Obama Drops The Veto Hammer On Republicans Plans To Gut Wall Street Reform

President Obama threw cold water on Republican plans to gut Wall Street reform and consumer protections by threatening to veto both GOP bills if they should reach his desk.

The White House first threatened to veto a Republican bill that would allow manufactured housing lenders to raise the cost of loans to consumers:

The Administration strongly opposes H.R. 650, which would weaken key consumer protections and provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Specifically, the bill would revise the Truth in Lending Act to allow manufactured housing lenders to raise the cost of loans to consumers without triggering existing rules designed to protect consumers from loans they cannot afford to repay. Many borrowers purchasing manufactured homes are among the lowest income and economically vulnerable consumers. H.R. 650 would put these borrowers at significant risk of being subjected to predatory lending and being steered into more expensive loans even when they qualify for lower-cost alternatives. There is no reason to deny these borrowers the consumer protections that they receive today.

Because H.R. 650 would weaken key consumer protections and provisions of the Dodd-Frank Wall Street Reform Act, if the President were presented with H.R. 650, his senior advisors would recommend that he veto the bill.

Immediately after the veto threat on H.R. 650 the White House followed up by threatening to veto H.R.685 that would also weaken consumer protections for people who are buying a home:

The Administration strongly opposes H.R. 685, which would weaken key consumer protections and provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

A fundamental component of Wall Street Reform is its requirement that lenders, before extending mortgage loans, make reasonable, good faith determinations that mortgage borrowers have the ability to repay the loans. The law provides lenders with protection from liability under this requirement if their loans satisfy certain clear criteria and thus are “Qualified Mortgages.” One of the criteria is that the up-front costs (“points and fees”) not exceed three percent of the total loan amount. During the housing bubble, many lenders front-loaded mortgage loans with points and fees and therefore had less incentive to determine a borrower’s ability to repay. Moreover, excessive, front-loaded points and fees contributed to predatory lending behavior, “steering” borrowers into more expensive mortgage loans.

H.R. 685 would revise the Truth in Lending Act to allow certain charges to be excluded from the definition of points and fees even when the lender or its affiliates receives the fees. By exempting certain fees from the three percent cap, H.R. 685 would allow lenders to increase the cost of loans and still be eligible for “Qualified Mortgage” treatment. This revision risks eroding consumer protections and returning the mortgage market to the days of careless lending focused on short-term profits.

Because H.R. 685 would weaken key consumer protections and provisions of the Dodd-Frank Wall Street Reform Act, if the President were presented with H.R. 685, his senior advisors would recommend that he veto the bill.

Republicans in Congress are attacking consumer protections in an effort to turn back the clock to the days when Wall Street crashed the U.S. economy. For those who say government doesn’t matter, and that both parties are the same, I suggest that they examine what Republicans are trying to accomplish. President Obama is the only person standing in the way of a Republican agenda that is designed to only serve corporations and the wealthy.

Both of the Republican bills are backdoor assaults on consumer protections and the regulations that were put in place after the last Republican president was a friend of Wall Street. Politics does matter. President Obama and Congressional Democrats are standing up to stop Republicans from returning the country to the bad old days of too big to fail.