Former House Speaker Newt Gingrich says removing needless regulation on banks would help alleviate the nation’s crippling housing crisis. Gingrich also told Fox News’ Greta Van Susteren following Tuesday night’s Republican debate in Las Vegas that small banks — not Wall Street giants — could be an answer to the mortgage dilemma.
Van Susteren asked the presidential hopeful what he would do to help Americans who are finding it difficult — or impossible — to make their mortgage payments.
“I’ve been working with several bank leaders of local small community banks who want to do exactly what you’re describing — and you have to repeal the Dodd-Frank bill because the way the Dodd-Frank bill works, it dramatically regulates the banks,” Gingrich said. “It sends a signal to the regulators to tell them not to make the loans, not to roll over the money — and in effect, it encourages foreclosures and encourages the bank actually seizing the property.
“So until you repeal the Dodd-Frank bill, which I think the House Republicans ought to do this week — I mean, this is a terrible bill which is killing housing, it is killing small banks, it is killing small businesses, and it ought to be repealed,” he said. “The minute you do that — literally, the minute you do that — it’s going to be easier for people to work their way out. You’ll have a dramatic decline in foreclosures.”
Van Susteren asked what incentives banks would have to help out people facing foreclosure.
“If you had a free, open market — and people weren’t so severely managed now by the fed regulators that they’re afraid to do anything — you’d have smaller banks and smaller mortgage companies offering refinancing all over the place,” Gingrich said. “Because, as you just pointed out, the long-term rates are now dramatically lower, so they could lock in an advantage — they’d have a better portfolio — people would have lower payments.
“This is exactly what was happening 8 or 10 years ago as interest rates went down. The fact is, interest rates today are among the lowest they’ve ever been for housing, but people are locked in because the regulators come along — and I’ve had bankers tell me this — particularly if you’re a small independent bank,” he continued. “They’re told by the regulators: Don't you loan this money. And so they’re literally being told it’s better off for people to be foreclosed on than it is for people to have a workout — even though that’s exactly the wrong policy in terms of human beings.”
Gingrich said the housing crisis could begin to wane in a short period of time if the inhibitive Dodd-Frank regulation is repealed.
“I think it would turn around within weeks if we totally repealed it . . . if we said all this red tape, all these regulators, all these things are gone tomorrow morning,” Gingrich said. “I think you could call and bring in five or six community bankers — and I’m talking now about small local banks, I’m not talking about Wall Street — they would tell you they would turn around on a dime.
“I’ve told people: You know, that that the recovery begins late on election night when people realize Barack Obama's gone,” he said. “You’ll literally see investment decisions being made by the next day, and the turnaround will begin literally that fast.”
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