The Wall Street Journal and other financial news media are reporting that the U.S. home ownership rate has slipped to it’s lowest in 15 years, and experts predict it will slip even further. Why? Mortgage lending is tighter than a violin string, with no signs of loosening, not even for an election. This echoed what every single Realtor I know says: we have record low, like HISTORICALLY low mortgage-interest rates and falling home prices that have made homes more affordable than at any time in the past decade. But whose lending money? Not the big banks, that’s for sure. Could this have anything to do with the fact that five institutions in this nation control 50% of all the deposits? Talk about an oligopoly. Warren Stephens (a Little Rock, Arkansas wealth manager) argues that we need to dismantle the big banks, and I believe he is correct. A recent re-financing experience put me through the big bank wringer. Mr. Stephens solution, in case you cannot read the actual article, calls for a five-step program I whole heartedly endorse:
-Gradually reduce the bank deposit cap to 5% from 10%.
-Demand the breakup of banks that already exceed the 5% cap.
- Force banks to choose between commercial banking and investment.
- Retain the $250,000 limit on deposit insurance indefinitely. God help us if we ever had to invoke this protection.
- No more bailouts. You screw up, you pay the price like the rest of us.