By Cliff Montgomery – Nov. 19th, 2016
Advocates of capitalism are very apt to appeal to the sacred principles of liberty, which are embodied in one maxim: The fortunate must not be restrained in the exercise of tyranny over the unfortunate. – Bertrand Russell
Insanity: doing the same thing over and over again and expecting different results. – Albert Einstein
Conservative members of Congress are working to tear up “regulations introduced in response to vulnerabilities that were identified during the financial crisis that began in 2007,” according to a little-discussed study on the matter recently released by the Congressional Research Service (CRS).
Those laws are safeguards meant to keep bankers and other financial moguls from engaging in the same questionable activities which destroyed most of the world economy several years ago.
The effects of that collapse are still felt by a very large number of people in the U.S. and around the world.
In their dash to prove Russell and Einstein correct, it seems that financial conservatives in Congress are suffering from an amazing inability to learn from experience. But perhaps this is what happens to people when their pet theories become more important to them than reality.
We at the American Spark have noticed that one of the best ways to keep alive a discredited theory is to manipulate language: One no longer employs language to discover the truth, one employs it to hide the truth.
People tend to think in terms of language. So if a group of people effectively control the language employed by the wider community when that community discusses a certain subject, the little group may to a great extent control how that subject is perceived.
The Spark therefore believes it is important to provide our readers with a glossary which helps explain a number of terms consistently used by financial conservatives, and which unfortunately have found their way into the otherwise quite accurate CRS report.
Glossary:
“Credit” – Debt.
“Economic Growth” – Modern capitalism – in essence, the “Gold Mine-and-the-Shaft” model of economic activity: The wealthy few always get the Gold Mine, and you never get anything but the Shaft.
“Operation Chokepoint” – Any activity in which the wealthy few are forced to abide by laws and standards of decency, just like everyone else.
“Regulation” – A law or basic legal accountability for the wealthy.
“Regulatory Burden” – The cost of actually enforcing such legal protections – when applied to the non-wealthy, it is called “law enforcement.”
“Regulatory Relief” – An end to basic legal accountability for the wealthy.
“Unnecessary Red Tape”- Any law which enshrines or upholds a fundamental human right.
Please keep this glossary in mind as you read the CRS study, as well as the report’s summary, which we have quoted in full below.
“The 114th Congress is considering legislation to provide ‘regulatory relief’ for banks. The need for this relief, some argue, results from new regulations introduced in response to vulnerabilities that were identified during the financial crisis that began in 2007.
“Some have contended that the increased regulatory burden—the cost associated with government regulation and its implementation—is resulting in significant costs that restrain economic growth and consumers’access to credit.
“Others, however, believe the current regulatory structure strengthens financial stability and increases protections for consumers, and they are concerned that regulatory relief for banks could negatively affect consumers and market stability. Regulatory relief proposals, therefore, may involve a trade-off between reducing costs associated with regulatory burden and reducing benefits of regulation.
“This report discusses regulatory relief legislation for banks in the 114th Congress that, at the time this report was published [Nov. 10th], has seen legislative action. Many, but not all, of the bills would make changes to the Dodd-Frank Act (P.L. 111-203), wide-ranging financial reform enacted in response to the financial crisis.
“The bills analyzed in this report would provide targeted regulatory relief in a number of different areas:
- Safety and Soundness Regulations. Safety and soundness, or prudential, regulation is designed to ensure that a bank maintains profitability and avoids failure. After many banks failed during the financial crisis, the reforms implemented in the wake of the crisis were intended to make banks less likely to fail. While some view these efforts as essential to ensuring that the banking system is safe, others view the reforms as having gone too far and imposing excessive costs on banks. Examples of legislation include changes to the Volcker Rule, capital requirements, liquidity requirements applied to municipal bonds, and enhanced regulation for large banks.
- Mortgage and Consumer Protection Regulations. Several bills would modify regulations issued by the Consumer Financial Protection Bureau (CFPB), a regulator created by the Dodd-Frank Act to provide an increased regulatory emphasis on consumer protection. The Dodd-Frank Act gave the CFPB new authority and transferred existing authorities to it from the banking regulators. Many regulatory relief proposals could be viewed in light of a broader policy debate about whether the CFPB has struck the appropriate balance between consumer protection and regulatory burden. One legislative focus has been several mortgage-related CFPB rulemakings pursuant to the Dodd-Frank Act.
- Supervision and Enforcement. Supervision refers to regulators’ power to examine banks, instruct banks to modify their behaviors, and to impose reporting requirements on banks to ensure compliance with rules. Enforcement is the authority to take certain legal actions, such as impose fines, against an institution that fails to comply with rules and laws. Although regulators generally view their supervisory and enforcement actions as striking the appropriate balance between ensuring that institutions are well managed and minimizing the burden facing banks, others believe the regulators are over-reaching and preventing banks from serving their customers. Examples of legislation include changes to call reports and bank exams, as well as legislation addressing ‘Operation Chokepoint.’
- Capital Issuance. Banks are partly funded by issuing capital to investors. Disclosure requirements and investor protections may better inform investors about the risks that they are assuming but can make it more costly for institutions to raise capital. Whereas some view these existing regulatory requirements as important safeguards that ensure investors are making educated decisions, others see them as unnecessary red tape that stymies capital formation. The capital issuance legislative proposals discussed in this report are generally geared toward making it easier for financial institutions to raise funds.
“Congress faces the question of how much discretion to give regulators in granting relief.
“Some bills leave it up to the regulators to determine how much relief should be granted, whereas others make relief mandatory.
“Some bills provide relief in areas regulators have already reduced regulatory burden.
“Some of the legislation is focused on providing relief for small banks, whereas other bills provide relief to the entire industry.”
