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My views on the crisis -- a summary statement
A few inattentive malcontents are complaining that I haven't stated my views. I have, but if you want them, or some of them, in one neat place, devoid of subtlety or explanation, here they are:
1. Glass-Steagall repeal was not a major cause of the financial crisis, nor was government-induced "minority lending."
2. We should use regulation to move more of the currently unregulated derivatives markets to the clearinghouse model.
3. The crisis represents a massive conjunction of both market and governmental failure.
4. I would not nationalize banks as ongoing concerns, at least not short of a far more extreme emergency than the current status quo.
5. The modified Paulson plan was better than nothing -- especially after the market had been scared -- but far from my first choice. In any case the plan would have been revised almost immediately. The Paulson and Dodd plans were never that far apart.
6. My first choice is to induce and if need be to force more information revelation, identify the insolvent banks, close them up, and give the battle-tested FDIC a much greater role in the whole process.
7. In the meantime the Fed should not worry much about inflation.
8. The critical deregulatory mistake was allowing excess leverage. Many deregulations get blamed but in fact contributed little to the problem.
9. Everyone says that letting Lehman die was a big mistake but I'm not yet convinced. Maybe a bracingly high TED spread is what we need.
10. Libertarians are overrating the moral hazard argument, as many equity holders have been wiped out.
11. If someone is pushing conclusions and not identifying the potential weak points in his or her arguments, be suspicious. Also beware of anyone pretending to offer you simple answers.
12. I have a long and complicated view on the relevance of Austrian Business Cycle Theory which resists easy summation, but markets could have and should have been more cautious in response to Greenspan's easy money policies.
13. Insolvent hedge funds and the commercial paper market remain outstanding issues which are not easy to address.
14. I agree with Arnold Kling about relaxing capital requirements though at this point I don't expect it to help much.
15. The crisis is complex and has many causes; there won't be a simple or quick solution.
If you wish you can google to the details. Also, I don't believe I had offered #9 before on this blog.
Posted by Tyler Cowen on October 1, 2008 at 07:21 AM in Economics | Permalink
Comments
Point #8 is particularly important: by allowing 30:1 leverage ratios, combined with the moral hazard of an implied "rescue", we were creating incentives for investing in risky financial instruments.
Posted by: Bradley at Oct 1, 2008 7:59:35 AM
FYI, my views are very similar to those of Tyler.
Posted by: Alex Tabarrok at Oct 1, 2008 8:02:57 AM
I'm glad you finally offered point number 9; TED spreads are fine this wide. But it seems to contrast your government-as-clearinghouse model.
Posted by: mpkomara at Oct 1, 2008 8:13:28 AM
Your list is long and your conclusions on the critical issues are still tentative and/or vague. For someone that has written so many posts about the crisis it should be depressing to write such a list. You and all pundits should read the column written yesterday by T. Sowell. In particular, I like this line: "Most people do not understand most things. But that is no reason to have national policy guided by their ignorance."
Posted by: E. Barandiaran at Oct 1, 2008 8:14:14 AM
The reason people are calling you out is because you've been slippery as an eel and late to the party. Remember when subprime was just a minor 250 billion issue which could be dealt with by being straight and recognizing some losses? It's helpful for you to post this. I'd make just a couple of quick points.
As for 3, 8 and 10, you are wrong on market failure, leverage regulation and moral hazard. These are closely linked. Banks (broadly defined) were able to become massively over-leveraged because their counterparties (not just shareholders) all assumed the government would stand behind as ultimate counterparty and also that the government would back the insurance on defaults. Otherwise, you'd never do business with someone with 30-40x leverage.
As for 1, and your post yesterday, it may be that minority borrowers don't default disproportionately, holding other factors constant, but its very true that in order to make lending widely available to them you needed to massively increase availability exotic (ie risky) loans and to lower standards and to make those products non-discriminatory (ie available to everyone). That's what happened and Congress and the Fed pushed it through policy and easy money.
