Banks lobbying to make bailouts permanent

[davelj]

[quote=ucodegen]

(4) Require greater diversification within the loan portfolio (most the Big Banks were allowed to get over-concentrated in certain areas)

I don’t know if I necessarily agree with this. Small banks by their nature are very concentrated when compared to how the larger banks were stuctured. Much of the problem was due to the mis-pricing of risk on sub-prime. The fact that CDS(s) were not regulated as an insurance product contributed to this. I also think that the ‘banks’ need to re-evaluate their models… which seem to be primarily ‘momentum’ based as opposed to fundamentals. This pyramid collapsed when the greater fool could not be located (because the greater fool could not buy in – wages had not kept up with price increases). Up to then, all of the creative financing was to allow the greater fool to buy in at ever increasing prices.[/quote]

Actually, very few community banks will fail due to concentration in sub-prime (those loans were found in large institutions – WAMU and Countrywide, etc. – and securitizations). Community banks are over-concentrated in Construction and Development and CRE. I would ALSO require greater loan portfolio diversification for community banks, don’t get me wrong. Too many institutions – both big and small – are over-concentrated in certain areas.

[davelj]

[quote=patientrenter]I suggest limiting CLTV to 80%. [/quote]

I agree with 80% on SFRs. I’d limit it to 70% on CRE. And I’d end the practice of “interest reserves” on construction and development loans. The borrower would have to show that they are capable of making the interest payments on the loan with their pre-loan liquidity (such that the bank isn’t lending them the interest payments, so to speak).

[davelj]

[quote=patientrenter]I suggest limiting CLTV to 80%. [/quote]

I agree with 80% on SFRs. I’d limit it to 70% on CRE. And I’d end the practice of “interest reserves” on construction and development loans. The borrower would have to show that they are capable of making the interest payments on the loan with their pre-loan liquidity (such that the bank isn’t lending them the interest payments, so to speak).

[davelj]

[quote=patientrenter]I suggest limiting CLTV to 80%. [/quote]

I agree with 80% on SFRs. I’d limit it to 70% on CRE. And I’d end the practice of “interest reserves” on construction and development loans. The borrower would have to show that they are capable of making the interest payments on the loan with their pre-loan liquidity (such that the bank isn’t lending them the interest payments, so to speak).

[davelj]

[quote=patientrenter]I suggest limiting CLTV to 80%. [/quote]

I agree with 80% on SFRs. I’d limit it to 70% on CRE. And I’d end the practice of “interest reserves” on construction and development loans. The borrower would have to show that they are capable of making the interest payments on the loan with their pre-loan liquidity (such that the bank isn’t lending them the interest payments, so to speak).

[davelj]

[quote=patientrenter]I suggest limiting CLTV to 80%. [/quote]

I agree with 80% on SFRs. I’d limit it to 70% on CRE. And I’d end the practice of “interest reserves” on construction and development loans. The borrower would have to show that they are capable of making the interest payments on the loan with their pre-loan liquidity (such that the bank isn’t lending them the interest payments, so to speak).

[davelj]

[quote=patientrenter][quote=davelj]the regulations and capital requirements should change….[/quote]

I agree, but I’d tweak by making the step-up in capital smooth instead of having breakpoints. Why? ‘Cos there’s a lot of mischief done in trying to get just under the wire. And I’m a former mathematician, so what the hell, I love nonlinear formulas :)[/quote]

I’d have no problem with this…

[davelj]

[quote=patientrenter][quote=davelj]the regulations and capital requirements should change….[/quote]

I agree, but I’d tweak by making the step-up in capital smooth instead of having breakpoints. Why? ‘Cos there’s a lot of mischief done in trying to get just under the wire. And I’m a former mathematician, so what the hell, I love nonlinear formulas :)[/quote]

I’d have no problem with this…

[davelj]

[quote=patientrenter][quote=davelj]the regulations and capital requirements should change….[/quote]

I agree, but I’d tweak by making the step-up in capital smooth instead of having breakpoints. Why? ‘Cos there’s a lot of mischief done in trying to get just under the wire. And I’m a former mathematician, so what the hell, I love nonlinear formulas :)[/quote]

I’d have no problem with this…

[davelj]

[quote=patientrenter][quote=davelj]the regulations and capital requirements should change….[/quote]

I agree, but I’d tweak by making the step-up in capital smooth instead of having breakpoints. Why? ‘Cos there’s a lot of mischief done in trying to get just under the wire. And I’m a former mathematician, so what the hell, I love nonlinear formulas :)[/quote]

I’d have no problem with this…

[davelj]

[quote=patientrenter][quote=davelj]the regulations and capital requirements should change….[/quote]

I agree, but I’d tweak by making the step-up in capital smooth instead of having breakpoints. Why? ‘Cos there’s a lot of mischief done in trying to get just under the wire. And I’m a former mathematician, so what the hell, I love nonlinear formulas :)[/quote]

I’d have no problem with this…

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