Jan. 14, 2020 6:59 pm ET

To resist President Trump’s campaign of economic reform and deregulation, his critics usually attempt to portray long-overdue, common-sense policies as assaults on the poor. A good example is the controversy regarding the Community Reinvestment Act, or CRA, which requires banks to meet the “credit needs” of their “entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institutions.” The media howled at a plan to rein in abuses of the law—despite its role in fueling the subprime crisis—setting off a fight among regulators.

Bank regulators started using the CRA in the mid-1990s to pressure banks to make subprime loans. Congress used quotas to force government-sponsored enterprises to buy these loans, and regulators set capital standards to induce banks to hold them. By 2008, roughly half of all outstanding U.S. mortgages were high-risk, as measured by down payments and creditworthiness. The federal government itself guaranteed, issued or held 76% of subprime loans. The term “subprime” originated from the implementation of the CRA.

To curb this abuse and encourage sounder lending, the comptroller of the currency proposed new benchmarks last month to measure CRA compliance and require full reporting and accountability. His reforms represent an essential step toward relieving the pressure banks face to lend to politically favored, uncreditworthy entities—the policies that helped cause the subprime crisis.

Yet after the proposal was tarred by the media as an attack on poor neighborhoods, a Federal Reserve Board member proposed an alternative that largely preserves the Obama CRA policy. Disputes among bank regulators are rare, and President Trump should help resolve this one by publicly supporting the comptroller’s reforms.

While policy makers fight over CRA abuses, another effort is under way to politicize credit. This time, instead of steering credit to the favored uncreditworthy, activists want to deny credit to the disfavored creditworthy. Banking was used as a weapon against legal, solvent businesses by the Obama administration during Operation Choke Point, a program to deny the disfavored access to banking services. The Federal Deposit Insurance Corp. labeled certain businesses “high risk,” including firearms and ammunition dealers, check-cashers, payday lenders and fireworks vendors. Unelected regulators, not Congress or courts, marked these industries as “dirty business” and made it “unacceptable for an insured depository institution” to offer them banking services.

The Trump administration ended Operation Choke Point. But some members of Congress have joined political activists in a new effort to block credit from going to legal, creditworthy enterprises through political intimidation. “There’s more than one way to skin a cat, and not everything has to be done through legislation explicitly” said Rep. Alexandria Ocasio-Cortez last year.

At a congressional hearing with the then-CEO of Wells Fargo, she demonstrated how this political skinning works by asking, “Why was the bank involved in the caging of children?” He responded that “for a period of time, we were involved in financing one of the firms” that built federal immigration detention centers, but “we’re not anymore.” Under political pressure, JPMorgan Chase and Bank of America joined this boycott of the detention-center company.

With Democrats unable to ban guns legislatively, Rep. Carolyn Maloney admonished banks at a recent hearing to not “finance gun slaughter.” When she urged JPMorgan to deny credit for legal firearm sales as other banks had done, the CEO responded, “We can certainly consider that. Yes.” At the same hearing, Rep. Rashida Tlaib challenged bank CEOs: “Will any of your banks make a commitment to phase out your investments in fossil fuels and dirty energy?” The CEOs declined to defend fossil fuels, even though they power 90% of U.S. transportation and provide two million jobs in energy extraction alone.

If these CEOs sound weak-kneed, it is important to understand that corporate leaders are entrusted with the stewardship of trillions of dollars, the life savings of millions of workers and retirees. Their congressional intimidators hold the power of subpoena and adverse publicity over their banks today, and could be one election away from having the power to take over their banks.

Democrats on the Senate Banking Committee have now joined the effort, calling on the nation’s largest banks to align their business strategies with the Paris climate agreement, from which the U.S. has withdrawn.

Letting political intimidation dictate the availability of private credit endangers freedom and stifles productivity growth and job creation. Had banks been intimidated out of making oil and gas loans a decade ago, fracking would have been impeded, America wouldn’t have achieved energy independence, and economic growth and wages would be lower. Americans would also be using less natural gas, burning more coal and generating higher carbon emissions.

