Poetic Justice? Former Head of Federal Reserve Applies for Mortgage… and Gets Denied

Ben Bernanke No RefiIt must have been beyond embarrassing.

Ben Bernanke, former head of the Federal Reserve, one of the most powerful financial institutions in the world, was recently turned down when he tried to refinance his mortgage.

As he confessed to Moody’s economist Mark Zandi at a recent conference: “Just between the two of us, I recently tried to refinance my mortgage, and I was unsuccessful.”

Ben was trying to be funny, but this is a bad joke.

“I’m not making this up”, he said. “I think it’s entirely possible (lenders) may have gone a little too far on mortgage credit conditions.”

Do tell, Ben?

This stunning admission of failure would indeed be laughable if it just didn’t hit home (and our pocketbooks) so much. And it’s a classic case study of well-intentioned government meddling gone awry yet again.

In fact, it’s a double case study.

The first case occurred way back in the Clinton administration, when government regulators kicked off what would turn out to be a two-decade long, massive “affordable housing initiative” that coerced banks to relax their standard credit practices, putting millions of people into houses they couldn’t afford. The house of cards finally collapsed, leading to millions of foreclosures and triggering the Great Recession – one of the most serious financial crises seen in a long time.

Near panic, government regulators put their learned heads back together to come up with a plan to fix the fiasco they created in the first place. And this is the second case of classic government mishandling and mismanagement.

Pooling all their wisdom, they arrived at the Dodd-Frank act. You just can’t make this stuff up. The “Frank” partner in the act is none other than Barney Frank, one of the chief orchestrators and champions of the misguided Affordable Housing Act mentioned above that ended up tanking the economy and causing a near-financial meltdown.

So did the Dodd-Frank act provide the solution to all the economy’s woes, and now all is well?

Not hardly.

What it did do was establish new regulations for the financial sector, but in the worst possible way. It not only kept in place government rules forcing banks to lend to un-creditworthy low-income and minority borrowers (the rules that caused the financial fiasco in the first place), but it also punished banks by making it costlier to do business.

Again, you just can’t make this stuff up.

And the new regulations punished regular borrowers as well, many of whom, like Bernanke, find themselves unable to qualify for loans, despite living in the times of so-called “easy money.”

Thanks, Ben. Welcome to the system you helped create.

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