Livinglies's Weblog

see https://www.law360.com/banking/articles/1379222/ex-occ-head-defends-true-lender-rule-as-dems-eye-repeal?nl_pk=174037a3-be4b-4c3d-91af-6410a938b802&utm_source=newsletter&utm_medium=email&utm_campaign=banking

This is a lot like 2008. But then the banks threatened to pull the plug on all trading platforms for bonds and other securities. They managed to convince a large number of decision-makers in the nation’s capital and in State capitals around the country that if securitization “infrastructures” were compromised, the entire financial system would collapse thus bringing the entire economy to a halt and the end of civilization as we knew it.

It was a lie then and it is still a lie. But everyone in legislation, regulation and adjudication bought it hook, line and sinker.

The truth was that the investment banks and found a brand new toy and didn’t want to lose it. They were making more money than was ever conceived possible. Starting in 1983 zero, the shadow banking market is now estimated to be trading “contracts” (securities) with a “nominal” value of more than $1.4 Quadrillion dollars which is around 20 times all the money in the world.

Small wonder that central banks are virtually powerless to control monetary policy or effects. Not even the U.S. Federal reserve controls even 1% of that amount.

So after 25 years of plain pulp fiction about the use of the word “lender” Illinois is the first state to try to address that term and bring it back from the twilight zone. It seems that Illinois thinks that a lender is someone who has paid money in exchange for a promise to pay it back. And even more strange, Illinois thinks that such a true lender must comply with lending statutes.

The investment banks are of course outraged. If states are going to require that the lenders are the people who paid the money and who must comply with lending statutes, then what will happen to securitization? The answer is simple. It can continue but only with disclosure to investors what is really happening and that would mean they would need to stop referring to homeowners as borrowers.

So the latest lie is that the banks will stop lending bringing the financial sector to a halt, crashing the economy and destroying society — or will it? Illinois wants to know what is going on in its state. Investment banks don’t want to reveal that. It is all very proprietary trade secret information mainly in the same sense that organized crime has proprietary trade secrets.

So they’re spinning up the idea that this is bad for “borrowers” who are actually investors in a scheme in which they get nothing and that lenders will simply stop lending in an environment where the truth must be told. Let’s see what happens.

see https://www.troutman.com/insights/new-illinois-predatory-loan-prevention-act-leaves-lenders-and-borrowers-with-uncertain-future.

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