Mar 262010

Here’s a truly bizarre story from the land of the truly bizarre. The current American administration wants banks – a very broad term in US parlance – to reduce or even negate mortgage payments for people who are unemployed.
To someone who has lived, eaten and breathed mortgage finance all his working life, this is unheard of, even more so for a capitalistic culture which supposedly prides itself on a reliance on free market dynamics as the cornerstone of its existence. But let’s back up a moment, and recall that the American usury culture has never been truly capitalistic. Had it been so, instances of so-called ‘jingle mail’, where a borrower in distress simply drops the keys to their home in the mail addressed to their mortgagee, and lights out for parts unknown, would not exist. Equally, instances of so-called bankruptcy protection – a misnomer is ever there was one – where a financially distressed borrower can declare bankruptcy, have liabilities virtually forgiven then go right back to doing whatever they were doing prior the mortgage distress occurring, would not exist under a properly regulated and prudently managed financial system.
Further, had capitalism truly relied, stood or fallen on the basis of a genuine free market system, the need to bailout Goldman-Sachs would never have been contemplated let alone enacted. This latest in a line of seemingly desperation measures by the Obama administration are not anti-capitalistic or *GASP* socialist measures designed to change forever the fabric of the United States of America. These measures are efforts to undo the laisse faire capitalism which has existed in the US since the end of the first world war, fostered by and benefited from to a great degree by defence contractors and providors.
I don’t see drip-feeding banks that comply with administration demands to go easy on borrowers as a cure-all for US fiscal system woes. Some serious financial regulation needs to be formulated, put into place and monitored for regularity. It’s such restrictions on Australian financial markets which has allowed this country to sail through the GFC almost unmarked. In the post-GFC world, banks globally will be required to hold far more capital than is presently the case, and be regulated much more stringently. This is going to mean higher margins on lending, credit will be harder to get and risk will be scrutinised much more closely. Such moves are going to really upset the ‘laisse faire’ proponents, and we’re likely to see a similar angst arise in the US, just as we’ve seen over the Health Care debate. I’m left to wonder whether the wingnut looney fringe in the US will be able to cope with another government intervention into what they will doubtless see as some form of freedom to default, or be a bankrupt. They’re a weird mob living in a weird culture, operating under a wide variety of weird and utterly unfettered systems. I reckon I’d be confused if I lived there, for which I’m eternally grateful that I don’t.