SALON

Monday, Jan 14, 2008 4:20 PM UTC

Barney Frank on the regulation warpath

The verdict is in on 30 years of "radical economic deregulation." Guilty, guilty, guilty.

By

Topics: Globalization, How the World Works, Mortgage Crisis, Barney Frank, D-Mass., Alan Greenspan,

Barney Frank kicks off his opinion piece in Sunday’s Financial Times with Paul Krugmanesque precision:

As we prepare for this autumn’s election, the results are in on America’s 30-year experiment with radical economic deregulation. Income inequality has risen to levels not seen since the 1920s and the collapse of the unregulated portion of the mortgage and secondary markets threatens the health of the overall economy.

The chairman of the House Financial Services Committee has never made any secret of his belief that a “mature capitalist economy is as likely to suffer from too little regulation as from too much.” So the news value in his pronouncements is minimal. But he did let drop one interesting historical observation.

In 1994 a Democratic Congress — the last before the Republican takeover marked the arrival of the deregulators — passed the homeowners equity protection act, giving the Federal Reserve the power to regulate all home mortgage loans. The avatar of deregulation, Alan Greenspan, then Fed chairman, flatly refused to use any of that authority.

The relevant section of the Home Ownership and Equity Protection Act (HOEPA) reads as follows:

The Board, by regulation or order, shall prohibit acts or practices in connection with–

(A) mortgage loans that the Board finds to be unfair, deceptive, or designed to evade the provisions of this section; and

(B) refinancing of mortgage loans that the Board finds to be associated with abusive lending practices, or that are otherwise not in the interest of the borrower

HOEPA, writes lawyer Raymond Natter in an analysis of the legislation, was designed to prevent “reverse redlining” — “the practice of targeting residents of specific disadvantaged communities for credit on unfair terms, and in particular by second mortgage lenders, home improvement contractors, and finance companies.” But it was written broadly enough so as to give the Federal Reserve Board authority to do whatever it wanted. If Greenspan had decided that the popularity of no-money-down, stated-income, negative-amortization inducing option-ARM mortgage loans might undermine the health of the housing sector, he could have squelched them.

Of course, he did the opposite. He recommended them: “American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.”

Which speaks to an obvious point: The presence or absence of regulation is almost a sideshow to the real deal — the presence or absence of legislators willing to regulate. Before the 2006 midterm elections, Barney Frank’s views on regulation were not receiving prime placement in the Financial Times or being echoed throughout the blogosphere. Now he’s the chairman of a crucial House committee, and waiting eagerly to see just what kind of majority in both branches of Congress the Democrats might end up with this November.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21. More Andrew Leonard.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments

 20 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>

follow salon

Most Read

Popular on Reddit

links from salon.com

vote
Loaded terminology like "entitlements" and "welfare" skews the debate and alters America. How right-wingers use semantic tricks to kill government.
291 points292 points | 63 comments
vote
New Yorker launches tool by Aaron Swartz to protect leaks: Strongbox, co-created by the late technologist, is an open-source drop box for leaked documents
261 points262 points | 10 comments
vote
New Yorker launches tool by Aaron Swartz to protect leaks: Strongbox, co-created by the persecuted late technologist, is an open-source drop box for leaked documents
199 points200 points | 1 comment
vote
Obstruction will ruin the GOP: Playing politics and abusing the system can excite the extremes, but it's a recipe for long-term political disaster
53 points54 points | 8 comments
vote
How right-wingers use semantic tricks to kill government -- "...much of the U.S. economic security support system consists of subsidies for the affluent in the form of tax breaks, like those for private retirement savings plans such as 401(k)s and private employer-provided health insurance."
47 points48 points | 3 comments

From Around the Web

Presented by Scribol
listener_new_rect The Listener: So long, Sookie Stackhouse

Recommendations