I'm posting this diary for a few reasons...
--I strongly disagree with a diary posted earlier today by n00161 entitled: "Why Helping People Facing Foreclosure Is A Bad Idea..."
http://www.dailykos.com/...
--I truly believe one of the most important functions of government in this decade and on an ongoing basis--in some instances it already is beginning to change thanks to Dems taking control of the House Financial Services Committee this year--will be to implement better enforcement policy as it relates to consumer law and advocacy within the financial services industry.
--The financial services industry--stating the obvious: led by the folks that pretty much control/manage MOST of the money in this country--is far more powerful and pervasive and clever, in terms of how they protect their profitability and in terms of how they position temselves within goverment and throughout our society. And a large portion (most) of the U.S. population does not realize just how much they're truly on the wrong end ("the business end") of that equation.
BASIC PREMISE #1:
There was very inadequate oversight, in terms of consumer advocacy, of the financial services sector for quite a long time. Some people--and I might be one of them--put forth the concept that there's never been adequate oversight of that sector.
Looking at this from a 32,000-ft. perspective, and without a lot of technical jargon or footnoted reference (much like the author, n00161, did in his diary earlier today), it becomes clear that action must be--and is finally being taken now in Congress to some extent--to put a saddle on an area of our corporate society concerning what is nothing less than a financial services sector gone wild during the Bush presidency.
Before one does delve into the technical and status quo matters related to this reality, it becomes self-evident that there are some very basic facts about all of this of which most folks just aren't aware.
--MILLIONS OF AMERICANS were illegally "navigated" into ARMS and subprime-rate mortgages and refis over the past few years by unscrupulous mortgage firms and lenders, whose ONLY objective was to increase their bottom line.
--MILLIONS OF AMERICANS were rate-bumped at closings around this country. (The process of increasing the APR on a mortgage at the last moment.)
--MILLIONS OF AMERICANS were forced into loans they couldn't afford due to an inherently biased credit data industry, with the most convoluted rules, procedures and methodologies--and then the most lameass enforcement policies to boot--in the world.
--Upfront, this all cost us, as consumers, (perhaps) hundreds of billions of unnecessary dollars, once one factors in the add'l percentages we'll be paying on loans; and this all translates into excessive monthly payments, thus busting the budgets of millions of households around the US, and sending them into foreclosure.
We're in the mortgage mess because of the ongoing LACK of regulation and enforcement of regulations (what little regulation there is) of the financial services industry--something that was all the more heightened when Bush took office.
Take a look at the Financial Services Committee in Congress up through 2006; and pay particular attention to the AGENDA of the the Subcommittee on Oversight and Investigations, and see how they fiddled for over a decade while Rome burned. This group, tasked with policing a financial services industry gone wild with greed, was almost exclusively not on financial services and consumer legislation, but on ANTI-TERROR legislation, since 2001.
Republican Sue Kelly, my congressperson in NY-19 in 2006, was the Vice Chair of the Financial Services Committee, and the Chair of the Subcommittee on Oversight and Investigations. This was a large part of the reason why I became a vociferous John Hall supporter; he's now our rep in Congress.
We're in the mortgage mess because of an overall inability (lack of desire or priority) to enforce the regulations are behind the true reasons why the public was navigated into loans they couldn't afford--and those true reasons are that the financial services industry, in general, is set up to return a profit to the companies that are in it, FIRST and FOREMOST. Basic stuff. No surprise here; the consumer is always last in that food chain.
BASIC PREMISE #2: Forget the lists about who's spending the most lobbying for this or that cause down in D.C. We're talking about "The golden rule: He who has the gold rules!"
Unless you were born yesterday, here's another basic fact: The financial services industry--the folks that CONTROL the money--are, perhaps THE most powerful lobby in this country. And, I'm not necessarily talking about the tens of millions of bucks they funnel into political campaigns--BOTH Dem and GOP--but, in terms of their machinations behind the scenes throughout our society, but with special preference given to the elected officials and power brokers that make the rules and are supposedly responsible for enforcing them.
