Forum Post: Some Rules of Moral Hazard, or Truth or Consequences:

My Rules of Moral Hazard, or Truth or Consequences:

1. Banks may not own investment houses. (Reinstatement of the Glass-Steagall Act)

2. Government should ensure credit can move freely through the economy; Government should not bailout creditors.

3. Government should rescue banking systems; Government should not rescue banks or credit unions, nor provide 100%, or even 80% coverage of bad risk (haircut rule).

4. Failure belongs to the bond & shareholders who take risks with their own money; Govt should not put the burden of failure (risky gambles) on taxpayers.

5. Banks and investment houses must disclose to investors all positions they hold with respect to insurance, derivatives, and any new forms of instruments of investment and insurance that may arise, that bet against the investors position.

6. Mortgage lenders will verify income of buyers; if any documents (pay stubs or mortgage papers) are falsified, the mortgage company will pay off the full amount of the mortgage. (Truth in Mortgage Lending Rule)

7. All mortgage papers must be signed and reviewed by a human; "Robo-signing is prohibited.

8. The buyer(s) will receive a copy of all mortgage papers.

9. If the housing sector heats up to the extent that mortgage papers are not reviewed, the mortgage company, credit union, or bank that owns the paper will pay off the full amount of the mortgage in the event of a default by the home owner.

10. No home may be seized, nor homeowner dispossessed of property by local sheriffs or other law enforcement agents without the mortgage papers being presented.

Please feel free to add to these, but keep the language simple. The Grifters/Bankers aren't all that smart.