Is Deregulation to Blame?

The new Washington consensus says "yes." The facts on the ground say something different.


You might not be able to tell by looking at it on the page, but deregulation has become a four-letter word in Washington. In October's vice presidential debate, Sen. Joe Biden (D-Del.) practically spat it out: "If you need any more proof positive of how bad the economic theories have been, this excessive deregulation, the failure to oversee what was going on, letting Wall Street run wild, I don't think you needed any more evidence than what you see now." Speaker of the House Nancy Pelosi (D-Calif.) echoed the sentiment in her floor speech before the first vote on the bailout bill: "It's really an anything-goes mentality. No regulation, no supervision, no discipline."

In reality, regulation as a whole has thrived under President George W. Bush. Between 2001 and fiscal year 2009, the federal regulatory budget increased 65 percent in real terms, to about $17.2 billion. (For more see "Bush's Regulatory Kiss-Off," page 24.)

But what about Wall Street in particular? What specific acts of deregulation are being blamed for the financial crisis, and what role if any did they play? Let's look at the accusations one by one:

1) The partial repeal of the Glass-Steagall Act in 1999 allowed commercial banks to get involved in risky investments, such as mortgage-backed securities.

The Glass-Steagall Act of 1933 prohibited investment banks from acting as commercial banks, and vice versa. Signed by Bill Clinton (who continues to defend the legislation), the Gramm-Leach-Bliley Act of 1999 repealed those aspects of the law. Many on the left blame at least part of our current woes on that move. With the repeal, Barack Obama said in a March economic address, "we have deregulated the financial services sector, and we face another crisis."

In fact, multiple exemptions to Glass-Steagall had been granted for years before Gramm-Leach-Bliley was signed into law. Most European financial markets, not normally known as more "deregulated" than the U.S., never separated commercial and investment banks in the first place. And there is no correspondence between institutions that benefited from the repeal and those that recently collapsed. Institutions that didn't take advantage of the Glass-Steagall repeal, such as Lehman Brothers and Bear Stearns, were the ones that failed most spectacularly, in part because they lacked the stability provided by commercial banking deposits.

If anything, Gramm-Leach-Bliley may have softened the blow. The George Mason economist Tyler Cowen argues that Gramm-Leach-Bliley made way for more diversity in the financial sector, and "so far in the crisis times the diversification has done considerably more good than harm." Under the Glass-Steagall rules, Bank of America and J.P. Morgan Chase would not have been able to acquire Merrill Lynch and Bear Stearns. Nor would Goldman Sachs and Citibank have their current unified form, which may have helped them survive.

There is a significant body of academic work supporting this idea. The Rutgers economist Eugene Nelson White, for example, has found that national banks with security affiliates—the sort of institutions Glass-Steagall was designed to prevent—were much less likely to fail than banks without affiliates.

2) The Commodity Futures Modernization Act of 2000 guaranteed that high-risk tools such as credit default swaps remained unregulated, opting instead to encourage a "self-regulation" that neverhappened.

In late September, Securities and Exchange Commission (SEC) Chairman Christopher Cox estimated the worldwide market in credit default swaps—pieces of paper insuring against the default of various financial instruments, especially mortgage securities—at $58 trillion, compared with $600 billion in the first half of 2001. This is a notional value; only a small fraction of that amount has actually changed hands in the market. But the astounding growth of these instruments contributed to the over-leveraging of nearly all financial institutions.

In the late 1990s, the fight over these and other exotic new derivatives pitted a committed regulator named Brooksley E. Born, head of the Commodity Futures Trading Commission, against the powerhouse triumvirate of Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert E. Rubin, and Securities and Exchange Commission Chairman Arthur Levitt Jr. Unsurprisingly, Greenspan, Rubin, and Levitt won. The result was the Commodity Futures Modernization Act of 2000, which gave the SEC only limited anti-fraud oversight of swaps and otherwise relied on industry self-regulation. The Washington Post has closely chronicled the clash, concluding that "derivatives did not trigger what has erupted into the biggest economic crisis since the Great Depression. But their proliferation, and the uncertainty about their real values, accelerated the recent collapses of the nation's venerable investment houses and magnified the panic that has since crippled the global financial system." In other words: The absence of a regulation didn't cause the crisis, but it may have exacerbated it.

