Posts Tagged ‘fat cat bankers’

Blaming Fannie & Freddie: Taking The Easy Way Out

“Will Obama Slay The Fannie and Freddie Beast?”  is the headline of one story appearing in Newsweek today. Basically, it appears that instead of doing anything to the major players that actually caused the economy to collapse, you know, those fat cat Wall Street CEOs with their stupid, blow-up-the-housing market schemes, once again the easy target gets the blame: poor people who shouldn’t have been able to buy homes in the first place.

The Obama administration appears to be suggesting — very subtly — that homeownership isn’t a God-given right. That the American dream has morphed into an American entitlement. That millions of people who should not have been homeowners in the first place ended up paralyzed by unsustainable debt as a result

The American Dream is indeed powerful and one of its major tenets is owning your own home. Why is that such a tenet, though? Because for years, owning a home was the only asset any except the top five percent of Americans could claim.  Having said that, homeownership has never been an entitlement and the idea that giving poorer Americans the ability to purchase homes led to this crisis is completely incorrect. It is par for the course, however, as it is easy to blame everything on those least able to represent themselves. Poor and working class Americans  don’t have a powerful lobby like Wall Street does.

The fact is that the financial crisis was NOT caused by making loans to poor people to buy homes. It was NOT caused by the CRA or Fannie and Freddie. It was caused by greedy Wall Street bankers knowingly creating financial products that were doomed to fail from the very beginning.  The Center For Responsible Lending and others have done studies which have  revealed that risky borrowers weren’t the problem;  it was the terms of the loans themselves .  In fact, the majority of people who received “subprime” loans could have qualified for conventional mortgages, with a much lower default risk.  Furthermore, most of the loans made were not loans to first time homebuyers: the majority were refinances and loans made to homeowners moving from one house to another.  

It is deeply saddening to me that the Obama Administration appears to be buying into the Republican talking points, given to them straight from Wall Street, that the cause of the crisis was government intervention to try and help people get a leg up when true cause was the absence  of government in making sure that the mortgage products that were being peddled to the American people were safe and sustainable.

Bank Of America’s Latest Checking Account Is Free If You Never Go Into A Branch

The banks hate the new regulations being put on them by the financial reforms enacted over the last few years. They hate them because they turn off the spigot of easy fee income that the fat cat bankers have come to expect as their due.

According to this article by Dan Caplinger, Bank of America will begin offering a new checking account that is completely free, with no minimum balances or other charges, so long as the customer NEVER visits a branch office. Should the customer visit a branch, for any reason whatsoever, the account would convert to one that charges a monthly fee of $8.95 per month.

Caplinger opines that the reason that banks are making these kinds of changes to their account offerings is because

Banks have been on the defensive for quite a while now, and the new legislation on debit cards and financial reform certainly isn’t going to help. Having changed from investment banks to bank holding companies less than two years ago, Goldman Sachs  and Morgan Stanley will now have to separate out their derivatives trading units. While that may not affect you much, it’s a big deal to the big banks.

New restrictions on debit card fees will also have an impact. Although Citigroup  reported that limits on debit-card-related fees likely wouldn’t have a big impact on profits because it doesn’t have a huge retail banking business, B of A said it could cost $2.3 billion annually.

As another major player in the debit card business, JPMorgan Chase () could also see substantial lost profits. Yet JPMorgan CEO Jamie Dimon summed up the general attitude toward the regulations: "If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger. Over time, it will all be repriced into the business." In other words, once you think you’ve plugged one leak in the framework of fee income for banks, new ones will pop up to take its place.

It is the same old excuse trotted out by the big banks and the big bank  lovers out there that you just can’t regulate them or else they will just find other ways to make money from fees. Please! How about offering a real service, for a change, and charging for that? Wouldn’t that be a good way to make more money?

Here’s an idea and maybe one of the banks will take me up on it: how about charging a monthly fee for a suite of bank services like access to financial advisor whose job it is to help the customer understand where his or her money is going and how to best manage it? Oh, wait a minute, that would be more expensive to implement than just dinging people with overdraft fees. D’oh!

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