BASIC PREMISE #3: At its very core, our government is currently setup without a proverbial spine when it comes to enforcing and overseeing consumer-friendly legislation as it relates to the financial services sector. Does anyone really find this surprising? This is all further compounded by the reality that the economy is just not a very sexy issue for the MSM, as far as the general public is concerned. If it takes more than 90 seconds to explain something, you're probably only going to read about it or watch it on cable tv, certainly not in the middle of Dancing with the Stars.
Two of the PRIMARY entities responsible for enforcing unethical and out-of-compliance financial services activity as it relates to credit data and mortgages in this country are, ridiculously, the freakin' Federal Trade Commission (FTC), when it comes to the credit data industry, with "credit data" being used as the excuse for consumer unfriendly credit-decisioning on a case-by-case basis (this is where it is determined that you're going to pay through the nose for the right to borrow money); and, the Department of Housing and Urban Development (HUD), when it comes to mortgages. They are both somewhat quasi-legal bodies, and they may--for the most part--only initiate civil litigation, NOT criminal prosecution. (This is particularly the case with the FTC.)
Every few years, when some savvy consumer action group acts up and catches the sentiment of the people, the politicians climb onboard and someone gets nailed. This is happening right now with the mortgage mess; but, it's occurred at other times, during the very few moments that the MSM has opted to place this front and center on our evening news. Usually, in those instances, a case gets referred to some ambitious prosecutor--one perhaps seeking higher office--and someone may end up in jail for a brief period. But, that's the rare exception to the rule.
The absolute truth is that the pathetically pro-business/anti-consumer legal system in this country is established in a such manner--further heightened by Bush's laissez faire approach to managing same--to only provide a financial slap on the wrist to the likes of any financial services business that operates outside of appropriate guidelines. A Countrywide or a Gibraltar Savings & Loan comes along; people make a lot of noise; and maybe once or twice a decade, someone may go to jail for a year or two. Countrywide appears to have some sort of get-out-of-jail-free pass, at least at the moment. But, it'll be interesting to see what happens in coming months in that regard.
But, generally speaking, the financial services industry lawyers up whenever they're caught "out of school;" they pay a fine--sometimes a big fine if it's a newsworthy event--and they don't even fess up to any wrongdoing in the formal settlement, anyway.
THIS IS THE WAY IT WORKS. Plain and simple. To the financial services industry--except perhaps nowadays when it comes to data security--this is all as simple as the next sentence: The ramifications to the financial services industry for doing things that are outside of the law are (almost always) merely a cost of doing business. Because, it's merely a matter of paying a fine and moving forward.
Period. End of story.
There's a lack of proper enforcement of consumer protection laws in the lending industry, in general.
And, that's further compounded by...
BASIC PREMISE #4: We're talking about the most sophisticated-yet-basic of concepts in worldwide commerce. As a senior exec at a lending firm once told me: "I'm in the business of selling money." And, when it comes to selling money, on a daily basis, the American public is misled and exploited. This is just a fact of life. The problem is, it's virtually institutionalized throughout our society.
What makes this point in time a little more pronounced is...this time it's now coming to everyone's attention that...tens of millions of Americans were ripped off for hundreds of billions of dollars, too. These ripoffs took on many shapes and sizes:
--from allowing co's like Lending Tree to put forth the notion that "when banks compete you win," when nothing could be further from the truth (the only thing banks COMPETE for at Lending Tree is the right to buy the leads that Lending Tree generates...think about it...there are thousands of mortgage firms out there...hundred of 'em on Lending Tree, too...you apply for a mortgage at Lending Tree...they give you FOUR responses maximum. Do the math!
For the record, I'm IN the interactive lending industry. What I just said, as it relates to millions upon millions of leads (actually, they're full-blown credit app's) that these "originators" generate, IS a fact. (I used Lending Tree just as an example.) This marketing cost is passed onto you, the consumer, and in a big way. By the way, they were one of the larger originators of mortgages for Countrywide during the past few years, too! The fact that it's quite misleading, and being perpetrated upon the American public everyday is business as usual. (This is just one small example of this, too. There are many--too many--to mention in a Diary on Kos; so pardon my simplification of matters.) Additionally, there are a VARIETY of other profit centers allowed by the legal system and federal regulations (i.e.: HUD, FTC, etc.) which are violated as a matter of course by hundred or thousands of lenders and loan originators, on a daily basis, too.
