Where’s the Rest of My Reform?

I can appreciate that Bernie Madoff is behind bars and that the Dodd- Frank Reform Bill passed. In fact, I think we can all agree – those were good things! But though some justice has been served, I still don’t have wholehearted trust in the financial system around me.

Here are some of my most recent gripes:

1. Banks still don’t admit that prior underwriting standards were flawed.

From Dime Savings Bank to New York Community Bank, no lender yet has admitted that they let buyers overpay and that speculative models were based on bogus expectations (eg: that it would be easy to evict and replace low-income renters; buildings could function at shockingly low operating costs, and that the Bronx was would quickly gentrify).

2. Banks ignore asset deterioration so they can make back their big bucks.

Even when a building has fallen into foreclosure due to predatory equity, many banks continue to seek as much money as possible for their investments through the foreclosure process. They do this even when building conditions have dilapidated to horrific levels. When the roof is now collapsing and the building has been virtually ignored for the last 5 years – how is it acceptable to say that it’s still worth the initial overvalued price?

3. Lenders don’t want to take responsibility during foreclosure.

This typically means that during foreclosure, conditions get worse until the lender makes back its money and sells the buildings. Thank god for the Milbank lawsuit which encourages lenders to put some money into the buildings and take some responsibility in the interim process.

4. New predatory loans are still in the making!

Take a look at today’s sales, and you’ll soon find that many banks have not changed or stopped their bad lending practices. The same faulty assumptions underlie underwriting today.

We deserve financial reform.

And, as I recall, risky practices and faulty underwriting are the same factors that brought this country to the brink of economic collapse required us to finance a 2 trillion dollar bailout. Don’t we deserve some change? After all, it was our dollars and cents that paid for this system’s survival.

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