Banks Draw Major Fines on Eve of Shelby Markup
It is somehow fitting, possibly ironic, and maybe choreographed--although I don't think the Obama Admin is that smart--that the @$5.7 Billion in fines laid on five behemoth banks, today, after guilty pleas of rate fixing occurred on the eve of Senator Dick Shelby's (R-Ala.) markup, scheduled for Thursday, legislation to reduce what he sees as the regulatory burden on large financial institutions.
Separately Shelby's proposals also paves the way for those same banks and their peers--down the road--to take over the nation's mortgage finance system with regulatory changes to Fannie Mae and Freddie Mac's oversight.
Stealth GSE reform
Maybe someone on the Senate Banking Committee will put the puzzle pieces together and show why each action is unwise and fraught with greater problems and that the large banks just are not worthy managers of both the primary and secondary mortgage markets, which ultimately they will control if Shelby and his allies prevail.
(Just last week, in unrelated actions, the Department of Justice fined Nomura Securities and the Royal Bank of Scotland over $2 Billion for faulty mortgage backed security sales to Fannie and Freddie. As dozens of major fines and guilty please over the past five years have shown, aberrant big bank behavior is constant and multi-faceted.)
What good--except for the banks themselves--can come from reducing regulatory eyes from behemoth financial institutions with asset sizes between $51 Billion and $499 Billion, as Shelby proposes?
Answer: No good at all. More oversight, not less, is needed.
And, in typical fashion, making major changes to the Fannie and Freddie charters without any working idea of what should replace them after their disassembly-which is the stated goal of their Senate antagonists--is irresponsible and paves the way for chaos and inefficiency in the mortgage, markets, which indirectly control about 20% of our nation's GNP.
OK, the GOP controls both hoses of Congress, but some voices need to be raised and force the Senate Banking Committee Republicans to explain the interconnections of their major legislative objectives in tomorrow's markup.
Those are not ad hoc statutory alterations and the implications are far reaching and I would argue bad for the American public on both scores..