Friday, April 1, 2011

The Economic Truth That Nobody Will Admit: We're Heading Back Toward a Double-Dip

Addressing the issues that created the recession was never done; hence, the susceptibility to a double-dip recession shouldn't surprise anyone. The FDIC is pushing to grant Banks the capacity to make more of the same loans that mortgagors were making with the stipulation that Banks 'make sure' that borrowers understand the financial responsibility that they are accepting - not whether or not the borrower 'can' pay the loan on time!

In addition to making loans easier to obtain, Banks will be allowed to do exactly as the mortgagors did - bundle the loans into derivatives without the obligation of responsibility for those bundled loans. As proposed by the FDIC, the lender will only have to hold a 5% interest in the bundled derivative!!

I think that the Banks should hold a 40% interest in their bundled loans. This will force the Banks to except only applicants that are qualified to secure a mortgage loan. It will also force Banks to pay the price of not having cash-flow as a result of bad holdings. If your bundles are on the up and up, you can borrow against them; if they are the scum of the earth, you suffer personally, and not the industry!
On second thought, why don't we just let the Housing Industry go to hell in a hand-basket and be done with it!

In a democracy, silence is not golden; it is condonance in the face of injustices; it is fear, where the thought of reprisal fosters control – Rodney A. Davis

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