Part of the problem was a technicality. Instruments such as credit default swaps aren't quite the same thing as futures, and therefore do not fall under the Commodity Commission's purview. But the real issue was that Greenspan, Rubin, and Levitt were concerned that the sight of important figures in the financial world publicly warring over the legality and appropriate uses of the derivatives could itself create dangerous instability. The 2000 law left clearing-house and insurance roles to self-regulation. Without a clearinghouse, the market for credit default swaps was opaque, and no one ever really knew how extensive or how worthless the derivatives were.

In congressional testimony on October 23, Greenspan seems to have admitted error: "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he told the House Committee on Oversight and Government Reform. But Greenspan still wasn't convinced that regulation is the solution: "Whatever regulatory changes are made, they will pale in comparison to the change already evident in today's markets," he said at the same event. "Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime."

3) A 2004 rule change by the SEC permitted big firms to keep too much debt on their balance sheets.

In 2004, the international Committee on Banking Supervision issued Basel II, an accord on banking regulation. In its wake, the SEC revised its regulations to allow five broker-dealer firms with more than $5 billion in capital—Lehman Brothers, Bear Stearns, Merrill Lynch, Goldman Sachs, and Morgan Stanley—to participate in a voluntary program that changed the way their debt was calculated. The existing net-capital rules required firms to keep their debt-to-net capital ratios below 12-1 and to issue warnings if they started to get close to that. Under the new rules, broker dealers increased these ratios significantly. Merrill Lynch, for instance, hit 40-1. This was possible because the rule changed the formula for risk calculations and instituted more subjective, labor-intensive SEC oversight in place of hard and fast guidelines. "They constructed a mechanism that simply didn't work," former SEC official Lee Pickard told The New York Sun on September 18. "The SEC modification in 2004 is the primary reason for all of the losses that have occurred."

The SEC believed that it could more effectively and subtly manage risk under the new regime. Instead, the five firms took advantage of the new scattered oversight to extend themselves further than they could under the previous rules. In short, the commission—not to mention quite a few banks—bit off more than it could chew. As The Wall Street Journal editorialized in October: "As for the SEC, if commissioners took on a massive burden in 2004 without realizing they had signed up to safeguard the world's financial system, then they overreached. But they sure didn't 'deregulate.' "

There is a sense in which the change was a deregulation. It did, after all, loosen a rule. But it did so in the context of what Adam C. Pritchard of the University of Michigan Law School calls a "rather Rube Goldberg apparatus for regulating financial services, with regulatory functions allocated to an alphabet soup of regulatory agencies" full of perverse regulatory incentives—including several new incentives in the rule change itself that encouraged dishonesty and obfuscation in SEC reporting. This is the kind of false, constrained deregulation that gives free markets a bad name.

It may have actually been a new regulation that kicked off the crisis. In 2007, the Financial Accounting Standards Board issued a statement about mark-to-market practices, FAS 157, clarifying the ways that publicly traded companies should value their assets. Under the new rules, assets had to be valued at the price they could fetch if sold today. If the market for a particular type of asset, such as credit default swaps, happened to be illiquid for the moment, the accounting value was now zero, regardless of any inherent worth. This rule change was a follow-on to the Sarbanes-Oxley reforms of 2003, where the idea was to stop companies from inserting optimistic guesses about the worth of their investments into their balance sheets as Enron had done, a practice that was sometimes affectionately described as "mark-to-make believe."

When investments that probably have long-term value are assessed at zero in the short term, balance sheets and capital ratios turn ugly and panicked selling ensues to make them prettier. (For more on this, see "Anatomy of a Breakdown," page 26.) This is what happened with collateralized debt obligations, stuffed with subprime mortgages, which suddenly lacked for buyers. Steve Forbes put it best: "How can you mark to market something when there's no longer any market?"

4) Through all this time, Fannie Mae and Freddie Mac were allowed to run wild.

Unlike the banks and other market institutions that went down in the crisis, the government-sponsored enterprises Fannie and Freddie were always creatures of the federal government. As such, they were regulated less than their fully private counterparts when it came to such crisis-impacting phenomena as derivatives trading and capital requirements. Because of their size and politicized culture, they were able to fend off periodic attempts at reform. And because of the government's implicit (and eventually explicit) guarantees of their multi-trillion-dollar portfolios, they lacked the discipline of worrying about failure.

