip Hammersley
Philip Hammersley
2 years ago

Liberals (Marxists) tried this before. Loaning money to people who can’t pay it back is not smart. That’s why there was a collapse during Bush’s reign. Pressured by the feds, banks loaned money to people who had enough to make mortgage payments ONLY UNDER IDEAL CONDITIONS. Life doesn’t work that way! Banks sold their loans and those who bought them defaulted just in time (coincidentally) to swing the election!

AlC
AlC
2 years ago

I thought this originated during Carter’s term, but was boosted during Clinton’s. Stupidity just repeats what never worked before. Just like the HEW and other useless federal unconstitutional agencies. One’s definition of insanity: trying the same response to a perceived problem that didn’t work before, and expecting a different outcome.

Carol
Carol
2 years ago

Democrats never learn from their mistakes cuz they never think they can make one! And when the people get hurt, they just keep blaming everyone else! I pray that folks are finally waking up to this immature and incompetent party! Everything the Democrats do leads to destruction and insanity!

Sean Richman
Sean Richman
2 years ago

The democRATS only care about votes and people that will vote for them to keep them in power.Their plan is marxism and the destruction of the real AMERICA,don’t doubt it.

John S.
John S.
2 years ago

The cure for stupidity is the ballot box .

Karen
Karen
2 years ago

Do the Dems do anything right? Absolutely NOT! It’s so obvious they are only interested in power and $$$$$$. They can’t take it with them. Hey Dems, read your history books. This kind of thinking never, never works out. You’re going down!!!!!!

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