Caught My Eye

Arnold, my guess is that you are half happy about Frank's comment. You like the idea, but what about all the other government incentives that surround housing? What good is eliminating securitization without limiting all the other government incentives for housing? Reducing securitization just transfers the risks around.

On the other hand, this raises a good question: what is the one thing we want to get out of financial regulation reform? I don't think I'd put less securitization on top. I think I'd start with less concentration, but I'll willing to hear other ideas.

I don't disagree with Barney Frank's view of securitization now. My point is that back when it mattered, he was the world's biggest proponent of anything that made mortgage credit cheaper and more lenient, including securitization.

And when the lack of securitization makes lending more expensive, we will see other interventions to bring the price back down...oh...wait... we are already seeing this. My bad.

Interestingly, the second most important thing about financial regulation turns out to be limiting Barney Frank.