Some of the attitudes displayed here are exactly why the so-called reforms are a joke. There is more effort being put into deflecting blame and protecting political constituencies than protecting the taxpayer. As the article pointed out, the reforms would have done nothing to prevent the crisis. D-F and the Volcker rule addressed areas that were not really issues. There are three fundamental problems, and they are still unaddressed. One, is the system that allows originators of mortgages to assign them with no residual liability. If brokers are on the hook somehow for fraudulent loans, they have some skin in the game. Two, the government has no business sponsoring GSE's. Maybe at one time it was a good idea, but now, there is plenty of private capital to do that job. We are paying an enormous cost , hundreds of billions at a minimum, but it is off the front page because there are a lot of forces that want to continue this game. If we have learned anything , it is that the government should no tbe involved. We got shoddy, arguably corrupt, management from the political hacks like Franklin Raines who were installed to run these firms. We got political interference with their regulation and management. Three, there was a massive failure of regulation, stemming from both too much and too little government intrusion into the credit process. Too much, as in CRA and conditioning mergers, etc on payoffs to ACORN and other democrat-affiliated parasites. Too much , as in congress and reguglators forcing lenders to expand loans to borrowers with bad credit. Too little, in the Fed and bank regulators allowing a range of toxic products and practices, from no doc to very high loan to value rations to flawed securitizations. We didn't learn the lesson of the S&L crisis, which was fundamentally an issue of moral hazard. Sadly, we learned nothing or, worse, the wrong lesson, from the latest crisis. That almost insures another one, and judging from how the last one dwarfed the S&L crisis, it should be a doozy.
You're certainly entitled to your view, AAA, however unsubstantiated and unsupported it might be by actual evidence. To be sure, there are some things that you say that I agree with.
I wonder if the D-F bill even address the rating agencies. The rating agencies didn't have any skin in the game. The Fed required a rating and yet it's only an opinion and no one could sue them (maybe that has changed, but at the time the rating agencies were bullet proof against a lawsuit)
First of all AAA is now correct in what he says. But, don't you all really see what happened. LTCM and Victor Neiderhoffer were the models. Sell premium and suck out huge dollars til you blow up. Mortgages were just like selling options for premium --- especially in non recourse states. These mortgages are still being put back on the banks today. It was all done because Wall Street no longer had to answer to the partners and retired partners. Those partners no longer had the financial incentive to make sure the companies acted responsibly and rationally with their investments. Make as much money as you could and take out massive bonuses. If you blew up Goldman or Bear... so be it. Then say no one saw this coming. Follow the money.
This issue has been studied ad nauseum. Do an internet search. The facts and the data show that programs to help less affluent buyers access mortgage money made only a negligible contribution to the crisis. The origins of the crisis and its progression are very well understood by now. The interview with the "professor" is rather ridiculous in that it contains one misleading statement after another. Remarks that are mainly correct as far as they go but misleading nevertheless. It is, however, a nice example of Barron's shoddy journalism standards. I quit reading Barron's a long time ago. They have become nothing but a Wall Street Shill. From title of this guys chair at Columbia I would guess it is funded by the Financial Industry.
yeah, I concur. It's a paper for mooks. Remember Amazon dot bomb cover? What a waste of time reading that crap. Biased bs. I didn't bother wasting my time reading the "fantastic" interview b/c it's just an ax grinder.
Wallison and Calomoris were co-directors of American Enterprise Institute's Financial Deregulation Project. That worked out really well. They are just trying hard to scrub their tracks in enabling the 2nd Great Depression. That way they can keep giving BJ's to the banking industry for pay.
LOL! and speaking of Barron's, do you guys remember that giant headline to the effect of what a great buy GM is!? Just as GM was circling the drain of course. It did boost the stock for a few weeks, long enough for their buddies to dump it I suppose...
That's an interesting and relevant fact I would say. It's funny how these corporate interests always just happen to find "experts" that will say up is down if it is favorable to their bottom line.
Still reading Barron's? While watching 80s Wall Street Week on VCR? Those monologues were the Real Holy Grail.