Thanks for visiting by blog my object is to share my thoughts objectively about real estate and/or finance I think they go together.

Mar 17, 2018

Banking Regulations being rolled back

Posted by: Jose Gomez

On Monday March 12th 2018 The Columbus Dispatch published an interesting article regarding the rolling back of Dodd Frank banking regulations.  According to the article Dodd Frank has affected smaller banking institutions.  The higher cost of lending has made it harder for smaller banks to lend to small businesses, and it has contributed to a 25% percent reduction in the number of FDIC insured bank since 2010. Now back in 2012 folks in the financial sector agreed that too many banks were not good for the economy because it led to too much financing.

The proposed bill will ease mortgage lending by NOT requiring smaller banks to consider the borrower’s ability to repay the money.   The bill will raise the threshold for banks to be considered “too big to fail” and thus subject to the stress test by the Feds.  I get it we want smaller banks to lend more money with lesser requirements.  It seems incredibly risky and very similar to lending practices before the recession.

I know easy access to credit will spur the first time home buyers’ market and thus an increase in new home constructions.  While this is good for real estate too much borrowing is unsustainable, if borrower’s salaries and wages can’t keep up with their ability to finance.  I am afraid we could be creating another real estate bubble, but only time will tell.

Now increasing the “too big to fail” threshold may govern some banks.  This artificial growth in the financial sector could trigger banks to acquire other banks to become “to big to fail”.  We all know that “too big to fail” gives institutions access to Federal TAR money for when they fail. Maybe this time around there are enough regulations around “to big to fail” maybe.

More importantly I hope we as consumers learned the lesson from the last recession, and with unemployment at all time low and possibly easier access to credit financing. It is us (the consumer) who evaluate and consider our own ability to replay, and maybe all this deregulation works in our favor the borrowers and the banks...