WSJ Op-Ed: Complex Loans Didn’t Cause the Financial Crisis
Financial reform is overdue, but the Consumer Financial Protection Agency is not the way to go about it.
That’s the premise offered by Todd Zywicki in an op-ed in the Wall Street Journal today.
The upshot: “The bank loans were not foolish because borrowers didn't realize what they were doing,” Zywicki writes. “They were foolish because of the incentives they created for borrowers, especially when housing prices turned south.”
Zywicki is a law professor at George Mason University and a senior scholar at the Mercatus Center, a university-based research center that works to advance knowledge about how markets work to improve people’s lives. The op-ed is based in part on a Mercatus working paper, "The Housing Market Crash."
Click here to read the whole article.
That’s the premise offered by Todd Zywicki in an op-ed in the Wall Street Journal today.
The upshot: “The bank loans were not foolish because borrowers didn't realize what they were doing,” Zywicki writes. “They were foolish because of the incentives they created for borrowers, especially when housing prices turned south.”
Zywicki is a law professor at George Mason University and a senior scholar at the Mercatus Center, a university-based research center that works to advance knowledge about how markets work to improve people’s lives. The op-ed is based in part on a Mercatus working paper, "The Housing Market Crash."
Click here to read the whole article.
Views: 2
Replies to This Discussion
-
Permalink Reply by David Ruggles on -
In my view, the bank loans were not foolish because loans originated were sold to Wall Street anyway. Yes, a few mortgages were going to be held "in house" by a few conservative depository banks. Many banks sold mortgages to Wall Street and then theoretically "bought them back" as part of a AAA rated ABS, just to avoid the requirement of maintaining the cash balance required for holding a mortgage. The perversion of the system occurred on Wall Street. Of course, allowing CDOs not to be regulated as insurance, despite being an insurance product, was an oversight by the feds. Yes, we need whatever regulation is required to prevent this stuff from happening again.
I understand the derivative market is alive and well and currently as unregulated as before. Last I knew they were buying life insurance policies as a bet on when a policy holder will actually die. What will they think of next.
If I'm wrong on any of this, please let me know. I really don't live in that world and don't want to be led astray by bad information. -
Subscribe to Auto Finance News by clicking here.
Details
About Us
Guide to Posting Images
Videos
Code of Ethics
Advertise
Our Other Sites:
Air Cargo Management Group
AccountsRecovery.net
Bank Innovation
________________________
Subscribe to our sister publication, Auto Finance News. Click here to learn more about the industry's leading newsmagazine or here for VIP access.
You agree that in posting to this site you will abide by the Terms of Service spelled out below.
Events
Job Board
© 2012 Created by JJ Hornblass.
