The 2008 financial crisis was caused, in part, by mortgage lenders taking on too much risk. Now, the pendulum has swung so far in the opposite direction that the private sector has all but ceased taking on mortgage risk any more.

Why it matters: Private-sector risk aversion has prevented millions of Americans from buying houses. It is also driving banks out of the mortgage game. That might be OK, if the nonbanks weren't disappearing too, and unlikely to return any time soon.

Flashback: Banks paid more than $100 billion in mortgage-related fines after the financial crisis — a stark reminder that such activity can prove extraordinarily costly.

• That, alongside more stringent government rules about how much capital banks need to allocate to such activity, has resulted in what one banker described to Axios as a "derisking" in mortgage lending — a/k/a an ongoing exit.

How it works: Most mortgage lenders make money in two ways.

• After they originate the loan, they hold it on their books for a relatively short amount of time before selling it to the government — either directly (the Federal Housing Administration and the Department of Veterans Affairs both buy mortgages) or to agencies like Fannie Mae and Freddie Mac.
• After selling the loan, the originator generally continues to service it — to collect mortgage payments and send them on to the loan's new owner. Servicing fees are low, generally about a quarter of a percent, and servicers need to make the payments even if the homeowner is in arrears.

Between the lines: Bank capital and liquidity rules implemented after the 2008 financial crisis make both activities unattractive to banks trying to maximize their return on capital — especially once compliance costs are added in.

• "The Basel rules on capital are so punitive the banks really can’t afford to be in the servicing business," Urban Institute fellow Ted Tozer tells Axios.
• Add in an unknown chance of fines and/or shaming from regulators and politicians, and banks have broadly concluded this isn't a business they want to be in.

Where it stands: Nonbanks now originate 71% of agency-backed loans and 86% of government-backed loans, per Inside Mortgage Finance.

• While those figures are the result of a long-term trend going back more than a decade, they're probably growing faster than ever at the moment. "Over the last month, I think it’s begun to accelerate," BTIG analyst Eric Hagen tells Axios, as deposits have fled banks.
• Banks still eclipse nonbanks in the relatively small market for jumbo loans that aren't backed by the government, since such products help to build relationships with high-value customers, and can be held as long-term assets on the bank's balance sheet.

The big picture: The mortgage market is now dominated by nonbanks that operate with relatively thin cushions of capital and need substantial economies of scale.

• Between March 2021 and January 2023, total mortgage originations fell by 83%, per Black Knight. Refinancings — which were more than 70% of the total at the beginning of the period — dropped by a stunning 95%, as spiking interest rates killed demand.
• Refinancings are the relatively cheap and easy way for nonbanks to make money in the mortgage business. Without them, more of those lenders are likely to close.
• Given that most outstanding mortgages are at 3% or lower, refinancings aren't going to pick up any time soon. The result is that few if any new nonbank lenders are likely to enter the market, even as the number of existing lenders continues to dwindle.

The bottom line: So long as the government continues to backstop mortgages, they won't go away. But homebuyers shopping for loans aren't going to find themselves with a lot of choice.

Because loan servicers have to make mortgage payments even when homeowners don't, they have a strong incentive to avoid that situation.

Why it matters: The result is that while government agencies like Fannie Mae and Freddie Mac are willing to buy riskier mortgages, lenders aren't willing to originate them, and would-be homebuyers with less-than-stellar credit find it extremely difficult to buy a house.

What they're saying: "It is becoming increasingly difficult for banks to stay in the mortgage business, which ultimately hurts everyday Americans," wrote JPMorgan CEO Jamie Dimon in this year's shareholder letter.

By the numbers: The Urban Institute estimates that if mortgage credit reverted to normal levels — below the excesses of the mid-2000s but much looser than today — an extra 1 million loans could be written per year.

The bottom line: The problem is not so much that lenders aren't willing to take on credit risk. As the higher default rates on government-backed loans demonstrate, lenders will do that — if they're paid more for servicing such loans. (FHA and VA loans typically pay about 0.45% to servicers, compared with the 0.25% paid by Fannie and Freddie.)

