The Fed slams the barn door shut:
"The Federal Reserve, acknowledging that home mortgage lenders aggressively sold deceptive loans to borrowers who had little chance of repaying them, proposed a broad set of restrictions Tuesday on exotic mortgages and high-cost loans for people with weak credit.
The new rules would force mortgage companies to show that customers can realistically afford their mortgages. They would also require lenders to disclose the hidden sales fees often rolled into interest payments, and they would prohibit certain types of advertising.
Borrowers would be able to sue their lenders if they violated the new rules, though home buyers would be allowed to seek only a limited amount in compensation.
“Unfair and deceptive acts and practices hurt not just borrowers and their families,” said Ben S. Bernanke, chairman of the Federal Reserve, “but entire communities, and, indeed, the economy as a whole.”
At least Bernanke got this right; if nothing else, he has that over Greenspan as Fed Chair.
Now, where did all those pesky horses go off to?
UPDATE: December 19, 2007 9:24am
Bloomberg gets the headline just right:
Fed Plans to Tighten U.S. Mortgage Rules After Crisis
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZt6NB.3Fpl4&
>
Source:
In Reversal, Fed Approves Plan to Curb Risky Lending
EDMUND L. ANDREWS
NYT, December 19, 2007
http://www.nytimes.com/2007/12/19/business/19subprime.html
“Unfair and deceptive acts and practices hurt not just borrowers and their families,” said Ben S. Bernanke, chairman of the Federal Reserve, “but entire communities, and, indeed, the economy as a whole.”
No kidding! I take it that he uses “hurt” as the past participle rather than the present tense…
Yeah, but for those that instituted this fiasco against unsuspecting borrowers: “All great wealth starts with a crime.”
Rep. Frank said it well:
“We now have confirmation of two facts we have known for some time: One, the Federal Reserve System is not a strong advocate for consumers, and two, there is no Santa Claus,” Rep. Frank said yesterday. “People who are surprised by the one are presumably surprised by the other.”
Well, the best part about the law is that the verification process (hopefully) protects greedy buyers from themselves.
Look, I have no doubt that there are some people out there who had no idea about the details of their loan. They just knew the builder and realtor told them “Don’t worry, just sign”. But until someone has hard #s to prove otherwise, I’m thinking the vast majority of these loans went to people who knew exactly what the payments were and just didn’t want to face reality. The race to “victimhood” grew tiresome a long time ago.
All those shiny new Miami condos will be “under water” for some time. People need to man up and take their lumps so we can all move on.
the horses have been gone so long they are ready for the glue factory. better lock that barn up tight! gubmint to the rescue!
Regulatory Cops on the beat ? What a concept !
Did somebody set the ‘Way Back’ machine to 1998 ?
.
Here’s a prediction. Years from now, when a new housing bubble is ready to emerge, the big banks will see to it that these new rules are shitcanned if they stand in the way of making money and we’ll hear some bullshit rationalization about “the need to make home ownership opportunities more available.” And it won’t matter if Bernanke is still there or not.
I dunnno. Banks aren’t in the pink now, and the pain at the brokers trying to sell their CMO shit is pretty intense. However, even now, the kernel of the next scam is being dreamed up. I give it five years.
Crazy idea I know, but why not just require all those who make loans get insurance to cover themsleves if the loan goes into default. FDIC is a sham as you should know.
I mean, people are told they should get health insurance in case they get sick, even if they can not afford it. So it seems the banks should do the same, instead, everytime they get sick, the Fed comes to the rescue, with our money.
How many of those sub-prime loans do you think a real insurance company would have insured? Heh heh.
So, our money cant be used to pay for the sick people (thats Socialism), only for sick banks (thats Capitalism?). Of course, 54% of our National Income is spent by government, so we are 54% Socialist, whats a couple of more percent.
I get it, Corporate Socialism is good, Social Socialism is not. Silly me. Yet the people pay more taxes than Corporations.
