Post by unlawflcombatnt on Mar 20, 2007 16:33:50 GMT -6
Economist Nouriel Roubini has written an outstanding article titled Who is to Blame for the Mortgage Carnage and Coming Financial Disaster
Roubini makes the case that it is the lack of regulation of the subprime industry that has caused the subprime catastrophe. Both tax incentives and reduced interest rates have contributed to the problem. But Roubini makes an excellent case that the lack of oversight and regulation is the major cause of the problem. To put it differently, it is the de-regulation of financial markets that is the prime culprit. Below is a quote that summarizes the article by Roubini.
"In summary, lack of sensible supervision and regulation of banks, mortgage lenders and other financial institution – partly induced by an ideology of free market fundamentalism – has been the core cause of this private sector created disaster, not excesses of regulation or of government policy. Thus, to minimize the fiscal costs of cleaning up this mess, use of public funds should be carefully managed and targeted to help the true victims of this mess – borrowers duped by predatory lending practices – while avoiding any bail-out of the culprits of this mess. Privatizing profits in good times while socializing losses in bad times is another form of reckless corporate welfare that generates moral hazard while fostering new bubbles. Ideological supply side voodoo zealots should not be allowed to spin a tale where evil government intervention caused this disaster. And the private sector institutions and investors that indulged in this unregulated reckless behavior should take their losses. Market economies are the best economic system but they work properly when private greed, manias, panics, stupidity and recklessness is tempered by sensible supervision and regulation. And may the unfolding mortgage disaster bury once and for all the neo-con supply side voodoo economics religion of unregulated free markets fundamentalism."
Roubini makes the case that it is the lack of regulation of the subprime industry that has caused the subprime catastrophe. Both tax incentives and reduced interest rates have contributed to the problem. But Roubini makes an excellent case that the lack of oversight and regulation is the major cause of the problem. To put it differently, it is the de-regulation of financial markets that is the prime culprit. Below is a quote that summarizes the article by Roubini.
"In summary, lack of sensible supervision and regulation of banks, mortgage lenders and other financial institution – partly induced by an ideology of free market fundamentalism – has been the core cause of this private sector created disaster, not excesses of regulation or of government policy. Thus, to minimize the fiscal costs of cleaning up this mess, use of public funds should be carefully managed and targeted to help the true victims of this mess – borrowers duped by predatory lending practices – while avoiding any bail-out of the culprits of this mess. Privatizing profits in good times while socializing losses in bad times is another form of reckless corporate welfare that generates moral hazard while fostering new bubbles. Ideological supply side voodoo zealots should not be allowed to spin a tale where evil government intervention caused this disaster. And the private sector institutions and investors that indulged in this unregulated reckless behavior should take their losses. Market economies are the best economic system but they work properly when private greed, manias, panics, stupidity and recklessness is tempered by sensible supervision and regulation. And may the unfolding mortgage disaster bury once and for all the neo-con supply side voodoo economics religion of unregulated free markets fundamentalism."