How have financial institutions changed since the financial crisis?

Answer 1

It depends on what end of the financial institution you are talking about.

To be an entrepreneurial, self starter mortgage broker for instance, it used to cost a $10,000 bond (which means bonded by an insurance company where you pay a monthly premium, and have sufficient net worth = $10,000 and be fiscally responsible. all you needed was $200 in some states and dependent on your credit history and financial net worth), an office space to convince people you are a real business, a phone and fax line if necessary. Well, and some balls to broker a loan. And you needed to be registered with the state's financial institution regulation agency. And be in the phone book.

Now, you need all the above plus 16 credits of college courses, becoming licensed by the state (paying a nominal fee to the state)as a loan officer and other minor hoops to jump through

Back in the day, if you were a mortgage broker, loan officer or lender, your Arch nemesis used to be The Truth in Lending Disclosure, with its infamous Regulation Z. No loan officer ever understood it,no borrower ever cared about it. But it was a clunky piece of paper full of legal mumble jumble wound so tight, it would make someone as smart as a brain surgeon's head spin. In layman's terms, all it really said was that the total fees payed by the mortgagor (the borrower) towards the loan could not exceed 5.99% of the loan amount. This excluded the broker fees to the Realtor. Think Reg Z, Think Ralph Nader, now go throw up.

Regulation Z is out the window now and the 5.99% has been lowered-- practically eliminated. Forcing the small shop mortgage broker out of business,leaving die hard American entrepreneurs to dry, to starve and to scram for other trades--non left for profit.

The above changes, made it easier for the Realtor (s) to push the eye opening loan or Mortgage broker out of the picture. It is now easier to be a real estate Agency and a Loan broker in one, than it is being just a loan broker.The Realtor still takes 7% of the sales price and now gets whatever meager fees from brokering the loan. The consumer is now a lamb among wolves.

The cost of money has been lowered to catastrophic lows, think1980's levels where a 30 year mortgage used to be 18% now a staggering 3.00% in some cases.

Back then, at that rate, the mortgage interest deduction would have been an extremely lucrative income tax perk for those capable of qualifying, but the monthly payment on such a loan would have been far more painful for your average Joe, or Joe Plumber. Living in projects was the only option for many Americans. The middle class. The system set in place by the Clintonian administration was so that every American could own a home. IN the 80s the Republicans made it so that only the die hard money making Americans could afford a home and reap the tax benefits of paying for it. Financial Opportunity for prosperity was abundant, the lazy and the not so smart lived in projects and trailer parks.

Bank CEO bonus structures remain untouched and have worsened. Bank projected profits remain untouched, un-monitored, and have worsened, the Realtor contracts with buyers and sellers now protect the agency and build vice grip holds around the home buyer or seller. Democrats and Socialist sympathizers have had their way and there is big government monitoring in the financial lending to the detriment of the consumer and American small business. A gift from the Bush Administration in an attempt to mask the bottom line.

That is just one instance. The financial crisis has created a Gollum, in terms of a fictional fix to the true problem. Home ownership is now a far dream for the average American, financial stability is a thing of the past.

But because the cost of money is down the drain, we think we have a victory. At these rates the national debt is doomed to worsen. (Print money at the lowest possible cost, spread the wealth and do not replenish the well, encourage well fare and social security for those who have not earned it. Take away the american dream for those willing to pursue it. Welcome to socialism people!)

Now, those at the top of the financial institutions will still have their way. The consumer, the one in need of money is paying less in interest, being policed to the extreme, paying more fees out the wazoo and condemned to impoverishment by the hand of the very government sworn to protect them.

On the other hand, Government had to step in, someone had to do something.

with a 580 credit score you used to be able to buy a house with no money down. Many Americans jumped on the band wagon, and many of these bad credit people failed, they failed and created a plethora of toxic loans. The same financially irresponsible folks turned around, refinanced their houses in some cases up to 300% of the property values, cashed out all that money and became more in debt. Then they turned around and blamed the very banks they robbed.

To put it into perspective what I just said means, 90% of American homeowners purchased real estate at say $100,000, and cashed out $200,000 from that very real estate. They then used the $200,000 cash-out to become more in debt. Then they blamed the very banks that gave them $200,000 to better their lives.

Money in the hands of the starving is a dangerous thing. Guess where that $200,000 went? Into the pockets of the few best Monopoly players in the country. The smart became richer by giving the poor plenty of money to spend.

The problem is, because the people at the at the top, the CEO etc (best Monopoly players) have made and set increasing profit goals and margins that have not changed, no matter what, their goals will be met regardless and the new structure set in place is a veil on how they will reach those financial goals.

Truth be told, you can take the poor man out of poverty, but no amount of money can buy poverty out of the poor man.