Bryan Robertson, may be unto something here. Banks are the cause of many of our economic problems. Consider the current foreclosure crisis...think it's the the dishonest homeowners that caused them? Think again. A crisis of the magnitude we saw in 2008 is too sophisticated to have been caused by homeowners. That was the biggest bank heist that happened right before our very eyes...yet nobody gets prosecuted. See what Andrew Jackson had to say about Banks.
There is widespread displeasure with the banking system. Borrowers are upset because short sales and foreclosures are chaotic at best and the banks have been successful sued for improper foreclosures. Mortgage brokers are upset because the rules around their ability to loan have been changed significantly. Real estate agents are frustrated because banks take unreasonable time to approve short sales, foreclose on a short sale in process, or put overly strict requirements on borrowers. The system is a mess and the banks have walked away with little more than a slap on the wrist, a few fines, and promotion to the status "Too Big To Fail" effectionately know as TBTF. The financial reform put into place by the Dodd-Frank Bill was a joke and banks continue to hold too much power while they profit hand over fist at the expense of the public. What exactly could we do to really fix the banking system?
What we really need to reconsider is nationalizing the banks. Nationalizing wipes out the need for them to generate unreasonable profits. An alternative is going back to the days of heavy regulation. Some readers of this article will scream "Less Government" but if that's your opinion, let me offer a little history lesson for you. The banks and Wall Street are built to bleed the public of money and when given the chance, they do it at the expense of everyone but themselves.
- When banks were deregulated in 1980 and 1982 by removing distinctions between banks and other financial institutions, the Fed gave easy money for banks to over extended themselves. As a result, we had the S&L crisis in the 1980s with 747 bank failures, a huge drop in housing construction, and the recession of 1990-1991.
- When banks were deregulated in 1999 with the Gramm-Leachy-Bliley Act the barrier between Wall Street investment banks and depository banks was removed. This enabled the mortgage-backed securities debacle which is widely credited with being the cause of the financial meltdown we've experienced the last 5 years.
It is clear that when banks are allowed to operate on a "for profit" basis with loose standards, they will do whatever they can to increase their margins. The Levin-Coburn Report for the U.S. Senate found that high-risk, complex financial products were the cause of the recent meltdown. These products exist to play financial games to create profits when such profits aren't needed.
Banks don't actually create any tangible value in the form of a product or service. They are clearinghouses for money. They lend you money, you pay it back, and the interest is their profit. However, the profits made have been deemed by Wall Street analysts and insufficient which has resulted in higher fees and other costs, passed onto the consumer, to ensure more profits. No additional value is given, just increased cost. The idea behind mortgage backed securities is nothing more than a game of packaging groups of loans together and selling them off with slim margins to generate more "paper profits".
By nationalizing the banks, we get what we really need - a source of loans (almost all guaranteed by the Fed anyway), the same ATM networks, fewer bank branches (would likely close many to reduce operating costs), and ongoing stability that would ensure that other markets with tangible assets (e.g. real estate) would continue to grow. They key is stability. Going back to hardcore regulation, and possibly nationalization, would mean not having these destructive recessions that end up uprooting families and undermining our communities.
I welcome your thoughts.
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Bryan Robertson, Broker Associate
Realtor, Developer, e-ProSereno Group - Los Altos
369 South San Antonio Road, Los Altos, CA 94022
C. Lloyd McKenzie, MBA
Berkshire Hathaway HomeServices
New Mexico Properties/Allstar, REALTORS
6739 Academy Rd. NE SU 200
Albuquerque, New Mexico 87109
Areas Served: Albuquerque Metro/ Algodones/ Bernalillo/ Cedar Crest/ Corrales/ Edgewood/ Los Lunas/ Los Ranchos de Albuquerque/ Placitas/ Rio Rancho/ Sandia Park/ Tijeras