Banks and financial institutions want diverse portfolios with uncorrelated investment risk to reduce the impact that a single, poor-performing asset will have. Mortgage-backed securities provided, among other benefits, such diversity. Risk was reduced by packaging “pieces” of mortgages from communities around the country. But nationwide government policies and regulations – among other things – helped to correlate those geographically uncorrelated risks.
Fed monetary policy fed a nationwide housing boom, as did legislation like the Community Reinvestment Act and American Dream Down Payment Initiative. Congress ordered Freddie Mac and Fannie Mae to purchase hundreds of millions of dollars in sub-prime mortgages from around the country, relieving lenders of the need to carefully vet borrowers’ ability to repay their loans. The Basel Accords required financial institutions to define, calculate, and deal with risk in a uniform way. All this regulatory herding led to a regulatory stampede when the Fed tightened its monetary policies.
Ironically, many people blamed the repeal of Glass-Steagall for the collapse – ironic because the repeal had allowed banks to diversify their portfolios, which reduced risk and may have helped to cushion the impact of the housing bust. Similarly, the post-bust consensus that the federal government must financially back institutions that are “too big to fail” creates incentives for institutions to grow and become “too big to fail,” further correlating risk.
FWIW, after reading your Essay #7 and #8, I've purchased the book. Though I'm just getting started, it would have been handy for me umpteen years ago when I took economics as an undergrad. The writing is straightforward, even for a retired business dweeb like myself, and more "real" than what felt pretty abstract to me back then.
Socialism probably works ok with the mass copying and wide distribution of all digital info, to each according to their desire, not need. Stealing is immoral not because they get something unearned, but because it takes away from somebody. Copying takes away the intangible, but actual, market value of the digital info protected by IP law enforcement (violence! Coercion!). A patronage model, and prizes, might well work increasingly better, while IP enforcement gets increasingly tyrannical.
IP might be more screwlike, needing different screwdrivers, rather than a nail of stealing, merely requiring a hammer of ever more laws & enforcement.
Banks and financial institutions want diverse portfolios with uncorrelated investment risk to reduce the impact that a single, poor-performing asset will have. Mortgage-backed securities provided, among other benefits, such diversity. Risk was reduced by packaging “pieces” of mortgages from communities around the country. But nationwide government policies and regulations – among other things – helped to correlate those geographically uncorrelated risks.
Fed monetary policy fed a nationwide housing boom, as did legislation like the Community Reinvestment Act and American Dream Down Payment Initiative. Congress ordered Freddie Mac and Fannie Mae to purchase hundreds of millions of dollars in sub-prime mortgages from around the country, relieving lenders of the need to carefully vet borrowers’ ability to repay their loans. The Basel Accords required financial institutions to define, calculate, and deal with risk in a uniform way. All this regulatory herding led to a regulatory stampede when the Fed tightened its monetary policies.
Ironically, many people blamed the repeal of Glass-Steagall for the collapse – ironic because the repeal had allowed banks to diversify their portfolios, which reduced risk and may have helped to cushion the impact of the housing bust. Similarly, the post-bust consensus that the federal government must financially back institutions that are “too big to fail” creates incentives for institutions to grow and become “too big to fail,” further correlating risk.
FWIW, after reading your Essay #7 and #8, I've purchased the book. Though I'm just getting started, it would have been handy for me umpteen years ago when I took economics as an undergrad. The writing is straightforward, even for a retired business dweeb like myself, and more "real" than what felt pretty abstract to me back then.
Socialism probably works ok with the mass copying and wide distribution of all digital info, to each according to their desire, not need. Stealing is immoral not because they get something unearned, but because it takes away from somebody. Copying takes away the intangible, but actual, market value of the digital info protected by IP law enforcement (violence! Coercion!). A patronage model, and prizes, might well work increasingly better, while IP enforcement gets increasingly tyrannical.
IP might be more screwlike, needing different screwdrivers, rather than a nail of stealing, merely requiring a hammer of ever more laws & enforcement.