New bill:
Congress engineering yet another financial crisis
September 8, 2014
Simon Black
Say hello to the next financial crisis, brought to you courtesy of
the dumbest
new bill of the week: H.R. 5148: Access to Affordable
Mortgages Act.
Ordinarily whenever an individual wants to borrow money for a
mortgage, the bank conducts due diligence… both on the borrower as well as the
property.
It’s in the banks’ interest (as well as the banks’ depositors) to
ensure that the property
is at least worth as much as the amount being borrowed. Duh.
Congress doesn’t agree. Apparently when banks conduct property
appraisals,
that seems to unfairly discriminate against some segment of the
population trying
to buy crap properties.
And we certainly can’t have that going on in the Land of the Free.
So with HR 5148, Congress aims to exempt certain ‘higher-risk
mortgages’
from property appraisal requirements.
Curiously, this legislation reverses several provisions in the
1968 ‘Truth in Lending Act’.
It’s as if Congress is now anti- Truth in Lending and pro-
whatever the hell gets the
money on the street.
And of course, all of this comes at a time when mortgage rates are
still near their
all-time lows.
You can borrow money to buy a home today at just 4%. That’s less
than half the
long-term average of 8.5%, and a fraction of the 16%+ people were
stuck paying
30 years ago.
Isn’t paying 4% affordable enough? Nope. Not according to
Congress.
So now they’re trying to engineer yet another financial crisis by
encouraging banks
and other lenders to exercise minimal due diligence on their
mortgage portfolio.
This comes at a pivotal time. US banks are only now just barely
starting to recapitalize after the early days of the financial crisis.
They’ve unloaded their toxic assets to the US government and
Federal Reserve.
They’ve borrowed money at essentially 0% from the Fed and loaned
it to the Treasury Department at interest (the mother of all scams).
After six years of these freebies and taxpayer-funded bailouts,
bank balance sheets
are only now starting to clear up.
So what does Congress do? They propose a new law to screw up bank
balance sheets
all over again.
It’s idiocy on an epic scale… and it makes one wonder what team of
monkeys is coming up with these ideas.
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