President Obama's State of the Union and a recent regulatory speech as prepared for a securitization group's conference drive home the fact that generally the government's view of whether it wants to encourage the industry to lend more or not remains conflicted.
Certainly it's not an easy call given the political need to continue to focus on measures aimed at ensuring the risky loans of the past that are still haunting the market don't recur.
This is, after all, tied to the ability to make new, less risky ones going forward.
But there also continues to be a call for continued and possibly increased lending to support consumer purchases of things like homes and educations in the midst of ongoing weakness in the economy.
Obama certainly voiced this during the State of the Union.
It also was in the text of Acting Comptroller of the Currency John Walsh's speech as prepared for the American Securitization Forum's meeting. The latter mentions the need for such financing as well as the importance of the practice that gave the ASF its name in providing it.
Certainly the government has been active and has put some money where its mouth is when it comes to lending with actions like HARP, and it may do more in line with some proposals in Obama's speech.
But it also clearly remains of two minds about it given the aforementioned regulatory aims associated with the recent downturn.
This results in a situation where the government keeps encouraging lending on one hand while pulling back from it on the other.
Contributing to this is political infighting that keeps things deadlocked as well as the fact that there generally is not enough to go around lately, the latter being something that is true for mortgage lenders, the government and consumers alike in many cases.
The State of the Union speech and its proposals were largely about changing that and rebuilding the country's wealth.
Maybe such moves actually and eventually could work if they can move forward.
But it is taking an awful long time to get rolling.
So government officials should really start getting the show on the road if it really wants the kind of lending they talk about to come back—and if they really want to shift mortgage risk back to the private sector while still getting mortgages and other consumer loans funded.
As Walsh's speech suggests, securitization could be key in doing this and perhaps the key regulatory item to work out in that context is the contentious definition of the qualified residential mortgage in new risk retention requirements that must be met in order to securitize.
As he puts it, such issues drag on because of “the challenges we face in formulating some of these very complex rules offer good news and bad news.
“The news is good if you believe that the time it is taking to develop consensus among diverse agencies defers regulatory burden; it's bad if you believe that delay in implementation translates to delay in recovery of financial markets.”
