MBS- FNMA 4.5 price: 102-18 closed.

10-yr Treasury Yield: 3.20% closed.

I can hardly allow to go unmentioned this article about a report by a University of Arizona law professor who suggests that it is ultimately a cultural product of perhaps “shame” that prevents home owners from just walking away from their underwater mortgages.  And in spite of the shame, he suggests it may probably be the best option for many homeowners.  Perhaps it is a compliment to our general sense of fairplay, and to our values, that he suggests we would uphold our agreements and make all attempts possible to maintain our contractual obligations. 

But… and it is a big BUT… it seems also worth recognizing how we are now becoming so full of disdain for the banking industry that reasonable people are considering the suggestions of this law professor more and more.  Lending institutions have reaped what they have sown in so many unimaginable ways that I wonder how many Americans, if polled, would see the banking industry as possibly the biggest pariah in the nation. 

Arguably, they are the cause of the meltdown we are experiencing.  Arguably, they have squirreled away the funds handed over to them by taxpayers intended to help pull us out of the meltdown they created.  And according to the TARP overseer, they are pretty unrepentant about their continuingly sluggish response to the consumers whose money they manage and service. 

So, we have a change in the paradigm happening in our nation, one where we have developed some pretty harsh views of the banking industry’s exploits.  And just as we view the behaviors of spoiled children as falling far short of admiration, perhaps we view the banks collectively the same way. 

If it’s true that banks have had a far greater demonstration of support than they’ve earned, and if they do not find it within their own ranks to share the “haircut” that the American consumer has taken, then it’s my prediction that banks will soon find themselves somewhat brutally dismantled by a populist groundswell advocating consumer protections and industry regulations like perhaps has not been seen since the last time the American public wrestled its financiers into submission many decades ago.     

It may be what is required.  And today, perhaps some long-awaited muscle  has been added to the wrestling team.  Boy, we need it!