In my last post I asked the question: “With all the cheap money and relaxed lending standards of the early 2000’s (that many people said were necessary to get people into their first home) – what did we REALLY get?
The Answer: An increase in home prices to unsustainable levels, providing a false sense of wealth to ALL homeowners which ultimately brought our nation – and much of the world – into a deep recession.
The other day, I had a chat with a good friend of mine. She asked rhetorically what I expected from my government – then quickly provided her own answer: “To keep me safe. That’s all, just keep me safe”.
She said she didn’t expect the government to look over her decisions about retirement, health-care, provide a welfare system, or anything more than simply keep others from coming in and blowing things up. And I completely understand that. I may not agree entirely, but I certainly understand and respect that concept.
Like my Mother used to tell me, “Whenever somebody does something for you, it costs you money!”
Lately, you hear a lot of talk about “free-markets” and “let the market work” lately.
But, what about when it doesn’t work?
I just wonder if our “market” wasn’t behaving more like a hormonal teenager than a responsible adult for the past ten to fifteen years. The good kids I know received good guidance from wise mentors. They may fee restricted at times, but the ultimate goal is to keep them safe.
In banking we had regulations – many initiated after the last Great Depression. Some were probably outmoded, but I think maybe we forget why there were regulations in the first place on what banks could do and what lending guidelines would allow
Of course, as far as lending standards, the fewer the regulations – the questions, the documentation, the credit history – the more people would qualify for a loan. But is that what you want? Would you loan money to just anybody?
I remember the lending requirements when I started in this business 30 years ago were rather straightforward – 2 years job history, income sufficient enough to pay the loan (Duh!), and a track record of paying your bills on time.
Why did we need to have loan products that allowed people to lie about income and disregarded a poor payment history?
Still, in the late 1990’s, many of these restrictions were burned on the pyre of deregulation. We seem, as a state and a nation, to de-regulate until something breaks.
Read about some new proposals for banking regulations.
There are reasons that banks should not engage in certain activities. Banks need to inspire confidence in their depositors. They need to feel that their money is safe.
There is that word again – “safe”.
I remember when these regulations were relaxed or removed. They were done so we could be “more competitive with the banks in other countries”. Well, we achieved that goal – the banks in England, Spain, Germany, France, and the rest of the world are as bad off as the ones in our country.
There is an old Italian Proverb: “It is easy robbing when the dog is quieted”
Our dogs were put on a very short leash.
Related posts:
