[BigV]

Hey, Big Sarge.

Did you know that the Community Reinvestment Act covered Commercial Banks? Did you know that the banks that have imploded Indy Mac, Bear Stearns, Merrill Lynch, etc are Investment Banks, not Commercial Banks? Did you notice that Commercial Banks, like Bank of America seem to have plenty of liquidity to buy even other banks, like Merrill Lynch!

I'm not buying this whole blaming tone communicated in the tone of the author of the video. This is a crisis of confidence in the other fellow's ability to repay a loan. But it's the bank to bank fear that prompted the gazillion dollar mother of all pork boondoggles. But I'm not bitter. Really.

The first firm to "securitize" mortgages was Bear Stearns. They introduced another obfuscating layer between borrower and lender. They created a new thing, a MBS, that I could buy. At that point, I have a note that has an anticipated return, which is "higher" because the risk is lower since, come on, they're backed by real property. How can you go wrong? But I don't really own a mortgage, but a fraction of a many mortgages, spreading the risk--good idea, right? It is. But now I can't say say which mortgage I own easily or which will be more likely to default.

This opacity is what causes uncertainty and therefore nervousness and unwillingness to buy/sell/loan/borrow. How can I know as an investor what to expect as a rate of return?

And, now that you've gotten me started, an even more fundamental problem here is our cultural propensity to live for short term returns and to live on credit. Living beyond our means, as individuals and as a national economy is a strategy that has exactly this kind of peril.

I'm not bankrupt. I'm not in foreclosure. Because I'm not overextended. My credit union has a big sign in the lobby "We have money to lend!" Go google up the bank of floyd. Seriously. Sound practices have sound results.

How does this relate to the CRA? Well, I think redlining *should* be illegal. And I think predatory lending, usury also should be illegal. But I have limited sympathy for institutions who are panicking because some percentage of their loans are going bad, some higher than anticipated percentage. That they're not getting the return they feel they're entitled to. Tough shit. You took the risk, you would keep the return, why are you moaning about the pain of the loss?

And for the stupid borrowers?? I've said before they and the lenders should come back to the table. As equals. Why would a lender kill their golden egg laying goose? What about some silver eggs in the interim? Or will it be roast goose? If the borrower can't make the 10% rate, why not ramp it back to a level they *can pay*?

I guess I'm not done being bitter. This whole thing is stupid.