There's an interesting piece from hedge fund manager Dour Kass over at TheStreet.com on who's to blame for the subprime mess. A few thoughts:
* While it's easy to blame Wall Street for throwing together ever-more exotic (and toxic) structures comprised of low-quality mortgage pools, where is the criticism of Kass' hedge fund brethren for lapping this stuff up, stuffing it in portfolios, and then not marking it to market?
* Similarly, while the ratings agencies do not deserve to be totally absolved from blame for their tardiness in downgrading low-quality credits (a penny that has yet to drop in many quarters), one of the primary reasons for this is the pilfering of ratings staff by brokers and, you guessed it, hedge funds!
* Macro Man was also disappointed not to see blame apportioned to the many subprime mortgagees who committed fraud by misrepresenting their income, the value of the property to be mortgaged, or the reason for the loan. Yes, it is unfortunate that many people may be forced to lose their house, and the subprime lenders are correctly rapped on the knuckles in the piece for their largesse. Ultimately, however, people should be held responsible for their actions, else moral hazard increases and each bubble proves to be bigger than the last!
* The government probably opprobrium for dithering over Fannie and Freddie and allowing them to balloon their balance sheets to the degree they have while still maintaining the Federal guarantee.
Otherwise, an interesting piece- Macro Man concurs that criticism of Greenspan is this situation is probably warranted.
* While it's easy to blame Wall Street for throwing together ever-more exotic (and toxic) structures comprised of low-quality mortgage pools, where is the criticism of Kass' hedge fund brethren for lapping this stuff up, stuffing it in portfolios, and then not marking it to market?
* Similarly, while the ratings agencies do not deserve to be totally absolved from blame for their tardiness in downgrading low-quality credits (a penny that has yet to drop in many quarters), one of the primary reasons for this is the pilfering of ratings staff by brokers and, you guessed it, hedge funds!
* Macro Man was also disappointed not to see blame apportioned to the many subprime mortgagees who committed fraud by misrepresenting their income, the value of the property to be mortgaged, or the reason for the loan. Yes, it is unfortunate that many people may be forced to lose their house, and the subprime lenders are correctly rapped on the knuckles in the piece for their largesse. Ultimately, however, people should be held responsible for their actions, else moral hazard increases and each bubble proves to be bigger than the last!
* The government probably opprobrium for dithering over Fannie and Freddie and allowing them to balloon their balance sheets to the degree they have while still maintaining the Federal guarantee.
Otherwise, an interesting piece- Macro Man concurs that criticism of Greenspan is this situation is probably warranted.
1 comments:
Click here for commentsI believe that some rapping on the knuckles of the mortgagees is needed just to have the social memory of it all. Later it will be the stuff of family, popular culture and social lore.
However, our betters, are paid quite handsomely, to led us. This is in the financial, social and political senses. They bear the greater burden for these reasons. Else we have the moral hazard of irresponsible leadership who pays no price for raping the lower classes.