Isakson Criticizes Federal Financial Regulators

'Unintended Consequences of Inflexible Rules, New Fees Making Recession Worse'

Feb 02, 2010

WASHINGTON – U.S. Senator and Senate candidate Johnny Isakson, R-Ga., criticized federal financial regulators whom he believes are prolonging the recession for homeowners and small businesses through inflexible regulations and proposed fees on banks.

“We are making a recession that is deep, that is broad, and that is pervasive worse because of the unintended consequences of well-intended regulation,” Isakson said during a speech on the Senate floor. “I encourage our regulators to give the great American ingenuity and entrepreneurship the chance to work. Sure, some of these people are in trouble, but there are avenues outside of that trouble.”

First, Isakson argued that mark-to-market accounting rules have caused tremendous problems for our nation’s banks. These rules are devastating to bankers as real estate is absorbed over time and not in one fell swoop. Isakson believes mark-to-market should not be an arbitrary write-down to zero but a recognition of the transition of values in a down market or in an up market. This issue hits at the heart of residential real estate construction lending thereby further crippling our economy from returning to prosperity.

In addition, Isakson believes regulators could help struggling homeowners by basing real estate appraisals on the “cost to replace” rather than on “comparable sales,” as well as by enforcing the 10-day rule on banks to make decisions on “short sales” by homeowners who are underwater.

Isakson also urged the administration to rethink plans to impose fees on the country’s biggest financial institutions in order to recover losses related to the Troubled Asset Relief Program. He said the vast majority of banks that received TARP funds are paying them back and that these fees will only further delay the ability of banks to extend badly needed credit to small businesses.

“If we put that much more of a burden on top of the people who are paying us, and paying a premium when we have a banking system under stress and duress, it is only making it more and more impossible for them to stay in business, for them to be vibrant and come back to bring credit to our communities,” Isakson said.

Finally, Isakson repeated his call for the Securities and Exchange Commission to reinstate the Uptick Rule on financial stocks in order to stabilize the markets and protect the American consumer from traders forcing down the price of a stock. In his remarks, Isakson argued that the market deterioration was impacted by short sellers rushing to the market, shorting financial stocks and accelerating the decline of those values. Isakson called for the Uptick Rule to be reinstated to ensure that traders are not coming into the market to take advantage of these difficult economic times.