As for 9, I am thrilled that Lehman was allowed to fail. Only thing the Government has done right in months.
As for 12, of course you do. If you came out and said it had any validity, you might lose your precious peer (and NYT) credibility. Much better to stick with the conventional wisdom that Greenspan's Fed was just a little too loose and people should have been more cautious, but was just one factor in a complex set of issues. Just because the dirty old man has dumped white lightning in the punch doesn't mean you should keep drinking. Of course, I am reminded about David Spade's joke about grain alcohol and co-eds: "you gotta be real careful with this stuff; give her this much and she'll do anything you want; give her THIS much and she'll die!"
Posted by: JJRG at Oct 1, 2008 8:18:46 AM
8. The critical deregulatory mistake was allowing excess leverage.
That's it in a nutshell. (And includes low down/no down/no doc mortgages.)
Posted by: at Oct 1, 2008 8:19:31 AM
The reason people are calling you out is because you've been slippery as an eel and late to the party.
Especially since Tyler was elected President to lead us out of this mess. And don't forget he runs Treasury, the Fed and is the majority leader in Congress.
You are overwrought. Consult his Dining Guide, then get a good meal and then, most importantly, some much needed rest.
THEN you can go back to yelling at your TV.
Posted by: at Oct 1, 2008 8:25:05 AM
If interest rates were set by the market then they would of never gotten so low, and how could of any of this gotten started? I think it's irrelevant to say that market should of been more cautious. In a free market with no possibility of bailouts, the same greed that brought these people down is what would of led them to be more cautious.
Posted by: Neal W. at Oct 1, 2008 8:31:53 AM
In his every ending search for acceptance by the liberal establishment, I predict within three years Tyler will accept a position in the Obama administration and shutdown MR.
Posted by: lewis at Oct 1, 2008 8:35:00 AM
"the commercial paper market remain outstanding issues which are not easy to address."
Seems the comercial paper market is not so bad off
http://www.bloomberg.com/apps/news?pid=20601109&sid=aAHCiRX_cqUo&refer=news
Posted by: eccdogg at Oct 1, 2008 8:41:23 AM
JJRG certainly brings to mind that old WB Yeats soundbite "The best lack all
conviction, the worst are full of passionate intensity."
Posted by: PCLE at Oct 1, 2008 8:43:58 AM
E. Barandiaran: you and JJRG should get together for a meal and some rest. Then you can get together and yell at the TV and at your least favorite "pundits" about how ignorant they are.
We just need you and a few other philosopher kings to set us straight. Sheesh.
I am grateful that Tyler has shared his thinking publicly on this blog. Being a not-so-bright-bulb myself, his postings have helped me understand this situation.
And notice that you, JJRG, and I, are all comnmenting on his blog - not on your blogs or my blog.
Posted by: at Oct 1, 2008 8:45:16 AM
I don't doubt that if TC were setting policy we'd be better off now than we are. And, I enjoy about 75% of TC's dining recommendations - thanks! But, I don't think that changes the validity of my points. I think TC has missed something important about moral hazard and how that interplays with the leverage issue, that so many of you keep raising. I also think he's missed a big part of the story on minority lending - see above.
Posted by: JJRG at Oct 1, 2008 8:51:09 AM
To the person that wrote the comment at 8:45:16 AM,
For the past two weeks, I (an Argentinian, living in Spain, and now traveling in Chile) have written several comments asking Tyler and Arnold Kling to pay attention to experts that have really worked on solving financial crises (fyi, I'm now retired but I worked 45 years in solving fiscal and financial crises).
Posted by: E. Barandiaran at Oct 1, 2008 8:59:13 AM
Letting Lehman die keeps the moral hazard aspect of the problem in play, if only partially. It increases the uncertainty around the moral hazard aspects of the problem. It means an individual banker can not be sure this his bank will not be the one that is too big to fail.
Posted by: spencer at Oct 1, 2008 9:01:19 AM
I'll echo JJRG here and say that as someone who had taken MR out of his feed reader because of the excessive number of "Tyler Koans", I find it ironic that his post "devoid of subtlety or explanation" is his longest original-word-count article in several days.
