I swear this relates to mortgages and real estate. 😊
I also just wanted to work this topic into a blog because it is so interesting.
Russia is propping up its Ukraine war economy with oil revenues – despite the West’s best efforts to shut off the flow of Russian oil.
The West is both stopping Russian tankers and going after countries that buy Russian oil with tariffs and sanctions – and it’s not working at all, per macro analyst Doomberg.
But, here’s the really interesting part.
More Oil Means Lower Prices – Hurting Russia
Doomberg explains that if we really want to hurt Russia and force them into peace negotiations – we should not only let Russian oil flow freely everywhere, but we should even have the U.S. Navy escort and protect every tanker full of Russian oil.
This is because all that extra supply would push down oil prices to the point where Russia could not afford to prosecute its war.
The current policy, ironically, is propping up already low oil prices and helping Russia.
This is an excellent reminder of two things: (1) Supply is everything; and (2) Politicians rarely account for unintended consequences.
Chase’s CEO Hated Mortgage Brokers – But Not for the Reasons He Wanted Us to Believe
In 2008, Chase’s CEO, Jamie Dimon, lobbied viciously for regulations to push mortgage brokers out of the market – under the guise of protecting consumers from the slimy ones. But he really just wanted to eliminate low-overhead and very nimble competition that he could not come close to competing with.
One unintended consequence was much more expensive loans, as regulatory compliance comprises a significant portion of the cost of every loan – and rates would be as much a 1/4% lower without all those regulatory “protections” (much of which are unnecessary thanks to AI, social media reviews, competition, and word of mouth reviews).
In addition, much to Mr. Dimon’s frustration, no doubt, mortgage banks and brokers figured out how to navigate those regulations much better than Mr. Dimon could – so the big commercial banks lost their temporary boost in market share.
The biggest takeaway though is that now that everyone figured out how to navigate the new regulations, the supply of loan officers and lenders is as high as ever, and consumers are the winners because we all have to compete so aggressively for market share.
Every Industry Limits Supply
Every industry tries to limit supply/competition through regulations – and sadly it works all too often.
We see it with licensing, e.g., lawyers (bar exam), Realtors, loan officers, (NMLS, but interestingly, bank loan officers don’t need NMLS licensing), contractors, and hair stylists.
And yes, much of this is to ensure adequate competency to protect consumers, but what most people don’t realize is that licensing is also in place to limit supply.
Regulatory Capture Is the Biggie
But the biggie is still just good old-fashion regulations. Big companies love them because they can afford to comply while nimble upstarts often cannot.
Big oil often loves the environmental regulations they complain about because those regulations keep upstarts at bay. It is similar with pharmaceutical and biotech companies.
And we are all paying outrageously high medical bills and insurance costs because of ridiculous regulations that prevent competition.
What should make the readers of this blog (mostly Realtors and loan officers) the most upset is that our lobbyists are doing such a bad job of restricting the supply of loan officers and Realtors…
We all have to compete like crazy – while also paying for sky-high tuition costs for our kids to go to “accredited colleges,” outrageous health insurance costs, $750 per hour legal fees, egregious prescription drug prices, and sky-high gasoline prices (if we happen to be in CA). It’s not fair. 😊
Two final points:
- As always, please be very leery of politicians pushing for regulations to “protect’ us, as those same politicians are often in the pockets of large corporations or lobbyists.
- And bring on the supply. It’s better for everyone, and it could cost Russia the war.
