Big News on Bachus Lender Regulation Bill?

Ben’s Bomb

I may be overreacting, but, if I was Rep. Spencer Bachus (R-Ala.), ranking Republican on the House Financial Services Committee, I would feel 10 feet tall and start my staff cranking out press releases, as fast as they were able.

In response to a Bachus question this morning, Fed Chairman Ben Bernanke seemed to endorse Bachus’ bill to require all mortgage lenders to be covered by federal regulation, which certainly means the mortgage brokers of the nation, but also federal regulation for the mortgage banking industry. (Commercial banks, savings and loans, and credit unions already have federal regulation.)

From Bachus’ perspective, this is part of the answer to the recent subprime mess and he may have gotten a huge advocate in Bernanke, if the Chairman’s handlers don’t “clarify the record,” this afternoon, when he gets back to the Fed’s office at 20^th and Constitution—once they realize his advocacy for additional federal regulation.

Good job Spencer!!

Bachus suggests that one answer to the phenomenon of roving gypsy mortgage thugs, who conduct business in states, are nailed for transgressions, then break down their tents, hop on their wagons, move onto another state and conduct the same havoc.

Suggesting that 3% of all mortgage lenders are responsible for over 90% of the subprime problems (a number which I think is low, since there are plenty of questionable actors in mortgage lending), Bachus says federal regulation is part of the answer to getting rid of the worst elements in the lending community.

I agree, but I know the brokers and lenders won’t.

If Bachus gets any momentum from the Bernanke endorsement, you will hear howls of complaints from the usual suspects about how regulation will add costs to and hurt borrowers, blah, blah, blah, blah, blah.

The brokers and mortgage banker trade groups will pay lip service to the principle of the Bachus bill, but complain about “using howitzers to kill fleas” and call for industry self regulation. They will use all the banality employed against serious regulatory proposals, which discomfit happy businessman.

Hang in there Rep. Bachus, you are onto something.

One of the best hopes for subprime relief--and housing finance, in general-- is that they lead to Congress to pass legislation like the Bachus proposal, then, look at the appraisal, title insurance, and mortgage insurance industries as well—all of which would be better run and more consumer friendly, if Uncle Sam—not the states and localities--regulated them.

Maloni 7-18-2007