Politics and Not Business

Politics and Not Business

Financial reform is political, difficult to comprehend, expensive to implement. Tragically, policy mavens give little consideration to the technology and financial resources required to implement their well-intended but not-in-the-world ideas. New regulations, but no business plan to guide their implementation. Disorder the result.

The Treasury Department and Congress were slow to recognize the complexity of implementing operational requirements implied by the passage of the Emergency Economic Stabilization Act of 2008 and Dodd-Frank.  Lenders, particularly, small-town community lenders feel unduly encumbered.

Involving themselves more deeply into community financing operations, the federal government has a new set of customers–mortgage originators nationwide. I believe these new customers doubt that the government empathizes with the business and management needs that result from policy pronouncements.

The government has become expert in measuring – the economy, unemployment, national demographic changes, etc. But, I fear it has taken little time to measure the effect political action has on its constituencies. Their process of understanding is political and not scientific. Outcomes are negotiated not derived from fact.

As an offset, MORTECH2010 has interviewed a stratified random sample of lenders. The study shows clearly that the political process and regulatory reform has distracted lenders countrywide from making loans, from serving their markets, and from running their businesses more effectively.

Most Pressing Issue      In 2011	% of All Lenders	% of Lenders  Under $100MM
Demanding Regulatory Environment	39.9%	44.7%
Adopting Federal Product Guidelines	28%	23.7%
Source: MORTECH 2010                                                                                                                                 © MORTECH, LLC

MORTECH 2010 shows clearly that lenders are preoccupied with changing Federal regulation. The effect sought by regulators may not be what they have achieved.

No, it would seem that more effective lender operations will be impeded by capital, resources, and time invested in reacting to what lenders interpret as the intentions of regulatory reform. The outcome remains in doubt and gotten with higher operating expenses. The data show just that.

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