As always with financial institutions, the fallout from Reaganomics
deregulation has led to some serious screwing of the public.

That is why I thing the Federal gov't. ought to sieze both Freddie
and Fannie, kick out the equity as an example and recreate new
hardware that properly reflects the nations needs, the best
interests of it's citizens and
the realities of Americas role in the world as a financial power.

It's something the markets would validate in a big hurry.

Gee, if you wouldn't call that fallout, what *would* you call it? g

History repeating itself in a country lacking eithe cultural or
institutional memory space.


I hear what you're saying, John, but why wouldn't it function well if
it were regulated more like commercial banks, with higher capital
requirements and some other sensible regulations?

I'm only advocating the demise of the existing institutions Ed. What's
being
formulated is the equivalent of a million fingers to plug a million holes
that may not even exist. That's the problem. America needs F&F as
constituted and for all of the reasons you mentioned. Those institutions
need rock solid credibility and so does the process.

Mortgages were bought and sold long before Solomon Bros. created mortgage
bonds you know.
The process of bundling mortgages as securities removes a lot of the
scrutiny of the underlying value and you completely lose any
accountability.
You could once get a read on the integrity of the product based on the
source. That ended.
Also, there is plenty of money at hand to fund mortgages , but by bundling
them into bonds and passing them through a broker once or twice - or as
many
times as you have to to clean them up - you end up having to look more at
the markets demand for product rather than the long term return on the
underlying debt.

The fee then becomes the holy grail and since you really can't get in
trouble for passing worthless mortgages as part of your bundle you put 10
percent junk in with 90 percent quality. The entire process is tainted and
value is willingly traded for cash in hand.

I don't think you could regulate in proper transparency. Some smart guys
will always thread the needle around it.
The rewards of doing so for the few are as large as the risk to them is
small that the incentive to "missbehave" will never go away.


It sounds like a good time to return to the 93% tax bracket for some of
those boys. Knowing that you're going to kick back the majority of all that
money to Uncle Sam might be an effective disincentive to some of the
highrollers that want to engage in that game. It would be a boon to the tax
rolls too.

Hawke