Monday, February 27, 2012

Bank of America Tired of the Government Price Fixing Scheme?

Bank of America is taking a interesting turn. They are seeking to stop selling loans to Fannie Mae and Freddie Mac. What are the implications of this? Will interest rates rise? Will other companies follow suit? If other companies follow suit, the underwriting standards will change. One thing is for sure, price fixing schemes have consequences, and allowing the banks assume the risks in the mortgage market is an ideal situation.

Bloomberg experts debate if Bank of America will use other GSAs instead of Fannie and Freddie.. Here is a novel thought: Why not just allow the Banks to accept the consequences of the risks of underwriting the loans? Why should tax payers deal with the consequences of the Price Fixing scheme that the Government forces via fiat to the Banks? Why should the U.S. Citizens underwrite and secure the poor choices of the individuals in Washington DC, Bank of America, and the individuals who defaulted on their loans? Is this really "fair"?

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