Jamie Dimon has a plan to fix the U.S. housing market: lock mortgage lenders and regulators behind closed doors until they figure it out.
“I would convene all the people involved in the business, I would close the door, I’d stay there until we resolved a bunch of these issues so we could have a more healthy mortgage market,” the 55-year-old chief executive officer of JPMorgan Chase & Co. said today.
The patchwork of U.S. and international regulatory policies governing the housing and mortgage markets are hampering recovery here and abroad, Dimon said on a conference call with analysts after the New York-based bank released fourth-quarter earnings. In the U.S., state foreclosure laws conflict with a variety of federal policies on refinancing or modifying loans to troubled borrowers, Dimon said.
Leadership is needed to overhaul the industry, including reviving the market for private-label residential mortgage bonds and reforming regulations governing mortgage repurchases and foreclosures, he said.
“You could fix all this if someone was in charge,” Dimon said, tapping on the table for emphasis. “No one is in charge.”
Dimon didn’t suggest that he should be the one to take the job, nor did he say that he would want it.
U.S. housing policy is set by federal, state and local agencies including the Federal Reserve, Federal Deposit Insurance Corp., Department of Housing and Urban Development, Federal Housing Finance Agency, Federal Housing Administration, Treasury Department, more than 50 state attorneys general and state bank supervisors, as well as local municipalities, which enforce foreclosure laws.
Some borrowers have been unable to get mortgages or refinance existing loans because lenders, along with Fannie Mae and Freddie Mac, which own or guarantee almost 50 percent of the U.S. mortgage market, have tightened underwriting standards to require higher credit scores and bigger downpayments.
After climbing to a peak of $11.2 trillion in 2007, total mortgage debt outstanding on single-family homes fell 7.4 percent to $10.3 trillion as of Sept. 30 as banks curtailed loans to consumers, according to Federal Reserve data.
The nation’s largest lenders, including JPMorgan, Bank of America Corp. and Citigroup Inc. (C), are currently negotiating with state attorneys general to settle claims lenders improperly foreclosed on borrowers without the proper documentation.
Dimon also criticized U.S. and international policies that work against the goal of sparking an economic rebound.
“We’re shooting ourselves in the foot everywhere around the world,” Dimon said. “If you looked at the inconsistencies and the counter cyclical and pro-cyclical things, it’s crazy. It’s not the way to get a recovery going.”
While U.S. lawmakers and Obama administration officials criticize banks for failing to lend to consumers, he said banks are hamstrung by strict underwriting rules. It’s no better in Europe where central bank policy is sometimes at odds with local governments, further delaying recovery there and hampering job growth, according to Dimon.
“No one is really in charge of putting these things together and realizing the negative effects it’s causing,” Dimon said. Conflicting policies will make the recovery “more painful and slower,” he said. “We all want jobs. This is not job creating.”
Dimon praised the European Central Bank’s move to provide three-year loans to the region’s banks and to accept a wider variety of collateral, saying the policy eliminated the risk a bank runs short of funds for at least the next year. European banks aren’t using the program to expand their purchases of sovereign debt or interbank lending because other regulators want banks to hold less of those assets, not more, Dimon said.
“It’s quite clear that regulatory policy, government policy, central bank policy, it’s not coordinated,” Dimon said. “It’s making the situation worse, not better. Basically, there’s no one in charge of the global financial system.”
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