By Orson Aguilar
Four years before the subprime mortgage meltdown devastated the U.S. economy, my organization warned Federal Reserve Board Chair Alan Greenspan that a deregulated financial sector was hurtling us toward disaster.
The New York Times, in recounting this 2004 meeting, noted that representatives of Greenlining Institute “implored Mr. Greenspan to use his bully pulpit and press for a voluntary code of conduct.” He was not interested.
Astonishingly, similar warnings are being ignored all over again.
After the 2008 crash, Congress passed a series of reforms known as the Dodd-Frank Act. While many of us felt this law should have gone farther, it did put in place a series of common-sense protections designed to curb the “wild west” atmosphere on Wall Street.
In mid-March, the U.S. Senate acted to slash those protections, passing a financial deregulation bill known as S.2115, rightly derided by critics as the “Bank Lobbyist Act.” Among other things, the bill would exempt some truly massive banks—up to $250 billion in assets, big enough to include American Express—from regulatory oversight designed to keep them from driving the economy into a ditch again.
The Senate passed the bill despite a warning from the Congressional Budget Office that it would increase the likelihood of a federal bank bailout and increase the budget deficit.
As in the Great Recession of 2008, the impacts of this policy would likely hitcommunities of color the hardest. A recent investigation by Reveal foundthat banks continue to practice illegal forms of race-based discrimination, a.k.a. redlining, in home mortgage lending. Obtaining home lending data is key to shining light on this bias, and hiding that data is exactly what the banks would prefer.
Because black, Latino and Asian American borrowers were specifically targetedby predatory subprime lenders, Congress beefed up reporting requirements under the Home Mortgage Disclosure Act, to be effective this year. Increased public reporting of statistics like borrower credit scores, mortgage loan terms and the assessed points and fees would help regulators find patterns of discrimination and stop redlining.
But the Bank Lobbyist Act rolls back these new reporting requirements for banks and credit unions making under 500 home mortgage loans per year—even though lenders still must collect this information for their underwriting files. By allowing banks to hide data they’re already collecting, the bill will make it harder to detect and prevent patterns of discrimination. Effectively, it’s a Redliner’s Bill of Rights.
Now that the Senate bill has passed with a bipartisan majority (sixteen Democrats joined all Republicans in voting “yes”), consideration moves to the House of Representatives. Rep. Jeb Hensarling, Republican of Texas, chair of the House Financial Services Committee, has indicated he wants to combine the Senate bill with existing House legislation that’s also regarded as dangerous by consumer advocates.
It’s time to sound an alarm. We need to remember what caused the Great Recession, and let Congress know we’ll be watching to see whether it proceeds with this mad experiment in bank deregulation.