U.S. Senator Bob Corker, R-Tenn., a member of the Senate Banking Committee, today sent a letter to Federal Reserve Governor Daniel Tarullo, head of Bank Supervision and member of the Federal Open Market Committee who voted last week for the Fed's latest effort to stimulate the economy (known as quantitative easing or "QE3"), arguing activism at the Federal Reserve and flawed mortgage rules being written in accordance with the Dodd-Frank Act are counterproductive. Corker said a more thoughtful approach would be to fix the regulations instead of ballooning the Fed's balance sheet and risking future inflation.
"It seems clear that we not only face the much discussed "fiscal cliff' in 2013, we also face a "mortgage credit cliff' as a series of new regulations and capital rules will go into effect next year. Instead of ballooning the Fed's balance sheet to lower secondary market rates on the one hand, while simultaneously raising the primary rate offered to borrowers on the other, perhaps a better approach would be to address the coming mortgage credit cliff through more sensible policies," Corker said in the letter.
Corker has been a critic of QE3, saying open-ended purchases of mortgage-backed securities will politicize the Fed and add substantially to its balance sheet risks but will not help our economy's long-term growth prospects. He believes to get the economy moving our country needs true fiscal reform that includes pro-growth tax reform, a long-term plan to restore solvency to Social Security and Medicare, and dramatically lowers the deficit.
Corker points out in his letter that mortgage originators are saying that rules establishing a Qualified Mortgage and a Qualified Residential Mortgage will force them to charge borrowers higher rates, counteracting the impact of the Fed's decision to buy more MBS. He further asks Tarullo to work with members of Congress to improve these regulations, pledging to do whatever is needed to fix these statutes "in an appropriate manner as expeditiously as possible."