• The real issue isn't credit but liquidity. Lenders need to be liquid enough to front a large number of mortgage payments pending some kind of resolution like a foreclosure or a workout.
• Many servicers, for instance, would have run out of cash very quickly during the early weeks of the pandemic were it not for official government mortgage forbearance programs.

How did Credit Suisse fail? Two ways: Gradually, then suddenly.

Why it matters: Credit Suisse's final years and hours were uniquely Swiss — which means that the way the bank was resolved is unlikely to provide much of a guide for investors looking at too-big-to-fail banks elsewhere.

The big picture: The failure of Credit Suisse was hardly unanticipated. Everybody saw it coming — shareholders, regulators, and especially rival and Paradeplatz neighbor UBS.

• FINMA, the Swiss bank regulator, had paperwork ready and drawn up for all three potential outcomes — nationalization, bankruptcy, and takeover by UBS.
• None of the options, however, could command any kind of support from key stakeholders, including Credit Suisse shareholders and bondholders, the Swiss public, the Swiss government, and the rest of the international financial system.

Between the lines: Bankruptcy would threaten a Lehman moment that could spread across the globe and destroy Switzerland's reputation as a solid financial center.

• Nationalization would have put the Swiss government on the hook for potentially unlimited liabilities, with no clear exit strategy. The seven members of the federal government, from all four political parties, govern under a consensus-based system that means it's almost impossible to make hard decisions — there is effectively no opposition, so all actions have to be palatable to the whole political spectrum.

How it works: When hard decisions do have to be made, there is a mechanism for that — emergency powers. Those were used when Swissair failed after the 9/11 attacks in 2001, for instance, and also when lockdowns were implemented in May 2020.

• In this case, the failure of Silicon Valley Bank caused heavy enough deposit outflows from Credit Suisse that the regulator was comfortable declaring that the bank could not survive the weekend as a standalone private entity.

The bottom line: Only once Credit Suisse was in a clear emergency situation could FINMA's plans be put into action. Until then, the certain knowledge that they would be very unpopular with the public — and therefore with politicians — effectively prevented anything from happening.

If you don't know who Anthony Scaramucci is, please stop reading now. If, on the other hand, you are someone like me who's been following his misadventures for years, then you really have to read the astonishing Bloomberg piece on where he finds himself now.

Why it matters: Long before his ill-fated and short-lived dalliance with Trumpism, the Mooch's main aim in life was to get America's middle classes invested in hedge funds, ideally through SkyBridge, his fund-of-funds.

• Scaramucci's connections could open hedge-fund doors that would otherwise be shut tight to small individual investors, went the sales pitch — and those investors could therefore look forward to the kind of outperformance that was hitherto available only to the rich.

Where it stands: "SkyBridge has all but barred investors from redeeming their money," reports Bloomberg. Some $800 million of the $1.1 billion main fund is held by Morgan Stanley clients; the bank "is trying to get them out of it" but Scaramucci allowed customers to withdraw no more than 7.5% of their funds in the most recent withdrawal period.

• The withdrawal gates haven't stopped total assets under management from plunging — from more than $9 billion in 2015 to less than $2 billion today. That's partly because, amazingly, SkyBridge has somehow contrived to lose 30% since pre-pandemic — a period when the stock market is up more than 27%.

Between the lines: Scaramucci's biggest mistake was getting into crypto. He not only invested clients' funds in the asset class; he also sold a 30% stake in his company to FTX founder Sam Bankman-Fried for $45 million.

• Scaramucci wasn't allowed to just cash the check, however — under the terms of the deal, most of the proceeds had to be reinvested in tokens associated with Bankman-Fried — FTT, Solana, and Serum.
• Needless to say, the value of those tokens has now been almost entirely wiped out, which is going to make it a lot harder for Scaramucci to fulfill his promise of buying back the stake from Bankman-Fried.

The bottom line: "Scaramucci may be in a corner from which even a cockroach couldn’t escape," per Bloomberg. His clients don't seem to be faring much better.