A Timely Mortgage Fix

Sunday, November 18, 2007

A Timely Mortgage Fix

It is a red-letter day when Congress is able to fight off the special interests, put aside partisanship and actually address a serious economic problem. That's what the House of Representatives did last week with passage of a bill reforming the mortgage lending industry.

The bill sets national standards, outlaws fraudulent and abusive practices, and requires investment bankers to exercise a minimum duty of care in packaging and securitizing mortgage loans. The lion's share of the credit goes to the chairman of the House Financial Services Committee, Rep. Barney Frank of Massachusetts, whose focus, knowledge and knack for dealmaking make him a rarity in the Capitol these days.

It's possible to quibble with some of the details of the legislation, like giving mortgage borrowers a right to sue passive investors who buy a security backed by hundreds of different mortgages. A right of action against the securitizers ought to suffice.

On the other hand, Frank, a Democrat, is to be commended for standing up to consumer and housing advocates who opposed federal preemption of state laws and regulations, which in some instances are more stringent than in the House legislation.

From a practical standpoint, demanding that national lenders conform their products to 50 different regulatory regimes is inefficient and costly. And from a policy standpoint, it is more than a tad hypocritical for liberals, who for years have fought against "states' rights" on abortion and civil rights, to become their champion when it comes to consumer regulation.

The bad news is that, despite the gathering economic storm around the mortgage market, the House bill faces uncertain prospects in the Senate, thanks in large part to Alabama's Richard C. Shelby, ranking Republican on the Senate Banking Committee, who has shown over the years that he is deeply in the pocket of the mortgage industry and would rather listen to himself talk than get something done.

Bold Moves at the FCC

While we're passing out kudos to public officials, how about one for Kevin J. Martin, the chairman of the Federal Communications Commission, who showed last week he could swing both ways when it came to industry regulation.

Anyone who has been awake for the last two years knows that whatever monopoly local newspapers had on the flow of news in their communities is crumbling rather quickly. So it is a shame that Martin's modest proposal -- to allow newspapers to own one of the minor TV stations in the same city -- prompted the predictable sky-is-falling hysteria from congressional Democrats and consumer groups. Those who oppose Martin on the basis of preserving a diversity of opinion might ask themselves how they expect newspapers to survive in the Internet era without having additional distribution channels and revenue sources. And in a world where people get their video information on their computers and cellphones, it's hard to see how a newspaper with a non-network TV license is going to monopolize public debate.

As it happens, while the "monopolists" in the newspaper business have been lowering their prices, the real monopolists in the cable business have been raising theirs. Which is why Martin, normally a deregulator, has decided it's finally time for the federal government to step in. His modest initial proposal is to lower the price cable companies can charge for their "public access" channels and limit the market share of any one cable operator to 30 percent of U.S. households. But the industry is worried that Martin's ultimate goal is to permit cable subscribers to buy only the programming they want -- a radical concept that might undermine the industry's monopoly profit.

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