Financial Services Committee Edition
Representative Andy Barr made the front page of the New York Times. For Freshmen in the House, Finance Panel is a Money Seat. The Herald-Leader also reprinted portions of the story. Committee seat has Andy Barr surrounded by industry cash.
The article notes that members of the Financial Services Committee are prolific fundraisers, particularly from the financial industry. I should note that this applies to both Republicans and Democrats. The Democrats raise less than the Republicans, but the Democrats on this committee still raise far more that Democrats on other committees.
That’s right, the Congress members who are charged with drafting laws to regulate the financial industry raise huge amounts of money from the financial industry. And Mr. Barr apparently leads the pack.
The article notes that Mr. Barr introduced a measure that would eliminate the requirement that banks verify that the people they are loaning money to have the ability to repay the money. That provision was part of the Dodd-Frank bill that was enacted in 2010 in the wake of the financial meltdown of 2007 and 2008. That provision was included in Dodd-Frank because most economists and regulators believed that one of the reasons for the financial melt-down was that banks were giving out loans to people who could not afford to repay them. One of the reasons that banks did this was that they were able to sell those loans to other financial services companies, and those companies bundle those loans and sold them as an investment vehicle called a Derivative. When the loans went bad, as surely they would when you lend money to people who can’t pay, the derivative market crashed, and nearly brought down the entire banking system.
But banks don’t like having to spend time and money investigating whether or not the people seeking loans have the ability to repay those loans. One would think that this would be a minimum level of prudence, but apparently the banks don’t like it.
Representative Barr is certainly a friend to the banking industry, and they are friendly in return. In just six months Mr. Barr has raised roughly $150,000 from them. Curiously, just after hosting a meeting with credit union lobbyists, Mr. Barr promised to protect a federal tax break work over $500 million a year to the industry.
I know there are wide spread complaints from both banks and small businesses that some provisions of Dodd-Frank have made it difficult to loan money. This is a situation that must certainly be addressed, but I haven’t heard anyone suggest that the problem is verifying the ability of individuals to repay mortgage loans.
It would be nice if our representatives would make the news for good things, not slightly icky things. I realize that Mr. Barr is just playing the game, but the game stinks.