Monday, August 4, 2008

American Tax Payers Paying the Price for Republican's Zeal to Deregulate

Immediately after Republicans eliminated the regulatory guidelines of prudent banking practices, unscrupulous home mortgage lenders were free to unfairly prey on both American home buyers and securities investors. Mortgage lenders were free to aggressively market risky sub-prime home mortgages to unsuspecting home buyers and then speculatively trade those risky sub-prime loans in securities markets to such unrestrained levels that the U.S. Federal Reserve and FDIC are now forced into government bailouts of banks and private securities companies to avert economic disaster.

The U.S. Federal Reserve and FDIC were forced into such a Federal bailouts of Bear Stearns in March 2008 and IndyMac Bank in California in July 2008 over these risky sub-prime mortgage loan trading practices. The depth of sub-prime mortgage loan risks to the U.S. economy are yet unfolding with thousands more American homeowners losing their homes every month through foreclosure.

Republicans would rather allow banks and brokers to take unmitigated and unregulated risks, to profit the few, and then socialize the bailout cost of those "too big to fail" by adding the rotten fruits of their bad decisions onto the public debt.

The United States is in the second inning of a recession that will last for at least 18 months and help kill off hundreds of banks, influential economist and New York University Professor Nouriel Roubini recently told Barron's in an interview.

Taxpayers will pay a big price for helping bail out the rest of the financial services industry as well, Roubini said; likely in excess of $1 trillion and possibly closer to $2 trillion. The banks will become insolvent because of mounting losses as a result of the housing bust and because they have only written down their sub-prime loans so far, he said. Still in front of them are their consumer-credit losses, for which they lack the reserves, Barron's reported. He also said there are hundreds of millions of dollars outstanding in home-equity loans that could be worth zero, too.

Democrats favor legislation that will restore the federal banking regulatory authority that the Republicans discarded in their zeal to eliminate any and all protective government oversight in every quarter of American financing and commerce.

Read RawStory's article, "Expert on bailouts: Bank regulators should investigate themselves" for additional background.

No comments:

Post a Comment