One Iceberg--Two Tips
December 18, 2007
Fed Approves Plan to Curb Risky Lending
WASHINGTON — The Federal Reserve moved Tuesday to impose new restrictions intended to curb unfair and deceptive home-lending practices and prevent a recurrence of this year’s meltdown in subprime mortgages.
By a 5-to-0 vote, the Fed approved a plan that would tighten provisions meant to protect borrowers and apply them to a far larger share of home loans — whether from banks, mortgage companies or other lenders — than under current regulations.
The proposed rules underscore the more assertive role the Fed is now prepared to take in regulating lending, in a big shift from the central bank’s approach in the past.
In general, the rules are meant to deter unscrupulous lenders from persuading people that they can afford loans that ought to be out of their reach. By extension, the rules are also intended to keep would-be buyers from deceiving themselves about the debt burdens they can shoulder.
“Our goal is to promote responsible mortgage lending, for the benefit of individual consumers and the economy,” the Fed’s chairman, Ben S. Bernanke, said. “We want consumers to make decisions about home mortgage options confidently, with assurances that unscrupulous home mortgage practices will not be tolerated.”
Of course this horse has long left the barn, but everybody in the sub-prime food chain is terrified of lawsuits. Making noises as though there were other forces at work other than naked greed is good press, but won't convince many prosecuting attorneys.
The second tip of this common iceberg is credit-card lending--another fraud the Congress has abetted that puts to shame the numbers rolling around in the sub-prime mortgage game. There are sub-prime credit card agreements as well and you don't see the wealthy being flogged by 30% interest rates.
That's a region of banker-theft that concentrates (like the current mortgage flap) on the poor.
Neither is an equal-opportunity theft.