The Dodd–Frank Wall Street Reform and Consumer Protection Act is essentially a collection of federal regulations aimed at financial institutions and their customers. It was supposedly implemented to prevent the recurrence of events that caused the 2008 financial crisis and was passed by the Obama administration in 2010.
The 2007-2008 recession resulted in a worldwide financial meltdown and a $700 billion taxpayer-funded bailout. The need for some common-sense financial reforms seemed evident. However is that what Dodd-Frank really was? What actually did cause the “Sub-Prime” mortgage bubble which led to this financial crisis?
That real facts are that President Clinton’s HUD Secretary, Henry Cisneros, discovered that a statistical difference existed between the granting of mortgages to black borrowers and white borrowers by banks. Ignoring differences in important contributing factors such as population numbers, income levels and the ability to repay these mortgage loans, Cisneros decreed that mortgage granting rates between black borrowers and white borrowers should be the same, meaning for every white home buyer granted a mortgage, they must also grant a black home buyer a mortgage. The fallacy of this decree is clear on its face. A truly non-discriminatory mortgage process would base mortgage approvals specifically on the borrower’s ability to repay the mortgage and not on race, creed, religion, sexual orientation or whatever. That would be a true non-discriminatory process. Banks resisted this idiotic decree, however Cisneros was backed up by Attorney General Reno who threatened nonconforming banks with FBI investigations. Banks were forced to approve “Sub-Prime” mortgages for borrowers who had no realistic means of repaying the mortgage. The result? Most of these mortgages became worthless paper. The result of these bad mortgages was recession world-wide. Henry Cisneros’ policy is a prime example of government over-reach and manipulation of economic policy for political gain … also know as Progressive justice.
Democrats badly needed a diversion to muddy the waters … to give their lap-dog media something to spin on their behalf! They needed to be seen to be doing something to “correct” the problem. Enter Dodd-Frank! But what Dodd-Frank actually did was act as a smoke screen to cover up the Democrat’s responsibility for the 2007-2008 recession.
The really sad thing is that the Obama administration did not learn from Henry Cisneros’ mistake and continued with the same kinds of policies that caused the 2007-2008 recession … expecting, of course, a different result! What Dodd-Frank really does is hamstring the banking industry with crushing regulations and help to perpetuate stagnate economic growth. I understand that regulation might be needed to help ensure fairness in lending practices, but Dodd-Frank is, by no means, that regulation.