Reformers

John McCain, via MSNBC:

“The crisis on Wall Street, my friends, started in the Washington culture of lobbying and influence pedaling and he was right square in the middle of it,” McCain said, painting Obama as a Washington insider. “My friends, this is the problem in Washington. People like Sen. Obama have been too busy gaming the system and haven’t ever done a thing to actually challenge the system. That’s not country first, that’s Obama first.”

Since I don’t feel like engaging with McCain’s Norma Desmond moments just now, I won’t say anything about his saying “that’s not country first, that’s Obama first”, beyond agreeing with Steve Benen: no one who puts Sarah Palin on his ticket has any right to lecture anyone about putting country before ambition. And Steve and others have already noted the absurdity of McCain, of all people, railing against “the Washington culture of lobbying and influence peddling”. I do want to make on points about the rest of this, though.

The heart of McCain’s argument is that he is a reformer who tried to take on the corruption in the mortgage and banking system, while Obama stood on the sidelines doing nothing. This is not true. The NYT:

“[McCain’s] record on the issue, and the views of those he has always cited as his most influential advisers, suggest that he has never departed in any major way from his party’s embrace of deregulation and relying more on market forces than on the government to exert discipline. While Mr. McCain has cited the need for additional oversight when it comes to specific situations, like the mortgage problems behind the current shocks on Wall Street, he has consistently characterized himself as fundamentally a deregulator and he has no history prior to the presidential campaign of advocating steps to tighten standards on investment firms.”

The Washington Post:

“A decade ago, Sen. John McCain embraced legislation to broadly deregulate the banking and insurance industries, helping to sweep aside a thicket of rules established over decades in favor of a less restricted financial marketplace that proponents said would result in greater economic growth. Now, as the Bush administration scrambles to prevent the collapse of the American International Group (AIG), the nation’s largest insurance company, and stabilize a tumultuous Wall Street, the Republican presidential nominee is scrambling to recast himself as a champion of regulation to end “reckless conduct, corruption and unbridled greed” on Wall Street. (…) McCain has not always opposed government regulation. He supported efforts to allow the Food and Drug Administration to regulate tobacco. And he pushed to strengthen the Sarbanes-Oxley Act requirements, which were put in place after the accounting scandals involving Enron and other major firms. But he has usually reverted to the role of an unabashed deregulator. In 2007, he told a group of bloggers on a conference call that he regretted his vote on the Sarbanes-Oxley bill, which has been castigated by many executives as too heavy-handed. In the 1990s, he backed an unsuccessful effort to create a moratorium on all new government regulation. And in 1996, he was one of only five senators to oppose a comprehensive telecommunications act, saying it did not go far enough in deregulating the industry. As chairman of the Senate Commerce Committee for more than a decade, McCain did not have direct oversight of the financial sector. But he sat at the center of arguments between telephone, cable and satellite companies, almost always pressing for more competition. “I’m always for less regulation,” he told the Wall Street Journal in March. He added: “I’d like to see a lot of the unnecessary government regulations eliminated.””

In making his case, McCain relies on his 2005 co-sponsorship of S. 190, which would have improved oversight of Fannie Mae and Freddie Mac. While I think McCain is wrong to say that “the lobbyists, politicians, and bureaucrats who succeeded in persuading Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac” were “at the center of the problem”, McCain was right to try to get stronger oversight in place. However, that bill died. According to Mike Oxley, the Republican Congressman who wrote it:

“Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration.” (Emphasis added.)

There’s a reason McCain relies so heavily on his co-sponsorship of this bill: it’s the only bill he has sponsored or co-sponsored during the last two Congresses that has anything to do with mortgage or banking reform. You can gauge the depth of his concern for this issue by the fact that in 2008, when a bill establishing tougher oversight over Fannie Mae and Freddie Mac did make it to the floor of the Senate, John McCain didn’t bother to show up for the vote. (Neither did Barack Obama.)

During those same four years, Obama introduced legislation to prevent mortgage fraud. He also co-sponsored a number of bills directed at abusive mortgage practices, including one that would, among a lot of other things, have required subprime lenders to document borrowers’ ability to pay, thereby making “liar loans” illegal, and another that called for licensing of mortgage originators.

I’ve put the full list of bills related to banking and mortgage reform sponsored or co-sponsored by Obama and McCain during the last two Congresses below the fold, so that you can judge the two candidates’ records for yourselves.

Obama: 110th Congress:

* Co-sponsored S. 1356: “A bill to amend the Federal Deposit Insurance Act to establish industrial bank holding company regulation, and for other purposes.”

* Sponsored S.1181: A bill to amend the Securities Exchange Act of 1934 to provide shareholders with an advisory vote on executive compensation. (Vote is advisory.)

* Sponsored: S.1222: A bill to stop mortgage transactions which operate to promote fraud, risk, abuse, and under-development, and for other purposes.

Sponsor: Sen Obama, Barack [IL] (introduced 4/25/2007) Â Â Â Â Â Cosponsors (1)

Latest Major Action: 4/25/2007 Referred to Senate committee. Status: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

SUMMARY AS OF:

4/25/2007–Introduced.

Stopping Mortgage Transactions which Operate to Promote Fraud, Risk, Abuse and Underdevelopment Act, or the STOP FRAUD Act – Amends federal criminal law to make it unlawful for any mortgage professional to: (1) defraud any natural person or financial institution regarding an offer of consumer credit secured by an interest either in real property or in personal property used as a principal dwelling; or (2) falsely obtain money or property from a natural person in connection with an extension of consumer credit secured by an interest in such property.