Posted by: Sandy at Oct 1, 2008 9:09:43 AM
I don't understand how you can speak of Austrian economics and simultaneously state that "markets should have been more cautious." Markets can't be cautious, they are aggregates. The individuals that create the markets have no incentive to be cautious.
Posted by: TO at Oct 1, 2008 9:13:24 AM
It's bizarre -- truly bizarre -- that one of you would call me "slippery as an eel." I've probably gone on record with more economic opinions than all but a few economists in the history of the world, ever. And I have dozens of posts on the crisis, each usually with an opinion, albeit sometimes a complex opinion. What I very often don't do is serve up "emotional red meat" or play "blame game" or inflame passions rather than try to calm them.
Posted by: Tyler Cowen at Oct 1, 2008 9:33:08 AM
Thanks for the summary. Lots of good points, IMO, especially those stressing the complexity of the problem. I'm suspicious of the virtue of a "bracingly high" TED spread. Do we really want a system where a three-month loan to a bank is that risky?
Posted by: Bernard Yomtov at Oct 1, 2008 9:33:54 AM
4. I would not nationalize banks as ongoing concerns, at least not short of a far more extreme emergency than the current status quo.
Are you simply trying to avoid a sweeping statement here, or can you think of specific circumstances in which nationalizing banks as ongoing concerns would be a good idea? Or for example, have other governments nationalized industries/companies in history, and you thought it was a good idea under those particular circumstances?
Posted by: Bob Murphy at Oct 1, 2008 9:35:11 AM
So, a masochist walks into a bar and says "beat me." The sadist answers "no."
Lame and Brothers: This is an example of the schizophrenic government policy (with apologies to schizophrenics).
Even though there is plenty of pain (this libertarian doesn't hype the moral hazard argument) and panic abounds, the government chose poor Lehman to make an example of, but what they got was the problems that they wanted to avoid. So, they successfully inflicted pain, caused moral hazard, and didn't fix anything. When you can't tell if someone's actions are purely sadistic, that's a problem, even if you are a masochist.
Posted by: Andrew at Oct 1, 2008 9:36:46 AM
Tyler,
Some people aren't used to non-definitive opinions from "leaders."
So, to what extent is the problem the regulators slamming the door on the leverage problem now, of all times, and the market doing it of its own volition?
I also wonder to what extent current de-leveraging is fear versus greed. If it's fear, and companies are afraid of their own solvency, that's one thing. If, however, companies are waiting for competitors to go on sale, perhaps that implies other solutions.
Also,
"Tyler will accept a position in the Obama administration and shutdown MR."
Some people apparently manage to think this would be a bad thing. I have a name for those kind of people. It's the same name I use for people, lovingly, who didn't recognize that Ron Paul was THE libertarian movement this year. I'll call it a lack of perspective.
Posted by: Andrew at Oct 1, 2008 9:46:25 AM
A few points related to (8):
- Before being allowed by regulators, excess leverage was allowed by bondholders and shareholders. Why?
- You can always blame excess leverage when there is a default. This does not mean that a leverage restriction
would help. Banks can circumvent the problem by moving risks outside their balance sheet or increasing
the risk intensity of their balance sheet.
- Optimal leverage depends on balance sheet riskyness - > on the business model of the bank. How should
regulators define maximal leverage?
- Risk-weighed capital requirements have their weakness but they are better than any leverage restriction.
The problem is that they are pro-cyclical and underestimate some types of risks.
- If the banks' risk managers are not able to assess the risks of their bank, is it not too
demanding to ask regulators to be better at it?
Posted by: vic at Oct 1, 2008 9:49:44 AM
"15. The crisis is complex and has many causes; there won't be a simple or quick solution."
This isn't a "crisis". It is complex because there are millions of people with millions of situations and therefore millions of methods by which to move forward. There is "simply" no need for government involvement. Let the market resolve the situation and the "economy" will be exactly where it should be very quickly.
