Reform is supposed to be a good thing. By definition, reform implies improvement to an existing condition.
In Washington, reform has taken on an entirely different meaning. For our lawmakers, reform means promulgating new rules, issuing new mandates and spending billions of taxpayer dollars regardless of benefit.
For instance, the Patient Protection and “AFFORDABLE” Care Act, otherwise known as Obamacare, is going to cost the taxpayers at least a trillion dollars just in Federal funding. Among its numerous failings, this “reform” did not address medical liability laws, did not address the issue with Medicare and Medicaid reimbursements to doctors and does nothing to guarantee lower heath care costs.
Now lawmakers are preparing to pass a financial reform bill which will cost billions and fails every bit as miserably as heath care reform to make needed improvements to the system.
What this bill will do is create additional bureaucracy to fix problems which are arguably the result of prior Congressional activities.
One of the so-called benefits of the bill would be a prohibition against “liar’s loans.” These low or no documentation loans were spawned by requirements in the Community Reinvestment Act which forced banks to extend borrowing to subprime borrowers. Now lenders will be required to verify a borrower’s income and ability to pay before approving a loan – like they did before the government meddled in the lending business and forced banks to make loans based on reasons other than an individual’s ability to repay.
Do we really need a $19 billion reform bill to do that?
The financial reform bill will also create a very important and helpful sounding “Consumer Financial Protection Bureau.” This bureau will do things that other government agencies currently do while adding another $850 million per year to the federal budget.
What else will this “reform” bill do? House Minority Leader John Boehner explained it best:
“The bill doesn't end Wall St. bailouts, it makes them permanent and institutionalizes 'too big to fail.' This bill doesn't get the government out of the private sector, it creates a 'politburo-style' council of regulators who can seize any business and do almost anything they want to do with it,” Boehner said.
How you ask? By creating a ten-member council of financial regulators who will monitor the financial system for problems. Should they detect a problem, this council will have the authority to break up or take down any financial companies deemed to threaten the stability of the financial system.
This bill will also take the unprecedented step of regulating executive pay. New rules will regulate how executives – not just those in banking or financial firms – are compensated. The rules also increase oversight of pay practices within the financial industry.
In short, this 2,000 page piece of legislation represents yet another power grab that does little to help the rank and file citizenry while increasing the size and scope of the federal government.
Though this bill is being sold as a boon for consumers that will be paid for by taxing those big, nasty banks, make no mistake – it is the consumer who will ultimately pay the price for this bill.
Edward L. Yingling, president and chief executive officer of the American Bankers Association, told the Wall Street Journal that he believes the bill will hinder economic growth by making it more difficult for the financial industry to provide credit.
"This bill will, in the end, add well over a thousand pages of new regulations for even the smallest bank," Yingling said.
Yingling expects many smaller banks will close or sell out because they do not have the staff to “deal with the massive volume of new reports and rules."
Is that the kind of financial reform we need? This bill is definitely going to change the financial industry, but change is not always for the better.
Kristi Reed is a reporter for the Barrow Journal. She can be reached at kreed@barrowjournal.com.