Mike G,
Yea, I am sure some naive, financially challenged first-time homebuyer initiating the largest transaction in their life is going to rip the face off of cunning loan officers who make hundreds if not thousands of these credit decisions on a daily basis.
Watch some interviews of these buyers, they are clueless.
Mike G,
Yea, I am sure some naive, financially challenged first-time homebuyer initiating the largest transaction in their life is going to rip the face off of cunning loan officers who make hundreds if not thousands of these credit decisions on a daily basis.
Watch some interviews of these buyers, they are clueless.
A ‘PRESIDENT OBAMA’ COULD HAPPEN: Barack and Mitt Romney are among the strongest candidates. If Obama won, and with an overwhelming Congressional majority, it might not be a reason for anyone (except maybe David Geffen) to celebrate because any [long overdue] Lincolnesque attempt to reverse the inherent slavery of Reaganomics could convulse the World. Yes, we’re in that deep.
To explain where (I guess) we’re headed, and why, it helps to take a look back. First a warning here Senator; This can be some rough stuff. I assume you’re playing pro-ball here? I mean you wouldn’t leave the Senate to run for President if you’re just playing touch football, right? In any case, we’re into it now, so here goes;
More than 25 years ago our ruling white majority began Reaganomics; A systematic transfer and/or draining of this nations economic, environmental and diplomatic resources because they concluded that given our liberal democracy the day would come when the ethnic minorities could come to power. And now that day may well be nigh.
Point being, in practical terms; Let’s say you get into office. And in the first year sign legislation to raise taxes on wealthy individuals and large corporations. [You also order a strategic withdrawl from Iraq.] And so things are looking okay. Projections show revenues will be up and spending down. Feeling comfortable you sign additional social-welfare legislation…And you’ve just stepped into the trap.
Sir, government, individual and corporate debt is at dangerously high, record levels. Unless we bring in $3 billion of foriegn capital every day we’re broke. Yes, it can be argued that corporate balance sheets are in okay shape. But over the decades the trend has been towards lower credit quality. That is partly because CEO’s borrowed to fund massive stock-buy-backs to cash in options worth billions. Looked at another way; Who predicted Citigroup would be on it’s knees, borrowing at 11% just to survive?
RFK, Jr. characterized Reaganomics as treating the nation like a company in liquidation. Any reversal (which may
now be inevitable) will likely trigger a cascade of unpleasant economic outcomes. The most immediate problem would be soaring interest rates and deficits. Eventually hyper-inflation may be employeed to square-the-circle. That’s often the way these things get worked out.
We sure can’t produce our way out. Much of the manufacturing base was off-shored so CEO’s could report higher earnings to juice stock prices. By the way they also (cruelly) raided employee’s pension funds
and eliminated healthcare benefits. So now who picks up that tab? Mend those safety nets? At what cost?
In the 1940’s when Mao’s revolution in China went after the rich, they just moved to Formosa. You think multi-zillionairs will pay-up when they grabbed the money to begin with? Sign publicly financed elections and tax codes simplified for fairness, and everything moves to Lichtenstein.
Also climate change was ignored. Now we’re on track for what Al Gore has described as a “planetary emergency”. Have fun trying to fund any meaningful curtailment of global greenhouse gas emissions. As President Bush explained, it can be done with nuclear power and advanced battery technology. But doing it quick is the economic equivalent of open-heart-surgery…Meanwhile, who’s fighting where in the World. And with what weapons?
There’s an old saying in Washington, “The Buck Stops Here”. If you make it to the Presidency, maybe exercise circumspection because Congress won’t. They’re there to spend. You can too, however in charting a new coarse maybe first get a real fix on the downside risk. Then prepare the nation and World; When America changes direction it’s influential. I imagine there’s going to be some rough sailing. If you’re the captain you’ll want to be in control. In any crisis the scrutiny will be intense. However, if you sucessfully navigate the ship-of-state for a term or two, then yes, you’ve earned a celebration, and the Nations highest honors.