How do you expand on this unbelievable quote from Senator Dodd? [Hat tip Doomer G!]
Senators, including presidential hopeful Christopher Dodd, urged the Federal Reserve on Monday to protect borrowers in the subprime mortgage market by toughening rules on both bank and nonbank lenders and restricting some loans.
Joined by nine other Senate Banking Committee Democrats, Dodd, D-Conn., said that the Fed should require all mortgage originators to evaluate a borrower’s ability to repay a loan before making a mortgage loan.
This is a new idea that needs to be enforced by the Fed? We’re in bigger trouble than I thought.
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twist -
There are going to be a lot of hungry predators out there if their prey becomes off limits to exploitation. Expect the many players whose ox would be gored by a return to sanity to scream “Red-lining!”
John-
We are going to have to come to grips with the fact that it is PREDATORY to loan to people who can’t afford it- it isn’t bringing them “the American Dream.”
I’ll tell you how:
it’s all about pouring concrete, baby. Do you have another idea about what to do with all those construction workers? Just consider it another Roman Empire bread-and-circuses makework project. What would YOU do to make sure Joe Sixpack pigs out?
jryskmpr -
Hang me for a romantic, a Presbyterian, and reader of Max Weber, but just why does Joe have to pig out? Or the Pentagon either, for that matter.
incoming …
Guess who’s to blame for this mess. Us!
“US new home market may take til 2009 to rebound-S&P”, by Ilaina Jonas, Reuters, April 23, 2007.
John-
I guess we shouldn’t have mentioned anything.
John M ~
We’ve went a long way the wrong way from:
“You shall know the truth and the truth shall set you free.”
to: “You know the truth, but: Shhhhhhhhhhhhhhhhhhhh!”
John M.
I thought being a romantic and being a Presbyterian were mutually exclusive. Unless fire and brimstione is considered romantic. Yes I am going to hell.
The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’
Ronald Reagan
Metro -
Consider Margaret Avison.
“The Kid” is absolutely right…The notion of having a federal requirement that lendors “evaluate…the ability to repay” is non-sensical in so many ways. Requiring a lendor do do this is like requiring an Olympic diver to verify that there’s water in the pool before he jumps! The Fed has no business in these matters. If a lendor wants to dole out large sums of money to any dope with heartbeat and a SS #…So be it. Weak, stupid lendors with a bad (or non-existent) business plan will simply perish. Investors who hitch their wagons to these types of entities will get burned in the process – “Buyer beware”.
JohnM.
Sorry I don’t get it, but literature was never my strong suit.
The Kid,
The problem is that bad Fed policy, deregulation and lack of oversight has led us to this situation we now see. And as we saw in the S&L bailout eventually taxpayers are on the hook one way or another. BTW, Tmitteer, some of the entities on the hook for bad loans are GMAC, Morgan Stanley, Washington Mutual among others. These are supposed to be corporation that are run well with self oversight. This can and probably will impact many 401Ks out there.
So if the government has no say in how this market is handled, then why have a Fed at all? Let the free market decide everything including interest rates. But we want price stability, right. It is the feds job. Only under Greenspan the fed was used to goose prices in equities first, then real estate. Now because our dollar is so devalued it is in commodities.
Folks what you have had during the G-span years has been little government intervention.
BTW, post depression you had a very stable growth in house prices with minor blips until the late 80′s. The latest runup and its aftermat is what you get with no oversight.
Trouble? What trouble? This is how David Lereah describes the worst March in 20 years for existing home sales:
As you can plainly see, except for some nasty February weather, there’s no trouble at all!
In fact, the market is improving!
When it comes to regulation, I think it comes down to who is expected to pick up the pieces. If it is expected that the federal government is to bail out lenders, then they should stipulate responsible behavior as a prerequisite.
The quicker all these idiots (lenders and borrowers alike) go underwater, the quicker things will get back to normal. I’m looking for ways to speed this up rather than slow it down.
Metroplexual,
I understand your sentiment that the Fed feels as if it must swim because it’s already in waist deep. From my perspective, the Free Market should be set Free-Including setting rates. Adam Smith’s invisible hand will stabilize rates and largely prevent the ridiculous price escalation seen in ’04-’05. Irresponsible monetary policy (IMHO “good” monetary policy is an oxymoron) has led shepherded the US savings to the lowest level since the great depression…..Thanks fellas!
As for GMAC, Morgan Stanley and the like…If they’ve truly written a relatively large number of bad loans, I’d say they’re not well run and don’t have effective oversight. let’s face it, the current RE malaise and stark uptick of current (and pending) defaults, didn’t result from a drastic change in the national economy or steep decrease in personal earnings. That being the case, we can only assume that these bad loans resulted from poor internal oversight. At any rate, I refuse to believe that MORE government meddling is helpful
tmitteer,
Just remember, even Adam Smith believed in some government intervention. And while he was a “freetrader” he velieved in some protectionism.
My, how far we’ve come