Swiping Away Toward the Next Debacle?

banker 2 The Las Vegas Sun reports that residents of the Las Vegas metropolitan area have run up $3.88 billion – yes, that’s billion with a B – in credit card debt as of June 2014.  The residents are not alone. There’s more credit card indebtedness piling up in Texas.  The Dallas Morning News lists the increases in credit card debt for Houston is up 5.45%, for Dallas-Fort Worth up 4.70%, and just for good measure there are other increases around the country.  Orlando’s credit card debt is up 4.89%, Atlanta up 4.21%, Tampa-St. Petersburg up 3.75%.   There’s good and bad news here.

Remember the mantra in this blog? One man’s debt is another man’s asset?

Somewhere, somehow, in the maw of the Wall Street financial institutions, those accounts receivable are being sliced, and diced, and traded.  They are being securitized.  They are becoming Asset Based Securities.  Read bonds. They are being priced and sold.  And, of course, someone is making a tidy profit. Synchrony, the largest issuer of private label credit cards for large retailers in the United States,  recently earned a Morningstar rating of BBB for its new issue.  Profits are good news, if the products being transferred are valued properly.  If not, then we have the 2007-2008 Mortgage Meltdown Debacle Redux.

The replication of that debacle will be a bit more difficult if the Security and Exchange Commission succeeds in enforcing rules under the 2010 Dodd Frank Act. The rules now call for firms issuing the securities to file reports with the SEC on the underlying loan data, including credit scores and debt levels.  The SEC plans on providing potential investors with debt to income ratio information and metrics which would help with the assessment of loan/credit quality.  [WSJ]

We should possibly recall at this point that both the Heritage Foundation and the American Enterprise Institute have called for the repeal of most, if not all, the provisions of the Dodd Frank Act.  The ultra-conservative think tanks have already declared the Act an imposition of unreasonable regulatory burdens on financial institutions.  [AEI]  It should also be remembered that Nevada Senator Dean Heller has called for the repeal of the Dodd Frank Act and its attendant regulations. [NVProg]

It’s also within recent memory that then-Representative Heller voted against the House version of the Dodd Frank bill on December 10 and  11, 2009 when Representatives Berkley and Titus voted in favor of it.  [govtrack]  Then on the final vote, December 11, 2009 Heller voted against the measure as one of 176 Republicans to do so. [govtrack]

When the conference report came back with the changes made to the bill from the Senate, once again Heller voted against it, on June 30, 2010. [govtrack] Heller also voted against H.R. 4173 (111th) on the conference report. [govtrack]  Four “nay” votes certainly should indicate that Heller was not in favor of financial regulatory reform.

Once in the Senate, Senator Heller teamed with Senator Jim DeMint (R-SC) to fully repeal the Dodd Frank Act in 2011. [DB]  And, lest he be considered inconsistent —  Senator Heller has now signed on as a cosponsor of Senator Bob Corker’s (R-TN) bill (S. 1217) which would make the FMIC (Federal Mortgage Insurance Corp) an independent agency of the federal government – read: Out from under the provisions of Dodd Frank.

For the record, there are eight bills in the House and Senate which provide for the repeal or diminishment of the financial regulation reforms included in the Dodd Frank Act. [govtrack]  Among these bills are those  sponsored by (H.R. 5016) Rep. Ander Crenshaw (R-FL), (H.R. 4564) Rep. Patrick McHenry (R-NC), (H.R. 4304) Rep. Steve Scalise (R-LA), (H.R> 3193) Rep. Sean Duffy (R-WI), and in the Senate, S. 1861, sponsored by Senator John Cornyn (R-TX). [govtrack]

The efforts by the Securities and Exchange Commission and the Consumer Financial Protection Bureau to implement and enforce financial regulatory reform measures remain under a steady assault of lobbying interests, banking associations, wealth managers, and their allies in the U.S. Congress.  Senator Heller is certainly among this legion.

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