Public policy faces a contradiction. There’s a powerful impulse to blame banks for the financial crisis and to “make them pay.” Just recently, the Obama administration sued Bank of America, charging it with fraud in selling $850 million worth of mortgage-backed bonds. (The bank denied the charge.) These attacks remind banks of mortgage lending’s perils. “Every time a lender is publicly sued or flogged,” says Cecala,* “makes it less likely they’ll loosen standards.” What’s politically convenient is economically damaging. Which do we favor?
Afterwords
Only Bob Samuelson (and Guy Cecala) could accuse the Obama Administration of being too tough on America’s banks. Only Bob Samuelson (and Guy Cecala) could assert, without a sliver of proof, that the suit brought against BOA was politically motivated. And only Bob Samuelson (and Guy Cecala) could assume that banks have somehow the “right” to commit fraud without having to worry about the legal consequences of their actions. Forget about “too big to fail”! The new watchword is “too big to give a fuck”!
* Guy Cecala, publisher of the newsletter Inside Mortgage Finance, which Samuelson tells us is “respected,” which I’m sure it is.
