Sen. Judd Gregg (R., N.H.) rips into the Democrat financial reform bill on everything from the consumer protection agency to overwrought derivatives language to the failure to address lax lending standards:
“The bill is a disaster because it doesn’t address the fundamental underlining causes of the economic issue, which were real estate and underwriting,” he said. “This bill became, ‘I want to score the most points against Wall Street.’ Most of the initiative of this bill wasn’t directed at solving the problem, but it was directed at scoring political points.”
Gregg, who sits on the Senate banking, budget and appropriations committees proposed underwriting standards along with Sen. Bob Corker, R-Tenn., yet they were not included in the final bill, he said.
The Senate version of financial reform was approved late last week and must now be reconciled with the House version before it is signed into law by President Obama.
Meanwhile, the provision on consumer protection will expand the reach of government and create conflicts with the banking industry, Gregg said.
“You’ll basically have a consumer protection agency which decides to go out and in the morning and say, ‘well everybody who’s XYZ should have a loan, even though the local community bank says XYZ shouldn’t have a loan, because if we give them a loan, we know they’re not going to pay back,’” he said. “It’s going to become an agency that defines lending on social justice purposes instead of safety and soundness purposes.”
Gregg also blasted derivatives language in the bill, saying that it lacks coherence.
“You’ve got this Alice in Wonderland tea party atmosphere around derivatives,” he said. “Basically, the construct is it will make the derivatives in the market less sound, it will cause a huge contraction of credit—maybe up to three-quarters of a trillion dollars—and it will push massive amounts of derivative activity offshore and out of our control. So they will become even less controllable in the sense of having oversight.”