Is simply being angry enough

Unless you live under a rock you know about the Occupy Wall Street movement that is spreading from Manhattan to cities across the country.  This weekend there were events in Raleigh and Charlotte this weekend.  What is clear from these events is that people are angry.  Not just about banks, but many other issues facing our country.  But is simply being angry enough?

As a former organizer and still an activist, it fires me up to see so many people fired up and hitting the streets.  I worry though is being angry and hitting the streets enough? I’ve always believed in organizing with a purpose and not just organizing to organize.  I fear that some of what is driving this Occupy Wall Street is organizing to organize.  Every serious organizing movement in this country was about more than just being angry, it was being angry with a purpose.

I am not sure if this current movement is going to go anywhere or gain any victories without a purpose to the marches. As more groups and people join the movement, I hope that some organization comes to the movement. I would hate to see the masses of people who are hitting the street to go to waste. Let’s be angry with a purpose and not just angry to be angry.


Beginning of a New Era in Financial Protections

With all the talk of deregulation or the lack of regulation in the financial markets over the last several years, there was a growing sentiment that something needed to be done.  Even though it was not an easy fight in Washington, President Obama did sign into law the biggest overhaul of regulations of the financial world with the Dodd-Frank Act.  Part of this legislation called for the creation of a new bureau that would be the new watchdog of the financial world.  This watchdog known as the Consumer Financial Protection Bureau (CFPB) is a wide-reaching agency that is designed to keep the financial world in check.

Elizabeth Warren, who has always been a favorite of advocates to be the director, was appointed as a special advisor and charged with getting the agency ready for work.  She has done a great job putting the CFPB together and getting it ready to launch.  She did all this despite attacks from regulation opponents who now had control of the house.  They have made several attempts to defund and weaken the agency before it can even begin.  I you are against it then fine, but at least let us see what it can do before we begin making changes.  The people of this country deserve an agency that is going to protect their financial interests from an industry that cares more about its bottom line than anything else.

Today, is the culmination of all the hard work.  July 21, 2011 is the day the watchdog is unleashed.  Until a new director is confirmed the powers will not fully be unleashed, but there is still plenty of good that can and will begin.  This CNN Chart does a good job of explaining many of the new functions.  Warren was not tapped as the director of the new agency,  instead  former Ohio Attorney General Richard Cordray has been nominated by the president.  Even with the uncertainty of the agency without a director, the one thing that is certain, is that this is a new era of financial protections for American Consumers.

How the QRM will Change your Mortgage Loan

I have already done a series of blogs on my perspective of the QRM, but I wanted to share a post Adam Rust of BankTalk and CRA-NC did on the topic.  Below is a cross post of his blog.


This is a difficult time for American reporting. Most of America’s attention is shifting between the polar magnetism of Casey Anthony (see CNN’s “Essential guide to the Casey Anthony Trial“) and the debt ceiling crisis.

Left to progress under the radar is a substantial change in how Americans buy homes. You may have seen some reference to the qualified residential mortgage (“the QRM”) in the business section of your paper or perhaps from Bank Talk. The QRM is difficult to understand, in part because it is hard to explain what it means without going into a series of double negatives. But it goes something like this: banks will soon have to extract a down payment of at least twenty percent on any loan that they originate in order to avoid having to keep at least 5 percent of that loan on their books.

Banks don’t want to hold on to mortgage debt. The development of a secondary mortgage market solved that problem and it has changed the entire scope of how loans are now made. The QRM would change that in a sudden fashion. Normally, a bank sells a loan less than 90 days after closing. They are not interested in the interest – they write a loan in order to generate fees. Retaining five percent creates a liquidity strain, particularly for small banks.

The Senate Banking Committee held a hearing about the QRM earlier this month. This is an excerpt from one of the testifiers:

The respondent, Peter Skillern, is getting across a point that should be clear to everyone. Most Americans do not have twenty percent to put down on a home. If you live in any kind of big city, then the price of a new home is probably over $250,000. The average cost of a home across the United States fell from as high as $210,000 a few years ago to now a bit over $170,000. Even at the last price point, pulling out $34,000 plus closing costs is going to stretch a lot of people.

First-time homebuyers are a critical constituency, because they tend to be the ones that buy the houses that more well-off people are trying to sell. Think about it – it is hard to move up to a bigger home when you can’t sell your starter home.

