American Banks Tank the American Economy

In an interesting New York Times opinion editorial by Ulysses Smith on October 31, 2010, Mr. Smith pointed out that “persistently high unemployment in the United States is largely the result of foreclosures andAmerican Banks Sinking Economy under water mortgages, by the widely cited mismatches between job requirements and workers skills. He concludes that our financial crisis is ‘self-inflicting’ because “major banks have for years take short cuts with their mortgage securitization documents… as a systematic approach to save money and increase profits.”

Mr. Smith contends that the problems in the mortgage market are deeper than the robo-signing that we have all heard about:

  1. What many lenders cease to be concerned by the quality of lenders they are recruiting.
  2. The rush to speed up the securitization process has trampled traditional American property protections for mortgages.
  3. The market that has been created for “fabricated documents”

Mr. Smith suggests that the mortgage finance industry needs to step up to the table and come clean and come up real alternatives with borrowers. Otherwise, he concludes that “the entire economy will be the victim”.

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