Series 23 | Part 3: A Return To Risk

Rolling Back Regulations on Community Banks

For a long time now, Republicans have been saying that community banks are overburdened by compliance regulations that require them to hire compliance officers and that the extra payroll cost is making them unprofitable. They also say that these banks are merging with each other so they can afford these extra costs. They go on to say that these larger banks then aren’t able to get to know their local communities and understand the unique concerns of their clients. They say 75% of agricultural loans comes from these small banks and that small-business loans often come from them, as well, and that large banks wouldn’t want to lend to a small business or a family farm because they don’t want to take the risk with such a small client. They say expensive regulations cause these mergers that lead to large banks that don’t pay attention to community needs.

Consumer Financial Protection Bureau

The Choice Act is also intent on changing the definition, operation, and oversight of the Consumer Financial Protection Bureau. They want to make the Director of the CFPB an at-will employee. They want Trump to be able to fire Director Cordray whenever he wants, without giving a reason.

Republicans also want this agency to be subject to the Congressional appropriations process, which means Congress decides whether to fund or defund the agency, giving it whatever amount of money they want to give it.

Additionally, they want to turn this agency into a “consumer law enforcement agency” but “limit the agency’s authority to action against entities for abusive practices.” Those quotes are taken straight from

Federal Housing Finance Agency

The FHFA is the agency that took Fannie Mae and Freddie Mac into conservatorship when they weren’t solvent. They couldn’t provide stability to the mortgage market after the collapse. Therefore, the FHFA took control of their operations and assets until they could function on their own.

Fannie Mae and Freddie Mac offer to purchase mortgages from banks to make those banks less hesitant to lend to people that might otherwise be considered too risky for them. It’s similar to a being a guarantor on a bank loan. Instead of offering to make the loan payments if a customer defaults, Fannie Mae and Freddie Mac regularly purchase mortgages before a customer defaults in order to make banks more comfortable lending to people and keep the economy going. With Fannie Mae and Freddie Mac taking the hit instead of the bank, the banks felt more comfortable, and Fannie Mae and Freddie Mac were more comfortable taking the hit because they were backed by the U.S. Treasury Department.

When they could no longer do that even with the support of the Treasury, the FHFA took control of their operations and tried to work it all out so that the mortgage market didn’t totally shut down.

Republicans want to give Trump the ability to fire the Director of the FHFA without cause. Additionally, they want to subject the FHFA to the Senate and House Appropriations Committees, which are run by Republicans, which means FHFA might be defunded just CFPB might be.

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