Democrats To Promote More Bad Loans Under The Guise Of “Consumer Protection”

Because nothing says “consumer protection” like pressuring banks into making loans to people who have no business taking them.
Remember that subprime loans were at the heart of the financial meltdown that led to our current recession, and that all those subprime loans were the result of the government mandating and/or incentivizing their existence through regulatory pressure and manipulations through government-backed lenders Fannie Mae and Freddie Mac.

Expect to see more bad mortgages as a result of a House committee’s vote Thursday to create the so-called “Consumer Financial Protection Agency.” That agency, contrary to its deceptive name, will harm savers and consumers by forcing banks to make loans to people with bad credit, leaving banks with less money to pay interest. “The agency would be in charge of enforcing the Community Reinvestment Act, a law that prods banks to make loans in low-income communities.”
Government pressure on banks to make more risky loans in low-income neighborhoods was a key reason for the mortgage meltdown. Yet President Obama’s disturbing proposal would empower the new agency to enforce the Community Reinvestment Act without regard for banks’ financial safety and soundness. …
The mortgage crisis was also caused by the reckless government-sponsored mortgage giants (”GSEs”) Fannie Mae and Freddie Mac, and by federal affordable-housing mandates. But Obama’s proposed financial rules overhaul does absolutely nothing about Fannie Mae and Freddie Mac, admits Obama’s Treasury Secretary.

This is what happens when “social justice”, or equality of outcome, is the goal instead of equality of opportunity. For the liberals, at least per their actions, the optimal situation is for everyone to get a loan regardless of their ability to pay it back. But in reality, things like mortgages should be something individuals earn through fiscal responsibility. Remember that loans are meant to be mutually beneficial. Lendees get the capital they need for whatever investment they’re making. Lenders get interest payments. Nobody is best served by a defaulted loan, so without government interference lenders are for the most part only going to make loans to people with a high probability of paying them back.
With government interference, however, lenders are forced to also make loans to people with a low probability of paying them back. Which serves the liberals’ skewed sense of fair lending practices.
Yet outside of said skewed notions, there is also a disturbing desire for government control on display here. The federal government wants to dictate loan standards so that instead of loans being a mutually-beneficial relationship for lenders and lendees they’re something lendees are entitled to even if it isn’t a best business practice for lenders.
And when lenders take on too many bad loans under pressure from the government? They’re declared “too big to fail” by the government and they’re nationalized.
Meaning that this isn’t just about stupid notions about social justice. This is also a government power grab.