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Banks are part of the solution
a Bank of America branch in Chicago, Ill.
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Tess Vigeland: Banks definitely were this year's primary financial bogeyman. Well, them -- and the Eurozone. Banks have taken heat for imposing all kinds of fees and they're still under fire for the whole housing mess.
Commentator Jesse Torres, the CEO of Pan American Bank in Los Angeles, has this defense of his industry.
Jesse Torres: During the early to middle part of the last decade the financial services industry worked feverishly to increase the rate of home ownership in the United States. The effort involved the entire industry - banks, credit unions, mortgage brokers, private investors, non profits, the Federal Reserve. And some would say it was successful. It resulted in an all-time high homeownership rate of nearly 70 percent in 2004.
The effort began with the best intention: Get as many qualified Americans as possible with a place to call their own. However, by the end of 2006 the number of qualified borrowers shrank. The financial industry sought ways to put to use the excess loan capacity that it had developed. The mortgage industry, not just the bankers, had created an animal that could not be satiated.
Today, consumers, credit unions, elected officials, nonprofits, and others are holding the banks solely responsible and wholly accountable for the ill effects brought upon a large portion of Americans. Many of these groups shared the limelight for boosting home ownership to record levels in the United States just a few years earlier.
U.S. banks are not denying their role in the mortgage mess. It would be fantasy to do so. And while there is a perception that banks are not willing to lend particularly during these difficult times, it is important to note that banks make their money by lending. As a result, it is in every bank's best interest to find as many qualified borrowers as possible and make these monies available to as many individuals as possible. We are not opposed to being part of the solution. We are opposed to being the only part of the solution.
Vigeland: Pan American Bank CEO Jesse Torres.
The fractional banking reserve system along with fiat currency and lose loan standards are to blame. The rise in home ownership was because of Governments intervention into the Mortgage business. And the reason why was to increase the money supply in order to increase tax revenue and government spending. Afterall, think of all of the taxes generated on home owner loans and million dollar bonuses. The economy is a sham and only provides the illusion of prosperity brought to you by by consumer debt with money created out of thin air. The economy cannot be sustained without growin the money supply and this means that new consumer loans are needed. Current banking is the problem and not the solution. People need to own their deposites so banks cannot speculate with them, reserves need to be set at 100% so banks cannot create money out of thin air, and banks should only act as intermediataries to those individual deposters who want to laons their own money so money is tied to loans directly.
This policy prescription is a recipe for disaster. 100% reserve requirement means no leverage; no leverage means no growth; no growth means the end of capitalism as an economic system. All that will happen is that "individual deposters" will leverage other people's money but not call themselves "banks," and there will be no deposit insurance when the inevitable panic results.
