Wells Fargo: Require Banks to Retain More Loans

From an article on how much credit risk banks should be required to hold of the mortgages they originate. 

Regulators are in the process of deciding what mortgages will be exempt from rules requiring banks to retain 5% of the credit risk on loans they originate.

Wells Fargo has broken with other big banks by urging US regulators to require mortgage lenders to retain more of the loans they originate, rather than selling them to investors, a practice that helped to fuel the housing bubble.

Then later in the article John Gibbons of Wells Fargo (WFC), an executive vice president at the bank, said the following:

"The point we are making, unlike others, is that risk retention is a good idea,"

Bob Davis, an executive vice president with the American Bankers Association has a different take...

...wide-ranging risk retention "simply is not necessary for the plain-vanilla types of lending being done today".

Mr Gibbons of Wells Fargo countered that "'Oh, we've learned our lesson' is what you always hear at this point in the credit cycle."

He added: "If we want to discourage the type of 'hit and run' lending that got us into trouble in the future, we need to change the way the industry operates."

It's only 5% yet many bankers are still pushing back.

Amazing if not surprising.

Adam

Long WFC
---
This site does not provide investing recommendations as that comes down to individual circumstances. Instead, it is for generalized informational, educational, and entertainment purposes. Visitors should always do their own research and consult, as needed, with a financial adviser that's familiar with the individual circumstances before making any investment decisions. Bottom line: The opinions found here should never be considered specific individualized investment advice and never a recommendation to buy or sell anything.