More Evidence Banks Do What They Want

Every day the anger against banks is stronger.  It seems like banks can do what they want, when they want, and how they want, with no consequences.  They make risky bets, they get bailed out by taxpayers.  They get involved in bad loans, and aren’t required to modify loans.  It seems like at every turn they get a pass, mounting more evidence that banks can do what they want.

The latest piece of evidence is deals with the robo-signing phenomenon that came to light at the end of last year.  For those that don’t know, all the big banks put foreclosure proceedings on hold after members of their staff admitted in court that they signed documents without reading them.  These signatures became known as robo-signings as hundreds of these documents would be signed every hour.  A big stink was made of the whole thing and industry was supposed to have this under control.

However, an AP report, shows that the practice is continuing.  County Court Clerks in Michigan and North Carolina reported receiving hundreds of forged or robo-signed documents since this debacle was supposed to be ended.  In fact, the same people who testified in courts signatures are the ones still showing up.  The continued forged signatures no longer simply apply to foreclosures either.  The report mentions that the documents included transfers of loans and documents certifying a loan had been paid off.  So not only was the practice not stopped it has continued in other aspects of loan documents.

Despite settlements that were supposed to curb this practice, it is still in existence.  So much so that Guilford County, NC they have stopped taking questionable documents.  All this is more evidence that banks can and will do what they want.  Hopefully, on July 21, when the CFPB goes live, they can curb this lack of ethics coming from the banks.

Financial Regulation Will Not Kill Jobs

This was written by me but was originally posted on


Amidst all the recent talk about the debt ceiling and the national debt, two of the more discussed topics are financial regulation and job creation, with the latter even finding its way into debt conversations. No matter how we spin things, job creation can always work itself into the conversation. With unemployment numbers still high, getting the country back to work should be a priority for everyone.

For young professionals looking to enter the financial industry, the big question is whether or not the sweeping regulations of the new Dodd-Frank Act will impact jobs. Despite what opponents to financial regulation would have you believe, industry regulation does not lead to mass layoffs or the curtailing of job creation. In fact, studies have shown quite the opposite. When we look at the short term impact of regulation, we are only looking at one side. In order to determine the long term impact of job growth, we must look at all sides; in doing so, we will see that it is too early to write off regulation as a job killer.

Opponents of regulation, like the Heritage Foundation, want to paint a picture that these new measures are going to increase cost and stifle job creation or lead to job losses. This year, one of their senior research fellows testified before Congress that the current cost of regulation — which was at an all-time high — was threatening thousands of jobs. Politicians such as Rep. Jeb Hensarling (R-Texas) have echoed these sentiments, saying that the red tape punishes millions of job seekers. However, groups like the Economic Policy Institute (EPI) take a different approach. In their report, they examine a range of factors, including actual cost of regulation instead of estimated cost. Their conclusion is that these calls of doom from regulation are overblown.

The cost of regulation is often far less than the estimated cost. Moreover, the benefits often exceed the actual costs (page 10 of the report). During the housing boom, young professionals had a plethora of choices in the financial industry. Subprime lenders needed account executives and underwriters; mortgage brokers needed loan officers and processors. The more houses people wanted to buy, the more jobs needed to be created. The problem was that deregulation led to false hope, and now we are seeing the results. Starting in 2007, jobs in the subprime market began to disappear. This demonstrates that while deregulation got us short term job gains, it made for long term job loss.

With new regulations come new agencies, like the Consumer Financial Protection Bureau, and other offices created in Dodd-Frank. These new agencies and offices will be looking for the best and brightest in the country to fill positions. Banks and other financial institutions will need to hire the best and brightest as well, not just to deal with regulation, but also to think of new ways to do business. One thing regulation has done, as indicated in the EPI report, is increase innovation.

It is too early to rule out these new regulations as job killers the way some have. They will stabilize the financial markets; stable markets, in turn, foster growth and creation. That is how jobs are created. The short term gains may not be there, but we must look at the long term picture. If history indeed repeats itself, then these new regulations will lead to innovation and innovation to more jobs.

Additional issues with the possible QRM definition

If you are unsure of what the QRM is or what it would do, check out an article I wrote for that discusses the issue.  I want to talk about another side of the debate that isn’t often discussed.

