No Man of System

What should he have said about swaps and securitization?

Just what he said about unintended consequences.

Look at how opaque securitization has made risk.

Swaps were used very effectively to gain near-instant systemmically important status. In fact, the rumored existence AIG side letters would bolster the idea that AIG maybe persued their wreckless CDS strategy specifically for systemmically important status because the company was doomed anyway.

As for instruments like synthetic CDO's, unintended consequences can be nasty. Sure risk is spread out, but perfectly fine instruments, and even companies, can get slammed just for being in the same basket as something that is not so fine.

Here is a great article from 2005 that not only documents a prelude to this crisis, but warns of this crisis, or at least speculates about it.

I swear, I'm going to start a collection if pre-crisis warnings. Not vague Chicken Little Nostredaemus-like warnings, but very specific warnings. There were tons of them.

I wonder if he said the same thing about Gramm-Bailey regarding swaps, or securitization in general?

What should he have said about swaps and securitization?

K,

What we should be proposing is a run on the government.

Boy, that Geoge Will... what insight!

I wonder if he said the same thing about Gramm-Bailey regarding swaps, or securitization in general? Unintended consequences, and all.

Or the Fed's policy of QE...

Or all the liquidity facilities and the moral hazard they create...

Bair has yet to rule out banks participating in the purchase of each other's distressed assets.

What should be the public response if banks are allowed to participate on the buy side of PPIP?

I wonder if Will would have the guts to write an opinion calling for a bank run?

John -

Not only is that arrogant and astounding - it doesn't say much for that person's argument for planning!

I think the point is that Geithner knows this which is why central planning is neither the goal nor the program currently in place. Arrogance, it seems to me, is inherent in the outlook of the central planner. You can't really be a central planner without a certain degree of either naivete or arrogance.

In a recent conversation with someone on the subject of central planning, the response to my assertion that some things are just to complicated to plan was that a system being too complex for a simple-minded libertarian (me) to understand doesn't mean some enlightened liberal (Krugman/Geithner) isn't up to the task.

The arrogance was astounding.

The above article illustrates pretty quickly why DC economics suck. Quote- "He was pretty quickly functioning as the top economic policy staffer through [Hillary Clinton's] campaign."

The he is a boy of 31 years with ZERO economics education or work experience.

Don't worry. Obama got the best assistant to do the job. Read

http://www.nytimes.com/2009/06/01/business/01de...>

If I suffer no consequence from my actions, why should I not act?

This nation has spent every year since 1933 making every effort to protect each individual from his folly.

"If you protect a man from his folly, you find you have raised a fool." William Penn.

Obama and congress are fools, but will suffer no consequence from their folly, that is left to us.