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Cato's pessimism:
The Obama Administration is presenting a misguided, ill-informed remake of our financial regulatory system that will likely increase the frequency and severity of future financial crises. While our financial system, particularly our mortgage finance system, is broken, the Obama plan ignores the real flaws in our current structure, instead focusing on convenient targets.
Shockingly, the Obama plan makes no mention of those institutions at the very heart of the mortgage market meltdown – Fannie Mae and Freddie Mac. These two entities were the single largest source of liquidity for the subprime market during its height. In all likelihood, their ultimate cost to the taxpayer will exceed that of TARP, once TARP repayments have begun. Any reform plan that leaves out Fannie and Freddie does not merit being taken seriously.
Instead of addressing our destructive federal policies aimed at extending homeownership to households that cannot sustain it, the Obama plan calls for increased “consumer protections” in the mortgage industry. Sadly, the Administration misses the basic fact that the most important mortgage characteristic that is determinate of mortgage default is the borrower’s equity. However, such recognition would also require admitting that the government’s own programs, such as the Federal Housing Administration, have been at the forefront of pushing unsustainable mortgage lending.
While the Administration plan recognizes the failure of the credit rating agencies, it appears to misunderstand the source of that failure: the rating agencies’ government-created monopoly. Additional disclosure will not solve that problem. What is needed is an end to the exclusive government privileges that have been granted to the rating agencies. In addition, financial regulators should end the outsourcing of their own due diligence to the rating agencies.
The Administration’s inability to admit the failures of government regulation will only guarantee that the next failures will be even bigger than the current ones.
Blog Archive
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2009
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June
(148)
- Retort of the day
- "Thanks for Sharing, Governor. Now Shut Up."
- Religious views of sex
- The worst is behind us
- And then there were sixty
- Quote for the day
- Health benefits and WWII
- Debating the public option
- Obama's speech to gay rights groups
- Ricci and judicial politics
- Neocon humor
- MSM whores
- "Terrible precedents"
- More on the latest Mankiw-Krugman spat
- "The Arbiter of Ignorance"
- "Forgive Mark Sanford"
- American and Iranian nationalism
- "Sorry sir, but this sewer is catch and release on...
- Credit where credit is due
- American Imaginer
- Krugman bashes a strawman and takes a short-term v...
- Amateur hour
- A more interesting take on Sanford
- How are those bailouts comming?
- Bloggy takedown of the day
- The pitfalls of the public option
- Leaving bad enough alone
- Some choice you're giving us, lady
- King David didn't resign after his sex scandal, so...
- Missing the logic of recognizing his own would-be-...
- Guilty pleasures
- A tragic life
- Iran's Assembly of Experts
- Against mandates
- A different perspective on Iran
- Unbreakable no longer
- The more things change...
- 40% of income on healthcare in 2100 isn't so bad, ...
- In the shadow of the mountain
- Why the obsession with Sanford?
- Dick Van Patten explains why Jesus Christ is God
- Reponding to events in Iran
- Keeping quiet
- Detainee rights
- Blame the demons
- Rawr
- Israeli settlements are illegal
- Iran election tracker
- Recount
- Line of the month
- UAW jumps the shark
- Moore Award nominee
- Redneck nerdery of the week
- The first nerd presidency of the modern era
- Roger Cohen in Iran today
- Escalating violence in Iran
- Bravo, Ron Paul
- Wow
- The importance of local legitimacy
- PETA bait
- Pictures of Israeli settlements
- The professor vs. the fighter pilot
- Lesson in democracy for neocons
- About those smoking bans
- "Administration's Reform Plan Misses the Mark"
- Stage of denial
- Prophetic quote of the day
- Worldwide protests
- A genuine rally photo
- Potemkin rallies
- Manufactured controversy watch
- "The Laffer Curve of the Left"
- Tweet of the day
- The revolution will be twittered
- The minimum wage
- That Iranian "election"
- Favored constituency watch
- Quote of the day
- Ranking the public plans
- Punblic health insurance option, ctd.
- Quote of the day
- U.S. auto industry doing well
- Quote of the day
- Tipping the scale
- Procedure over innocence
- Nanny state cometh
- Freedom and responsibility
- Paging Dr. Gore
- Obama reconsiders domestic agenda
- The next Iranian president?
- One for the (neoconish) rightists
- 29 Democrats needed
- Public health insurance, antitrust, and price cont...
- Back to work
- A stock market primer
- After gay marriage
- Joe Scarborough
- Americans care about smaller government
- How stupid do they think we are?
- Misunderstanding markets, school vouchers edition
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