On Friday, the New York Times reported that banks are continuing to practice risky behavior as the economy “improves.” While the mainstream media has been quick to discuss the improving economy, not much conversation has been situated around whom exactly the economy is improving for and how millions of Americans still struggle financially. Just one example, for instance, is that 11 million renters currently pay more than 50 percent of their incomes on housing.
But Wall Street is making more investments, known as structured financial products, and escaping new financial regulations, such as the Dodd-Frank bill that did not change the structure of how loans are bundled — which, when done riskily, causes crisis.
Tad Phillips, a commercial real estate analyst at Moody’s rating agency, told the Times: “The players in the business are generally the same as they were before. … Because it’s the old players, they know how to push the boundaries.”
The Times reported that banks have issued $26 billion in new collateralized loan obligations, or loans pooled and given to poorly rated companies, in just 2013 alone — more than what they issued in all of 2007. The Times stated, “Demand for the loan pools has been so brisk that banks have been able to loosen underwriting standards on the underlying loans and bonds. This provoked the Federal Reserve to release guidance last month warning that “prudent underwriting practices have deteriorated.”