continued from page Protection Bureau ….
continued from page
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 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 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 subprime, 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 then the bubble exploded. Who suffered the most in the ensuing recession? Per Pew Research, “Blacks and Hispanics have borne a disproportionate share of both job losses and housing foreclosures.” The lowincome Americans 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.” To find out more about Star Parker and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2022 CREATORS. COM
