We Need More Transparency at the Federal Reserve

Last Friday, I participated in a student town hall at the University of Minnesota with my colleague, Dr. Ron Paul (TX).  As I’ve said in the Bulletin so many times before, Washington’s spending spree is laying an incredible burden on today’s young people.  Even as our national deficit and debt levels have surpassed any previous records, Washington continues to spend more and more of your hard-earned tax dollars.  In fact, federal expenditures in 2009 are expected to increase by 22%.

Your government needs to be accountable to you for every dollar it spends.  But so much of it remains obscured by budget gimmicks and parliamentary maneuvers.  That’s why I’ve introduced the Truth in Accounting Act, requiring that the government’s books be open to the American taxpayers. 

It’s also why I’ve cosponsored Dr. Paul’s legislation to audit the Federal Reserve (Fed).  The Fed has been at the center of the Wall Street bail-out, initiating about a dozen different lending programs and spending trillions of dollars, all without even a vote by Congress.  In fact, the Federal Reserve created $2 trillion of assets and debts during the past year.

Interestingly enough, the Federal Reserve Board of Governors has refused to make most of the information about its transactions public.  Bloomberg, a respected financial news organization, took the Fed to court to find out the names of the borrowers and the loans being made.  They recently won that case, but the Federal Reserve is reported to be considering an appeal.

This is your money and your government needs to be accountable to you for how it spends it.  Full transparency and openness is critical.  And, these efforts – auditing the Federal Reserve and opening up the government’s books to the taxpayers – are important steps that must be taken, and taken soon.
 

Congress Needs to Consider the Real Life Consequences of it Decisions

Last week, the House Financial Services Committee, on which I sit, considered expanding the Community Reinvestment Act (CRA), a law which many experts believe is at the heart of last year’s financial meltdown.  Congress too often considers the sound bites without considering the consequences.  It too often forgets that legislating doesn’t happen in a vacuum.  Investor’s Business Daily published a column that I wrote about this issue last week.  I’ve shared it below.

Investor's Business Daily Op-ed:
Widen Scope Of What Caused Meltdown?

In an alleged effort to protect against a recurrence of the financial collapse of 2008, Congress is considering a slew of new mandates, regulations and agencies.

At the top of the list is an expansion of the very government mandate that is at the heart of the financial collapse, the Community Reinvestment Act.

It appears that rather than learning from mistakes of the past, Congress is taking steps that could exacerbate the problems in the future.

The CRA has been credited by many experts as a key contributor to the financial meltdown of 2008. Originally introduced in 1977, it was established to ensure that low-income individuals and minorities were receiving fair and equal access to credit.

A laudable goal, but like many well-intentioned government mandates, many unintended consequences have resulted.

Too Many Loans

One of the lessons we learned from the financial crisis was that too many people were approved for loans they couldn't afford, and plenty were originated due to pressure to meet CRA mandates.

Since 99% of banks are already in compliance with the goals of the CRA and providing low-income families with the opportunity to finance home purchases, the mandate was overreaching and forced banks to make irresponsibly risky financial transactions.

We have barely begun to pull ourselves out of the financial meltdown, and Congress is already considering expanding the scope of the CRA — requiring additional financial institutions to comply with its mandates.

Instead of subjecting credit unions, mortgage lenders, insurance companies and others to the CRA, which encourages low underwriting standards and risky lending behavior, Congress should consider reforming the law or, as some have suggested, repealing it all together.

Unfortunately, Congress is neglecting common sense and bypassing cautionary measures; the bigger-is-better mind-set is again dominating the halls of the Capitol.

Interestingly enough, the same week the House began to readdress the CRA, Acorn — a prime beneficiary of that law — made unflattering headlines involving additional arrests for voter registration fraud and videos showing the outfit counseling a couple to evade tax laws and seek federal housing grants to start a prostitution ring.

These recent events should have raised questions in the minds of lawmakers about the course of action on which they were about to embark.

As Manhattan Institute senior fellow Steven Malanga has said, "Acorn's a creature of the CRA."

Acorn and similar groups used the CRA to lay their foundation. In fact, CRA-related deals between banks and these community groups have resulted in an estimated $10 billion exchange.

Malanga continues:  "Acorn found its way into the mortgage business through the Community Reinvestment Act, the 1977 legislation that community groups have used as a cudgel to force lenders to lower their mortgage underwriting standards in order to make more loans in low-income communities.

"Often the groups, after making protests under CRA, were then rewarded by banks with contracts to act as mortgage counselors in low-income areas in return for dropping their protests against the banks.

"In one particularly lucrative deal, 14 major banks eager to put CRA protests behind them in 1993 signed an agreement to have Acorn administer a $55 million, 11-city lending program. It was precisely such agreements that helped turn Acorn from a network of small local groups into a national player."

Due Diligence, Please

The fact is, not enough transparency exists under the CRA to even answer questions about the extent to which banks were forced into making such deals. And lest we find ourselves repeating our mistakes, Congress should seek out these answers. It is irresponsible for Congress to do otherwise.

Our nation cannot afford to face another financial calamity.

It is imperative that members of Congress and the Obama administration conduct due diligence before prescribing remedies.

It's more important to address these issues correctly than quickly. Rushing to meet arbitrary deadlines will be done at the peril of another collapse.


Bachmann Office Coming to a Town Near You

My staff regularly holds Mobile Office Hours at locations all across the district.  These are opportunities for you to come meet one on one with someone from my office who is trained to be your liaison with federal agencies.  Please bring copies of any paperwork that you might have with you when you visit.  Particularly, if you are having a problem with a federal benefit or program and have letters or documents that might help my staff get answers for you quickly.

Should you have any questions or concerns, however, you can always stop by one of my district offices between 9:00 am and 5:00 pm to talk to my staff as well.    

Woodbury                                          Waite Park
6043 Hudson Road                               110 2nd Street South
Suite 330                                           Suite 232
Woodbury, MN 55125                           Waite Park, MN 56387
651-731-5400                                     320-253-5931

You can find a complete schedule of my Mobile Office Hours on my website at: http://www.bachmann.house.gov/ConstituentServices/mobileofficehours.htm.

Next week, my office will be in the following locations:

Thursday, October 8th
9:00 am to 10:30 am
Howard Lake City Hall
625 8th Avenue

Thursday, October 8th
11:30 am to 1:00 pm
Annandale City Hall
30 Cedar Street E

Thursday, October 8th
1:30 pm to 3:00 pm
Clear Lake City Hall
7684 1st Avenue W

Thursday, October 8th
4:00 pm to 5:30 pm
St. Michael City Hall
3150 Lander Avenue NE

And, please take a moment to visit my website (www.bachmann.house.gov) and sign up for my regular telephone town halls as well.  That technology allows you to speak with me from the comfort of your own home.  You’ll get an update on what Congress is doing that might impact you and have the opportunity to ask me a question about what’s on your mind. 

Note: Please do not respond to this email, as this is an unattended account. If you wish to unsubscribe from this newsletter, you may do so by clicking the "unsubscribe" link at the bottom of this page. If you wish to contact Congresswoman Michele Bachmann regarding a specific issue, please visit our contact web page at http://bachmann.house.gov/Contact/

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