This debate has been solely focused on the restrictions is places on first time home buyers, and rightfully so. Redefining the face of home ownership isn’t a good thing and hurts the economy.  Let’s think for a second though about the families that already own a home.  Often times, when they are ready to move, they depend on first time home buyers to purchase their homes.  What happens to this segment of people when there are no buyers for their homes.  With the possible new rules that could change the down payment requirements, even current home owners will have difficulty with a down payment for their next purchase.  That is until they can sell their first home.  When they can’t sell their first home, it prevents them from moving on.  It is a rare instance, in the large scheme of things where a homeowner can afford a second mortgage, and have the large sum for an initial down payment on their next home.

My fear is that not only first time home buyers will be impacted by these changes.  Current homeowners will also face difficulty, and our current housing crisis isn’t solved.  What it would do is further slow down our market, which is already overburdened with housing stock.  Financial reform shouldn’t create more problems for the crisis it is trying to fix.

Just my thoughts.

Obama Gets “C” on Financial Report Card

This posting while written by me was originally published on

With Congress working to end the administration’s programs to scale back the foreclosure crisis, RealtyTrac and Trulia released the results of a study that show 54% of adults believe the housing crisis is here until at least 2014. When I think about grading President Barack Obama on financial justice issues, I must decide what should be defined as financial justice. Understand the state of the country when he first took office: America faced a housing crisis due to the lack of regulation of banks and the subprime market, and foreclosures were about to rise not just from bad loans, but from homeowners losing their jobs. I would give the president a C on financial justice; Obama has succeeded when it comes to regulating banks to prevent a future crisis, but he has lacked when dealing with current foreclosure issues, leading to an uncertain future for the long-term health of the housing market and prices.

Foreclosure Prevention Programs

The housing market began to deteriorate and foreclosures began to rise in 2007, but the bottom came in the fall of 2008, catapulted by the fall of Lehman Brothers. In March 2009, the administration made a decision to step in and help save some mortgages. It launched a series of programs under the Making Home Affordable Program. The Home Affordable Modification Program (HAMP) was one of these programs to be run out of the Treasury Department. HAMP set guidelines for what was needed to modify a mortgage, and banks and servicers were invited to participate. One key component here was that nothing was mandatory for the banks; their participation was strictly voluntary. The program was supposed to help save millions of homes from foreclosure and hold off the crisis. In reality though, the program has been a failure.

According to the latest scorecard, there are only 609,615 active permanent modifications from 2,684,832 eligible delinquent loans. Early in the process, trial modifications lasted three months, and could last longer than six months without a permanent modification being offered. Housing counselors still have issues with aged trial modifications.

No program under the Making Home Affordable Program has had the level of impact that was hoped for. Though some homes have been saved, the expectations were to save millions of homes. That has not been the case.

Grade: F

Bank Regulation

Once Obama finished dealing with Health Care Reform, he turned his attention to financial reform. The House and the Senate debated numerous proposals before the Dodd/Frank Act took center stage as the bill of choice. This bill was massive in scope and covered almost every facet of the banking industry. The biggest component of this reform in bill was the creation of the Consumer Financial Protection Bureau (CFPB). This all-encompassing regulatory body was to be independent from Congress and would be the one regulatory body that covered banks. Many of the rules relating to the CFPB will go into effect on July 21, 2011 — they recently launched a website, and the implementation team is working to lay the initialgroundwork. The Republican leadership in the House, who have always opposed the creation of CFPB, is trying to weaken the agency before it can even get off the ground. The banking industry has not been very excited about this, and spent millions of dollars trying to defeat it.

There are some components of this reform bill that may not be great for consumers. Banks are going to find a way to pay for increased costs that are a result of more regulation, and pass that cost on to consumers. There are some amendments, like the Durbin Amendment, that may increase the cost of goods for low-income families as a result of capping interchange fees for big banks. But it will not cap these fees for small banks, which include many providers of prepaid cards. These added costs of reform make it difficult to give the highest grade possible, but I believe that the majority of these reforms are a step in the right direction.

Grade: A-

Final Grade

You can see from my perspective, the president has been hit or miss on financial justice. He has been successful on bank regulation, while his performance on the foreclosure crisis has been abysmal at best. I think his overall grade is right in the middle, and there is definitely room for improvement. Even though I have been a supporter of Obama, I am not sure this is one of his strongest successes so far.

Overall Grade: C