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Dodd-Frank Inspired Regulations Harming the Poor at Bank and Check-out Counters

August 22nd, 2016 Comments off

Dodd_Frank___bloombergbusinessweek___credit postedDailyBusinessNews-MHProNewsWhile Sen. Elizabeth Warren(D-Mass.) sings the praises of the six-year-old Dodd-Frank Act, saying, “If a bank screws up, you have someone to call so you don’t get stuck with the bill,”

in fact, consumers get stuck with the bill whether a bank makes mistakes or not.

The American Action Forum, according to what theblaze tells MHProNews, reports the true costs equate to $112 per individual and $310 per household, a direct result of expanded powers from new regulatory agencies, costs that stem from compliance alone. Based on this data, the Forum estimates the regulations have resulted in consumers and businesses spending 74 hours on paperwork with an impact of $36 billion.

Treasury Secretary Jack Lew has said Dodd-Frank and its offspring, the Consumer Financial Protection Bureau (CFPB), has provided “over $11 billion in relief for more than 27 million hardworking Americans,” but in fact, regulations have led to a 14.5 percent decrease in revolving credit.

Under the Durbin amendment, as added to the Dodd-Frank legislation, the Federal Reserve has limited the amount that banks with over $10 billion in assets can charge merchants for debit card purchases (“swipe fees”) to 21-23 cents per event.

Prior to the Durbin amendment merchants would charge one percent per transaction to cushion against the risks of fraud or overdrafts by consumers, and the average swipe fee was $0.44 per transaction. The thinking was consumers would save at the checkout counter by cutting the swipe fee in half. However, a study by the Richmond Federal Reserve reveals big-box retailers did not pass on the savings.

Additionally, the Boston Federal Reserve reports the Durbin amendment has cost large banks at least $14 billion a year or more in order to make up for lost revenue and riskier retail transactions, resulting in higher ATM and overdraft fees, stricter limits on debit card transactions and less free checking. Unfortunately, Americans at the poverty level are the ones hurt the most by restrictions on minimum balance checking and low-cost banking services.

In the presidential campaign, Hillary Clinton intends to add to regulations, which would continue to harm consumers and businesses alike, while Donald Trump said he would dismantle Dodd-Frank. ##

(Image credit: bloombergbusiness)

matthew-silver-daily-business-news-mhpronews-comArticle submitted by Matthew J Silver to Daily Business News-MHProNews.

Former Head of Ginnie Mae does not Envision GSE Reform Soon

November 11th, 2015 Comments off

joseph_murin__former_ginnie_mae_prez_and_ceo__scotsmanguide__creditThe former president and CEO of Ginnie Mae, Joseph Murin, said the Obama administration is not looking to recapitalize GSEs Fannie Mae and Freddie Mac, preferring to leave them as a conservatorship from which funds can be extracted as needed. Also, he does not believe reform of the government-sponsored enterprises (GSE) will occur under the next administration, scotsmanguide reports.

The Treasury is using them as a cash cow to use their cash flows for other areas of the federal government, where the administration feels that they need funding,” Murin said. “It is a deliberate strategy to be able to keep the GSEs where they are today, let them continue to earn and to transfer those earnings over to the Treasury.

Treasury Secretary Jack Lew said the administration does not want to release the GSEs from conservatorship now would it consider allowing them to retain earnings. He said President Obama wants Congress to take up housing finance reform so taxpayers would not be unduly exposed to risk.

Noting that the status quo is the administration’s policy, Murin does not believe any major reforms to the GSEs will be adopted, although he says it might be more likely with a Republican presidency, but adds, “I think they will continue to kick the can down the road,” Murin said. “Everybody is pointing to a new administration in 2017. However, I am not sure that is something that is in the cards.

He says some mortgage industry people and Civil Rights groups want the GSEs to recapitalize and release. Murin favors replacing Fannie and Freddie with one entity like Ginnie Mae, which insures mortgage securities backed by the federal government, like FHA, but does not purchase mortgages like the GSEs do. You cannot expect private capital to fill the void left by the absence of a government guarantee because without it, mortgage rates would spike 200 to 300 points. He said, “I don’t think that is ever going to happen, where the private marketplace takes over. The cost of liquidity under a private environment will be too high and it will impact in a negative manner the housing and mortgage market in this country.

The NAACP, the Community Home Lenders Association (CHLA) and the Community Mortgage Lenders of America (CMLA) all support a recapitalization of the GSEs. The NAACP and two other progressive groups are concerned that access to credit for lower-income borrowers is at risk under the status quo.

Mortgage trade groups are concerned Fannie and Freddie will be eliminated, especially since Freddie Mac reported a $475 million loss in Q3 2015, as MHProNews reported Nov. 4, 2015, a significant drop compared to net income of $4.2 billion in the same quarter of 2014. While the Treasury will not have to come to its rescue this time, Federal Housing Finance Agency Director Mel Watt predicted the GSEs will likely have to make draws against the Treasury as their capital reserves are decreased to zero by 2018.

CMLA Executive Director Glen Corso says taxpayer-funded bailouts could lead to the elimination of the GSEs. “There are folks out there that would like to see the GSEs shut down, and our concern is that gives them ammunition to argue that, ‘My God, they are at it again; they are losing money, let’s shut them down right now,’” Corso said. “Our members are very concerned about that.##

(Photo credit: scotsmanguide–Joseph Murin, former CEO and president of Ginnie Mae.)

matthew-silver-daily-business-news-mhpronews-comArticle submitted by Matthew J. Silver to Daily Business News-MHProNews.

Raise Debt Limit or Risk another Recession, says Lew

October 10th, 2013 Comments off

Treasury Secretary Jack Lew told members of the Senate Banking Committee failure to raise the debt limit could result in the rise of interest rates, possibly jeopardizing the nascent housing recovery, as well as lead to higher costs on retirement accounts and make it more expensive to buy a car or start a business. Noting the rise in interest rates recently that slowed mortgage applications, Lew suggested another hike resulting from failure to raise the debt limit, combined with spillover effects including loss of value in the dollar and credit market disruptions, could potentially result in another recession, according to housingwire.com. Sen. Pat Roberts (R-Kan.) says 70-80 percent of the American people want to limit spending and President Obama’s response is that he will not negotiate. MHProNews learned Lew responded, saying, “Congress needs to open the government and make it possible for us to pay our bills,” and then the president will negotiate.

(Image credit: housingwire.com)