Re:The Real AIG Scandal
by anamax on Wednesday March 18, 2009 @07:22PM
(#522534)
> You could argue that the OTS or other bodies already had the authority needed to place limits on issuance of derivatives.
The problem with this argument is that the issuance is irrelevant. My standing on a street corner selling billion dollar cats isn't a problem.
The problem was that regulators said "sure, buy as many of those cats as you can find and hold them as assets". The unregulated firms saw that for the crock that it was.
We got hit by two problems. One was subprime loans, which were pretty much a creation of regulation and govt action. The other is bogus assets accepted by regulated institutions. Again, regulators failed.
Yes, the unregulated institutions have also taken a hit, but only to the extent that they counted on the regulated ones.
There's another thread in HN about folks driving more dangerously because they think that their cars have some feature that reduce the risk more than it does. (Or, as a friend of mine puts it, the folks with a winch are the ones who get stuck.)
The problem with this argument is that the issuance is irrelevant. My standing on a street corner selling billion dollar cats isn't a problem.
The problem was that regulators said "sure, buy as many of those cats as you can find and hold them as assets". The unregulated firms saw that for the crock that it was.
We got hit by two problems. One was subprime loans, which were pretty much a creation of regulation and govt action. The other is bogus assets accepted by regulated institutions. Again, regulators failed.
Yes, the unregulated institutions have also taken a hit, but only to the extent that they counted on the regulated ones.
There's another thread in HN about folks driving more dangerously because they think that their cars have some feature that reduce the risk more than it does. (Or, as a friend of mine puts it, the folks with a winch are the ones who get stuck.)