HUD has the Real Estate Settlement and Procedures Act, or "RESPA." It's supposed to act as a driving piece of regulation to protect the consumer's interests when it comes to buying a home when they obtain a mortgage. It's violated millions of times a year, and in many instances, in very clever ways. In Countrywide's case, and others (like Ameriquest, remember them?), the sales staff has leads steered to them by the thousands. And, in the process of closing loans, "RESPA" might as well be the name of a soft drink, as far as the reality of the marketplace and the process of closing a loan is concerned.
This reality, alone, can add MANY TENS of THOUSANDS of DOLLARS to the upfront costs of a typical mortgage; and hundreds of thousands of dollars to the "back end," in terms of inflated interest rates, a/k/a "APR's," for YOU, the consumer. Multiply that a million times a year--it happens more ofen that--and you get to where we are today.
BASIC PREMISE #5: Above and beyond everything I've mentioned so far, there's the biggest mongolian cluster f--k of all that's perpetrated upon the American consumer, and it relates to the lack of appropriate credit data, credit-decisioning scorecards (it IS all about the SCORES, folks), and the truly absurd amount of latitude that lending institutions have when it comes to actually abiding by regulations as those regulations relate to the credit data used to process a credit decision for you, the consumer. You thought everything else was too complicated to put on the news for common consumption? This process might as well be about molecular theory as far as the consumer's concerned.
THE FACT REMAINS THAT THE PROCESS OF CREDIT SCORING, WHEN IT'S DONE ON A PROPRIETARY BASIS BY ANY LENDER, HAS VERY LITTLE OVERSIGHT AT ALL . Of course, that's JUST the way the financial services industry wants it. There are laws; but there's very little capacity/capability/very few resources within the FTC to actually police them. (I'm not necessarily talking about YOUR score on your credit report--the one you see. I'm talking about how the lending institutions score YOU on a proprietary basis behind the scenes.)
What does this mean?
It's HERE where, perhaps the biggest ripoffs occur, and it's because it's here where the problem is so grossly institutionalized into the industry--and far too complicated to be covered in a blog comment on Kos--where many of us are getting screwed most of all; and, where we continue to be screwed to this day.
I'll leave you with one "little" fact...
BASIC PREMISE #6: This emphasis to the "SUB-PRIME" (mortgage) industry--it's really about ALL forms of lending, not just mortgages--is in fact all about no less than 40%-60% of our ENTIRE society.
Because, depending upon the totally under-enforced and unenforced regulations that are supposedly in place to "help" all of us, so we never get into NATIONAL and WORLDWIDE messes like this, the reality is, based upon a purely statistical definition of the term "sub-prime," that depending upon a lender's OWN DISCRETIONARY credit-decisioning process (as it's allowed under current US law), anywhere from FOUR to SIX out of every TEN credit applicants in the U.S., is subject to SUB-PRIME RATE-SETTING (i.e. higher and/or egregious), as opposed to the rates one sees being advertised in the marketplace. And, it's the lack of proper implementation and supervision of these "credit decisioning" processes which is at the heart of a great deal of the problem which this country is experiencing today.
So, n00161, do you work for a bank or a financial services firm? I have to ask, because from where I'm sitting, it's clear to me that this is a very pervasive and somewhat complicated problem that has (supposedly) gone unrecognized in our society for a long, long time. In many ways, it IS "Poli-Sci 101." Power equals money, and so forth. And, reiterating what I said above, that's just the way the financial services industry wants it! So, when they get caught up in their own cycle of greed, they throw out a few sacrificial lambs, and move forward.
After all is said and done, it's just the cost of doing business as far as the lending industry is concerned. Problem with all of this is that THIS TIME THEY REALLY SCREWED THE POOCH. But, the Bush Administration is there to bail them out....those poor...helpless...defenseless banks and mortgage firms.
Well, n00161, what about bailing US out for a change?!?!?
Now there's a concept!