The Mortgage Insider

This last month, the Senate passed its version of financial reform in much the same way it approached health care reform. Yep, you guessed it … here’s another 1,500 pages of unintended consequences that no one in the Senate has actually read. Well, that’s not entirely true. I’m sure the “too big to fail” lobbyists, who likely had their legal teams draft this version of financial reform for Senator Dodd, know exactly what is in it. What, you think that sounds too cynical? Well, you must have missed a little story MSNBC broke on April 20th. According to NBC Deputy Political Director, Mark Murray’s lead-in, “After criticizing Republican leaders yesterday for having a secret, closed-door meeting with Wall Street executives, (D) Senate Majority Leader Harry Reid today faced his own questions about a fundraiser he attended this year hosted by the president of Goldman Sachs.”[1]   

It turns out that Reid pocketed $37,000 from this exclusive, one-night-only political “pole dance.” Hey, this guy still has the legs of an 18-year-old! On the other hand, the bad news for the rest of us is that there is little doubt his feigned outrage over (R) Mitch McConnell’s earlier meeting with Wall Street execs was likewise justified. The truth is, there are at least five financial lobbyists for every representative in both the Senate and Congress. And they have poured over $285 million[2] into the personal campaign funds of key representatives on both sides of the aisle already. That’s how you know we are all going to get the representation we deserve, right? And now that the Senate and House versions need to be reconciled in conference, you can bet the mother of all lobbyists’ bachelor parties is about to begin. I know, I can’t wait to see what all our strumpets in Congress will be wearing to that gala affair!

Another glaring similarity to health care reform is the extent of the takeover, by the Federal government, of yet another sector of our economy. The summary of the bill that is available at the Library of Congress site[3] contains so many new Federal agencies that I lost count. Among the few I know you’ll be most excited to learn about are vast new powers for the Federal Reserve Bank. For those of you who don’t know, the Federal Reserve Bank isn’t even a part of our government. It is a privately owned bank with shareholders like any other large bank. The only difference is that we are not allowed to know who those shareholders are, or how the Fed spends the money of ours that it is allowed to print. Gee, I can’t imagine why anyone would what to abolish this arrangement. How about you? So the Fed gets a new Bureau of Consumer Financial Protection added. Yes, I know what you’re thinking. Given the extraordinary role they played in creating the financial meltdown we find ourselves in, how does granting it vast new oversight powers make any sense at all? The end result is the Fed would have final approval of any new credit product, loan program, or mortgage program offered in the U.S. They are also charged with guarding against abuses by mortgage companies and credit card issuers. So, who is going to protect us from them?

Timmy Geithner, likewise, gets rewarded for his stellar job as Treasury Secretary. The Treasury gets the shiny new “Financial Stability Oversight Council” that is, of course, designed to oversee risk in the financial market, promote discipline, and respond to threats of financial meltdown. Okay, I’m speechless here. This much irony makes my ears bleed. The Treasury also gets a new Office of Insurance Management to oversee “all aspects of the insurance industry.” Wow, can’t wait to see that one either! And if the new “Liquidation Panel” in the U.S. Bankruptcy court authorizes it, the Treasury gets to decide when a financial institution is placed into receivership with the FDIC. Okay, I think you get the idea here.

And let’s not forget the SEC. You might think that now would be a good time to finally regulate the “over the counter” derivatives market. Well, kind of sort of … The SEC and the Commodity Futures Trading Commission (CFTC) will oversee large swap trader reporting and certain categories of swaps only. No, I’m sorry there is nothing here to prevent another AIG situation from forming. The SEC also gets two more agencies: the new Investor Advisory Committee and the Office of the Investor Advocate. These institutions will have final say on what kind of things your investment advisor and financial planner can offer you as a consumer.

So, children, what did we just learn? Apparently, if a combination of gross political malfeasance and systemic financial fraud brought us this second Great Recession, then the cure is an even larger dose of political malfeasance paid for by the same financial crooks! “Then what should I do,” you ask? Well, the experts, in the form of Fed Chair Bernanke and Treasury Secretary Timmy Geithner, have assured us repeatedly that no inflation is likely anytime in the near future. Consequently, you can be certain substantial inflation and higher rates are just around the corner. What are you waiting for? Get your financial house in order. Lock in these low rates while you still have a chance.

 [2]               http://www.reuters.com/article/idUSN2323889820100523?type=marketsNews

[3]           http://thomas.loc.gov/cgibin/bdquery/z?d111:SN03217:@@@D&summ2=m&