Money quote:
Neither markets nor government are perfectible; the best we're going to get is ones that work pretty well most of the time. In 2005, everyone--homebuyers, bankers, regulators, legislators--was making essentially the same mistake. And while it's more comfortable to believe that this was malevolent, the more prosaic truth is probably that sometimes large groups of people get stuff badly wrong. We can't plan our way to a risk free system. The best we can do is a system that fails a little bit better.Inded. Since we can't eliminate risk, let's eliminate regulations!
Bonus in the comments: Moral hazard does not apply to bankers.
Funniest take away: TARPs(Dubya's& Obama's) eliminated Risk for Investment Bankers and Hedge Funds who openly committed Fraud. They didn't fail. They formed a criminal racket to enrich themselves betting on a Housing Bubble Crash they orchestrated with help from the ratings agencies.
ReplyDeleteAfter the crash they were further rewarded by two bail outs and a generous Fed discount window.
The moral of Megan's "realism": Risk is for the little people(defrauded pension holders, investors, homeowners, etc) who were peddled AAA "shit", or Liar Loans, while insiders, right after selling the "shit", bet against them and reaped profits as the bubble popped. The Bankers and Hedgies who committed Fraud should NEVER have to bear the burdens of RISK in a TRUE FREE MARKET SYSTEM(Anathema to most Libertarians, but not Jane Galt). And the reason why, HOW COULD THEY HAVE KNOWN A CRASH WAS COMING WHEN THEY ORCHESTRATED IT VIA WIDESPREAD FRAUD AND CONTINUE TO REAP BENEFITS?
Funny, Megan, markets seemed to have worked a lot better when the New Deal reforms were in place, than when Reagan & Co. decided we didn't need 'em anymore...Laffer Curve! Deregulation!
ReplyDeleteYes, Megan, it's been a trip back to the Roaring Twenties..1929, in particular...
Strawman Alert:
ReplyDelete"We can't plan our way to a risk free system. The best we can do is a system that fails a little bit better. "
Nobody is *asking* to plan our way to a risk free system. we are simply saying that if banks want to take on risk, they should do so with their shareholder capital, not public bailout funds.
She continues to get idioter by the day.
Cynic
In 2005, everyone--homebuyers, bankers, regulators, legislators--was making essentially the same mistake.
ReplyDeleteLet's see, who made the biggest bundle from the mistake?
And who has had all their "mistake" pain taken away by the government?
Magic of the markets, people.
~
In comments her points about moral hazard are even worse than saying it doesn't apply to bankers, I think.
ReplyDeleteI think she's saying that moral hazard definitely applies but there's nothing we can do about it.
What a horrid woman.
I tried to point out what she was doing, let's see how she tries to worm her way out.
The best we can do is a system that fails a little bit better.
ReplyDeleteAnyone thought of a system that taxes the bejesus out of libertarians?
As usual for Megan, she starts with zero knowledge of what actually happened and then fabricates from there.
ReplyDeleteSome of us here remember the tales come out of Southern California of bank authorizing loans, re-finanicing, home-equity lines, another round of re-financing and so on for properties that were not worth what the mounting pile of debt added up to. My favorite was the $102,000 house that the buyer managed to run up $2 million in mortgage, home equity and refinancing debt on in under a year before mailing in the keys and walking away with the dough. The banks issuing all that credit had no incentive to say no and every incentive to say yes since 1.) they were being PAID to originate the loans and 2.) they instantly sold the debt and knew they would never have to worry about whether it not is was risky.
But I guess it would inhibit the confidence fairy if we tried to put regulations in place to prevent such practices.
The Housing Bubble Blog started in 2004, with its constant tales of bubbly madness & escalating fraud - http://thehousingbubble.blogspot.com/
ReplyDelete"And while it's more comfortable to believe that this was malevolent..."
ReplyDeleteNo, it's just obvious it was greed. Duh. And the bastards should regulated much more stringently.