Operation Choke Point: A slippery slope

by MPA08 Aug 2014

By David Lykken
Special to MPA


The Department of Justice and other regulators are telling banks not to lend to certain business lines and, frankly, that terrifies me. I understand, tactically, that these regulators are trying to shut down businesses that -- in my many cases -- should be shut down. But using banks to accomplish this task just doesn't seem right.

The inevitable question that arises is, "Where does it go from here?" If regulators can pick and choose which organizations banks can lend to, at what point do banks completely lose their power to the government? It seems to be that, although well-intentioned, exercising such control over banks will give regulators too much control over the entire economy. It's a slippery slope that could lead to a direct threat to free market in America.

I think if there are industries or organizations that need to be shut down, regulators need to go directly to those organizations. Exercising control over the banks is too much power for governing organizations to have. In the end, it will produce the wrong incentives for both lenders and borrowers -- and lead to devastating consequences for the entire economy.

David Lykken is 40-year industry veteran who consults on virtually all aspects of mortgage banking. David hosts a successful weekly radio program called “Lykken On Lending” (www.LykkenOnLending.com) that is heard each Monday at noon (Central Standard Time) by thousands of mortgage professionals.

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