You're thinking maybe that I'm ignoring the potential pain? I am, because it is a logical consequence and therefore deserved. The lesson is, don't take advice from fools, be they financial advisors or government officials.
Posted by: Randy at Oct 1, 2008 9:50:20 AM
My understanding is that Sweden nationalized park of it's banking industry when they suffered a similar problem. A few Europea counries are now doing the same in response to the current crisis. Brad DeLong has advocated Bank nationalization too on his weblog.
Posted by: DRR at Oct 1, 2008 9:50:30 AM
A few points related to (8):
- Before being allowed by regulators, excess leverage was allowed by bondholders and shareholders. Why?
- You can always blame excess leverage when there is a default. This does not mean that a leverage restriction
would help. Banks can circumvent the problem by moving risks outside their balance sheet or increasing
the risk intensity of their balance sheet.
- Optimal leverage depends on balance sheet riskyness - > on the business model of the bank. How should
regulators define maximal leverage?
- Risk-weighed capital requirements have their weakness but they are better than any leverage restriction.
The problem is that they are pro-cyclical and underestimate some types of risks.
- If the banks' risk managers are not able to assess the risks of their bank, is it not too
demanding to ask regulators to be better at it?
Posted by: vic at Oct 1, 2008 9:52:22 AM
People, I can assure you that neither administration would have me, nor do I have the kind of emotional stamina required to accept such a job. You can expect MR to continue.
Posted by: Tyler Cowen at Oct 1, 2008 9:54:34 AM
I would not echo the tone of JJRG, and I love MR and most of the posts, and greatly appreciate the insights and knowledge of all who post here.
However, there is something to be said for the concern that TC is only speaking to broken pieces and not weaving together the parts.
Why would people take on excess leverage and behave in excessively risky ways? Is it just animal spirits? No. That anyone ever thought that, post-caveman is ridiculous, but we've certainly come past that now. We understand institutions, we understand that people respond to the incentives they face.
Looking underneath the superficial anger at "markets" for being too highly leveraged, one can see the obvious culprits: Fannie and Freddie and sub-prime policies (including some aimed at minority lending) and of course loose monetary policy.
There are surely other culprits as well, but the interesting part is about what these polices did to incentives, which then led to the aggregate outcome picture - the excessive leveraging and wild eyed speculation. Pointing at that outcome and criticizing it does nothing.
And finally, I think it is also critical to tie together your CAUSE and your REMEDY. If you find the policy culprits (or other culprits, maybe you found a market failure that policy needs to fix), then your remedy should cure the disease and not make it worse.
You at least need to make the case that your remedy will not exacerbate the problem, and that it will have some beneficial effect in the short run, or something. But, if you keep at such a high level in both your diagnosis and your prescription (and make no prognosis at all), then it is impossible even for the reader to determine whether it will work or not. We have to just take the assertions at face value.
And perhaps there is a little bit of wanting to stay cozy with the mainstream - I won't speculate on that. I will say that it is not as difficult for me to picture Tyler joining the Obama administration and shutting down MR as one might imagine.
Posted by: liberty at Oct 1, 2008 10:02:49 AM
I work on proposals to address real, existing policy problems, rather than write compelling, rigorous arguments about them. Also, it is very probable that I am not as smart as Tyler. However, my experience is *always* that there are many causes, and no silver bullet. Tyler's review of his views reflects a similar sense, I think, and does him credit. It is, for example, a useful if preliminary guide to what *not* to do in the months and years ahead.
Posted by: Roland Stephen at Oct 1, 2008 10:05:27 AM
This may seem elementary, but in a textbook sense, what market failures do you blame? Imperfect information on the structure and risk of mortgage-backed securities?
By the way, I think the "slippery as an eel" comment is a complete outlier and is in no way representative of the views of your readership. I appreciate your frequent opining and it is one of the main reasons I am an avid reader of this blog.
