Carl Horowitz

Supporters call it “financial services reform.” Yet the Restoring American Financial Stability Act of 2010 is far less about reform or stability than about central control over the ground rules of residential mortgage lending – and with a strong dose of racial entitlement. Its principal legacy may be an even worse rerun of the financial collapse of 2008.

By a 237-192 margin, the House of Representatives on June 30 passed the 2,300-plus-page conference bill which is designed to protect households from predatory practices by banks, subprime lenders, brokerages and other financial intermediaries. Yet in practice the measure is likely to invite a new generation of reckless lenders and unqualified borrowers. That’s because during House-Senate conference sessions, affirmative action zealots managed to insert a series of mandates whose implicit intent is to lower credit standards for nonwhites so as to boost their rates of homeownership.

Sen. Christopher Dodd, D-Conn., and Rep. Barney Frank, D-Mass., prime sponsors of the larger bill, have refused to entertain legitimate objections. If the Senate approves the measure – it is set to begin debate shortly – Congress once more will have made clear that it views institutional safety and soundness as a lesser priority than achievement of demographic “diversity” among borrowers.

The driving force behind these amendments, by all accounts, is Rep. Maxine Waters, D-Calif. Congresswoman Waters, a member of the conference committee and the Congressional Black Caucus, used her clout to ensure that the final package delivers a cartload of favors to black and Hispanic mortgage borrowers, not to mention lending institutions that cater to them. Investor’s Business Daily recently surmised that the bill “could have been written by ACORN [the Association of Community Organizations for Reform Now], and probably was.”

Carl Horowitz

Carl F. Horowitz is director of the Organized Labor Accountability Project of the National Legal and Policy Center, a Gold Partner organization dedicated to promoting ethics in American public life.
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