Moreover, the practice of creating lists of political undesirables could be adopted on both sides of the aisle. How would today’s intimidators react if some future administration or Congress added abortion clinics, labor unions or disfavored media companies to a government hit list? Circumventing the legislative process to limit the freedom of some endangers the freedom of all.

In addition to supporting the comptroller’s reforms, Mr. Trump should use his executive authority to issue regulatory guidance to enforce the CRA by guaranteeing that legal, creditworthy borrowers not be denied banking services. The use of political intimidation to allocate capital is an assault on economic efficiency and freedom. The Constitution protects desirables and undesirables alike.

Mr. Gramm is a former chairman of the Senate Banking Committee. Mr. Solon is a partner of US Policy Metrics.

Sept. 10, 2019 6:41 pm ET

Who owns the vast wealth of America? Old folks. According to the Federal Reserve, households headed by people over the age of 55 own 73% of the value of domestically owned stocks, and the same share of America’s total wealth. Households of ages 65 to 74 have an average of $1,066,000 in net worth, while those between ages 35 and 44 have less than a third as much on average, at $288,700.

While there is plenty of blame to go around for Republicans’ inability to repeal and replace Obama Care, the effort was all but doomed as soon as the GOP chose to fight on the wrong battlefield. Trying to pass a replacement through the budget process known as reconciliation was powerfully attractive, since it would have permitted the Senate to act on ObamaCare with only 51 votes.

But under the Senate’s rules for reconciliation, the debate was limited to actions that would directly affect revenues and expenditures, thereby forcing Republicans into an argument about how much to spend on ObamaCare beneficiaries.

You can watch the video here.

By PHIL GRAMM

Feb. 2, 2017 7:23 p.m. ET

So powerful is the political appeal of entitlement programs that modern democracies routinely choose bankruptcy over curtailing them. That’s even true of ObamaCare. Despite surging premiums, lagging enrollment, the growing burden on the economy, and the enduring opposition of most voters, the debate is about replacing rather than simply repealing it.

Oct. 17, 2016

In claiming earlier this year that the current U.S. health-care system “was HillaryCare before it was called ObamaCare,” Hillary Clinton was telling the truth—but not the whole truth. In 1993, while first lady, Mrs. Clinton led a task force to deliver universal health care to the voters who elected her husband. She failed. After many revisions, the final bill stalled in the Senate for lack of Democratic votes.

HillaryCare was a comprehensive plan for the government to take over the health-care system, with program details and cost-control measures precisely defined. Having learned from that defeat, the Obama administration left as many details as possible to be written during implementation after ObamaCare became law. With few details to defend and the clear falsehood that “if you like your health-care plan you can keep it,” President Obama pushed through his “signature” legislation.

While Bill Clinton recently denounced the Affordable Care Act’s effect on the health-care market as “the craziest thing in the world,” ObamaCare was never anything more than a politically achievable steppingstone. As with HillaryCare, a single payer, national health-care system has always been the goal.

Hillary Clinton’s Health Security Act of 1993 would have broken the nation’s health-care system into regional Healthcare Purchasing Cooperatives, which would have collectively set treatment guidelines and implemented cost-control measures. In the abstract, HillaryCare was just as popular as ObamaCare would be 16 years later, with some 20 Republican senators initially supporting an alternative plan that would have largely implemented HillaryCare.

That’s when Sen. John McCain, the late Sen.Paul Coverdell and I took our fight against the bill to regional media markets. When we attacked HillaryCare as inefficient, people yawned. When we showed that the program was unaffordable, people checked their watches. But when we focused on the extraordinary loss of freedom that HillaryCare entailed, where the federal government decided the doctor you could see and the services that could be provided, our rear-guard action became a crusade.

The stone that slew the HillaryCare Goliath was freedom. Even the Democrat-appointed head of the Congressional Budget Office was forced to conclude that under HillaryCare health-insurance premiums were federal revenues and all health-cooperative expenditures were federal outlays.

The decisions of HillaryCare’s National Control Board, which would have determined every allowable benefit and treatment, would have been final—not reviewable by any agency or judge. What finally broke the back of HillaryCare was the provision imposing civil penalties for providing treatments not allowed by the regional cooperative and criminal penalties for accepting a separate payment for providing such care within a cooperative.

