Editor's Comment: Whether they stick to it or not is another story. But in a sharp break with the Obama administration's efforts to avoid the inevitable crash of the mega banks, Bernanke has made it clear that there is something rotten in Denmark. Bernanke's concern is whether we can reach an equilibrium where asset values are properly reported and the workings of the finance industry reflect reality --- so that the economy that depends upon the ability of the finance industry to provide much needed capital does the job instead of the reverse --- consuming the capital it creates.
This development is another step toward reality. If the FED continues down this road, the illusory assets of the mega banks will be revealed and the stark truth of our condition will be admitted. Bernanke seems to understand what the Obama advisers do not get --- the entire world knows the truth. If we want to maintain our high moral ground and our status on the world stage, we need to take the lead on this instead of pretending the explorer's clothes are real. The snickering is getting increasing louder amongst central bankers and it isn't going to be long before the IMF, G-20, and EU, along with the Asian associations decide that they had enough of using the dollar as the reserve currency of the world. Our 15 minutes are up. Either we fess up or lose our position entirely.
MEMO TO OBAMA: You don't need a degree in economics to understand the reality of this situation. Ask most people on the street and you'll get the correct diagnosis and prognosis. Stop listening to advisers who are stuck in serial ideological ineptitude and start using your own prodigious brain power. You'll get it right if you figure it out for yourself.
The anger is not about TARP. It's about the continuing effort to "save" the mega banks at the expense of the rest of the country while ignoring an extremely obvious available alternative. We don't need the Mega banks. They are an obstacle to our success. We have a perfectly intact and workable infrastructure with more than 7,000 community banks and credit unions and a EFT (electronic funds transfer) backbone that can do anything the large banks do, if you let it. We have passed the point where people care about whether some homeowner gets an over-sized benefit from this mess. People want relief, they want jobs, they want their country back to the way it was when innovation, job creation and economic leadership was oozing from our core.
October 25, 2010
Mortgage Lenders Under Review, Bernanke Says
By THE ASSOCIATED PRESSWASHINGTON (AP) — Federal banking regulators are examining whether mortgage companies cut corners on their procedures when they moved to foreclose on people’s homes, the Federal Reserve chairman, Ben S. Bernanke, said Monday.
Preliminary results of the in-depth review into the practices of the nation’s largest mortgage companies are expected to be released next month, Mr. Bernanke said in remarks prepared for delivery to a housing finance conference in Arlington, Va.
“We are looking intensively at the firms’ policies, procedures and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures,” Mr. Bernanke said in remarks that echoed those made last week by several administration officials.
Mr. Bernanke’s remarks come as attorneys general in all 50 states plus the District of Columbia are jointly investigating whether mortgage companies improperly evicted people from their homes. They are looking into whether paperwork and legal procedures were handled properly.
At the same time, staff members at the Fed and other federal agencies are evaluating the potential effects of the foreclosure debacle on the real-estate market and on financial institutions, he said. Federal officials said last week that several agencies were investigating mortgage lenders, but Shaun Donovan, the secretary of housing and urban development. said that the government had found no evidence of “systemic issues in the underlying legal documents.”
Bank of America and Ally Financial Inc.’s GMAC Mortgage have resumed processing foreclosures, after halting them temporarily to review documents. Both lenders face allegations that employees signed but didn’t read foreclosure documents that may have contained errors. Other companies, including PNC Financial Services and JPMorgan, have halted tens of thousands of foreclosures after similar practices became public.
Dubious mortgage practices and lax lending standards were blamed for contributing to a housing bubble that eventually burst and thrust the economy beginning in 2007 into the worst recession since the 1930s. Many Americans took out home loans that they did not understand and bought homes that they could not afford.
As a result, foreclosures have soared to record highs, and remain one of the negative forces restraining the economy’s ability to get back on sounder footing.
Now more than 20 percent of borrowers owe more than their home is worth, and an additional 33 percent have equity cushions of 10 percent of less, putting them at risk should house prices decline much further, Mr. Bernanke said.
“With housing markets still weak, high levels of mortgage distress may well persist for some time to come,” Mr. Bernanke warned.