Reforms are political window-dressing
In a letter to the editor last week ("Don't be fooled by Committee for Truth in Politics"), the writer begins reasonably enough decrying the spinning of supposed truth and the burgeoning of spin organizations that are less than candid about their funding and agendas. I am not familiar with the committee she accuses of having done these things so I cannot comment on it. But I am familiar with and will comment upon her characterization of the "financial reforms package" recently enacted by our government which described as "protect(ing) consumers from the predatory practices by financial institutions."
My problem with this rosy view of the legislation is that the legislation does not make any real nor important changes, just politically correct, populist, window-dressing changes.
The letter writer bemoans young adults, "not savvy to the rapacious tactics of big banks" being charged "millions of dollars in overdraft fees" on their debit cards for buying " a Coke, cup of coffee, whatever, without the funds to cover the cost."
First of all each was not charged millions, each was charged the fee set forth in their tiny-print, boiler-plate contract. Young adults have to learn to read small print because the devil is in the details.
Second, they have to learn not to buy a Coke or a cup of coffee when they don't have the funds to cover the cost.
Thirdly, they have to learn to shop around for a better deal from some other bank.
The real problem is people falling for the government's pretending this financial reform does something to prevent another financial crash. In fact it completely avoids doing that. The biggest single precipitator of the crash was the sudden defaulting on a large number of real estate loans and the subsequent crash in real estate prices.
And what caused that? The government, during the Clinton years, deciding to use legislation to greatly expand the percentage of home ownership by forcing banks to loan to borrowers on terms the banks otherwise would not have. Representatives Dodd and Frank were principal architects of this policy and used the new Community Redevelopment Act to ram this down the lenders' collective throats.
The government responded to lenders' reluctance, even faced with those threats of lawsuits, by creating a buyer for these new loans, Freddie Mac and Fannie Mae. Those new entities, funded by our tax dollars, bought all these loans and the banks got their dollars back to re-lend to more non-qualified borrowers and the cycle just continued. Naturally it had to collapse.
This "financial reform" does nothing to change these two tax-funded entities who continue to guarantee new loans that are defaulting at exponentially higher rates than the national average.
The problem lies in our unwillingness to accept that mistakes were made, and because we are humans will always be made, must be owned up to, and the people who ran these mistakes must be put out. These particular mistakes must not be made again and those who bought homes above their means, who buy Cokes they cannot pay for, must face their own consequences. Any financial reform package worth its salt should have dealt with this.