The Trump administration wants banks to stop lending money to immigrants without work authorization. Not because of any specific default data. Not because of systemic risk. Because someone needed a press release on Monday.
Federal bank regulators issued guidance asking lenders to scrutinize mortgages and auto loans to people who can't legally work in the United States. The guidance does not cite elevated default rates among this group. It does not reference a single bank failure tied to these loans. It just asks banks to be more careful with a category of borrowers the administration finds inconvenient.
This is regulatory policy as performance art. Banks already underwrite loans based on income verification and credit history. They already deny applications from people who cannot demonstrate repayment capacity. Adding a layer of immigration status scrutiny does not make the loans safer. It makes them more politically satisfying to issue.
The retail trader reading this thinks it matters. He thinks maybe bank stocks go up because they avoid bad loans now. He does not understand that banks were already avoiding bad loans. He also does not understand that his portfolio is down 40% because he bought calls on a company that sells nothing.
The technical analyst looks at this headline and sees what it is. Noise. The S&P does not care about mortgage guidance. The ten-year Treasury does not care about auto loan policy. Your stop-loss does not care that you read the news today.
Banks will continue lending to anyone who can pay them back with interest. Regulators will continue issuing guidance that accomplishes nothing but generates headlines. And you will continue losing money while reading both.
Photo by Metin Ozer on Unsplash
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