In the last several months we have
seen a significant deterioration of the banking and financial services
industries.
Many economist and experts in banking and finance saw this
crisis on the horizon long before 2007. One of the most elementary concerns at
issue has been loan qualification during the initial stages of the loan
origination process. Enough time has now passed to demonstrate the root causes
to the impending crisis that has taken on many different forms. Originator fraud
is one of the main mechanisms that have brought the mortgage industry to its
knees. These recent developments are presently hindering other sectors of the
economy with a devastating punch.
The mortgage industry has been a major
contributor to the present credit and economic crisis.
Slack qualification standards, manipulation of debt
to income ratios, loan to value ratios, appraisal fraud and subprime and Alt–A
product steering by loan originators. These mortgage originators whom used their
power and influence to intentionally manipulate unsuspecting consumers. Presently these originators have gone without penalties.
As these toxic loans moved from mortgage brokers, regional
and community bank balance sheets as “loans held for sale“ their next
destination was the secondary market. The loans were packaged, rated as
triple-A, then sold to investors all over the world. The end result became the
collapse of the entire banking industry along with the auto industry,
manufacturing, small business. As we look around the state, hardship is apparent
within the unemployed, education, and Wisconsin families.
Wisconsin taxpayers now know the 700 billion dollar bailout
has not worked and now come with a series of expanded bailouts that will
leverage the next two generation of taxpayers. In the very near future another
bailout looms, the next bailout is the non-performing assets of commercial loans
which could equate into a 1.5 trillion dollar catastrophe with a prolonged
under-tow of the economy.
As your Representative, I will implement accountability within banking and the financial
services industry, by proposing the following agenda:
Expand the powers of the Department of Justice under chapter
165. The goal is to solely provide the Attorney General the power to reach
around the Department of Financial Institutions to investigate fraud within the
banking and financial services industries.
Mandate bank examiners and regulators become matter of public
information under “the freedom of information act”.
Publish the findings of institutions with descending capital
ratios, deficient loan portfolios and safe and soundness ratings from the FDIC.
Provide a link on the department of financial institutions web site for
Wisconsin consumers.
Mandate credit regulations:
1) A 60 day notice of change to terms and/or conditions of credit card contract.
2) Limit interest rates
on all credit cards.
Form a banking and financial services commission. The purpose
of this commission would be as follows.
1)
Drill down into the tactics implemented deep within the origination process of
mortgages to determine the catalyst that collapsed the mortgage industry. Like
appraisal fraud, debt to income, loan to value manipulation, along with the
element of product steering.
2)
Address the issue of why the calendar for the financial institutions committee
has been clear during the present banking crisis.
3) Address the issue of the uptick in “loans held for sale “on bank balance sheets from 2004 to 2008.
I am a strong
believer in capitalism and letting the free market implement corrections. Never
too big to fail is a failure at the expense of the next two generations of
taxpayers