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Consumers Lose In New Financial Regulations
For some unknown reason, it seems that whenever banks or lawyers are involved, rules and laws and changed and reinterpreted at will. The same institutions and people who were tasked with preventing abuse or fraud from running rampant in the economy too often fail in their jobs. But the only reaction to these failures is to give the exact same regulatory agencies more power and money.
Take, for example, the new regulatory framework for the banking and financial industry that President Obama announced in mid-June 2009. The Federal Reserve, which created the housing bubble through artificially low interest rates, did not predict the crisis, refused to believe it was as bad as it was, and is now optimistic about recovery that only it sees, is being given more power to regulate the financial markets.
This is just what the country needs -- a semi-public, semi-private, secretive banking institution that is able to print money and raise or lower interest rates at will but which can not even see or predict the market bubbles that it is creating. The only flaw in such a system is that it just does not have enough power already, and therefore must be given responsibility for the system as a whole.
So the president wants to change the banking rules to give the Federal Reserve responsibility for managing systemic risk to the entire financial system and economy. This is the same institution that, if abolished, would go a long way towards eliminating systemic risk. Moral hazard and systemic risk have been institutionalized by the Federal Reserve system's policy of lowering interest rates and bailing out favored companies.
The rules, though, are always changed to give the government's favorite institutions more power, while the people have their money taxed or inflated away to pay for these new power grabs. In the end, these laws, the stated purpose of which is to protect consumers and borrowers, are always used against the same people they were written to protect. The more laws they write, the easier it is to find one to justify any action.
Most of these new changes and laws will be put into place for a small number of reasons. One will be to increase the profits of the banks and its government insiders during good times and to socialize the losses on a system-wide basis in bad times. Another purpose is to conceal the first purpose in a maze of new bureaucratic red tape and regulations. The more opaque the system becomes, the easier it is to fleece Americans.
Homeowners and consumers will be expected to pay the bills for these new regulations and profit-increasing schemes. Although borrowers and banks both entered into the housing bubble hoping to gain huge profits without working, only the banks went in knowing that any huge failures would also be rewarded with profits in the form of government bailouts. There was virtually no risk for lenders, as they got the houses and the payoffs.
Although there is nothing wrong with huge profits, the companies and individuals making large amounts of money can not expect the government to steal money from taxpayers in the event of a downturn in the economy. But the government also can not routinely bail out private corporations just because their failure would put some former bureaucrats out of a job and eliminate future board of director positions for politicians.
In the absence of the federal bailout policy, does anyone really think that banks would be able to run roughshod over the American people? Would banks be able to foreclose on millions of borrowers and still receive hundreds of billions of dollars care of the same people they are foreclosing on? But the banks rely on the force of government to make them whole, rather than negotiating with borrowers in the market to stop foreclosure.
After all, the only result will be more government jobs for banking regulators, more banking jobs for former regulators, and more power given to proven failures like the Federal Reserve system. Negotiating with borrowers for mortgage modifications? It is much easier just to foreclose, claim "systemic risk, " and get in line for a bailout taxed or inflated away from the same homeowners the banks refuse to negotiate with. Nick publishes articles offering foreclosure help and news to homeonwers who are at risk of losing their homes. His sites examine various methods of saving a home, including large sections on how to qualify for a loan modification that will not almost certainly default. Visit his site now to read more about how foreclosure works and how a mortgage modification will help you: http: //www. foreclosurefish. com/Topics related articles：


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