“Increased regulations, many of which are from the Dodd-Frank financial-reform measure, are making it harder on banks and consumers, but easier on the financing system that helped create the 2008 credit crisis, says Dick Bove, vice president of equity research at Rochdale Securities.
Because of the regulations, traditional banks are being restrained in providing some services, including check cashing, payday loans, wire transfers, prepaid bank cards and mortgages with “graduated payment schedules,” Bove notes, all services generally associated with lower-income customers.
“So, who is supposed to provide the funds inside the regulated banking system to buy these loans? Clearly, the answer is the shadow banking market,” he writes in a note, according to CNBC. “Unregulated mortgage companies are likely to spring back into business. They will have their loans packaged by unregulated securities firms.”
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