Busted: Bankers and The Global Economy

July 28, 2008

Banking & Lending Standards Threaten Economy

Pollster financial consulting firm Deloitte LLP has discovered that two out of three Americans have finally decided that getting a mortgage is more difficult. This fact creates quite a conundrum for financial authorities that want easy answers. Henry Paulson, U.S. Treasury Secretary correctly believes that without mortgages, there is essentially not a housing market. Paulson wants to jump start the ailing economy through the devastated U.S. housing market. That is why Paulson is so adamant about protecting mortgage cousins, Fannie Mae and Freddie Mac at all costs. They currently guarantee roughly 80% of U.S. mortgages and secure the future in the eyes of conventional wisdom.

In fact, without Fannie and Freddie, the U.S. government has little chance at stopping the bleeding in the mortgage and financial markets unless authorities were to reinvent the wheel. Unfortunately for the economy, bankers are no longer free-wheeling loans, making it tougher all the way around for good customers to buy a home. Why? Bankers are playing by the rules or “stricter standards”, which threatens to upend the entire economic recovery plan by the Treasury and Federal Reserve.

Now that the party is over, bankers are typically demanding a (more…)

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