We did it. We passed Wall Street Reform. Now, lenders are no longer rewarded for bad behavior:
It has become fashionable to blame profligate borrowers for the calamity. And there is no question that in the madness of the housing bubble, some people should never have sought mortgages or bought homes they clearly couldn’t afford. But the crisis was driven by Wall Street’s hunger for quick profits and its eagerness to buy mortgages and package them into securities. Banks, mortgage companies, brokers and appraisers all conspired to steer borrowers into loans with escalating interest rates, balloon payments and other conditions that made them highly prone to default.
The new law does not ban risky loans outright. It does establish several conditions that, if correctly implemented, should discourage lenders from issuing them.
Lenders must now take the common-sense precaution of documenting the borrower’s ability to pay. They can no longer penalize borrowers — eager to free themselves from subprime or other risky mortgages — for paying off the loans early. And lenders are forbidden to pay kickbacks — “yield spread premiums” — to brokers who push borrowers into costly, higher-interest loans.
If loans violate the law, borrowers will be able to stop a foreclosure and sue to recover damages. The risk of being hauled into court should persuade investors to look closer at the underlying loans to make sure that they conform with federal law.
These are all good, and desperately needed, reforms. Industry lobbyists, who do some of their best work in the rule-making phase, will work hard to water them down.
Consumer advocates are especially worried about how the Fed will formulate the rules that are supposed to stop lenders from steering creditworthy minority or female applicants into more expensive mortgages and end “wealth stripping,” under which lenders design loans that quickly rob homeowners of their equity.
Congressional leaders believe that the Fed was chastened by the crisis and will now do all that is needed to protect lenders. Given the agency’s long history of kowtowing to the banks, mortgage lenders and credit card companies, Congress will need to do more than trust. It will have to verify that the new rules finally give consumers — and the American economy — the strong, permanent protections they need.
It's time for the Fed to step up. And, if they don't, they must be held accountable.
Wall Street is pouring money into the campaign coffers of the Republican Party. The Republicans stood up for Wall Street on Capitol Hill, and, Wall Street is paying them back:
Financial firms and the people who work for them are increasingly donating their political cash to Republicans, according to a preliminary Center for Responsive Politics analysis of second-quarter federal campaign finance data.
The Center's preliminary study indicates that political action committees and individuals associated with the broad finance, insurance and real estate sector have given more money to federal-level Republican interests during every month since December. The gap continued to grow during that time, reaching its widest point in June...
Contribution trends toward Republicans is particularly pronounced in the securities and investment industry, the Center finds...
The Republicans stand up for Wall Street. So, Wall Street is standing up for the Republicans.
New York Communities for Change has launched an innovative campaign to keep Americans in their homes: keep people in their homes, or else. They introduce the campaign:
We all know the Big Banks triggered the forecosure crisis in this country through predatory lending practices. Now they have the power to fix it - by working with families facing foreclosure, these banks can modify their loans to allow them to make payments and stay in their homes. But the Big Banks refuse to do this. It's time to send the banks a message - change your ways, or we move our money.
Fill out the form below to send an email to the CEO's of the Big Five - Chase, Citi, HSBC, B of A, and Wells Fargo, letting them know that if they don't improve their loan modification policies by August 31st, YOU will move your money to another bank and refuse to do business with any of these five.
Take the pledge. And, help keep Americans in their homes.
...that's how much Wall Street spent trying to defeat and water down real reform.
The financial industry has spent $251 million on lobbying so far this year as lawmakers hammered out new rules of the road for Wall Street, according to the latest lobbying reports compiled by a watchdog group.
The financial sector spent more than any other special interest group from April through the end of June -- a whopping $126 million, according to the Center for Responsive Politics' latest estimates. Wall Street banks, as well as insurance and real estate firms, hiked the amount they spent on lobbying by 12% in the second quarter compared to the same period last year.
"Financial reform certainly drove Wall Street lobbying efforts," said Dave Levinthal, spokesman for the Center for Responsive Politics. "Even as the economy remains beaten and bruised, with some financial institutions continuing to struggle, most banks and securities houses found it in their budgets to hire lobbyists - and lots of them."
The usual suspects spent the most:
In the first half of 2010, Goldman Sachs (GS, Fortune 500) spent $2.7 million, just $100,000 shy of the total the firm spent on lobbying in all of 2009. The firm's reports to the federal government said it lobbied Treasury, White House and the Commodity Futures Trading Commission, as well as Congress.
Other banks also flexed their muscle on Capitol Hill this year. Citigroup Inc. (C, Fortune 500) spent $3 million and Bank of America Corp. (BAC, Fortune 500) spent $2.1 million on lobbying during the first half of this year, the Center for Responsive Politics reports.
Banking and financial lobbying groups are among the heavy hitters so far in 2010. The American Bankers Association (ABA) has spent $4.5 million and the Financial Services Roundtable has spent $4.2 million on lobbying so far this year, while the Securities Industry & Financial Market Association (SIFMA) has spent $2.8 million.
They tried their hardest, but, in the end, the power of people defeated Wall Street's millions.
Goldman Sachs pledged not to spend money on political ads.
Facing pressure from critics of Wall Street to limit its role in elections, Goldman Sachs has pledged not to spend any of its vast corporate reserves on political advertising.
The move was an unexpected sign of restraint after a major Supreme Court ruling this year that gave corporations the power to devote unlimited amounts to electing or defeating candidates for federal office.
The investment bank quietly revised its statement on political activities on its Web site last week, adding a sentence addressing the powers that were granted under the Supreme Court decision in January, known as Citizens United v. Federal Election Commission. “Goldman Sachs also does not spend corporate funds directly on electioneering communications,” the firm said in its statement. Those communications are generally interpreted to mean advertisements on radio and television broadcasts in the run-up to an election.
It's up to us to hold them accountable if they break their promise.