Today, Americans for Tax Reform sent the following alert to all Senate offices. Click here for a PDF..
Sen. Dodd’s “Wall Street Bailout” bill, S. 3217, the Restoring American Financial Stability Act of 2010, adds lighter fluid to the fire that started the financial collapse.
Make no mistake – Title 12 of this bill, misnamed “Improving Access to Financial Institutions” on page 1398, creates Fannie Mae 2.0.
Fannie Mae collapsed because it became a slush fund for bad loans the government forced banks to make.
Now, Title 12 – which was shoved in the bill during the final minutes before it passed out of Committee – will do the exact same thing:
This Title pays banks to advertise to, and seek out, low income people who would otherwise not qualify for loans
The bank, backed by the government, issues risky loans
The bank is now in a win-win situation
Either the loan is paid back on time, in which case the bank keeps all the profits, or
The loan defaults and the government uses taxpayer money to cover the bank’s loss
This scenario contains the exact same moral hazard which led to Fannie Mae’s meltdown. Do not allow these same risky practices to continue. Vote “no” on all cloture motions on this bill.
It is time to go back to drawing board and craft a bill that does not create Fannie Mae 2.0.