Financial Reform Cannot Happen Without Removing Monetary Incentives

Taylor said industry efforts are underway to weaken a federal independent appraisal standard, put into place by New York Attorney General Andrew Cuomo through a settlement with Fannie Mae and Freddie Mac and later adopted by FHA. As a result, virtually all mortgages are currently required to have a independent appraisal.

Taylor also said the committee “removed an important page” in the financial reform plan by requiring further study and refusing to adopt an amendment by U.S. Senator Al Franken, which would have established a government unit to assign agencies new issue ratings.

“Senator Franken should be commended for opening a can of worms that needed opening. Despite the potential of studying this problem to death, I don’t believe it will disappear. The agencies have systemic problems that must be resolved. However, an important page in the financial reform plan has been removed by refusing to end the conflict of interest between credit rating agencies and Wall Street. To require further study instead is kicking the can down the road, an exercise we cannot afford if we are serious about protecting investors and, ultimately, taxpayers. If the credit rating agencies had stood their ground and focused on substance rather than profits, the debate around deficit spending and taxes would be very different today.

“The good news, though, is the Senate approved Senator Franken’s proposal to create an office to advocate on behalf of homeowners seeking loan modifications with HAMP. Given the failure of HAMP to help more homeowners who, through no fault of their own, are facing foreclosure, this assistance is sorely needed. Banks have been happy to take from taxpayers but not so enthusiastic about giving back to homeowners harmed by the economic crisis the banks caused. We urge the committee to adopt Senator Franken’s proposal.”

By a vote of 63-33, the Senate passed Senator Franken’s proposal yesterday as an amendment to the tax extender bill.

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