Posted by: Zach at Oct 1, 2008 10:07:05 AM
11. If someone is pushing conclusions and not identifying the potential weak points in his or her arguments, be suspicious. Also beware of anyone pretending to offer you simple answers.So we shouldn't trust anything coming out of congress then?
Seriously, government cannot process complex solutions. The solution has to be simple because thats all its capable of implementing. If it (or the median voter) could produce works as complex and subtle as the economics profession, we wouldn't be in this mess in the first place.
Posted by: Grant at Oct 1, 2008 10:07:29 AM
Tyler: "The modified Paulson plan was better than nothing -- especially after the market had been scared"
Makes much sense to me. The last thing investors like me wanted to see is indecisiveness resulting from a leadership void. Reagan-Volcker would have spoken in clearly understood language and acted decisively. The nation's confidence in them would have carried the day with Congress. IMO, despite their political differences, Tip O'Neill and the Reagan administration would have worked together for the good of the nation.
Though I supported the man in two national elections, I now believe George W. Bush to be a joke as a leader. Bernanke is no Paul Volcker. Pelosi is no Tip O'Neill. We have no leaders in this time of crisis.
Posted by: John Dewey at Oct 1, 2008 10:14:18 AM
Tyler,
I think you are missing the moral hazard point. It is the moral hazard induced in the bondholders that is most important, not the equity holders. We actually have almost no history of shareholders being directly bailed out in the US, but lenders have been and are being bailed out left and right. How do you think 30 or 50 to 1 leverage arises in the first place? Why would rational person lend money to such an entity?
Posted by: Yancey Ward at Oct 1, 2008 10:18:32 AM
How does Sarbanes-Oxley fit into the current crisis? In other words, without Sarbanes-Oxley would the current situation be better or worse? How and why?
Posted by: Christopher Monnier at Oct 1, 2008 10:40:02 AM
Some people interpret any presentation of a complexed truth as an attempt to evade truth. If one prefers a quick and easy classification of a car as a fast-running turtle for the purpose of making an action. We can't stop him, but we can always say no to his turtle soup.
Posted by: Yan Li at Oct 1, 2008 10:45:57 AM
Great summary, I think, and I didn´t understand the "slippery as an eel" either. If you asked any regular reader what MR thinks about the crisis, we would be able to say something along the lines of this post. We might disagree with it, of course, but that's another matter.
For people who didn't get it, maybe we should make clear that Andrew Sullivan doesn't like Sarah Palin very much as a candidate.
On the other hand, please explain the point about Austrian Business Cycles, it sounds interesting.
Posted by: NPTO at Oct 1, 2008 10:49:48 AM
1. Glass-Steagall repeal was not a major cause of the financial crisis, nor was government-induced "minority lending."
I'm confused as to why you put the word minority in quotations. It seems to me that, since the government outlaws discrimination, relaxing rules in an attempt to help one minority would unintentionally help many other minorities, and that all of these minorities bundled together might even make a majority.
What did you mean by minority? Why did you put it in quotes? Why was it your #1 point?
Posted by: SheetWise at Oct 1, 2008 10:54:38 AM
1 was stated very weakly. Couldn't it be said that the evidence is that most likely without the Glass-Steagall things would have been worse.
Posted by: floccina at Oct 1, 2008 10:55:01 AM
Hi Tyler,
Where are you on:
- Spanish style countercyclical regulation (pulling VaR out of Basel or adjusting) of bank capital requirements?
- Degree of Impact of Fannie/Freddie, both in inflating the bubble and crowing the rest of the industry out of the prime credits?
- Banning of SIVs & other off balance sheet items unless their sponsors explicitly refuse to take them back on to their balance sheet (or even if) should funding dry?
I'm sure you've addressed these before but it seems that you wanted to this to be as exhaustive as possible.
Thanks!
Posted by: Anthony at Oct 1, 2008 11:08:45 AM
I agree with Yancey Ward's moral hazard point. Also, see the terrible lessons of Bear Stearns.
