I. After the 2008 meltdown, a CA mortgage broker was busted for fraud.
He was one of thousands, but I remember him so well because he looked like steroids were his main source of nutrients, he was wearing a tank top in his office to show off his “guns,” and he made Rocky Balboa seem articulate.
That personality type became the poster child for the mortgage meltdown, and he was the type that Chase CEO Jamie Dimon brought up over and over when he was demanding more regulations.
The irony was that those guys did not do many loans.
In the pre-2008 era, my two toughest competitors, with low-rate models very similar to mine, were a Columbia Law School grad/attorney and a guy with a master’s degree from UC Berkeley.
They closed 10x more loans than Mr. Steroid could ever close – and THEY were the guys Jamie Dimon actually feared because his bank could never begin to compete with them.
So, Jamie got his regulations and effectively pushed Mr. Columbia and Mr. Berkeley out of business, hurting consumers and hugely benefiting commercial banks.
This is the epitome of “regulatory capture.”
II. AI demand is pushing electricity costs through the roof!
Per this Kobeissi Letter post, Americans are very worried about AI data centers pushing up electricity costs. Many communities are refusing to let data centers even open because of their impact on electricity costs.
This is convenient for politicians because it was inflation and green mandates that pushed up costs more than anything else, but AI demand is clearly having an impact too.
It is also ironic because AI will eventually play a large role in bringing down energy costs.
III. Economist Peter St. Onge explains in this short video that regulations increase the cost of everything we buy by 20%.
IV. Cheap energy is everything, the true source of wealth, and the most important competitive battle with China.
Europe is on its knees largely because it drove up the cost of its energy so much with green mandates. The U.S., fortunately, is in much better shape, due to its massive energy reserves.
But China is winning and then some in the nuclear and solar spaces because they do not have America’s regulatory environment.
Whoever wins cheap energy first wins everything.
V. FDR imposed a massive fine on a farmer for planting 11 acres of wheat on his own land (because it threatened to push down wheat prices).
Financial writer Doomberg recently penned this excellent article about FDR’s regulatory power grab – how absurd his regulations were and how the ridiculous overreach by confused (but sometimes well-meaning) regulators all started.
Doomberg also explains why successful pushback on these regulations will free America to produce far more energy.
VI. Why energy will be free (or nearly free).
The advancements in battery, solar, nuclear, hydrogen, and geothermal technology are coming at a record pace, and will now advance that much faster with the help of AI.
In addition, the world (and especially the U.S.) is awash in hydrocarbons (oil and gas) per Doomberg. There is so much natural gas in the U.S. right now, for example, that they often can’t give it away.
This is comical because we were told in the 1970s that we hit “peak oil” and there were no more reserves.
VII. The only thing that can slow down the inevitability of nearly free energy is excessive regulations.
Erik Townsend, for example, has hosted numerous podcasts in which he explains how ridiculous regulations all but crushed America’s very clean nuclear power industry.
This is me hoping regulators remember that wealthier economies are almost always much “cleaner” economies.
VIII. Why bring all this up in a mortgage blog?
A. It is exciting and interesting.
B. I will never get tired of reminding readers of how costly excessive regulations are. With respect to mortgages, everyone is paying either $10,000 more in closing costs or taking a 1/4% higher interest rate because of the regulations Jamie Dimon demanded.
And yes, some regulations are great! I love some of the disclosure requirements, for example, and I well remember the 1970s when trash was everywhere and rivers and lakes were catching fire (I hate it when that happens).
