When the Fed Refers to Their Clients, They Are Not Talking about Consumers, They Are Talking about Banks
Fed Plans To Curb Mortgage Excesses Some in Congress Want Tougher Rules
By David Cho Washington Post Staff Writer Saturday, December 15, 2007; D01
The Federal Reserve is set to change home-loan lending practices that are blamed for pushing the nation into a housing downturn, but the effort is expected to fall short of far more stringent efforts by Congress.
The new Fed rules, which may be announced as soon as Tuesday, aim to curb predatory lending and the overuse of exotic home loans without hurting the financial system that backs mortgage lending, according to lawmakers and sources close to the Fed.
. . . Like the measures in Congress, the Fed rules would require lenders to clearly disclose mortgage information to consumers and to raise standards for approving mortgage applications.
. . . For example, lawmakers proposed legislation that would change how home buyers are approved for adjustable-rate mortgages, which have low introductory interest rates that jump after several years. Democrats want to require lenders to offer such mortgages to home buyers only if they can afford monthly payments at the higher rate.
But industry associations say that proposal would leave lenders with little reason to offer such mortgages. Ultimately, consumers would have fewer choices, they say.
"If you are too severe or too draconian, you are going to eliminate value in the marketplace," said Steve O'Connor, senior vice president of government affairs for the Mortgage Bankers Association.
"When the Fed refers to their clients, they are not talking about consumers, they are talking about banks," WHICH IS EXACTLY AS IT SHOULD BE. The Fed exists to provide liquidity in the banking system, while carefully guarding the keys to the printing presses. They are NOT responsible for the health of Wall Street, yet that has become their purpose under Alan Greenspan. Bernanke's job is to reverse Greenspan. Congress has no place in this, other than to enact laws against predatory lending practices and sub-prime mortgages are only the beginning. Congressional collusion with the banking industry in the matter of credit-card legislation is a national shame of gigantic proportion. A single late-payment that flips all credit-card interest to 30+%? Congress has allowed that disgraceful behavior.