"Since the credit crisis began, I have frequently found myself in agreement with Paul Krugman. Not everything, but for the most part, especially on many major points, we are sympatico: He has been correct about Moral Hazard, about the folly of these many bailouts, about the advantages of nationalizing the banks. And, I suspect he is right that the economy would benefit (short term) from a bigger rather than smaller stimulus."
I agree totally with Krugman. Securitization run amok is the reason that this will end up being Depression II.
Only about 30% of the loans have to fail
TO TANK THE WHOLE SYSTEM because they were securitized unbelievingly around the world. These made-up values (ponzi scheme) took the money today to pay yesterday's investor and now the music has stopped.
I disagree with you about the bad loans being written as the cause,
the need for more income from securitization caused Wall Street to flood the originators with free unencumbered funds
and unlimited funds to builders who overbuilt which caused the value of the collateral ON ALL OF THIS SECURITIZATION to fall
When these insurance companies, hedge funds and pension funds are opened up it will be amazing.
Madoff will seem like a wimp compared to the larger Ponzi schemes tied to securitization around the world. Everything is connected here.
This will lay right at the door of Glass-Steagall, won't it Mr. Rubin? Permalink