Below lies a list of the existing watchdog agencies tasked with “policing” both the bank and stock market industries.  All of which were in place prior too and during the so called financial meltdown.

Securities & Exchange Commission (SEC)
Commodity Futures Trading Commission (CFTC)
Federal Reserve System
Federal Deposit Insurance Corporation (FDIC)
Financial Industry Regulatory Authority (FINRA)
Office of the Comptroller of the Currency (OCC)
National Credit Union Administration (NCUA)
Office of Thrift Supervision (OTS)

But even though the listed regulators were empowered to quell any type of aberrant behavior, they all appeared to have been sleeping at the switch, or more likely, steered away from pulling the plug on the housing industry which historically accounted for the lions share of the United States economy since 1996.

With the bursting of the housing bubble, a scapegoat was required, enter Barney Frank and Chris Dodd, both of whom share equal blame for the collapse of the housing industry, with their constant K street induced interference.  Rather than do the honorable thing and tell the truth accepting responsibility, both Frank and Dodd started pointing fingers very early on projecting the blame on the evil bankers and Wall street, totally dismissing their own personal culpability.

In typical Washington form, create a problem, blame it on anyone but yourself, then get appointed to the committee to fix the very issue you created.  Not unlike gun control, there are more than enough laws on the books to avoid any future housing meltdown, but they become ineffective when politicians and lobbyist are involved.

Keep in mind that the meltdown in housing began in the Clinton administration, their goal was to open up the housing markets to under-served individuals and fill the void where the Federal Housing Authority/FHA was not taking up the slack. In doing so, along with the creation of risk based pricing structured on credit score tiers, a borrower could buy a home with a score as low as 500. Subprime thrived due to the fact everyone in the world was buying the collateral, each institution was aware of the risk in buying such low quality paper, so were the auditors of the above listed government agencies, if you wish to blame anyone, blame greed, that is the American way.

Now the solution to all the housing ills is to bring all the governing regulators under one roof and appoint the power to one person, very bad idea. Government is not capable of managing any entity of free enterprise, and that is what the housing market is,  government layered on the regulations in the 80’s, so much so that FHA lending became ineffective due to an overabundance of  red tape.

If this bill were to pass, which is not a certainty it will be heartily challenged in the Senate.  History is clear in that further intrusion of  government into the free market system has never succeeded, not once.  Government regulators need to be free of politics to maintain any level of efficiency, the past has shown that even if the regulations are in play, there are too many cooks in the kitchen spoiling the soup.

By creating a bigger watchdog, it just means you need to feed it more, and by all past experience the dog will probably be sleeping on the porch when it’s time to hunt.

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