Debunking “The Big Lie”: Blame Wall Street Not Housing Policy
Written By: Melvin W. LaPrade
Five years after the Great Recession of 2008, described as the first crisis of globalization by former British Prime Minister and Chancellor of the Exchequer Gordon Brown, the economic financial crisis continues to set off a protracted ideological struggle of competitive narratives. There is a singular point of agreement. That is, the financial crisis, originating in the United States subprime mortgage sector, threatened the complete collapse of the entire global economy system. Opinions diverge, however, on how dealings in a relatively obscure sector of the financial system cascaded into an economic global contagion. A widely accepted perception purports that misguided affordable homeownership mandates and government subsidization of mortgage risk is a root cause. Sustained attention on government intervention as a primary cause of the financial crisis reflects a powerful consensus among conservative and libertarian public policy think tanks, university scholars, and policymakers. Cynically known as “The Big Lie narrative”, this vigorous movement to rewrite history is an attempt to shape the financial reform agenda by devising and promoting the notion that government intervention in housing is not required and even counterproductive.
Contrary to the “Big Lie” narrative, in reality, much of the impetus behind the collapsing architecture of the financial sector, including those affecting housing, does not represent a failure in government intervention, but rather a Wall Street induced macroeconomic financial shock spawned by a failure of federal regulatory oversight over systemically important financial institutions. Therefore, we find the “Big Lie” thesis both unpersuasive and a distraction. The “Big Lie” narrative is unpersuasive because it exaggerates the role of government intervention in housing as the central cause for a global economic crisis while discounting the role of financial deregulation. This narrative is also a distraction in its shrewdness. It diverts attention away from the need for financial sector regulatory oversight and Wall Street reforms, while placing far too heavy a burden on the homeownership aspirations and mortgage credit needs of traditionally underserved communities as a principal source for a multi-trillion dollar global economy crisis.
The Dodd-Frank Consumer Protection Act: Consumer Protection, Predatory Lending Reforms and Fair Lending Enforcement
Written By: Melvin W. LaPrade
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). Title X of Dodd-Frank, the Consumer Financial Protection Act of 2010, establishment of the Consumer Financial Protection Bureau (CFPB) is among the most controversial provisions, merging consumer protection powers from existing regulatory agencies into a new Executive agency. Nearly two years after President Obama signed Dodd-Frank into law, the CFPB has fully embraced its vision to implement and enforce federal consumer financial laws to make certain that consumers have access to fair, transparent, and competitive financial products and services. Regrettably, these efforts will supply limited support for consumers already trapped in the web of foreclosure and downward spiral of economic collapse. Yet, the introduction of new consumer protections is a step in the right direction, as it sends a clear message to financial services providers that, for the first time, a single federal regulatory is committed to the task of forestalling further harm with a willingness to take innovative steps within its authority to achieve this goal.
The Case of Wells Fargo
Written By: Melvin W. LaPrade
Amid the turmoil of the subprime mortgage crisis, one question lurking beneath the surface of the national debate over its causes is the role of race. On January 27, 2011, the Financial Crisis Inquiry Commission (FCIC) released their Final Report on the Causes of the Financial Crisis (FCIC Report). Congress established the FCIC to “examine the causes of the current financial and economic crisis in the United States” and “to expose the facts, identify responsibility, unravel myths, and help us understand how the crisis could have be avoided.