>There’s a great new house foreclosure story on our companion blog called House ABCs. It’s by an attorney who believes people who are being foreclosed upon by the bank have a way out. Sixty percent of these cases are where the bank doesn’t even have the orignial signed note and in many cases with the right judge the homeowner can stay in the house until the note is found. In many cases, the original note has been destroyed. Know your rights, read the article. It’s important
House ABCs is the place to go.
Archive for the ‘banks’ Category
>By Don White
Obama and his team have two options: they can choose to adjust and fix the US financial crisis in a vacuum, which is highly dangerous, by more regulation or they can use a second imperative: Do nothing. Let the the free enterprise system take care of itself.
With it, Obama will mount a huge propaganda campaign absolving Democrats of blame–something they do well–while criticizing academics for not seeing it coming. The fact is, they did see it coming. It was the Democrats who didn’t react when Bush, on advice from academics, asked them to tighten up lending laws. They tabled his bill twice. Obama must send his liberal lawmakers back to school to learn how to avoid future financial bubbles.
It seems to me any further financial action at this hour will prove costly and fruitless. In retrospect, it may get Obama some Bush-like low marks that were responsible partly for the Republicans’ poor showing in the 2008 elections.
If Obama isn’t careful his desire to pass new regulations could cause companies to flee America en emase, and that means a continuous job drain the likes of which this country has never seen. If he chooses to regulate the problem to death, he’d better mount a global effort so that he doesn’t send companies fleeing America to find domiciles with friendlier regulatory structures.
The cause of the financial meltdown is as much a crisis of academics’ understanding of global finance as it is missteps taken by people who allowed the housing industry to bubble out. In other words, all the smart people at universities and colleges in the world had better go back to school. They will be delighted because it will offer them pause to rewrite textbooks and add to their personal wealth from an equal and opposite drain on student pocketbooks.
Put simply, some liberal academics and Democrats failed to understand global financial markets. Recent events have demonstrated that the financial market structure that has evolved over the past twenty years is a powder keg – the detonating device was the bursting of the 2004 to 2007 credit bubble. In considering where we go from here, two separate issues need to be addressed: how to deal with financial bubbles and the design of a new financial market regulatory structure.
Counter-cyclical bank capital requirements may help to deal with the first problem but regulatory reform presents more formidable difficulties. The problem here has been exacerbated by the forced financial restructuring that has taken place during the crisis management of the past few months. We now have a much more concentrated financial services industry and one in which large investment firms have been merged with deposit-taking banks. The financial landscape is now dominated by huge financial conglomerates which markets will correctly perceive as being far too systemically sensitive to be allowed to fail. Hence the whole moral hazard issue is thrown into even sharper relief.
There are two possible regulatory responses to this situation. The first is to try to put banking back in its box; to reverse the trends of the past twenty years by dismantling the financial conglomerates and re-imposing strict activity constraints on deposit-taking institutions. To a great extent, if left alone capitalism corrects itself and this is occurring. Democrats must just let things settle and not try to bail out any more private entities, like the big three automakers.
Lehman Brothers is gone and Bear Sterns is now owned by a bank. Can this be good for the U.S.? It is certainly better than spoon feeding GM, Chrysler, and Ford for the next hundred years. Let them go out of business. It’s the surest way to recovery.
After the 1929/33 crash the Feds passed legislation known as Glass Steagall in 1933 which was voted out in 1999. Banks such as Chase National Bank of their own volition announced that they were disposing of their securities affiliates because events had shown that commercial and investment banking should not be mixed. Maybe we should have kept Glass Steagall. It is ironic that today’s response is in the opposite direction: non-bank investment firms have either been eliminated (Lehman), pushed into the arms of banks (Bear Stearns, Merrill Lynch) or induced to re-charter themselves as deposit-taking banks (Morgan Stanley, Goldman Sachs). Unscrambling these new universal banking conglomerates would, however, present enormous practical difficulties and is probably unrealistic.
The second approach is to neutralize moral hazard by subjecting financial institutions to a comprehensive regulatory framework which would also see regulators acting in a much more intrusive, investigative and, if necessary, adversarial manner. In other words, the U.S. would become more socialistic–if we can say that after what Bush has done in the bailout area. Crucially, this new regulatory approach would have to be truly global since national authorities are at present inhibited from taking action that might induce regulated activities to move to more accommodating financial centers.
Written by LaVarr Webb & Associates