In the aftermath of the crisis, Congress keeps piling on rules to enforce, without proportionately increasing the number or competence of examiners. Is it any wonder overstretched supervisors never asked, "What if home prices stop going up?"
Ed DeMarco must be feeling as popular today as I did back 2004, when as director of OFHEO I faced pressure to accede to the popular sentiment that Fannie Mae could do no wrong.
The Fed's counterparty limit is not so much a banking rule as an indirect antitrust rule. It will create opportunities for smaller institutions to compete. That's the real reason terrified big-bank CEOs are meeting with Fed Governor Tarullo.
Dodd-Frank went a long way toward ending too-big-to-fail. Since large, diversified financial institutions provide significant economic value to clients, the likely effect of arbitrary and preemptive break-ups would be to concede global financial leadership to other jurisdictions.
The QM rule must include a safe harbor that affords lenders real protections when making the types of loans that government policy clearly seeks to encourage.
The very fact that terms like "too-big-to-fail" and "systemically important financial institutions" are in the financial lexicon is proof enough that our financial system is badly out of balance.
It is time for us to completely reconsider compensation for banking executives. Let's "blow up" the incentive model and replace it with a system rooted entirely in base pay.
The history is clear: the CFPB was given flexibility to change the 'qualified mortgage' definition in order to ensure that it does not limit the availability of responsible and affordable mortgages.
