Banking Shakedowns Continuing

Investors Business Daily, with an editorial page second to none, editorialized last week on the subject of "local responsible banking ordinances", which unfortunately are sweeping the country.

After implementation, cities and local governments will require banks who wish to be considered for city or county contracts meet criteria with respect to low income and minority quotas for mortgage and small business lending. In addition, banks must provided detailed plans from banks on their goals in expansion in these areas, along with data associated with loan origination, raising costs and increasing privacy concerns.

Banks already provide much of this information to banking regulators, but local agencies consuming and housing this information, much of which is proprietary, is concerning.

As IBD correctly notes, the moves effectively turn local authorities into bank regulators along with the federal government, adding another layer of CRA enforcement and creating additional pressure on banks to make risky loans. Should the banks fail to meet standards set forth by the city and county agencies, they would be excluded from participating in the bidding process.

Governing.com reports "City leaders who advocate for the ordinances say they're trying to build upon the Community Reinvestment Act (CRA), a 1977 law that ended that was designed to encourage banks to address the banking needs of low- and moderate-income Americans and reduce the practice of redlining".

However, it was the CRA that planted the seed for the current housing crisis that has crushed our economy.Banks were targeted, by groups like ACORN with a bevy of young attorneys to shakedown banks into lending to sub-prime borrowers for fear of being exposed as a potentially racist companies.In fact, President Obama, while working with ACORN decades ago, engaged in legal action against CitiBank.

While this may sound good at quick glance, closer examination shows something quite ominous.

These local responsible banking ordinances, an extension of CRA, will force the money center banks to lend based on standards set by those with the agenda of increasing lending to those who cannot qualify on their own merits, injecting governmental influence into privately held firms who have a fiduciary responsibility to their shareholders, not the community.

While small banks will sit it out, making a sound financial decision to forgo the cost prohibitive regulatory burdens associated with compliance, it is the invisible hand of the marketplace that should be dictating who succeeds, not technocrats with political agendas.

The political motivation of this exercise at the end of the day is what we find at the end of most left wing tentacles extending exponentially these days; the global transformation of wealth. In fact, the implementation of achieving political gain under false premises of betterment of the local communities has sustainable development and Agenda 21 written all over it.

In virtually each case of government interjection into the events of the free market system, simple economic principles, such as caveat emptor, are violated and further limitations are placed on our freedom.In the case agencies implementing "local responsible banking ordinances" the result will create an environment of increased regulation, taxation and barriers to business, which ultimately raises costs.

You have to wonder when or if these technocrat central planners will ever learn. As Ronald Reagan said, the more the plans fail, the more the planners plan. The previous plans have failed miserably, and future plans will as well.