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Incomprehensible regulatory regime covers subprime loans

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Incomprehensible regulatory regime covers subprime loans

Nowrasteh Letter to The Financial Times

Sir, Patti Waldmeir ("How to make the best of a subprime mess", Legal Counsel December 12) rightly observes that economies thrive when everyone knows the rules in advance. But while discussing the subprime mess, she forgets to point out that nobody knows what the rules are or who enforces them.

In the US, the Office of Comptroller of the Currency, the Federal Housing Finance Board, the FDIC, the Community Reinvestment Act, Gramm-Leach-Bliley Act, the Bank Holding Company Act, and an anfractuous compendium of state and local laws and institutions regulate banking and mortgages. No wonder it is such a mess.

Certainly the mortgage industry, banks and millions of consumers would benefit from the repeal of these onerous and confusing regulations. But the position has been made far worse by a regulatory environment that is so vast it is incomprehensible. Ms Waldmeir rightly concludes that sometimes a small change of the rules can be fortuitous, but knowing them to begin with also helps.