Our Financial Chaos the Result of Greed on Speed: Governor Schwarzenegger Needs to Sign AB 1830 for Mortgage Reform in California

By Ted W. Lieu
Chair
California State Assembly Rules Committee

The continuing financial implosion shaking America has at its core one single, unifying thread: the making of unsuitable home loans during the mortgage frenzy that resulted in a massive wave of foreclosures. The collapse of financial giants Ameriquest, New Century Financial, Indy Mac, and Lehman Brothers; the taxpayer bailouts of Bear Stearns, Fannie Mae, Freddie Mac, and AIG; the impending disintegration of Washington Mutual; and the fire sale of the venerable Merrill Lynch would NOT have happened if more effective laws and regulations were in place to prevent predatory and unsuitable home loan practices.

As Gordon Gecko in the movie Wall Street famously said, “Greed is good….Greed is right, greed works.” What we have learned, however, is that unmitigated, unchecked, unregulated greed has wrecked havoc and chaos in the mortgage industry and shaken the once strong financial pillars of Wall Street. The arguments made by former Federal Reserve Chairman Alan Greenspan that government should largely stay out of regulating the mortgage—and specifically the subprime—industry were, in hindsight, absolutely and categorically wrong in every way possible.

Several states have passed effective laws that, had they been in place, would have prevented predatory practices and the making of massive numbers of bad loans. The largest state in the nation, California, is on the verge of passing its own mortgage reform law (AB 1830), assuming California’s Governor listens to the people and not a small minority of those in the industry who continue to believe we should do nothing.

We need to reform this broken mortgage system. Taxpayer bailouts do not reform the system, they just prolong the pain. What we need are effective, common-sense regulations, such as those contained in Assembly Bill 1830 on mortgage reform, to become law. Enough is enough.

Ted W. Lieu represents the 53rd Assembly District. Prior to being elevated to serve as Chair of the Assembly Rules Committee, he served as Chair of the Assembly Banking and Finance Committee. He is the author of several mortgage bills, including AB 1830 which is on the Governor’s desk .

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