It's a Wonderful Mortgage

It's that time of the year again: one in which financial services columnists wax poetic and ponder the Bailey Building and Loan and how if it existed today (it doesn't really) regulators would sue George Bailey (and Uncle Billy and 'Old Man' Potter since he sat on the board) for fraud to go after the D&O insurance. Who cares if the good folks of Bedford Falls filled the negative net worth hole with their donations! (Sam Wainwright's line of credit would probably be dismissed by the FDIC as sham. Plastics? Hah! Looks like a mixing of commerce and banking to me.) But let's get down to the profit margin equation and ask this very important and basic question: is borrowing short and lending long any riskier than the system we have today? Why not fund seven year loans (the average life of mortgage paper) with deposits that average two or three years? Someone needs to go and do the math and take a look at the past 10 years and figure out how old fashioned balance sheet lenders would've prevailed. I'm not saying (at all) that I prefer the old system. Keep in mind that in the old system the rate paid on savings deposits was regulated by Uncle Sam and thrifts could not offer money market accounts. What happened to change all this? Our good friends at Merrill Lynch had the banking laws changed. Then we had Garn-St. Germain, FIRRERA, Glass-Steagall (torn down), and the list goes on and on. Message: Once you let an industry, any industry, lobby Congress to change the rules of their game, watch out. Message: if it ain't broke, do not fix it. The Genie is out of the bottle and there is no going back. Hark, the Herald Angels sing…