July 02, 2007
FLASH: The FDIC, realizing the cat is out of the bag and bank collapses are coming, admits "everybody was asleep at the switch". Ruh-roh.
"We clearly have a profound problem," FDIC Chairman Sheila Bair said Friday.
"It is going to get worse before it gets better, and decisive action was required," she added.
"Everybody was asleep at the switch."
It's amazing, after years of out-of-control lending, after years of watching mortgage brokers, lenders, builders, appraisers and realtors game the system, and after years of watching the world's biggest Ponzi Scheme grow unchecked, NOW, just now, do government regulators wake up to the problem? And their solution? Issue non-binding guidelines and hope for the best. Not a good idea.
Good god we are fu*ked.
But the market will take over in lieu of the "asleep at the switch" Fed or Congress doing their job, and credit is tightening anyway. And you know what tighter credit means - even lower demand, even lower home prices, even more defaults, even more foreclosures and even more hedge fund, pension scheme and bank carnage.
Remember, don't have more than $100,000 exposed to any bank account. And since the printing presses will be running soon to prop up failing banks, you might want to rethink having all your savings in US$.
Get ready for impact. We're coming in for landing...
U.S. banking regulators told mortgage lenders Friday to toughen standards for subprime home loans in a belated effort to end abuses that led to a surge in defaults and the highest foreclosure rate in five years.
Lenders, in most cases, should verify income levels instead of relying on borrowers' statements, the Federal Reserve, the Federal Deposit Insurance Corp. and other regulators said in guidelines issued in Washington. They also said banks should consider potential interest-rate increases when judging whether homebuyers can pay off loans.
Mortgage Bankers Association Chairman John Robbins said the new guidelines will "constrain consumer credit choices." The Washington-based group, which represents the mortgage industry, also discouraged Congress from passing legislation that would subject lenders to "rigid underwriting standards and litigation risk," Robbins said in a statement.