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Originally Posted by merrylander
^^^^ But was it sound economic policy? From the banks point of view probably, from the homeowners who took the royal screwing not so much. I like Sheila Bair's approach better.
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I think there's plenty of blame to go around for events leading up to the collapse of the mortgage industry. Some folks like to obsess or focus on a single piece of the puzzle, possibly like Ms Warren. I suspect Ms Warren would hold blameless or overlook the culpability of those who knowingly took out mortgages that they knew would be difficult to pay. The banks employed a dubious strategy to mitigate the risk of poorly underwritten mortgages while the Fed pushed a policy of (ridiculously) easy money to encourage expanded home ownership.
Was it sound economic policy that pulled out of that mess? Its not what I would have wanted to see, but it was a policy that was chock full of political expediency that happened to work out OK, at least in the short run. I think a precedent of financial institutions willing to assume risk against of belief that they'll be bailed out by tax payers sets a bad precedent and creates of potentially toxic environment. Time will tell.