05-29-2024, 09:09 PM
I've posted this before, so sorry if it sounds like a repeat, but the foreclosure concept is a different animal than it was after the GFC. When the housing market tanked, the banks were "required" to initiate mass foreclosures because of the 10% reserve requirement. They had to claw back as many non-performing assets as possible or risk running afoul of banking regulations. Since that almost tanked the global (ponzi) economy, regulators learned that was probably a bad idea.
To prevent a similar occurrence during COVID, the federal reserve eliminated the reserve requirement. Remember that scene in "It's a Wonderful Life" where George Bailey was explaining to the mob of depositors that the money wasn't back in a safe somewhere? Well it isn't. Most banks will do anything they can to keep existing loans going. Nobody knows why the FED didn't re-initiate the reserve requirement when the emergency was over, but the most likely explanation is that some of the banks would be unable to comply.
To prevent a similar occurrence during COVID, the federal reserve eliminated the reserve requirement. Remember that scene in "It's a Wonderful Life" where George Bailey was explaining to the mob of depositors that the money wasn't back in a safe somewhere? Well it isn't. Most banks will do anything they can to keep existing loans going. Nobody knows why the FED didn't re-initiate the reserve requirement when the emergency was over, but the most likely explanation is that some of the banks would be unable to comply.