Letting Freddie and Fannie get away with murder wasn't deregulation. It was bad governance. And letting deregulation take the primary blame for a credit-fueled housing bubble and its aftermath isn't an argument. It's misdirection.

Katherine Mangu-Ward is an associate editor at reason.

NEXT: 'He's Not Hung Up on the Need to Be Dignified'

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  1. Nothing about Barney Frank stopping Freddie/Fannie oversight because they were ‘helping’ to create affordable housing?

  2. Wait… the financial industry was deregulated recently? That’s news to me.

  3. Nothing about Barney Frank stopping Freddie/Fannie oversight because they were ‘helping’ to create affordable housing?

    That’s what she’s referring to when she mentions the politicized culture that enabled them to evade attempts at reform.

  4. Don’t confuse the issue with facts!! How dare you!! This article does nothing but try to confuse the issues with things as trite as things that actually happened. How do you expect politicians to continue with the power grabs if you point out things that contradict their buzzwords??

  5. No mention of Greenspan’s extended 1% rate?

    The Koch-conspiracy theorists are gonna eat you alive!

  6. Katherine, are you seriously suggesting that deregulation is not to blame?

    Have you ever read Naomi Klein? I think she could help enlighten you, especially with regards to the current financial crisis.

    With regards to the report I wrote about reason, my prof really like it and even suggested that I email it to the rest of the class.

  7. We could always try not rewarding stupidity.

    But that’s oldfashioned.

  8. Of course deregulation didn’t cause the financial crisis. That would mean that there is some flaw in the perfect libertarian faith in free markets. If there’s a flaw in the faith, where does that leave us? If anyone brings up deregulation, plug your ears and start screaming until they stop. Arrrrrrrrrrrrrrrrrrrrrrrrrrgh!

  9. Lefiti, are you being sarcastic? I can’t tell.

    It was the faith in the free markets without accounting for the unbridled greed that causes the ills of our nation.

    Sometimes I just wish we had a government that could take care of everything.

  10. kleinfan92

    Can you believe that some infidel scum actually think that a combination of government and private enterprise–a so-called mixed economy–works best?

  11. kleinfan92: 7/10. A little too obvious, but a good troll nontheless.

  12. in point 2 you say:
    ” In other words: The absence of a regulation didn’t cause the crisis, but it may have exacerbated it. ”

    Which is exactly why we have the regulation – to prevent (or at least mitigate) the exacerbations. A person can have two drinks and feel fine, 6 and feel really fine but maybe a little quesy – but he fills a beer bong with a bottle of tequilla, like someone did in my dorm my freshman year, guess what, he’s going die. Likewise, our financial system would have had a mild hangover if someone would have stepped in and popped the bubble 5 years ago, would have been vomitting in the toilet for a bit, if would have been popped 3 years ago, but instead we’re in the ICU.

    I also am dismayed when people are down on mark to market. Think about the pawn shop scene in Trading Places:

    “This is a Rouchefoucauld. The thinnest water-resistant watch in the world. Singularly unique, sculptured in design, hand-crafted in Switzerland, and water resistant to three atmospheres. This is *the* sports watch of the ’80s. Six thousand, nine hundred and fifty five dollars retail! …Look, it tells time simultaneously in Monte Carlo, Beverly Hills, London, Paris, Rome, and Gstaad.”

    “In Philadelphia, it’s worth 50 bucks.”

    It would seem the true free market position (drink?) would be to side with the pawn shop owner; there’s no doubt those many of those that favor suspending mark to market personally identify with Winthrop.

  13. My brother was a senior exec in a mortgage company that recently went under. He used to tell me about regulators attending industry conferences and browbeating mortgage banks into making loans “accessible”, essentially forcing them into making risky loans. Regulators (focused on expanding home ownership) are complicit in misshaping the mortgage business.

  14. It’s worth noting that Freddie and Fannie were pressured to act like other cowboys in the industry to be more “market-oriented” and “business-like”. A pure free market will never ensure the kind of transparency necessary for a properly functioning financial sector.

  15. “If anything, Gramm-Leach-Bliley may have softened the blow.”

