Fury at banks sends windfall to credit unions

@Linkat,

Linkat wrote:

Go ahead and challenge - I gave BF as an example - not as the whole picture - but he lead the availability for the de-regulation of mortgages.

The 'de-regulation' of mortgages that you speak of has been a goal of the government (promoting increased home ownership amongst those who traditionally couldn't get loans, in order to promote societal stability) since at least 1977. Frank wasn't elected to Congress until 1981 and had no significant role in housing for at least a decade after that. So, I can't agree with what you've written here at all.

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His philosphy, although his heart may have been in the right place, was doomed. Of course, those selling mortgages are also responsibile, however, they were given the green light and those directly selling are rewarded with compensation with each sale. It was set up to be disaster.

This ignores the fact that the vast majority of 'toxic' mortgages - the ones that lead to the major crisis in the housing market (not the derivatives market - we'll get to that in a second) were sold by groups who weren't regulated by the Feds, and weren't promoting increased home ownership for minorities. Instead, companies like Countrywide were involved. It was set up to be a disaster, for sure; but you're blaming the wrong thing for that disaster. It was a lack of regulation of non-FDIC insured lenders that prompted our housing crisis, not 'too much' regulation that did. I would also point out that loans that qualified for gov't programs such as the CRA were much less likely to fail than non-regulated ones.

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Wouldn't have happened if the government didn't first de-regulate the mortgage industry - it just snowballed after that.

That's true, but it doesn't have anything to do with Barney Frank or the CRA or poor folks - at all.

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And yes it is now so overregulated that an average person cannot get a loan. For example, there are people currently paying for their mortgage that cannot re-finance to lower amounts. If they can currently pay for their higher monthly mortgage, then why the h*ll cannot they afford to pay a lower amount.

That's not a question of regulations. It's the banks being unwilling to do so for a variety of reasons, not the least of which being the parasitic nature of the Mortgage Servicer. I would ask you what regulations you think are keeping banks from re-financing people's loans to lower amounts; I certainly don't know of any.

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Seems a bit over the top and a bit overregulated if some one that is paying $2k now and has been and has never been late with a payment, all of a sudden cannot pay $1,500?

I agree, but I'd need to see which regulations you are talking about that are preventing the banks from doing this, before I would agree with you that regulations are the problem. Instead, I think the problem is that the banks don't make any short-term profits off of refinancing homes; so they just don't give a ****.

When banks are making billions and billions in profits in the unregulated derivatives market - BofA has somewhere between 50 and 75 trillion dollars (!) of derivatives hanging out there - they have zero incentive to focus on their traditional role. And they aren't doing so, because we haven't forced them to do so. Obama's biggest mistake was not nationalizing the banks in early 2009, kicking out everyone who was at the top, and resetting the system...

Cycloptichorn

1 Reply

@Cycloptichorn,

No you are incorrect on the side that the mortgages were sold to groups not regulated by the government - most of these were sold to various financial institutions and mutual funds which are all regulated by the SEC.

Please I work in the industry - I have direct knowledge and see these products on a daily basis.

If I must repeat myself again - Barney Frank was one involved in this - I gave as an example - you are one of those arrogant individuals that enjoy picking one small item some one writes about and pulls it out of context.

The banks and other mortgage companies cannot offer loans to these individuals because the homes are worth less currently than what they were. So if they get an assessment, the loan will now be higher than what the home is worth and thus due to regulations (ie you need to have x% down to re-finance - they do not qualify).

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@Linkat,

Linkat wrote:

No you are incorrect on the side that the mortgages were sold to groups not regulated by the government - most of these were sold to various financial institutions and mutual funds which are all regulated by the SEC.

I'm not incorrect at all. I didn't say the mortgages were sold TO unregulated groups, they were sold BY unregulated groups, to private citizens, under no federal regulations such as the CRA at all. You are getting confused as to what I am talking about.

You are correct that the groups who BOUGHT the mortgage-backed securities were regulated by the SEC, but that hardly matters at all, as the SEC under Bush didn't do ****, and the companies selling the MBS routinely lied to their customers and the credit ratings agencies. Goldman, for example, just settled big-time in a case where they (one of their subsidies, actually, but let's not kid ourselves) were actively found to have been faking documents and lying to investigators and credit agencies, for years.

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Please I work in the industry - I have direct knowledge and see these products on a daily basis.

I don't doubt that, but you do seem to have gotten confused as to what I was talking about in my last post.

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If I must repeat myself again - Barney Frank was one involved in this - I gave as an example - you are one of those arrogant individuals that enjoy picking one small item some one writes about and pulls it out of context.

