Funny but the quasi governmental banks Fannie May and Freddie Mac were
apparently responsible for a large plurality of said bad loans which
they misrepresented on the resale market. This has been reported by the
Wall Street Journal. Which no matter what you may think about their
editorial page, has a better record of getting their facts straight than
any other American paper. It may be partisan but if it's true...
On 1/17/2010 10:16 PM, Tim Bray wrote:
On Sun, Jan 17, 2010 at 6:48 PM, paul stenquist<pnstenqu...@comcast.net> wrote:
Those in favor of more government would have us believe that under-regulation
caused the meltdown. But it was actually more a matter of government pressure
to make bad loans. That mistake was the result of a well-intentioned effort to
make sure that everyone had a home of their own. Mortgages for all. Credit
ratings be damned. Yes, the banks went along with it, and compounded the error
by packaging the loans and reselling them, but congressional pressure was the
motivator.
That is a profoundly ideological position, and unsupported by the
numbers. You think you need political pressure to explain behavior
that is short-term profitable and long-term disastrous? The banks did
what they did because their executives and traders, the insiders of
the system, were making sufficient short-term buckets of money that
they simply didn't care about the long term. The oldest question is
still the wisest one to ask: "cui bono"?
A bank is defined as an institution that loans long and borrows short:
thus by definition is unstable. Capitalism quite properly rewards
profit-seeking, and the most profitable behaviors in banks are the
most risky; thus such institutions will fail predictably and regularly
at immense social cost, absent a set of sanity-enforcing rules.
The notion that any bank could survive in even the medium term in an
unregulated environment is beyond silly. Nonetheless, the functions
they serve are considered useful and thus we need a regulatory
framework and in certain cases publicly-backed insurance. Humanity
being what it is, the managerial class will try to figure out how to
game this system; in the recent past they did an admirable job. The
result being that most of us with retirement portfolios saw them
savaged while our tax contributions were shoveled into the gap to keep
the credit markets from simply going up in smoke. So they could pay
each other record-breaking bonuses this year.
Educational reading from a really good writer with extensive
experience of the industry:
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom/
-T
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New;}}
\viewkind4\uc1\pard\f0\fs20 I've just upgraded to Thunderbird 3.0 and the
interface subtly weird.\par
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