One year to the day after the colossal failure of Lehman Brothers sent markets into a tailspin and raised questions about the adequacy of U.S. financial regulations, President Obama said Monday that the need for intense government involvement in the financial sector was "waning," but he still laid a blueprint for wide-reaching regulatory reforms. "We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis," Obama said in a speech on Wall Street.
As rampant unemployment sours the mortgage industry, the FDIC is encouraging its partner banks to do more to help borrowers troubled by job losses or underemployment. The agency is calling on banks to drop mortgage rates for half a year or more for those borrowers whose livelihoods have been ravaged by the economic recession, calling the practice "simply good business, since foreclosure rarely benefits lenders and would cost the FDIC more money."
A new wave of defaults and foreclosures threatens the U.S. housing market as interest-only loans are poised to reset, increasing monthly payments for borrowers by as much as 75 percent as they need to start amortizing the principal.
Congressional watchdogs last week decried Fannie Mae's and Freddie Mac's "mixed record in meeting their housing objectives," saying in a report that the government-sponsored mortgage giants would face major problems with investors if they were spun into private entities. The Government Accountability Office says the GSEs' capital and risk management deficiencies have compromised their safety and soundness, and claims the firms' loan-mod programs will make it difficult for them to depart from conservatorship.
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