Taking the Medicine
The mortgage industry should swallow what will appear to be a bitter pill and go along with re-regulation of the financial services industry. Why? Because it should prevent another disaster of the kind that is now in its third year of devastation to the business.
President Obama's plan can provide a starting point for the discussion. Obviously, not everything the administration proposes needs to be accepted, but the big picture is correct.
Unfortunately, it is hard to control greed, which was at the heart of this particular meltdown. Access to enormous amounts of money seems to engender enormous tendencies to corruption, whether illegally (the Bernie Madoff model) or legally but ethically reprehensible (awarding hundreds of millions of dollars of bonuses after accepting government bailout funds).
But, at least for financial institutions that have accepted federal help, the wicked loop between boards and CEOs that has led to unconscionable pay scales needs to be closed.
The government can try being as little more aggressive in dealing with banks and other FIs: Freddie Mac and Fannie Mae weren't too big to be put into conservatorship, nor Chrysler or GM too big to be put into bankruptcy.
The fact that the downward spiral of the economy seems to be bottoming out now should not make anyone feel that "market forces" can re-right the ship of business without the oppressive help of government. The market needs to be restrained from its own worst impulses, and reputable businesses always seem to be able to function within reasonable (not oppressive) guidelines.
It is worrisome along these lines that the government has decided to slow down its "PPIP" plan to get toxic assets off the balance sheets of financial institutions. These underwater assets are still real-time threats to bring down financial institutions if they have them in big concentrations, and they require capital to be held against them, which cuts money available to be loaned, as we have seen over the past couple of years. They aren't going to vanish by themselves, and while it is a big job to get them through the system, it needs to be tackled as soon as possible.