Paradise Lost In Hays County

Editor's Note: Documents on file at the Hays County Clerk's web site show there have been 619 properties posted for public auction in the six months between March and August of this year. There are no comparative numbers on the web site for the same period last year.

By Charles O'Dell, PhD

Monthly housing foreclosures in Hays County during the past five months are averaging over 86 per month. Watts, Cox, Ortega, Jones and Rios name only a few of our neighbors who have lost their homes, their castles, and their major investments.

If predatory and unfair lending practices led to the current foreclosure crisis, why is it just happening now, and how do we keep it from happening again?

Today’s financial liquidity and home foreclosure crisis is the result of our elected U.S. Senators and Representatives dismantling in twelve years (1970 – 1982) the regulatory guidelines for financial institutions enacted over the previous fifty seven years.

These contemporary legislators responding to pressures from financial companies, their lobbyists and their election campaign contributions in the millions of dollars replaced good business practices and consumer protection with an unregulated system that encouraged bad business practices putting the banking system at risk by destroying the dreams of millions of new homeowners.

Creating a Responsible Banking System
After the financial panic of 1907, the Federal Reserve Act (1913) established the Federal Deposit Insurance Corporation (FDIC) and included banking reforms, some of which were designed to control speculation. A year later the Federal Trade Commission Act prohibited unfair or deceptive business practices. In 1933 the Glass-Steagall Act separated “commercial banks” focusing on consumer checking and savings activities from “investment banks” that deal with speculative trading and mergers. The Truth in Lending Act of 1968 required banks to disclose loan terms and fees.

Sowing the Seeds for Today’s Foreclosure Crisis
Some provisions such as Regulation Q that allowed the Federal Reserve to regulate interest rates in savings accounts were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. Other provisions which prohibit a bank holding company from owning other financial companies were repealed in 1999 by the Gramm-Leach-Bliley Act. (Yes, the same Senator Phil Gramm who is economic advisor to presidential candidate John McCain.)

Today’s credit crisis has been caused by a sustained period of lax and inappropriate lending that could not have occurred had thoughtful banking regulations and consumer protections not been repealed in the name of competition. Already, commercial financial companies are being rescued at great cost to taxpayers, and millions of unsuspecting new homeowners are seeing their dreams evaporate in foreclosure. We will see an increasing number of our Hays County neighbors lose their homes in the coming months and perhaps years.

The lesson to be learned is this: Thoughtful rules and regulations enacted by our local, state and national governments are meant to protect individual citizens and the public health, safety and welfare. We are a society that functions by the rule of law. Public officials who fail to enforce our laws are a disgrace, and their failure to enforce our laws is a criminal act.

As co-founder of Hays Community Action Network (HaysCAN) in 2003, Mr. O’Dell strives to carry out the mission of ensuring open, accessible and accountable government. He is a long time and close observer of the workings of the Hays County Commissioners Court. He earned a degree in Agricultural Education and a Masters in Ag Economics at Texas Tech, and, later, a Ph.D. at The University of Maryland while employed as a Research Economist with the U.S. Department of Agriculture (USDA) in Washington, D.C. Texas born and raised on a family farm, O’Dell is a Hays County Master Naturalist and a board member of the Ethical Society of Austin.