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Mercnbeth -> RE: Obama Approval Lowest of Any President at This Point (12/14/2009 9:52:56 AM)
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quote:
Reality still is--people who can't pay back loans can't pay back loans. This doesn't mean people should be shut out--it DOES mean people shouldn't be encouraged to buy more than they can afford--car, home, credit cards, whatever. It's become a "gotcha" game, not a business venture, and in the long run, that's not good for anyone.
Totally agree, getting us to the pregnant question - now what?
Were the relative freedom enjoyed by car ownership and driving; the annual death toll on the highways would point to a government 'solution' to eliminate cars, if the same regulations being considered toward the Banking industry became law. I know of no banker lobbying for no banking regulations. Keeping the car analogy transparency, disclosure, and limits should be in place, as are the speed limits, impaired driving, and 'testing' of the vehicle and the driver should be in place and enforced.
It was only when the existing, albeit informal, LTV and income regulations used by mortgage lenders came under scrutiny as 'prejudicial' and, in some cases 'racist' that lenders had to loosen up or their charters and expansion licenses denied. As an 'insider' during this transition I can speak directly that each and every lending program initiated by any Federally licenses entity had to include provisions for low income and EEO 'exceptions' to policy.
The 'worst case' opportunistic, government sanctioned disaster was the result. Not because the few that would have come through the doors of the banks, but by the many that were generated by the brokers and loan originators who, if their book of business was turned down by the bank, would send a formal complaint to the regulators who in turn would pressure the financial institutions to accept loans they would have turned down under any other circumstances.
What happened next? Well, the Banks knew what was on their books and wanted to hedge or 'insure' their bets. They went to the insurance companies like AIG who, instead of seeing the loan risks at the borrows level, saw a good bank client with an excellent 'Rating' wanting some insurance on their portfolio's performance. In other words, their underwriting was of the bank, not the paper. When it blew up - everyone was surprised. The insurers didn't realize the risk of what they were insuring. The Banks didn't realize how the first major claim against the insurance would end up taking the profit varnish off the pile of shit they had bought. Compounding the problem was the 'who's holding the paper?'. Some of these things had been sold and bought 10 times with little or no due diligence involved. The concept was very basic - Fannie Mae is 'guaranteeing' it, Congress demands it, we're 'insured', the Fed wants it, and "hell - Real Estate NEVER loses value. Only one of those, the value of Real Estate, was 'banker' controlled.
Something to consider, not to change anyone's mind - but a dose of reality sometimes help.
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