The FDIC believes they’ve solved the financial troubles that caused the economic crisis of the last few years. Their latest guidelines are designed to limit risk and increase responsible lending practices. Let’s discuss what they’ve decided and see if it will really do the job.
The main culprit of the issue was the reselling of mortgages on the secondary market. So the FDIC has introduced the Qualified Residential Mortgage rule. The QRM says banks must retain at least 5% of a loan’s risk when selling it off to an investor.
This change was part of Congress’ original decision to prevent the crisis from happening again. The FDIC finally worked out the nitty gritties. But does this really stack up? Will it prevent banks from hiding the relevant facts, gambling on short term gains, and building up a house of cards again?
I’m on the fence but I’m willing to hear them out. What are your thoughts?