Friday, January 30, 2015


In his oral biography, Harry Truman stated that any political leader should be a student of history so as to not continue to commit past mistakes. 

This may come as a surprise to many of you, but there is one area in which I agree with many Tea Party members. Recently Congress, Republicans and Democrats alike, made the mistake of not remembering past mistakes -- to the detriment of America and its citizens.

Only a few years ago America’s entire financial system was teetering on the brink of collapse, primarily because of greed by big banks, big lenders and lack of oversight by the government. Lack of oversight allowed lenders and investors to package home loans. This was done without regard to the quality of loans and without fully vetting the borrowers. In fact, many of the packages contained loans never examined by a real bank official or regulatory investigator.  Many were phony packages included along with a few that were legitimate. 

When revealed, the perpetrators of these misadventures began the cry that the banks were too big to be allowed to fail, and that failure of our institutions would drive America into a recession or depression much like the 1920's. In all probability, we, the people of America, had little or no choice but to pony-up the billions of dollars to bail these folks out. As a result of saving Wall Street--and leaving Main Street citizens to fend for themselves--many oversight laws and regulations were re-instituted to prevent the same calamity from occurring again.

But then, on the eve of a lame-duck session of Congress about to depart for Christmas vacation, Republicans and Democrats alike yielded to lobbyists, allowing lobbyists for big firms to even write the law allowing the continuation of many of the practices which led us to the brink of disaster a few years ago. Provisions which remove the difference between banks and derivative trading banks were slipped into a “must pass” spending bill which will preserve essential government services. Mortgage giants and mega-loan companies making home loans and auto loans were allowed by these provisions to ignore formal standards about credit worthiness of would-be homeowners or big car buyers.

As an old, experienced and wise traditional banker once told me, “When you make a loan to someone who cannot afford it, you do a disservice to the borrower and to the bank.” 

In this case, Congress appears to be doing a disservice not only to the borrowers who can’t afford it, but to the future of America, and to our children and grandchildren who will receive the bill for our Congress’ folly.

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