Better Late Than Never?

The United States House of Representatives this week passed legislation called the Mortgage Reform and Anti-Predatory Lending Act. This legislation is meant to control the abusive lending that lead to the sub prime mortgage crisis. Only, the crisis has already come and gone. So why enact legislation now? Banks have already adjusted their own lending practices, making it increasingly hard to gain credit. The Federal Reserve has also adopted new rules to discourage predatory lending. This new legislation in essence is to prevent future episodes of mass foreclosure and mortgage default. I find the most interesting piece of the legislation is a mandate that would require lenders who originate loans to retain at least 5% of the risk when a mortgage is bundled into securities and sold.
Obviously, new rules need to be enacted. Though the initial crisis is over, we are still dealing with the mess of the sub prime collapse. Critics think that current legislation could actually do more harm than good by inadvertently punishing consumers since many of the mandates are untested. The last thing we need is new legislation making the situation worse, especially when the economy is already shaky at best. I am not sure what the solution is. I think we should be looking at how we got into this mess in the first place. How were banks allowed to grant loans to people they knew would not be able to pay them off? And we now actually need a law that states that lenders cannot do this! Luckily, there is also legislation in the House that funds more investigation into how this financial meltdown happened in the first place. Its just too bad that Congress is getting involved in these financial matters after they have destroyed so many!