Your example wasn't correct. It's an attempt to place the blame somewhere other than where it belongs - and that's with the desperate search for unlimited profits on the part of banks, investment houses and mortgage lenders, all of whom bent the rules and common sense in order to chase these profits - along with outright deception and breaking the law on a regular basis. THIS is what led to the crash - not Barney Frank. Over-simplifying the issue helps nobody understand what went on.

Besides, I disagreed with your entire paragraph describing the problem - it's inaccurate and unsupportable by facts. I know this, because I've had this same discussion about 15 times here on A2K, and the side of the argument you are taking has never been able to produce a factual basis for their argument. Just lots of hand-waving and muttering about 'gov't incentives' and pointing at people like Frank as some sort of boogeyman.

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The banks and other mortgage companies cannot offer loans to these individuals because the homes are worth less currently than what they were. So if they get an assessment, the loan will now be higher than what the home is worth and thus due to regulations (ie you need to have x% down to re-finance - they do not qualify).

Only because the banks are fighting cram-down as hard as they can. A certain amount outstanding on these mortgages should simply be lopped right off the top and the banks and mortgage lenders should eat the cost; they created this problem in the first place by finding gov't regulations they could take advantage of and twisting them as far as possible, they furthered the problem by continuing to do so for as long as possible (even when they knew they were putting their companies and our economy at great risk), and they are now fighting as hard as they can to keep from taking responsibility for the errors they have made.

Cycloptichorn

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@DrewDad,

The intellectually honest thing to do is to own up to making a baseless accusation about roger not caring about the average man and not to try to deflect with wordplay.

He wasn't using "union" like a curse word, he was ribbing an acquaintance about her union history. You misread it and stuck your foot in your mouth and the smart thing to do is to pull it out instead of digging in.

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@Robert Gentel,

This isn't the only thread on which he seems, to me, to be down-in-the-mouth. I gave my opinion, which he is free to ignore.

You too, for that matter.

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@DrewDad,

Roger said:
@BumbleBeeBoogie,
Aw, you just like credit unions because they call themselves "unions."
~~~~
How is that 'down in the mouth' about anything, (regardless of whether they do or don't help out people [normal or not])?

You obviously don't know Roger, and Roger knows BBB from a time or two, so Robert's right, he's gently ribbing her.

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Bank fees piss everyone off.

ATMs have saved banks millions of dollars in labor costs, but it's so damned convenient for consumers that they're also able to charge fees when you use them.

You could just imagine the first guy who made the pitch in the board room:

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You know how usually these automated processes that we implement to save ourselves expense tend to annoy the consumer? Like recorded telephone message trails that are so convoluted the consumer usually hangs up in frustration before getting what he or she needs. The thing is that they love ATMs! We've been able to reduce our staff by 15% because of these beauties and that far more than pays for the machines and their upkeep, but the consumer has become so dependent upon ATMs that we can charge them a fee for using them, and they will pay it!

Here's the really brilliant part of the idea: At some point the consumers are going to get pissed off with these fees and the double dipping we're getting. They'll still pay the fees, but why piss them off if we don't have to? So when they get good and pissed, we announce we are waiving the fees for customers who use our ATMs. Anyone else can use our ATMs but they still have to pay the fee. The beauty is that most of the places where ATMs are most convenient for customers are where they want to spend their money, not at one of our offices. So we encourage independent ATM owners who buy and service the machines, charge a fee for its use and then kick back a percentage to us!

We still save staff expense and we still make money on people accessing their accounts through ATMs. What's more, our customers think we're great because we don't charge them the 10% of the time they use our machines!

One would think that the cost of regulations designed to keep the banks from screwing us wouldn't cost us anything, but they do because unless they absolutely must, no company is going to pay for government imposed costs (like taxes and regulatory expenses) out of their profits.

But it's not fair!

Linkat is absolutely correct that typically the regulations are not needed for the majority of ethical companies. They're in place to catch the bad eggs. If your company never violated the rules and you never had any intention of violating the rules why would you think it fair that you eat the cost of regulating the bad eggs? You wouldn't and although you it might cause you a little heartburn, you're going to pass the costs on to your customers.

In addition, government bureaucrats have zero incentive to come up with regulations that work efficiently. The default is complicate since regulations are supposed to be onerous aren't they? These companies proved they can't be trusted so tough on them.

As a result we have regulatory laws like Sarbanes Oxley which when it passed was estimated to cost medium sized companies about $95,000 a year to comply. Several years of the law actually being in place and the actual cost of compliance for a medium sized company is over $2 million.

SOX has been a bonanza for accounting companies and now just about everyone in DC (including Nancy Pelosi) agrees that it needs to be reformed if not repealed.

We want the government crawling up the arses of corporations, but think it can be done without us paying for it. Not the way it works.

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Fury at banks sends windfall to credit unions

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