Thursday, November 27, 2008

What I'm Reading

UPDATE: below

Articles on what went wrong in the mortgage business: MORE:

In comments, I link to two other articles.


bobn said...

The Cato institute article is nonsense.

1) It indicts the CRA, which Carl previously stated he doesn't believe.

2) It somehow neglects that originators lowered their standards because the securitization market explicitly encouraged them to. Google the phrase "Yield Spread Premium" for more information.

3) It emphasizes the role of the GSEs, when during the period that this was being baked in (2004-2006) their share of mortgages fell significantly. Google the phrase "conforming loan" for more information.

This was caused by unfettered greed and De-regulationism in both parties, with special emphasis on the non-regulation of the Bush Administration, in particular the Cox SEC.

Carl said...

Agreed. There's also an article in the current New Yorker.

bobn said...

Agreed ?

This must be a trick of some sort. ;-)

Carl said...

I know, I know: but when you're right, you're right. . .

Carl said...

The New Yorker article is incomprehensible. But here's another piece I recommend: What Barack Obama Needs to Know About Tim Geithner, the AIG Fiasco and Citigroup, by Chris Whalen.

bobn said...

Ritholtz is pretty good.

I caught the same Whalen article on Geithner via Naked Capitalism.

Not very encouraging, is it?

A year ago, I was afraid we might have a depression. It is what got me - after 52 years of never feeling the need - to first buy a gun.

Now I'm more afraid of the current government solutions to the depression. And the one part of the Obama Change thing that most appealed to me - the idea that the kleptocracy currently in place might be stopped, via an enema of the executive branch - is now shown as totally vain.

Carl said...

Obviously, the worst of all worlds is a recession plus bad government. It's awful hard to "fix" the economy if you can't agree on what went wrong. Particularly, as I have argued, when it appears that both the free market goofed and there was neither fraud nor unwarranted deregulation among chartered banks.

There was plenty of unwarranted regulation. The CRA is part of that, so I agree with Investor's Business Daily that it should be repealed. But, Barney Frank loves CRA, so it's gonna stay. And though a bad law, CRA didn't cause the mortgage crisis, contrary to IDB's claims.

The only policy response I'm sure is making thrifts take charters to become banks, allowing elimination of the OTS. Like CRA repeal, this has little chance.