Tags: Maloney | housing | finance | Congress

Rep. Maloney Attacks Ryan Budget — Part II

By    |   Tuesday, 29 Apr 2014 07:47 AM

In a speech before the 23rd Annual Hyman P. Minsky Conference in Washington, Rep. Carolyn Maloney, D-N.Y., attacked two provisions of the Ryan budget that were scheduled to be considered on the House floor later that day.

The first, as discussed in the previous article in this series, would repeal title II of the Dodd-Frank Act, which gives the FDIC powers to resolve large, troubled nonbank financial institutions similar to the powers they have to deal with banks but don't use when the banks are too big to fail. Republicans have derided this as a bailout fund because it authorizes the FDIC to borrow $150 billion to keep these institutions afloat while it tries to work them out.

When the Democrats first proposed a fund, the Republicans yelled "Bailout!" Now the Democrats claim taxpayers are protected, because the FDIC would recover the money later through assessments on the industry. This from an agency that will not have restored its own Deposit Insurance Fund to statutory norms for many years.

Maloney is very angry, because Democrats tout title II as one of the main features of Dodd-Frank.

The second Republican provision of the Ryan budget that has Maloney livid is the inclusion of the Republican version of a bill on so-called "housing finance reform" without meeting the conditions laid down by the groups I refer to as the Housing Finance Industrial Complex. At a think tank event in 2009, as the Oministration was taking shape, I predicted to Jared Bernstein, who would become a top adviser to Vice President Biden, that nothing would be done about housing finance reform. Bernstein, whose candor makes him popular as a liberal panelist before conservative groups, responded that if this was the result, it would represent a policy failure.

Now it's five years later, and the legislation is still languishing, and when now former Rep. Barney Frank, D-Mass., was still in Congress, he delighted in taunting Republicans for failing to act while they were in the majority.

Far from being contrite about the role the collapse of housing finance played in the 2008 episode of the ongoing financial crisis, the Complex and its advocates in Congress are demanding that Congress double down on its support by making the formerly implicit federal guarantee explicit, because the industry acknowledges that investors will not buy mortgage-backed securities unless they are government-guaranteed. That's probably due also to the advent of quantitative easing, under which the Federal Reserve has been buying trillions in Treasury and mortgage-backed securities, so that investors have become spoiled.

Another key fault in the industry plan backed by Maloney and other industry-friendly legislators is that it is built around the 30-year, fixed-rate mortgage as the cornerstone of the American Dream of home ownership. This model played a key role in the savings and loan crisis 20 years earlier, but the Housing Finance Industrial Complex presses on with the same failed program.

In fact, the first step toward real mortgage finance reform, obviously, would be to stop listening to the same industry lobbyists and conflicted legislators who created this mess and are looking to perpetuate it further.

(Archived video can be found here.)

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Robert-Feinberg
In a speech before the 23rd Annual Hyman P. Minsky Conference in Washington, Rep. Carolyn Maloney, D-N.Y., attacked two provisions of the Ryan budget that were scheduled to be considered on the House floor later that day.
Maloney, housing, finance, Congress
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2014-47-29
Tuesday, 29 Apr 2014 07:47 AM
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