Watch out. The mortage securities market is at it again. (by Sheila Bair, Barney Frank)

[antigop]

http://money.cnn.com/2013/05/23/news/economy/mortgage-backed-securities.pr.fortune/index.html

We thought the Dodd-Frank financial-reform law fixed all this by requiring securitizers to keep some skin in the game. Under the law, for every dollar of loss suffered by mortgage-backed securities investors, at least 5¢ must be borne by those who securitized the mortgages. In that way, the law aligns the interests of borrowers, securitizers, and investors in making sure mortgage loans are affordable and sustainable over time. Unfortunately, in an effort to get the 60 votes needed under Senate rules to move Dodd-Frank forward, the bill's sponsors agreed to make a limited exception to the skin-in-the-game requirement. The law exempted loans meeting standards so tight that there was little, if any, chance they would default. But as it turns out, that wasn't good enough for the financial and housing industries. They are now arguing for regulatory changes that would allow this exception to swallow the rule. Enlisting the aid of several affordable-housing advocates, they have argued that making securitizers retain risk will lead to higher mortgage rates, hurting low-income families who can't meet tough mortgage standards. Instead, they say, loan bundlers shouldn't have to retain any risk if the loans they securitize meet the basic lending standards set by the Consumer Financial Protection Bureau. Those standards, however, focus on consumer protection, not on system stability. They address the most egregious pre-crisis lending practices, such as failure to document income, but they include no down payment requirement and permit total mortgage and other debt payments to reach a whopping 43% of pretax income. (The industry standard was closer to 35% before the subprime craze.) Virtually all mortgages being originated today already meet those standards.

[Demeter]

1. When the Crooks Write the Laws

or pay the people who do, then the laws will be worthless.

And that's where we are today. We had perfectly good laws, instituted in the Great Depression by honest, deep-thinking, educated people. The crooks ordered them removed, and their sock-puppet political hacks (I mean you, Bill Clinton) removed them.

But those proven laws back! Don't let the crooks make new, worthless laws!