Monday, December 1, 2008

January 20, 2009 Yet?

Ignoring this long list of recommendations is the financial equivalent of the Bush administration's famous decision to ignore an intelligence briefing titled "Bin Laden Determined to Strike in US":

In 2005, faced with ominous signs the housing market was in jeopardy, bank regulators proposed new guidelines for banks writing risky loans. Today, in the midst of the worst housing recession in a generation, the proposal reads like a list of what-ifs:

_Regulators told bankers exotic mortgages were often inappropriate for buyers with bad credit.

_Banks would have been required to increase efforts to verify that buyers actually had jobs and could afford houses.

_Regulators proposed a cap on risky mortgages so a string of defaults wouldn't be crippling.

_Banks that bundled and sold mortgages were told to be sure investors knew exactly what they were buying.

_Regulators urged banks to help buyers make responsible decisions and clearly advise them that interest rates might skyrocket and huge payments might be due sooner than expected.

Those proposals all were stripped from the final rules. None required congressional approval or the president's signature.

"In hindsight, it was spot on," said Jeffrey Brown, a former top official at the Office of Comptroller of the Currency, one of the first agencies to raise concerns about risky lending.
Not that any president can hope to foresee and prevent every crisis, but having one who can read will be a nice -- if possibly too late -- change.

3 comments:

Laura said...

Dale, 1/20/09 can't come soon enough for me. After watching Obama's weekly podcasts on YouTube, I started to believe change is actually possible.

Laura said...

oops, did I say YouTube? I meant to say iTunes, but it may also be on yt.

Dale said...

Complete sentences! From a US president? Somebody wake me up.