Monday, June 28, 2010

Financial reform: Who's happy, who isn't and why

Los Angeles Times article "Financial reform: Who's happy, who isn't and why" (June 26th, 2010) writes an article on one of the two major parties who will be hurt by financial reform, if it passes. The article speaks at length of how banks will be harmed. It does not, however, note that the individuals who lose the most due to financial regulation are likely to be low-income borrowers.

'This is a landmark, a true inflection point,' said Calhoun, president of the Center for Responsible Lending in North Carolina.

Since the mid-1970s, Calhoun has been pushing to get an agency that would look out for consumers' interests.

If one takes the typical narrative, shark-like banks waited in the wings for naïve, impoverished individuals, in order to get them to take out a loan they could not possibly repay to the bank. The bank would then work through months or years of foreclosure hearings to get a house worth less than the value of the loan, while individuals are living in a house they could not have otherwise afforded, and often never having to repay their loans, having declared bankruptcy.

This, of course, is a political narrative rather than a sensible one. It remains that some of the individuals who have benefitted the most from poor bank lending practices are the very people banks are accused of acting in a predatory manner towards (by giving them free housing for a period).

Financial reform seeks to end this relationship between the poor and banks that would lend them money for "unaffordable mortgages." Because Corrections does not see a paternalistic master-slave relationship between government and the poor as beneficial to the poor, we see this sort of legislation as hurting the people it claims to help, a party that shouldn't be happy, though the Los Angeles Times does not take note of these poor.

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