No. of Recommendations: 5
if I understand correctly, most long-term US mortgages can even be renegotiated to a lower rate if rates fall (and can be held onto for dear life if rates rise.) How this would even be possible for banks to offer is beyond me, but maybe someone familiar with US banking can explain.
Oh you naïve Canadian person!
US bankers have perfected the art of privatizing profits and socializing losses. As soon as they write a (conforming) mortgage they turn around and sell it to Fannie Mae and Freddie Mac. Backed by the full faith and credit of the US government. Do you not remember the fiasco in 2008-09 when they had to be bailed out by me and my compatriots?
For the ones that banks do keep on their books, what happens when rates rise and they have to mark them to market, making a leveraged bank like First Republic bank? Bailout, that's what. JPM Chase demanded and got its pound of flesh from FDIC in that - my compatriots and I are in a five-year risk-sharing agreement with Jamie Dimon. We share risks, he keeps the profits (as old mortgages roll off and First Republic issues new ones at higher rates).
It's good to be acUS banker!
Everyone should read The Bankers' New Clothes by Admati and Hellwig. US banking does not have to be this way. But no one can bell the fat cats.
