Columnist: Gentle Ben Has No Interest in Regulating Mortgage Abuses
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Those who enjoy reading about the Federal Reseve and its impact on housing should bookmark Lou Barnes at Inman.com. He writes with clarity, insight, and passion, and this week he takes Fed Chairman Ben Bernanke to the woodshed for being gutless and possibly clueless regarding the mortgage mess.
Barnes’ Key points:
--Bernanke has no interest in regulating mortgage abuses.
--Bernanke parrots the Wall Street line -- that investors who bought subprime morrtgages are blameless.
--Barnes believes otherwise: Wall Street enabled these products, which should trouble the Fed.
--The Fed is unlikely to cut rates while there is still ‘an ocean of cash sloshing around the world.’
--Further, the Fed’s command of the financial system is slipping -- it’s being outpaced by financial innovations.
Describing Bernanke’s speech yesterday on subprime mortgages, Barnes writes, ‘He made it clear that he has no interest in a regulatory effort to intercept future abuses: ‘... Disclosure is the first line of defense. ...’ He is wrong, of course: disclosure won’t do a thing to stop my clients yesterday, who, despite two excellent government-sector jobs, are drowning in debt, have withdrawn and blown their retirement funds, and are absolutely determined to buy with nothing down a house that they cannot afford. Only tough-minded, regulation-based underwriting will defend that line.
Read on below: Why Bernanke’s speech on subprime mortgages was ‘offensive.’
More: “Offensive to me, on page four of the subprime remarks Bernanke adopted the Wall Street line that mortgage misbehavior was the work of originating firms. Sure. Those poor, innocent investment bankers had no idea what they were buying. ... If Bernanke does not grasp the role of Street suction in this mortgage episode -- runaway IB demand for bad product -- then I have very little faith that he has correctly measured other risks inherent to the nouveau sausage machines.”
Strong stuff.
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Photo Credit: msnbc.com