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« En masse for Obama | Main | Love story »

Mar 31, 2008

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Percy Walker

This is interesting, exciting stuff. The regulatory structure needs major repairs and there's a lot to like in the still-vague overhaul plans.

Krugman quickly establishes himself as a person to be ignored, while Barney Frank, who will be one of the most important players in this, fortunately, finds the plan "encouraging."

jimcaserta

I would like to see any new regulatory plan run through a simulator, starting back in 2001. IE - how would 2001-2008 have looked different if these new regulations were in place back then.

I think the biggest lever regulators have will be to assess reserve ratios. What you had was places like Bear Stearns & others buying mortgage debt, with their own debt. People assumed BS was a safe bet, and they got good rates. BS passed those low rates along to mortgage borrowers. Repackaging risk does not remove the underlying risk.

I also don't understand the market's love of ARM's. If you can refinance after a rate reset, the lender gets screwed, and if you can't refi, and can't afford the higher rate, the borrower gets screwed. They're premised on hoping someone gets screwed.

jimcaserta

Nice - "Prudential financial regulation to address issues of limited market discipline caused by government guarantees" Were excessive govt guarantees what caused the lack of market discipline?

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