I hate the idea of the financial institution tax as a matter of record. (in2thefray). I like this idea though. If you want to tax the banks and lenders for their bad behaviour let’s look at this group too.
● Barney Frank. As the poster boy of government meddling in the mortgage market gone awry, the Massachusetts congressman would be first in line for the hypothetical guilt tax. He, Sen. Chris Dodd and other colleagues were outspoken opponents of attempts to rein in Fannie Mae and Freddie Mac. He kept repeating that Fannie and Freddie were not facing a financial crisis.
As for Obama’s responsibility fee on banks, Frank said “It’s entirely legitimate to make them pay for the damage (they) inflicted on the financial system.” Barney, don’t you see the irony?
● Fannie Mae and Freddie Mac. They willingly complied with the government’s demands to buy up more subprime assets. Their lobbying arms fiercely resisted attempts to further regulate them. Fan and Fred really worked the politically correct this-is-good-for-minorities angle in order to get their way, even though the targeted groups had weaker credit histories.
● HUD. In 2004 the Department of Housing and Urban Development ordered Fan and Fred to substantially step up their buying of subprime and Alt-A loans and securities, making them become the largest buyers of those securities, according to Helen Thompson, writing in The Political Quarterly.
● Jimmy Carter. His presidential administration presided over the Community Reinvestment Act, which cracked down on banks that weren’t lending enough to “low-income, minority, and distressed neighborhoods” i.e. borrowers with weaker credit histories.
● Bill Clinton. Under him, stricter CRA rules went into effect mandating that banks had to prove they were lending enough to low- and moderate-income borrowers. “Innovated or flexible” —i.e. less-stringent—lending practices were also authorized.
● ACORN. It and other housing activists used the CRA to pressure banks to extend mortgages to people with poor credit and/or little or no money for a down payment—i.e. subprime borrowers who accounted for the bulk of the foreclosures and subsequent financial meltdown.
● Alan Greenspan, Ben Bernanke, and other Federal Reserve governors. In the early to mid-2000s, the Fed kept interest rates low at a time when it should have been tightening. The excess liquidity fueled the housing bubble. And through its bailouts, the Fed also fuels the moral hazard problem.