Tag Archives: Wall street reforms

In search of an honest politician

The United States faces an incredible number of issues, yet so many of them could be solved with just a little foresight. Unfortunately, politicians are rewarded by getting reelected, not by offering viable long-term
plans for the country.

A case in point is the current status of Wall Street reforms.  The largest banks have only gotten bigger since the financial crisis began – so much for addressing the “too-big-to-fail” rumblings.  Plus, Wall Street quickly reestablished its propensity to pay out large bonuses to their bankers for taking speculative risks.   Derivatives, which were a contributing factor in the real estate meltdown, currently stand at ten times the planet’s gross domestic product.  Someone is going to get burned when those take a fall, and the taxpayer is usually the one to take the hit.

Although there have been a few reforms, the bankers in Manhattan are smart enough to always find new loopholes.  The old problems have most definitely not been fixed.

Since my business is mainly real estate – as a mortgage note buyer – I have a particular interest in how that industry is affected by government policies.  Let’s see how the elected officials have done so far:

1) The homeowner mortgage modification programs have used up a lot of media ink, but helped few people.  FAIL!
2) Fannie Mae and Freddie Mac, the government sponsored entities that buy loans, continue to need huge amounts of bailout money, and will cost taxpayers hundreds of billions of dollars.  FAIL!
3)The obvious necessity of requiring home buyers to put decent down payments of at least 10% when purchasing was put aside by the FHA raising their own down payment requirement from a measly 3% to a laughable 3.5%.  FAIL!

The housing market needs to go through a natural market recovery, which it can do if left alone by the Feds and the states.  The real estate bubble took years to build, and it will take at least that many years in which to recover to something approaching normality.

If the government will stop butting in, the housing market will have a chance to catch its breath and stabilize.  Community and regional banks will be more willing to lend as the volatility decreases.   For those situations where banks prefer not to tread, owner financing
can pick up some of the slack.  When a mortgage note (often called a real estate note) is created, a much more transparent and honest transaction occurs.   The former property owner also has the flexibility to keep the mortgage note or to sell the note to a mortgage buyer.

There are lots of viable solutions to the economy and housing market.  So far, the bureaucrats have only made the problem worse, and Joe Six-pack has no clue to the long-term implications of government policies and programs.   Will those few politicians who still have a brain and a heart for the country, please take control!