Banks have convinced policymakers, regulators and sometimes the courts that new regulations might be too expensive. However, the point of public intervention is to induce banks to take account of costs they impose on others.
The best way to meet the needs of consumers and communities is to once again have the private sector play the lead role in the housing market, led by responsible local lenders.
Bankers must concentrate on achieving greater efficiencies, stop focusing on short-term goals and strike the right balance between unacceptably poor compliance practices and unattainable perfection.
Making home loans that aren't "qualified mortgages" will soon carry legal risk. Will making only QM loans expose lenders to fair-lending claims under the disparate impact doctrine? Washington must clarify.
If U.S. know-your-customer rules required banks to identify and scrutinize foreign recipients in addition to the senders of money, other countries would likely return the favor.
Fannie Mae and Freddie Mac have now become the gatekeepers for underwriting qualified mortgages. This guidance might be a safe harbor from litigation, but history indicates it may fail as a safe harbor from risky lending.
A century and a half ago, the National Bank Act was born with a mission to promote a strong, vibrant national banking system. What it created was a dual banking system that has been meeting the changing needs of bank customers ever since.
The market should pay more attention to whether banks are adequately capitalized for unabated fraud, such as misrepresentations of securities or insider trading, settlement complications and other operational failures.
