Saturday, December 01, 2007

Banks Pay the Price for Risky Mortgage Bets

Opinion holds banks culpable for the current lending predicament of the United States. A common theme found throughout business where the main objective is profit without regard for what fees are reasonable, complicated stipulations, variable rate changes in addition to added cost to the costumer are the root causes. To articulate my view but in layman terms: banks charging excessive fees in addition to increasing rates to garner unreasonable profits is damaging the economy nationwide. The situation we have are two economically static industries (those producing a product where consumers have modest choices therefore lacking significant ability to control pricing through supply and demand i.e. gasoline and housing) simultaneously are seeking excessive profits removing fluidity of money and overall consumer buying power. The solution is for Business leaders to reel in their pricing models. This is the most practical action.

"Major banks are suffering enormous losses on investments tied to home mortgages. For years, Wall Street made handsome returns betting on mortgage-backed securities. But those securities are opaque and contain risks that investors were either unwilling or unable to recognize."

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