Feds To The Rescue

If you did'nt realize the magnitude of the problem, that predatory lending and the foreclosure meltdown is causing, take note. The Federal Reserve's cash infusion of $38 billion and the cutting of the discount rate has yet to stem the bloodletting in the mortgage industry. The high mortgage delinquency rate continues to spin out of control and continues wreaking havoc and the pundits say, we have yet to see the worst. Clearly the Feds see the handwriting and are in-fact willing to go to the wall.

Seeking to reign this monster in, the Feds have resorted to giving the big boys more room to play. Today the Federal Reserve temporarily relaxed one of its major rules/guidelines for federally insured banks. The rule states that federally insured banks should never be overexposed to mortgage brokerage affiliates.  These Banks could not lend more than 10% of their capital to a subsidiary. This temporary ruling eliminates the 10% cap. 

Already Citgroup and Bank of America have agreed to avail themselves of the opportunity this temporary set aside provides and it is rumored that others may join the bandwagon.

This is a good thing as a short term measure for those mortgage concerns seeking liquidity. Long term and the problem becomes even more convoluted. We are already seeing national and international fallout as a result of the foreclosure meltdown and predatory lending. It isn't just  our economy, but the global economy at stake. There are no sure answers, but rest assured the Feds are hard at work on this one!