    Sorry, Katherine, you’re completely wrong here. The whole notion of phrasing this crisis as “regulation” vs. “deregulation” is misleading and, I think, not helpful. An industry can only be truly “deregulated” if it is a primarily private one. The banking industry in the United States has typically been more public than private, and in that sense “deregulation” is little more than government privilege to bankers. Of course, FULL deregulation of the banking industry (free banking) would have avoided this problem entirely.

    Here’s Ron Paul’s analysis on Gramm-Leach-Bliley:

  16. “Nor would Goldman Sachs and Citibank have their current unified form, which may have helped them survive.”

    Am I missing something? When did the two merge? Do you know something the rest of the world does not?

  17. Likewise, our financial system would have had a mild hangover if someone would have stepped in and popped the bubble 5 years ago, would have been vomitting in the toilet for a bit, if would have been popped 3 years ago, but instead we’re in the ICU.

    A certain Texas Rep tried to do this by ending the Fannie/Freddie federal guarantee 5-6 years ago.

  18. “browbeating mortgage banks into making loans “accessible”, essentially forcing them into making risky loan”

    Since when is ‘browbeating’ equal to ‘force’?

    Most troublesome loans were produced by firms that were not regulated at all, and were not at all under CRA.

    Mortgage originators were only on the hook for six months. If a mortgage went bad after six months, the originator wasn’t responsible.

    Why’d they make so many bad loans? To raise their volume and profits. Why’d they make loans so cheap? To raise volume and profits. Absurdly cheap loans that are attractive to poor folks are *also* attractive to non-poor people, especially to non-poor people who are speculating on the real estate market.

  19. “My brother was a senior exec in a mortgage company that recently went under.”

    I bet his company wasn’t even regulated under CRA. Which company was it?

  20. CRA is a red herring. Everyone, stop talking about CRA.

  21. “The structure of the financial system changed fundamentally during the boom, with dramatic growth in the share of assets outside the traditional banking system. The non-bank financial system grew to be very large, particularly in money and funding markets. In early 2007, asset-backed commercial paper conduits, in structured investment vehicles, in auction-rate preferred securities, tender option bonds and variable demand notes had a combined asset size of roughly 2.2 trillion. Assets financed overnight in triparty repo grew to 2.5 trillion. Assets held in hedge funds grew to roughly 1.8 trillion. The combined balance sheets of the then major investment banks was 4 trillion.
    In comparison, the total assets of the top five bank holding companies [was]…6 trillion. [In total], total assets of the entire banking system were about 10 trillion.

    The scale of long-term risky and relatively illiquid assets financed by very short-term liabilities made many of the vehicles and institutions in this parallel financial system vulnerable to a classic type of [bank] run, but without the protections such as deposit insurance that the banking system has in place to reduce such risks.”

    ~Tim Geithner, June 2008. (I don’t have a link, it’s from pg 168 of The Return to Depression Economics by Paul Krugman

    CDO’s, Hedge funds, auction-rate preferred securities, etc… all were created and left unregulated. IN 1998 when Long Term Capital Mangement failed because they had over-leveraged themselves in risky bets and had to be bailed out, we should have realized we were repeating the “trusts” of the early 1900s.

    /Among many, many other flaws in this article.

  22. Sometimes I just wish we had a government that could take care of everything.

    spoken like a true socialist, kleinfan93.

    if thought for yourself a for a minute, and stopped blindly accepting what pelosi and friends would have you believe, you would realize that government involvement and regulation are the entire cause of this mortgage mess. freddie and fannie, two government institutions, distorted the mortgage market by offering subprime mortgages with the government’s implicit backing. meaning that the government removed much of the risk involved in providing subprime mortgages to those who probably couldn’t afford to pay them back. with the risk removed, because the feds were basically guaranteeing the loans, investors flocked to these risky investments with very high returns, further distorting the market and driving the growing bubble. and the rest, well the rest is history. bubbles burst and now we must deal with the mess our politicians have gotten us into. it is sad that you and others see the only way out being increased implementation of government policies that got us where we are today.

  23. Maybe someone could point out to me exactly where the regulators kept the free market from acting in a way that would have allowed us to miss this mess.
    It looks more like a series of examples of regulators who didn’t do enough. Reform is a form of regulation.

    Also just because some people drive like idiots doesn’t men we would all be better off walking.

