By KIMBERLEY HAAS
The director of the Consumer Financial Protection Bureau says it’s time to take big bank bailouts off the table.
Rohit Chopra shared his candid opinions on the subject during the Mortgage Bankers Association’s annual convention and expo last week during an on-stage conversation with MBA President and CEO Bob Broeksmit.
Chopra said although the financial system is dependent on the banking system operating day-to-day without interruption, he doesn’t think the public should be on the hook for bailing banks out when they get into trouble.
“Banks, especially big banks, get a lot of benefits from the public. Big subsidies, direct and indirect, and I don’t think the public should be on the hook for bailing them out when they’re on the precipice of failure. This is not actually a free market system at all when they can gamble and when they lose, they get bailouts,” Chopra said.
Chopra said because banks are insured and backed by the federal government they need to be soundly managed.
Even though there are inherent risks when a large bank fails, it’s also true that when a large nonbank fails it can create a catastrophe. Issues within the financial system need to be addressed, Chopra said, before calling for an end to the bailouts.
“I get it. We want to do it in the right way. But I hope that we can align on the fact that, let’s take the big bailouts off the table because it’s disgusting for that to continue to proceed. People who are taking risks, they should have the downside, especially when they are a very large financial institution,” Chopra said.
Up Now: MBA President and CEO Bob Broeksmit, CMB has a candid conversation with The Honorable Rohit Chopra.
— Mortgage Bankers Association (@MBAMortgage) October 16, 2023
There have been four bank failures in 2023.
Chopra went on to say that although the mortgage industry is dependent on government support, it works out best that way because if it was a completely market-based system, mortgages would be even more expensive and industry profits would be lower.
As director of the CFPB, Chopra is also a member of the board of directors of the Federal Deposit Insurance Corporation and the Financial Stability Oversight Council.
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