Posted by: Dave at Oct 1, 2008 11:13:20 AM
"The critical deregulatory mistake was allowing excess leverage."
I'm glad to see that my relatively uninformed (24 undergraduate econ credits, but that was a long time ago) instincts (regarding the extent to which too much leverage is a large part of the problem) are vindicated.
Posted by: LarryM at Oct 1, 2008 11:15:38 AM
People, I can assure you that neither administration would have me, nor do I have the kind of emotional stamina required to accept such a job. You can expect MR to continue.
Too bad on the fist, I bet you do on the middle, and thank goodness for the last.
Though I supported the man in two national elections, I now believe George W. Bush to be a joke as a leader. Bernanke is no Paul Volcker. Pelosi is no Tip O'Neill. We have no leaders in this time of crisis.
Agreed. (Which also goes some way to explaining why the MSM is so clueless when it cites polls showing the majority of people as agreeing that "The country is going in the wrong direction" as some kind of overwhelming support for Dems. Nope. See Congress's approval ratings.)
For the past two weeks, I (an Argentinian, living in Spain, and now traveling in Chile) have written several comments asking Tyler and Arnold Kling to pay attention to experts that have really worked on solving financial crises
And if they have or haven't, so what? You write this like you sign their paychecks. And this "crisis" in the US is not merely up to the "experts".
Rightly or wrongly, ignorantly or wisely, Americans have swamped their congress critters with phone calls, letters, faxes and emails telling them "No bailout!"
Posted by: at Oct 1, 2008 11:29:32 AM
Sheetwise: "It seems to me that, since the government outlaws discrimination, relaxing rules in an attempt to help one minority would unintentionally help many other minorities"
Let's not try to hide reality, OK? Housing discrimination laws were not working. Community Reinvestment Act was definitely about ending redlining, and redlining has been used for several decades to get around racial discrimination laws.
Subprime loans certainly benefitted not just low income blacks and hispanics but also low income whites. However, the effect on the overall black and hispanic populations was far greater. Many who promoted the expansion of subprime lending the past decade did so with the specific intent of increasing minority home ownership.
Posted by: John Dewey at Oct 1, 2008 11:30:21 AM
you act like tyler owes you some comprehensive, definitive answers on an extraordinarily complicated set of policy questions, when you should instead be dubious of anyone purporting to have such answers. he gave you his thoughts, what more do you want? should he play like a talking head on CNN or FOX or whatever? i think most of us are here because he doesn't.
Posted by: dj superflat at Oct 1, 2008 11:40:05 AM
If this is truly a credit crunch affecting Main Street business then:
For every financial institution regulated by the Federal Reserve that meets the current capital adequacy standards for its investment risk - lower its reserve requirements by half.
This does not save bad banks, it does not reward risky behavior. Banks that have adequate capital will be able to double the lending that their existing reserves will support. If the reserve requirement reduction is set for 5 years or until the bank fails to meet the capital adequacy standards based on risk the bank will avail themselves of the opportunity to make more money but will continue to do so prudently.
Voila! no more credit crunch.
Posted by: Bernard Hinds at Oct 1, 2008 11:41:23 AM
#1 - Do you have $$$$ numbers to prove your assertion that minority/CRA/HMDA/ACORN/Al Sharpton/Jesse Jackson/Obama lending was not a significant cause?
Let me see. FNM/FRE, 50% of business had to be minority, er, low-to-moderate income loans. What is 50% of $1.8 trillion FNM/FRE held? What is 50% of $5 trillion FNM/FRE guarantied?
Dodd, Frank, Gorelick, Johnson, Pierce, Obama, the Clintons, the dem congress and their massive graft finance organs: FNM/FRE are responsible for the so-called housing bubble/mortgage crisis/credit crunch. I know this to be true. If that were not, there'd be 24/7 televised MSM show trials, er, congressional hearings on how Bush and Wall Street destroyed the economy.
