OUR SOLUTIONS
Modernize the Community Reinvestment Act (CRA)
Modernizing the Community Reinvestment Act will increase transparency, accountability and stability in the financial system by ensuring banks and mortgage companies provide responsible, quality lending and financial services in American communities. Over 80% of the high-cost subprime loans made between 2004-2007 were made by institutions NOT regulated by CRA. Those loans that have performed the best were loans made by institutions regulated by CRA. We need to update the law to ensure all lenders are covered by the law in order to curb subprime predatory lending and prevent a future crises.
Too Big to Fail
In the US today, three banks hold almost 34% of the nation’s deposits, four banks issue 50% of the country’s mortgages and the five largest credit card lenders control 74% of the market. These companies have a stranglehold on our wallets. And as we’ve seen, when they make bad decisions, they can take the whole economy down with them.
New laws should be put in place that minimize the risk of the “too big to fail” problem. No single institution should be in control of such a large part of the market. Instead, we should encourage a vibrant, diverse, stable banking system, made up of thousands of small and medium size banks. Strong competition policies and antitrust laws will encourage financial institutions to invest in productive activity, instead of investing in changing the rules of the game or manipulating the market.
Consumer Financial Protection Agency
The Obama Administration has called for the creation of a Consumer Financial Protection Agency (CFPA) that will make protecting consumers a priority over protecting the interests of the banks. Seven different government agencies had the power to stop the reckless risk-taking that wrecked our economy, but they didn’t use it. Lax oversight helped spawn the disastrous mortgage products and practices that triggered the current crisis. What’s more there is virtually no regulatory authority over firms that have pushed bad mortgages, payday loans and other products that are overly complicated, or are simply rip-offs. The CFPA will bring the focus we need to clean up destructive and unfair financial practices, restore the integrity of our financial system, and prevent another disaster in the future.
Democratizing the Federal Reserve
The Federal Reserve was established in 1913 and put outside of the reach of Congress and the President. The thought was that removing the Fed from politics, would position it to be more independent and serve the needs of the nation and the economy as a whole. But instead of independence, the Fed is largely under the control of the financial industry and left wholly unaccountable. District Reserve Bank Presidents are elected by nomination from the banks and several come from the financial industry regulated by the Fed. The Federal Reserve has enormous responsibilities to set our national monetary policy and regulate the financial industry, the Federal Reserve however seems to answer only to the banks. There is no reason for the banks to be given a special role in the determination of the country’s monetary policy, choosing the terms of their own regulation or the ability to choose their own regulator.
Federal Reserve officials should be appointed by the President and directly accountable to Congress and the community, not the financial industry.Congress should immediately overhaul the structure of the Federal Reserve and demand that a restructured Federal Reserve serve the entire economy, not just the bottom line of Wall Street.
Modernize Home Mortgage Disclosure Act (HMDA)
The Home Mortgage Disclosure Act (HMDA) was enacted in 1975. The law’s success speaks to the power of transparency. HMDA requires lenders to disclose to regulators AND the American people where loans were made and to whom banks were denying loans to. The data showed that banks were denying people credit based on where they lived, even if they were well qualified for the loan. The fact that the data was available to the public made it hard for the banks to deny charges of unfair lending. This resulted in millions of qualified Americans being able to become homeowners and banks learning that there was money to be made in communities previously denied loans.
Unfortunately, HMDA has not kept up with the changing face of lending. What was originally an issue of ensuring loans were being made to qualified applicants is now an issue of ensuring QUALITY loans are made to borrowers. HMDA can be strengthened by making banks disclose the interest rate, fees, and other terms of the loans made.