Since the collapse of the subprime market, there has been much discussion and study of the situation and outcomes. The impact to our economy was significant and several regulations were developed in order to prevent this type of demise to our housing and mortgage lending industries.
The Emergency Economic Stabilization Act (EESA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 were both designed to prevent a recurrence of the subprime mortgage crisis experienced in 2008. These acts were designed to resolve the financial crisis, minimize future taxpayer losses, and protect consumers. The EESA enabled the government to purchase the bad credit securities through the Troubled Assets Relief Program (TARP). This act also allowed for increased FDIC insurance to the financial institutions in order to assuage the customers fears looming with potential bank failures.
The Dodd-Frank Act was expressly written to protect the consumers by reestablishing regulations and oversight that were removed with the enactment of the Community Reinvestment Act of 1977. Its focus is on eliminating predatory lending, limiting a company’s options in trading within funds and includes the retention of risk on traded securities, and provides for transparency and accountability with oversight from the Security Exchange Commission.
While these two monumental efforts have done much to correct the economic situation created by the subprime mortgage lending market collapse. A new surge of subprime lending has emerged in the auto loan industry and the regulators are being tested. Aggressive sales tactics are now being applied in the form of car loan solicitations. The Department of Justice is responding with subpoenas and inquiries into General Motors and Sandtander Consumer USA for their questionable lending practices.
For all intents and purposes, it appears that the appropriate attention is being paid to the reemergence of abuses in the subprime lending industry. Actions are being taken in line with the laws and regulations emplaced in 2008 and 2010. With due diligence and a bit of luck, we should be able to prevent a repeat of the collapse experienced previously.