The new standards could also be applied to mortgage lenders, forcing them to provide the option of mortgages with simple terms, and requiring mortgage lenders to offer the best available mortgages. It might even mean that mortgage lenders have to (gasp!) make sure that borrowers can actually afford the home loans that they are getting.

In addition to protecting the run-of-the-mill consumer, Obama also wants to protect investors. His regulatory reform would require that hedge funds engage in greater disclosure and would institute the regulation of derivatives and credit default swaps.

Regulatory reform: What is needed? Or does it go too far?

While some are applauding the consumer protection measures, others are concerned that they go too far. What happens when the government sticks its fingers too much into the regulatory pie? As expected, reactions to the proposed consumer protections pretty much fall along the following lines:

1. Consumer advocates call them a good balance.
2. The banking industry insists they go too far and will ruin business.

I’m inclined to call them a good balance. Consumer protection is badly needed right now. While over-regulation is a stifling influence, prudent regulation can be something that eventually helps everyone. No, the economy won’t boom like it did during the era of de-regulation. But what did a massively growing (and artificially stimulated) economy get us anyway? A massive recession to balance the growth, that’s what.

What do you think of the new consumer protection agency proposed by President Obama?

Image source: Wikimedia Commons

Post from: EveryJoe

Regulatory Reform: Consumer Protection

But, as Money magazine points out, dumping all of your stock may not be the best option:

So even though your gut may be telling you otherwise, you don’t want to abandon stocks. Nor do you want to embark on what may seem like a plausible strategy of getting out now with the idea of jumping back in at a more opportune time in the future.

It’s time to rethink your stock investments, and diversify to bonds and even perhaps gold. But it’s not time to get out of stocks altogether. In fact, if you have the risk tolerance for it, a few well-thought-out stocks may be a good addition, since they are at such bargain prices right now.

Post from: EveryJoe

Investors: Get Ready for a Bumpy Ride

“My biggest concern is that there are a lot of Americans who are making their mortgage payments, they are current, and the benefit won’t go to them,” Representative Spencer Bachus, the top Republican on the House Financial Services Committee, told reporters after the meeting with Paulson today.

Evidently, the main concern is for those who got in over their heads, and for investors and those in the mortgage industry who accepted the risk. The question of rewarding those who did not make sound financial decisions comes up, while those who maybe didn’t make the best decision, but didn’t over-reach, get nothing.

Additionally, the main flaw in the mortgage fix plan is that it is temporary. The extended rates would help for now, but if the borrowers don’t change their ways, in five years (or whatever it ends up being) when the teaser rate does finally end, the borrowers (and the rest of the economy) will be in the same place again.

Post from: EveryJoe

New Mortgage Fix Doesn’t Benefit Those Making Their Payments