HomeLoans Blog

The House Financial Services Committee has started the much anticipated regulatory reform hearings. There needs to be a great philosophical debate over the role of regulation and the extent of regulation.

Two 1990's pieces of regulatory reform have received a good deal of blame for the mortgage and credit crisis.

Gramm-Bliley-Leach basically removed restrictions that separated investment banking from depository banking. These restrictions had been in place since the depression.

The Commodity Futures Modernization Act created the unregulated credit default swap market that provided a false sense of security for the mortgage security bundles, that was used to justify the risky mortgage lending practices that have brought down our banking institutions.

The committee hearings started yesterday with political positioning and finger pointing. The blame goes to those who were in Congress when these two pieces of regulation were passed.

Most are still in Congress. Pointing fingers and assigning blame will not help. We are depending on those at fault to correct the problem. Finger pointing only serves for political posturing. If you want blame - follow the lobby money.

It is time, though, to get to work on this essential regulatory correction, before we nationalize more banks.

A good start would be to focus on repealing the two pieces of legislation that curbed regulatory restraints.