Families were forced to pay into the regional cooperatives and medical providers had to provide all medical care through the cooperatives or operate completely outside them. Since few families could afford to pay the cooperative for health care and then pay for additional care, and few providers could afford to operate totally outside the system, any real health-care choice would have been extremely limited, very expensive and available only to the highest-income families. When challenged to defend the loss of freedom HillaryCare entailed, congressional support collapsed and no effort to resurrect it was made until ObamaCare.

President Obama left out the politically dangerous details of how the program would be structured and how costs would be controlled. But in the end ObamaCare passed because he neutralized the freedom issue that had killed HillaryCare by lying about the ability of Americans to keep their health insurance. Seldom in any free society has a purposeful lie led to a greater loss of freedom.

In 2008, candidate Obama attacked HillaryCare repeatedly, claiming in a speech in Ohio that Mrs. Clinton’s approach would “have the government force you to buy health insurance, and she said that she’d consider going after your wages if you don’t.” But the very coercion he condemned became the cornerstone of ObamaCare, with an “individual shared responsibility payment” of up to $2,085 levied by the IRS on anyone without health insurance.

The Achilles’ heel of ObamaCare today is the same weakness that felled HillaryCare—the coercion required to force millions of young, healthy people into the exchanges where they can be exploited. Why the Republican majority in Congress has never forced a vote on health-care freedom, giving families the right—promised by President Obama and his Democratic allies—to choose not to participate in ObamaCare and to buy the health care of their choice independent of the exchanges, remains the greatest mystery of the 114th Congress.

ObamaCare’s plan was always to cook the frog slowly. It didn’t immediately close the individual market or shut down the small-group market as HillaryCare did. President Obama granted substantial flexibility in implementation, such as suspending penalties for individuals and employers, waiving income-verification requirements and easing the premium shock on young enrollees by administratively adjusting the community-rating system. But the result of delaying the coercion ObamaCare requires has been an explosion in health-care premiums and massive losses by insurers.

Except for the fact that it is occurring right before the elections, the four largest national health insurers dropping out of ObamaCare is not a problem. This is the plan. Eliminating the facade of private insurance is how ObamaCare “morphs” into HillaryCare and ultimately into a single-payer plan like Medicaid or Medicare. This is exactly what Mr. Obama and the Clintons wanted to begin with. Right on cue, they are now campaigning for a Bernie Sanders-type nationalized health-care system.

For the ObamaCare of today to be transformed into the HillaryCare of 1993 and finally into a nationalized health-care system, a president is needed who has the willpower to impose the coercive details, nail down hard deadlines and unleash agencies to tighten controls and squeeze the life out of private insurers. In 1993 Hillary Clinton unapologetically proposed to do just that. If she is elected president she will have the unilateral power under ObamaCare to do it. The loss of what remains of Americans’ health-care freedom is an election away.

Mr. Gramm, a former chairman of the Senate Banking Committee, is a visiting scholar at the American Enterprise Institute.

Aug. 3, 2016 

Donald Trump has been criticized by Democrats and Republicans alike for saying that “the American dream is dead.” But instead of slaying the messenger, critics on both sides of the aisle should be examining why so many Americans agree with Mr. Trump and why the Obama “recovery” has been so painful for so many.

When President Obama took office during the 2007-09 recession no president was ever better positioned to lead a strong recovery. With an impressive electoral mandate, Mr. Obama enjoyed a filibuster-proof Senate supermajority, a 79-vote House majority and a nation ready for change. History too seemed to smile on Mr. Obama’s endeavor. The recession ended just six months into his first term and, with the sole exception of the Great Depression, every severe recession since 1870—when reliable annual data were first collected—had been followed by a vigorous recovery.

In his capacity to implement his program, Mr. Obama stood as a colossus with the fates on his side, the vast power of government at his disposal and no one—not Congress, the Supreme Court or the Federal Reserve—willing or able to deny his will. No resources were spared. The Obama $836 billion stimulus exceeded all previous U.S. economic stimulus programs combined. The Treasury borrowed over $1 trillion a year for four years in a row, according to Office of Management and Budget data. The Federal Reserve injected $3 trillion of new reserves into the banking system, generating record-low interest rates.