The Federal Reserve today admitted that it could have done more to avert the meltdown among subprime lenders. I guess 20-20 hindsight is everything.
Senate Banking Chairman Chris Dodd, D-CT, pressed the Fed to take a harder line at a hearing in Washington today, according to Bloomberg News.
"Regulators were supposed to be the cops on the beat, protecting hard-working Americans from unscrupulous financial actors," said Dodd, a candidate for president. "Yet they were spectators for far too long.''
An executive from Countrywide Financial Corp. (NYSE:CFC) urged Congress to "be careful about an overcorrection" that would cut access to credit for people with bad credit histories, Bloomberg said.
Fat chance of that happening.
Life is going to get much harder for subprime lenders. They have managed to unite the Democrats and Republicans against them, no small feat in the current political climate.
Interestingly, New Century Financial Inc. (NYSE:NEW) was a no-show at Dodd's hearing.
Delinquency rates on subprime mortgages are their highest levels since September 2002 and foreclosure rates are their highest levels since 2004,
Guess what? Subprime loans are not the only shaky loans out there.
You don't want to be around when that other shoe drops.
Why do we have a weak dollar?
Holiday hiring slow for retailers
Closing Bell: What sell-off? (AIG, ABK, EPR, MBI, JAVA, ORCL, ERTS)
Reader Comments (Page 1 of 1)
3-23-2007 @ 7:46PM
Adam Kochanowicz said...
Do you not spellcheck?
"subrime"?
"urged Congress 'not' to 'be careful about an overcorrection'"
3-23-2007 @ 7:35AM
jonathan berr said...
Hey, Thanks for pointing that out. Obviously, I should have been more careful.
Jon
4-12-2007 @ 8:42PM
Joe A said...
How can Congress now wail against the Fed? Under Greenspan and after, the Fed has advised Congress to curb the activity of the biggest actors in creating the real estate bubble: GSE's (Government Sponsored Entities) Freddie Mac and Fannie Mae. Those GSE's purchase about HALF of all the home mortage paper and re-sell it with an implicit government guarantee, ironically with the effect of making housing less affordable. Whenever the public undertakes to insure private risk (in this case indirectly, by providing liquidity), that risk will grow without bound. I have never heard it explained how these GSEs were ever expected to make housing more affordable by means of artificially inflating demand. It seems rather that rising real wages and fewer barriers to development would make housing more affordable, meanwhile leaving demand alone.