Thursday
Oct162008
The Economic Crisis: Failed Government Regulation and Racial Scapegoating
Thursday, October 16, 2008 at 3:21PM
“The evidence is overwhelming. This crisis is a direct consequence of years of regulatory failures by government officials” said Senator Christopher Dodd (D-Conn.) Dodd continued, “the dominant players were not Fannie and Freddie, but the Wall Street firms and their other private sector partners; the mortgage brokers and the unregulated lenders”. At the U.S. Senate Committee on Banking, Housing, and Urban Affairs hearing on “The Genesis of the Current Economic Crisis”, the overall consensus of Senators and panel members was that government regulation failures and Wall Street investors were to blame.
Dodd said, “no one can say that the nation’s financial regulators were not aware of the threats posed by reckless sub-prime lending to homeowners, communities, and indeed the entire country. That threat had already been recognized by Congress”. Senator Robert Casey (D-Pa.) said he was troubled by the fact the Treasury Department wants to commit $250 billion to aid banks without “planning to modify a single loan”. Casey suspects that banks are now holding back on modifying loans because they’re waiting to see if they can sell them to the Treasury Department first, which he believes is the worst things that can happen right now.
The Honorable Marc H. Morial, President and CEO of the National Urban League, said that he wanted to, “set the record straight about what I call the Financial Weapon of Mass Deception: the ugly and insidious and concerted effort to blame minority borrowers for the nation’s current economic straits”. Morial blamed a few conservative reporters such as Fox News’ Neil Cavuto and the Washington Post’s Charles Krauthammer for, “telling the world that this crisis in not the result of a failure of regulation, but the fault of minority borrowers who bit off more than they could chew”. Morial said, “while minorities and low-income borrowers received a disproportionate share of sub-prime loans, the vast majority of sub-prime loans went to white and middle and upper income borrowers.”
Dodd said, “no one can say that the nation’s financial regulators were not aware of the threats posed by reckless sub-prime lending to homeowners, communities, and indeed the entire country. That threat had already been recognized by Congress”. Senator Robert Casey (D-Pa.) said he was troubled by the fact the Treasury Department wants to commit $250 billion to aid banks without “planning to modify a single loan”. Casey suspects that banks are now holding back on modifying loans because they’re waiting to see if they can sell them to the Treasury Department first, which he believes is the worst things that can happen right now.
The Honorable Marc H. Morial, President and CEO of the National Urban League, said that he wanted to, “set the record straight about what I call the Financial Weapon of Mass Deception: the ugly and insidious and concerted effort to blame minority borrowers for the nation’s current economic straits”. Morial blamed a few conservative reporters such as Fox News’ Neil Cavuto and the Washington Post’s Charles Krauthammer for, “telling the world that this crisis in not the result of a failure of regulation, but the fault of minority borrowers who bit off more than they could chew”. Morial said, “while minorities and low-income borrowers received a disproportionate share of sub-prime loans, the vast majority of sub-prime loans went to white and middle and upper income borrowers.”
Dodd Releases 'Sweeping' Financial Reform Package
Senate Banking Committee Chairman Christopher Dodd (D-Conn.) released his version of "sweeping" financial reform on Tuesday. Dodd's proposal will restructure and create a new architecture to the financial regulatory system.
“It is the job of the Congress to restore responsibility and accountability in our financial system to give Americans the confidence that there is a system in place that works for and protects them,” said Dodd during a press conference.
The 1100-page draft would create a new independent watchdog within the proposed Consumer Financial Protection Agency. It would also allow for a single financial federal regulator whose job it would be to end “too big to fail” companies and protect businesses and individuals from systemic risks.
“Our plan will stop abusive practices by creating an independent Consumer Financial Protection Agency with one mission: standing up for consumers,” said Dodd.
While Dodd's proposal differs from those put forth by the House Financial Services Committee and the White House, it would address the substantial problems that helped cause America's financial crisis.
Dodd told reporters he hopes to move the bill through committee during the first weeks of December. In the meantime he said, he will be welcoming Republican suggestions on the legislation.