Mortgage

GOP debate: The problem with that Dodd Frank guy

Trying to get regulation right

I think many people watching the debate last night had one burning question by the end — who the heck is this Dodd Frank guy? He sure sounds like a jerk, putting small banks out of business and causing socialism. 

That's because I'm pretty sure your average person on the street isn't familiar with the Dodd-Frank Act or its repercussions on the banking industry. And what does the Consumer Financial Protection Bureau do? Is that anything like the Adjustment Bureau?

Personally, I was thrilled to keep hearing it mentioned, since I've been watching the debates for both political parties this season just hoping someone would bring up housing.

Well, be careful what you wish for. 

The candidates were (generally) ready with talking points about banking regulation, but once they got off of those specific points, they made less sense.

Every candidate wanted less regulation. Carson noted a "stampede of regulation," Rubio and Bush called out Dodd-Frank for making small banks struggle and go out of business and Fiorina went the farthest, citing the legislation as an example of how socialism starts. 

But every candidate also wanted banks to do the right thing, with Kasich saying there was too much greed on Wall Street and everyone jumping on the too-big-to-fail banks as bad players.

What the candidates seemed to be unable to do is connect the dots between regulation and making banks do the right thing. For instance, in the same breath Bush called out Dodd-Frank legislation for suffocating small banks (a position I happen to agree with) but called for creating new policies that would require higher capital requirements. Presumably those policies would take the form of regulations.

That's the thing about regulation. Too much and you feel like the government is treading all over your right to life, liberty and the pursuit of happiness. Too little and the bad guys end up running the place. 

I used to live in a neighborhood with a really active HOA. They would constantly patrol our community, issuing letters about weeds, cars parked for too long, loud parties. It was really annoying. Live and let live, I thought.

Until I moved into my next neighborhood, with an HOA that was MIA. Then I had a kid with a basketball hoop very close to my bedroom window, who liked to practice at midnight. I had neighbors who owned seven cars (seven!), including two full-size Hummers, and parked in front of my house. There were several houses that looked abandoned. At that point I seriously contemplated running for HOA president and becoming the very authority that I used to rail against.

On a fundamental level I'm not a huge fan of regulation, and I've written specifically on how Dodd-Frank has hurt the mortgage banking industry here, here and here. The CFPB's massive data collection program, called out by Fiorina at the end of the debate, is actually of grave concern to me, considering the potential for the bureau to abuse their power.

But I also don't expect the bad actors that are present in any industry to just do the right thing if we leave them totally alone.

I want regulation, I just want it fairly applied. I want it to be transparent. I want it to make sense, which means considering the unintended consequences, especially on the average American — or small banker — before it's passed.

Listening to the debate last night, I heard a lot of what we shouldn't do when it comes to banking regulation, but only halting attempts at what should take the place of those sometimes troubling regulations. The candidates' attempts to discuss the nation's financial issues made it clear that many of our current leaders (there were three senators and a governor last night) have a lot to learn about how the housing economy works.

Immigration, taxes and terrorism discussions are very important, but having a coherent strategy for regulating the banks and other institutions involved in housing will affect many more Americans in the end. 

I'm glad the national conversation now includes housing. Here's hoping candidates of all ideologies will step up and make it a discussion worth listening to.

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