Envision a single, solitary survivor of the coming economic meltdown. Who will it be? Certainly a money changer, if the US Government has anything to say about it.
The villian? Moral Hazard. The concept of rewarding bad economic behavior.
First, the Fed bails out the US banking system bad boys, aka investment bankers, led by their bad example, Bear Stearns.
Now, the US Treasury is going to codify this practice by revamping the banking regulation system.
Now, don’t get us wrong. The regulation methods in place since FDR sorely need updating. Nobody wants to see a serious recession or banking collapse [predicted here some months ago].
However, a lesson cannot be learned without a consequence for a bad decision. Nothing will be gained if those who never should have owned a house, have their loans forgiven or reduced. Consequently, their loaners will never reform if not held accountable, even if it means that some banks fail.
It is what it is. The flame is hot, and if you touch it you will get burned.
The Fed, the US Treasury, NOBODY should bail out the mortgage brokers or their customers. The most that we can recommend, is that variables [ARMs] should be changed to fixed rate and then the terms extended to compensate.
Well? 40 or 50 years at 7 or 8%? Better than a van down by the river!
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