It’s called The Financial Choice Act (I’m totally pro-financial choice) the bill, written by Representative Jeb Hensarling, would relieve banks of specific regulatory requirements set by Dodd-Frank, so long as they meet certain capital requirements. It would reduce the number of stress tests to banks to every two years instead of every year; scrap the Volcker rule, which restricts banks from making certain investments; drop the fiduciary rule; and gut the Consumer Financial Protection Bureau, which Hensarling has previously described as dictatorial.

The liberals LOVE them some Dodd-Frank. They say things like, Dodd-Frank was the government intervention we needed to reign in the reckless behavior of the big banks that caused the housing crisis. Here’s why that’s complete bullshit.

1. The housing crisis was caused by government intervention

Part A: Land Restrictions

The housing crisis of 2008 can be traced all the way back to when property values first began rising in certain areas. This was due to Federal, local and state governments restricting land use. This caused the supply of land to decrease, therefore causing the demand and subsequently, the price of houses to increase. Now less people were able to buy houses due to the rising prices in those areas. When the market reached its “boom,” those areas were the most expensive. When it hit it’s “bust,” those areas had the highest foreclosure rates. Areas where there were less land restrictions, experienced less of a boom and therefore, less of a bust.

Part B: The Community Reinvestment Act of 1977

A politically charged law that targeted banks for allegedly discriminating against blacks and hispanics in particular neighborhoods. A tactic labeled, “redlining.” Even though the alleged discrimination of minorities by banks theory has been debunked by numerous economists and statisticians, it didn’t stop organizations like ACORN from legally extorting money from banks in order to create more high risk, subprime loans to give to people who wouldn’t be able to pay them back. These subprime mortgages required creative methods to get people approved. One method, for example was the adjustable rate mortgage. This allowed people to acquire a mortgage at a low interest rate to start, and the rate would fluctuate as the market changed. For the first two years, the mortgage payment would be all interest and each year after, more money would go toward the principle of the loan, ensuring the bank gets most of their money earlier on.

Part C: The derivative

The government was LITERALLY FORCING banks to write risky mortgages in the name of “equality,” so, in order to ensure they wouldn’t fail, the government created companies to buy up the risky loans from the banks and bundle them together. They are the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association, otherwise known as Freddie Mac and Fannie Mae. These two government sponsored enterprises could take on an infinite amount of high risk loans, knowing the government would just bail them out if they failed, allowing other banks to write more and more high risk loans.

Part D: Government intervention by the means of manipulation of interest rates through the Federal Reserve

The federal reserve is the centralized government bank that oversees all other banks, prints money, and controls interest rates. Rather than letting the market set the interest rates in accordance with supply and demand, the Fed was artificially lowering interest rates to stimulate the housing market that the government fucked up by restricting land use. Once the market hit its peak in 2003/2004, the Fed started slowly increasing interest rates, causing all the adjustable rate subprime mortgage payments to skyrocket. Subprime mortgages started foreclosing at record rates and both Freddie Mac and Fannie Mae needed massive taxpayer funded bailouts.

2. Dodd-Frank “fixed” the crisis with more government intervention

This is like the government passing a law requiring people to drive 100 miles per hour at all times, realizing that car accidents increased, passing a follow-up law that fines people for speeding, and then patting themselves on the back for fixing the problem they created. There would be absolutely no need for Dodd-Frank if the government didn’t step in and destroy the housing market to begin with. The banks weren’t being racist. The CRA was put into place by democrats in attempt to score minority votes. Black and Hispanic people were given mortgages less frequently than whites and Asians, that’s a fact, but the CRA didn’t take into consideration, income, credit history or accumulated wealth when conducting their study. Only race. I wonder why…

3. The Financial Choice Act is a good start, but it isn’t enough

Gutting Dodd-Frank will only be effective if government regulation in the housing sector is dialed way back. Cutting the regulations that reigned in the reckless behavior without cutting the regulations that forced the reckless behavior could result in another crisis. The free market is self governing as long as we have police in every community, protecting people and their businesses, secure boarders protecting wages from illegal immigrants who will work for cheap, driving down demand for labor, and a government that stays the fuck out of our private businesses.

By: Dave Wilkins
Twitter: @davewilkins12