Sunday, February 26, 2017

Rage Against the Machine

Buyer Beware

Remember the Great Recession of 2007/2008? Maybe you lost a job, got a pay cut, or saw your retirement savings or home value evaporate. Maybe you even lost your home altogether, or saw your small business go under while the banking corporations got bailed-out. Wall Street hopes you have already forgotten all about it for they are poised to repeal all those regulations that were passed to prevent another economic crash.

 Last year, the Consumer Financial Protection Bureau, the first independent agency with the sole mandate of protecting consumers against scam artists, predatory lenders, and bad actors in the financial sector, caught Wells Fargo creating millions of bogus accounts without their customers’ permission. Wall St's friends in the Trump camp have pencil it in for removal of powers.

The Dodd-Frank law made rules to keep banks from making risky bets with your money. For instance, it requires banks to keep some skin in the game by maintaining a 5 percent stake in loans they originate, so they have a stake in the success of the borrower and the loan. It also encourages banks to keep some cash on hand in case of emergencies, just like the rest of us try to do at home. Gary Cohn, a former Goldman Sachs president — and now a Trump economic adviser — claimed that banks obliged to maintain a healthy reserve of funds are being forced to “hoard capital.” Cohn say abolishing these rules will help “ordinary” consumers. The truth is, cheap credit is already abundant. The commercial and industrial business industries are booming. Credit card and auto lending are at record highs, and mortgage loans are almost back to their pre-2008 crisis high. But Wall Street lenders want to take greater risks in search of greater rewards.