  24. Does anyone actually read real economics anymore? The predictable business-cycle of generated boom-busts has been documented thoroughly and has been proven factually correct once again.

    People who state that the bust was caused by too few regulations are ignorant of basic economic principles. And thinking that one man or group of men are capable of determining what is economically best for a nation of 300 million is a delusional.

  25. I agree with kleinfan92. Naomi Klein is awesome, and this crisis has proven her central thesis that governments move to deregulate economies in times of crisis.

    K, srsly, regulation is sooo sweet.

  26. the real problem is that manufacturing, mining, and farming has been decimated by cheap imports. the only industry left is construction and that is why we had a real estate bubble – the chinese lent us money to build unsustainable homeownership

    That has now burst and our goal must be to create value again through manufacturing, mining, and farming.

  27. Overall, good article. I think the calls for blaming deregulation are largely misplaced, and this article helps to put some of them to rest. Despite this, however, I am not an anarchist, and therefore think that markets do in fact need some, albeit minimal, regulation. Like other liberties, sometimes it is in the best interest of everyone to have some limits. In the same sense that we accept that markets function better without fraud, I think there is argument to be made that some regulations are proper. Therefore, it is wrong to look at this as a regulation and deregulation argument, which both sides, free market and anti market, seem to be doing. It is a possibility that deregulation, while usually a good thing, was possibly misapplied. It is also a distinct possibility that other regulations also fueled the fire. It is a case by case type of issue, and should be handled as one.

    This scenario is also interesting because, as someone mentioned earlier, banks are more public oriented entities than a normal business. Our entire money system is based off how the banks handle credit, and our system generally benefits from that. However, because these companies actually effect the structure of money, and therefore the economy, we have to be careful how we handle these companies. What that means, I do not know, but I am more willing to accept regulation of these types of institutions compared to other private entities, provided the regulations are appropriate and beneficial.

  28. This is a letter to the editor I submitted to the author and editorial board:

    I’m a writer who has specialized in the investment management industry for more than two decades. And I believe strongly that the true fault for this mess lies in the greed and perfidy of the debt rating agencies. Had they assigned rational and honest values to the mortgage tranches being created — instead of putting lipstick on a pig with “A-AAA” ratings, calling a pig a pig with C and D ratings — there would have been little profit incentive to create massive portfolios of subprime junk. Lenders and brokers would have had greatly reduced incentive to fund subprime loans. Investment banks would have had a much smaller supply of bad paper to package and sell and leverage. Investors, except for the most risk-tolerant, would have shied away from such paper in droves, leading to much healthier portfolios. And strawberry pickers earning $14,000 a year in Bakersfield, California, would not have qualified for $720,000 mortgages, as a recent Michael Lewis article recounts. Foreclosure rates would have been far lower, the housing bubble far less inflated (thus the inevitable deflation far less painful), and the credit markets would have remained far more liquid, averting or at least certainly attenuating the current crisis.

    I understand the incredible profit pressure placed on the agencies, and also realize that the investment banks went “ratings shopping,” ditching one agency for another if the ratings they sought were not granted. Perhaps that is the one logical place where some intelligent regulation — or, at least, a set of transparent and rational standards and guidelines, coupled with clear, stiff penalties for failure to comply, such as the Arthur Andersen death sentence — could have been usefully applied to prevent this mess.

  29. The problem is systemic. Deal makers will do their thing attempting all sorts of wild ways to circumvent prudence unless there is a serious downside to reckless behavior. You can’t expect the risk analysis groups in financial institutions to inject reality/caution if their bosses frown on this.

    Such institutions need checks and balances. They need sheltered rating agencies…or some private sector version akin to the function performed by the Governmental Accounting Office, where staff is rewarded for finding problems not the reverse.

    In short we need a “Consumer Reports” mechanism for entities that peddle products and services to businesses, particularly those entities that can cause fiscal harm. Aren’t there some newsletters that provide this service…?

  30. The US housing market didn’t just crop up in the 1990s. Lenders have been helping people buy homes for years. Historically, lenders looked at a borrower’s risk; some got lower interest rates, some higher, some no loans at all.