Here is my (unintellectual) take on the whole enchillada:
The mortgage crisis, which was caused by way too much liquidity, caused this credit crunch which caused way too little liquidity. Too many $$$$ were chasing real estate (God isn’t making any more!) and that created the housing bubble.
Banks’ overuse (aided and abetted by FNM/FRE) of securitizations/money multipliers - CDO-squareds!;
Banks’over-lending to individuals and/or over-lending by mortgage bankers, i.e., borrowing/lending more (monthly payments unsupported by income) than a borrower can reasonably repay - traditional standards for monthly income to mortgage payment ratios ranged from 28% for conventional loans to 43% for GI insured loans; PRICES ARE WAY ABOVE AFFRODABLE LEVELS FOR MOST AMERICANS.
Universal superstition - real estate values always soar, never drop;
Long Term Credit Management debacle – Fed lessened losses and added to moral hazard. LTCM was into thinly traded, hard-to-value paper. Sound familiar?
Clinton signed repeal Glass-Steagall 1999
Clinton Admin. excluded financial contracts from commodities regulations.
Billions $$$ of foreign money;
Billions $$$ more chasing assets when SEC (2004) waived investment banks’ leverage (debt to equity) rule to go from 12:1 to 40:1 – only five largest received waiver: Bear Stearns (defunct - $30B cost taxpayers); Goldman (now a BHC); Lehman Bros. (bankrupt); Merrill Lynch (sold at huge loss to shareholders); Morgan Stanley (now a BHC).
Speculators’ flipping houses and then over-building/oversupply of housing stock;
Push for low-and-moderate income loans from ACORN/CRA/HMDA and community activists;
FNM/FRE 50% must be low-to-moderate income borrowers – added trillions $$$. Bush admin. half-hearted attempts to mitigate go nowhere
Greed, hubris, and stupidity;
A 1% fed funds rate;
Banks need to replace lost mortgage refinancing fee revenues;
People more embarrassed by living in as modest home than by being foreclosed from a McMansion;
Liberal appraisals – did not stabilize comparable sales for over-heated/unsustainable market conditions;
Regulators failed to enforce underwriting standards – again, ACORN/CRA/HMDA; CRA protests on every merger application application – extortion.
Banks and Wall Street believed they could sell, securitize and forget.
Posted by: T. Shaw at Oct 1, 2008 11:49:29 AM
Thanks much for your opinions in one collected spot. I appreciate your willingness to opine without snark and partisanship. Your scenario of multiple causes makes the most sense. If anyone in the chain had performed properly, this all could have been averted. I still think that the people who had the job of rating the risks, should shoulder more of the blame. AAA ratings on bundles of bad loans was hard to understand. Large leverage ratios are a setup for failure almost by definition.
Steve
Posted by: steve at Oct 1, 2008 12:32:58 PM
Would Tyler and others care to review the impact on real estate once Fed actually owns $700B of "rotten" assets. What will this do to housing affordability index and inventory and ownership levels, assuming that credit remains available and economy/incomes stable.
Also, what's a running assumption on how fast can Treasury close on all these asset acquisitions and by what process would it manage as well as time/perform their sales?
How good is Treasury's asset ownership, selling record? Does this bill propose an efficient and effective process that's in place or will they have to invent the wheel?
Providing they actually succeed in keeping the flow of interbank and consumer/corporate credit, will that be enough to keep economy from tanking?
Posted by: Senja S at Oct 1, 2008 12:36:11 PM
As someone pretty young and with $15,000 or so to invest (not much, but everything I've got), can anyone tell me where I should be putting it right now? If capital is so valuable right now, how can I make lenders compete for my cash? Shouldn't this be a totally badass time to buy some CD's, especially at places like Bank of America?
Noob question, I know, but I'm just looking for someone to tell me why I'm wrong here.
Posted by: Brandon at Oct 1, 2008 1:11:56 PM
Brandon,
I predict economic collapse unless you deposit it into my account. Do that, I will continue to let you work for a paycheck and to borrow whenever you like.
Posted by: Yancey Ward at Oct 1, 2008 1:25:02 PM