Subjects violations of this Act to civil and criminal penalties.

Directs the Attorney General to establish: (1) a system for authorized mortgage professionals to receive updates from federal law enforcement agencies on suspicious activity trends in the mortgage industry and mortgage fraud-related convictions; (2) a Debarred or Censured Mortgage Professional Database that may be accessed to determine the federal and state bar status of mortgage professionals; and (3) grants to assist law enforcement agencies establish and improve mortgage fraud task forces.

Grants whistleblower protection to personnel of a widely accepted private certification board.

Amends the Housing and Urban Development Act of 1968 to authorize the Secretary of Housing and Urban Development (HUD) to provide tenants, homeowners, and other consumers with mortgage fraud counseling.

Directs the Secretary to provide grants to state appraisal agencies to improve the monitoring and enforcement of housing appraisal regulations.

Sets forth additional rights of borrowers in foreclosure proceedings.

Co-sponsored S.2452: A bill to amend the Truth in Lending Act to provide protection to consumers with respect to certain high-cost loans, and for other purposes.

Sponsor: Sen Dodd, Christopher J. [CT] (introduced 12/12/2007) Â Â Â Â Â Cosponsors (19)

Related Bills: S.1299

Latest Major Action: 12/12/2007 Referred to Senate committee. Status: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

SUMMARY AS OF:

12/12/2007–Introduced.

Home Ownership Preservation and Protection Act of 2007 – Amends the Truth in Lending Act to redefine high-cost mortgages and attendant lending practices. Sets forth a new formula for points and fees for open-end loans, and provides for bona fide discount points.

Prohibits: (1) prepayment penalties; (2) balloon payments; (3) yield spread premiums; (4) acceleration or debt; (5) evasions, structuring of transactions, and reciprocal arrangements; and (6) modification and deferral fees.

Prohibits creditors from financing, in connection with a high-cost mortgage, any prepayment fee or penalty, or any points or fees.

Prohibits an originator from making or arranging a high-cost mortgage loan that involves a refinancing of a prior existing home mortgage loan unless the new loan will provide a net tangible benefit to the consumer.

Sets forth prerequisites for subprime and nontraditional home loans, including: (1) an assessment of ability to pay; (2) a requirement of tax and insurance escrows; (3) prohibition of prepayment penalties and yield-spread premiums; and (4) a requirement of net tangible benefit to the consumer in the case of a subprime or nontraditional mortgage loan transaction that involves refinancing of an existing home mortgage.

Imposes a duty of care and a duty of good faith and fair dealing upon mortgage brokers and lenders, appraisers, and lenders and loan servicers.

Empowers state Attorneys General to enforce this Act.

Subjects lenders, loan servicers, creditors and mortgage brokers to civil liability for violations of this Act. Increases the amount of the penalty that may be awarded.

Amends the Real Estate Settlement Procedures Act of 1974 to require a transferor of loan servicing before the transfer tonotify the borrower of the status of the account and its full payment history.

Amends the Housing and Urban Development Act of 1968 to revise requirements for foreclosure prevention counseling.

Amends the Truth in Lending Act to expand from three to six years an obligor’s right of rescission.

Imposes liability for monetary damages upon assignees of subprime or nontraditional loans for violations of this Act.

Sets forth a remedy in lieu of rescission for certain violations.

Prohibits mandatory arbitration.

Subjects a lender to liability for certain actions, omissions, and representations made by a mortgage broker in connection with a high-cost mortgage, a subprime mortgage, or a nontraditional mortgage.

Amends the Federal Trade Commission Act to require the federal banking agencies and the National Credit Union Administration Board each to establish a separate division of consumer affairs protection and regulations with respect to depository institutions and federal credit unions.

Authorizes appropriations to employ additional agents of the Federal Bureau of Investigation and additional dedicated prosecutors at the Department of Justice to coordinate prosecution of mortgage fraud efforts with the offices of the U.S. Attorneys.

* Co-sponsored S.2595: A bill to create a national licensing system for residential mortgage loan originators, to develop minimum standards of conduct to be enforced by State regulators, and for other purposes.

Sponsor: Sen Feinstein, Dianne [CA] (introduced 2/6/2008) Â Â Â Â Â Cosponsors (13)

Latest Major Action: 2/6/2008 Referred to Senate committee. Status: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

Note: This bill text was generally incorporated into Division A, Title V of H.R. 3221, the Housing and Economic Recovery Act of 2008.

***

109th:

* Co-sponsored S.98: A bill to amend the Bank Holding Company Act of 1956 and the Revised Statutes of the United States to prohibit financial holding companies and national banks from engaging, directly or indirectly, in real estate brokerage or real estate management activities, and for other purposes.

* Sponsored S.2280: A bill to stop transactions which operate to promote fraud, risk, and under-development, and for other purposes. Similar to S.1222 above.

MCCAIN:

110th: None.

109th:

* Co-sponsored S.190: A bill to address the regulation of secondary mortgage market enterprises, and for other purposes.

Sponsor: Sen Hagel, Chuck [NE] (introduced 1/26/2005) Â Â Â Â Â Cosponsors (3)

Latest Major Action: 7/28/2005 Senate committee/subcommittee actions. Status: Committee on Banking, Housing, and Urban Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.

SUMMARY AS OF:

1/26/2005–Introduced.

Federal Housing Enterprise Regulatory Reform Act of 2005 – Amends the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish: (1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority over the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board.

Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting.

Amends the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation. Transfers the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation.

Excludes the Federal Home Loan Banks from certain securities reporting requirements.

Abolishes the Federal Housing Finance Board.