Action Alert: Guarding Against Another Financial Crisis

By Daniel Palacios and Clarinda Landeros

Following the Great Recession, this country has made progress towards creating a safer, more accountable financial system. Due to reforms enacted in the Dodd-Frank Wall Street Reform and Consumer Protection Act our communities are better positioned to succeed. However, proponents of financial deregulation continue working to undo many of the safeguards put in place by the Dodd-Frank reform movement. The financial crisis exerted influence upon every facet of American society and, as the largest minority group in the U.S., Latinos certainly felt the sting. It is important to guard against efforts that weaken consumer protections –  a key pillar in building assets for Latinos.

The latest legislative deregulatory effort is the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155), which may be considered by the U.S. Senate as soon as next week. This bill makes changes to help some of the largest banks in this country while rolling back consumer protections. S.2155 weakens stress tests for both regional banks and larger banks – stress tests are an important tool that ensure banks can withstand future crisis.  Further it reduces the Federal Reserve’s oversight over a wide range of financial institutions. If we learned anything from the financial crisis, it is that deregulation of the banks doesn’t create economic growth, instead it puts Americans at risk—like the millions of Latino families who disproportionally faced foreclosure during the crisis.  Big banks benefit from this legislation but do working people?

The answer to that question is clear in the bill’s provisions related to qualified mortgages and mortgage data which remove consumer protections put in place after the housing crisis. S.2155 exempts 85 percent of depository institutions from full reporting requirements under the Home Mortgage Disclosure Act (HMDA), an initiative aimed at combating discrimination and abuse in the home mortgage lending market. The bill weakens protections in the home mortgage lending market by exempting more financial institutions from the Qualified Mortgage (QM) rule which helps protect consumers from excessively risky loan products. Unfortunately, what appears to be driving this bill is not the needs of ordinary Americans and certainly not the needs of the Latino Community.

We encourage members of the NALCAB network to reach out to their Senators, urging them to vote NO on S. 2155. We cannot afford a repeat of the risky financial practices that devastated our communities just a few years ago. Now is our time to speak up.