Felix Salmon calls me out for arguing that securitization might not be to blame for the decline in lending standards. If lending standards dropped at the same time as the securitization rate soared, I’d say there’s a strong correlation between the two, and a pretty good prima facie case for a causal relationship too. I actually agree with Felix here. As I'll explain, it's hard to argue that lending standards didn't decline because of the introduction of securitization.
I've spent part of the week complaining about the way community banks are trying to gut the administration's consumer financial regulatory agency even though, in principle, they stand to benefit. (Short explanation: Community banks excel at getting to know their customers, building relationships with them, and vetting their loan applications carefully, not by trying to screw them.
Treasury inspector general says unlikely that U.S. will profit from bailouts. Volcker criticizes Obama finacial regulation plan. Prepared testimony from Volcker, Cochrane, Levitt and others on House hearing on systemic risk. Business school applications are levling off this year. Why there might not be a jobless recovery. The inequity of Congress's plan to extend jobless benefits.
Although higher capital requirements do seem like a no-brainer, Andrew Kuritzkes and Hal Scott offer some words of caution in the FT: The five largest US financial institutions subject to Basel capital rules that either failed or were forced into government-assisted mergers in 2008 – Bear Stearns, Washington Mutual, Lehman Brothers, Wachovia and Merrill Lynch – had regulatory capital ratios ranging from 12.3 per cent to 16.1 per cent as of their last quarterly disclosures before they were effectively shut down.
You read something like this and you kinda maybe start to think the ratings agencies are, if far from blameless, then perhaps a necessary evil. But then you go and read something like this piece in yesterday's Wall Street Journal and you're embarrassed for having entertained the thought. Per the Journal: Despite months of regulatory scrutiny and some internal changes at the firms, a recently departed Moody's Corp. analyst says inflated ratings are still being issued.
Stiglitz/Sen commission on flaws in GDP as measure of social health issues final report. Richard Posner discovers Keynes. Someone is actually defending the rating agencies. Oil discoveries are on the rise. John Tierney writes up the US-EU longevity gap study that I had some problems with. The United States of McDonalds.
The short answer, per this Journal piece, is yes.
Let me start by saying that if you write a blog about finance and economics, then newspaper headlines don't really get much better than, "Palin Addresses Asian Investors," which, as luck would have it, appears on the Wall Street Journal site today. Judging from the piece, Palin's speech was basically a lot of granular investment advice--as you'd expect: "We got into this mess because of government interference in the first place," the former Republican U.S. vice presidential candidate said Wednesday at a conference sponsored by investment firm CLSA Asia Pacific Markets.
Until last September, when the banking industry came crashing down and depression loomed for the first time in my lifetime, I had never thought to read The General Theory of Employment, Interest, and Money, despite my interest in economics. I knew that John Maynard Keynes was widely considered the greatest economist of the twentieth century, and I knew of his book's extraordinary reputation. But it was a work of macroeconomics--the study of economy-wide phenomena such as inflation, the business cycle, and economic growth.