Seperate commericial and investment banking once and for all so banks arent gambling with our money. If the investment bank fails…at least our money is safe and free-market capitalism prevails as another one will rise up and replace it someday. It doesnt seem like good practice when you are backing IBs like they are Fannie&Freddie because if they fail again it will just be another bailout. If I was a manager and my bank was being taxed at the proposed rates…I would take even more risk for reward to try and make up the difference to put more money in my pocket as well as please the shareholders. The too big to fail problem really is a fascinating issue…there is no right answer
How can you create value out of nothing in RE?
^ Look east, sir. Far east.
ancientmtk Wrote: ------------------------------------------------------- > How can you create value out of nothing in RE? By getting loans for 100% of the cost of creating or purchasing an asset and by being incentivized to do that with the prospect of large absolute dollar returns and/or the prospect of minimal loss due to artificial props in the market created by gov’t.
^kkent: thanks for your insight in this thread. It is very much appreciated.
kkent, i dont know what side of the mortgage industry you sit on, you said GSE, but regulate the mortgage industry? Thats a f***ing joke. I am in banking so I know and have gone through required disclosures, HMDA, RESPA, etc. Alot of the guys I have met and heard about from clients are guys who barely have a highschool diploma, dont need to have a license, yet are advising people on the largest investment decision they will make in their life. And mortgage brokers are regulated by state, not federal, and they engage in interstate commerce. If I said the things that I have heard mortgage brokers say, I could be fined or literally imprisoned. So I have no idea where you are coming from when you claim that the mortgage industry is regulated.
ancientmtk Wrote: ------------------------------------------------------- > How can you create value out of nothing in RE? It’s important to not conflate value and profits. While profits were immense, there was little value created. This is why it’s painful to hear, on a financial analyst forum nonetheless, that we should be trying to eliminate the risk/volatility of markets. While on the surface this appears to be beneficial, in reality economic actors just increase leverage in periods of low volatility which (imo) is more dangerous. Without bubbles people will be overly fearful, and without busts people will be overly greedy.
@Biz: regulation!=enforcement
BizBanker Wrote: ------------------------------------------------------- > kkent, i dont know what side of the mortgage > industry you sit on, you said GSE, but regulate > the mortgage industry? Thats a f***ing joke. I am > in banking so I know and have gone through > required disclosures, HMDA, RESPA, etc. Alot of > the guys I have met and heard about from clients > are guys who barely have a highschool diploma, > dont need to have a license, yet are advising > people on the largest investment decision they > will make in their life. And mortgage brokers are > regulated by state, not federal, and they engage > in interstate commerce. If I said the things that > I have heard mortgage brokers say, I could be > fined or literally imprisoned. So I have no idea > where you are coming from when you claim that the > mortgage industry is regulated. What side of the mortgage market do I sit on? Hmm, well, I work for one of the healthiest, largest and most powerful banks in the history of man in multifamily asset management for the GSEs, I’ve done appraisals and underwriting, and am currently on the side doing single-family development and now short-sale fund management (I was just asked to manage a fund). I think I know a little bit about real estate and regulations. First of all, as adavy pointed out, there is the enforcement aspect. The industry is highly regulated, but enforcement is incredibly difficult. Second of all, I don’t know where you are, but you have to be licensed in Virginia, Maryland, and D.C. to originate loans. Third, have you ever bought a house? There are literally pages upon pages of required documentation from the federal gov’t that few people will ever read. 1 loan application takes up 10,000 - 20,000 kbs of space on a computer. (A single document should be something like 10-20 kbs). There is so much required documentation from the federal government that people throw up their hands and refuse to read any of it. Fannie Mae, Freddie Mac, FHA, HUD, the VA, etc. all have their mits in the business. It’s a maddening, bureaucratic process. So bureaucratic and so document-heavy that forging documents is incredibly easy–there’s no way any gov’t could regulated and track MILLIONS upong MILLIONS of documents that IT requires! Don’t tell me this isn’t a regulated business. It’s just a bureaucratic, gov’t-laden nightmare.
Good article from RCM this morning that essentially echos everything in here. Cliff notes: BO is trying to get cozy with the UAW and essentially playing into populist outrage. It’s the blind leading the clueless in my opinion. http://www.realclearmarkets.com/articles/2010/01/18/the_bank_tax_is_another_bit_of_demagoguery_97592.html