    This market functioned pretty well, if we remember that every action, including every loan, has a social cost. So what changed during the bubble? Well, relevant data about the housing market are hiding in plain sight on the Census Bureau website (table 14). They indicate that the percentage of US households owning their own homes rose every single year from 1993-2006, and began a period of dramatic rise between 1995 and 1996. By 1998 it had broken through the peak of the historical range that prevailed at least since 1965 (and probably even farther back, although there are no data easily available).

    What this means is that whatever caused housing to behave strangely probably began around 1995, not 1999 (when Glass-Steagall was repealed). That points clearly to the changes in the Community Reinvestment Act as the primary culprit. The reason, I suspect, is that lenders now had to weigh the predictably uncertain risks of nonrepayment when lending to high risks against the unpredictably uncertain political risks of defying the political classes’ pressure to lend to the favored borrowers du jour. They lent more money to bad risks because they had to, and the securities industry responded in ways to try to make this risk more tenable, although ultimately this was a market experiment that failed, which everyone spots with such ease ex post. (Lender “greed” I don’t take seriously as a villain, unless someone can persuade me that lenders suddenly became “greedier” in the late 1990s than in the previous 5000 years of human civilization.)

  31. while well written to represent a libertarian view of the crisis, each example of regulation/deregulation employs reductio ad absurdum arguments which are easily reversed to reach opposite conclusions – that deregulation caused the crisis instead of regulation

    the important starting point of widely accepted agreement is that the bubble itself consisted of grossly over-leveraged credit, but from there the role of regulation/deregulation tends to be cherry picked from both sides to explain how and why the bubble burst

    what Mangu-Ward does well is to demonstrate, perhaps unintentionally, how different regulations at the margin can have good or bad effects, which is a refreshing escape from the incessant oversimplied refrain that more regulation is always bad and vice versa

    however, it’s tortured logic to characterize “loosened” regulation as “bad governance” that contributed heavily to over-leveraged credit as “regulation” instead of “deregulation”

    any reasonable interpretation of “loosen” at the margin is to deregulate rather than regulate via the removal of some prior constraint on private actors

    Mangu-Ward et al confuse this with a broader interpretation which attempts to include active government intervention of a nature which distorts whatever private incentives would have been unleashed with “true deregulation” – the kind libertarians believe would have avoided the crisis in the first place

    the message is that attempts to deregulate failed and manifested instead as more regulation because not enough was ever deregulated in the first place … the kind of argument that can spiral into questioning the basis for fiat money, fractional reserve banking and all the rest of it

    practically, an essential question is to what extent private resources were competing with public ones rather than depending on them – those who endorse the former will explain that the crisis arose from the private sector which was seeking an expanded supply of leveraged credit to fund higher prices, commissions and fees for exploited mortgages and viewed the government as blocking access to these opportunities rather than actively causing them with funding guarantees

    Greenspan’s critical error wasn’t that self interest per se failed – it was that self interest was not disciplined by competition – the operative element of the invisible hand for which transparency is a necessary condition – which he willingly and systematically destroyed in the shadow financial sector with deregulation or the prevention of new regulations

    however it’s interpreted – whether “regulation” or “deregulation” destroyed transparency, it was destroyed and contributed heavily if not primarily in pushing a controllable bubble into one that caused a crisis

  32. Acquisitions were not the problem at the failed banks but they may have been the reason subprimes were allowed to be used as the resource for beefed up balance sheets in the same form as the flaws of Enron and Worldcom.

    Glass Steagall was about much more than bank consolidations, and it appears that this is where the banks failed even before the consolidations exacerbated the problem by compounding it and making it more widespread and more comprehensive.

  33. Sadly, this article is full of false claims that can easily be fact-checked. Just as an example, her claim that Fannie and Freddie were subject to less regulation that private lenders is straight-out false. They were subject to much tougher regulation, which is the reason why they had such a low percentage of actual subprime mortgages compared to private lenders. Of loans made in 2007, for example, only around 15% have been seriously delinquent. The rate for Wall Street is 42%. Fannie and Freddie also held only about a quarter of all mortgages at the time of the crash.

    The author can make up her own narrative all she wants, but unfortunately for her, there are actual numbers that prove her wrong.

  34. A reverse mortgage is a mortgage for seniors that permits them to access some of the equity in their home to receive either a lump sum payment or periodic payments. Marketing for these mortgages is increasingly common on television, and a reverse mortgage can help financially strapped seniors. These mortgages also, however, have some significant pitfalls.

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