Lobbying May Be Risk to Financial Industry, IMF Economists Say

[dkf]

http://www.bloomberg.com/apps/news?pid=conewsstory&tkr=AIG:US&sid=a.t_08IHaM4M

Dec. 29 (Bloomberg) -- The financial industry’s lobbying about U.S. mortgage rules may have contributed to the recent financial crisis and may pose a threat to the entire industry’s stability, according to a report published by three International Monetary Fund economists.

The economists found institutions that lobby the most also have more lax lending standards, tend to securitize more of their mortgages and have faster growing loan portfolios. The delinquency rates are also higher in areas in which these companies’ lending grew fastest, the report showed.

“Our analysis suggests that the political influence of the financial industry can be a source of systemic risk,” Deniz Igan, Prachi Mishra, and Thierry Tressel said in the conclusion of their report. “It provides some support to the view that the prevention of future crises might require weakening political influence of the financial industry or closer monitoring of lobbying activities.”

Regulators worldwide are pressing firms to improve risk oversight after the world’s biggest banks and brokerages reported more than $1.7 trillion in writedowns and credit losses since 2007 tied to the global financial crisis. In the U.S., the Obama administration this month extended the $700 billion financial-rescue program until October.

The authors favored a “moral hazard” interpretation of their findings, where financial companies lobby seeking looser lending standards because they expect to be bailed out during a crisis or because they favor short-time gains.

[MannyGoldstein]

1. After Careful Deliberation Obama Will Give The Bankers More Money

To make up for the added risk they took on when they lobbied for laxer rules.

In fact, they'll need to be reimbursed for the money spent on lobbying.

[Phoebe Loosinhouse]

2. This is the sequence of events for the financial industry

throw out underwriting standards in order to write crap loans that will predictably go sour. Earn fees and commissions and year end bonuses. Donate to Congress

Bundle crap loans into securitized tranches in multiple bond offerings that no one can unravel and sell them to pension funds, other countries, widows and orphans. Earn fees and commissions and year end bonuses. Donate to Congress

Buy crap securitized bundled mortgages. Buy credit default swap because you know for a fact how crappy the underlying mortgages are. Make more money when they go under. Earn fees, commissions and year end bonus. Donate to Congress


Even better, don't even buy the bonds, just stand on the sidelines and bet they go bad, which you know they will, and buy credit default swaps. Earn fees, commissions, and year end bonus. Donate to Congress

Oh, oh, jig is up, Ponzi is quavering, everyone run around as chickens come home to roost. Tell America the financial system will go down the tubes unless the citizens replace all the funds you took. Sit for a few hours in front of stern and squeaky Congressional commission. Go out for drinks after. Cash the biggest check in history. Earn fees, commissions, year end bonus. Donate to Congress.

[glitch]

3. Lather rinse repeat until the host dies. Find another host. Lather rinse repeat.

Until there are no more hosts. Lay dormant until a new generation of hosts can grow into something parasitizable.
Lather rinse repeat.