Freddoso Interviews CantorSeptember 30, 2008
David Freddoso interviews Eric Cantor at National Review:
Barney Frank, Barack Obama, and other Democrats have suggested that this problem resulted from a philosophy of deregulation. Is that explanation fair, or what’s really at the heart of this?
A basic explanation of how we are where we are is the devalued state of the real estate market. We’ve had monetary policies that have allowed free credit to flow. We’ve had oversight regulators that have not done an adequate job in certain instances. But let’s see where we first started going off course. That was during the Carter administration, when Congress began this process of pushing lending institutions into extending credit to uncreditworthy borrowers.
This is the Community Reinvestment Act that you’re talking about?
Yes. And in fact, as the regulations developed, banks would be punished if they couldn’t demonstrate a certain number of loans on their books that were extended to those who were not worthy of that type of credit. It started a very bad trend. And then we had Fannie and Freddie, who continued this cycle and really ramped up that kind of lending in an exponential way with a very ineffective oversight regime, a fault of both Congress and the administration.
If there were one or two changes you could make to get more Republicans on board, what would you do in order to have the bill pass in an improved version?
First of all, an insurance program that would apply to certain classes of assets would help reduce the amount of money flowing out of the Treasury. Also, I think if you put in language about the mark-to-market rule — repealing that instead of just asking for a study about it. There’s not unanimity, but there’s a growing consensus about the impact of the implementation of that rule by the regulators as well as the accounting firms.
I also think that folks are very concerned about the short-selling situation at the FEC. We absolutely have to reinstate the uptick rule, and from what I’m told there’s runaway naked short-selling (the short-selling of stocks one does not actually possess) that tends to imperil the market. We need much stricter enforcement on the naked short-selling.