Quote:
Originally Posted by ADL Colin
Snake Doctor, and how best to even regulate that? The financial innovations of the past 25 years allow risk to be bought and sold. Are we going to regulate the buying and selling of risk by two interested parties? How about the leverage being built into these products? I wrote "$180 trillion" in derivative contracts above but BIS recently put the figure at $516 trillion most of it in interest rate contracts but $51 trillion in credit derivatives. $51 trillion is more than 4 x the entire US annual GDP.
BIS paper: http://www.bis.org/publ/otc_hy0711.htm
This amount of leverage is certainly a serious threat. |
Honestly, as liberal as I am, I don't think it should be regulated. The government shouldn't step in and do anything.
They already have programs for people to refinance if they never missed a payment before the adjustable rate went up and if they have equity in the home (i.e. put money down)
The government shouldn't bail people out who bought homes they couldn't afford, and they shouldn't bail out investors who bought the mortgages. The way capitalism works, the buyers should get foreclosed and the investors should lose a portion of their money for making a risky investment.
We're getting into "moral hazard" territory here and I don't like it. For instance I took a fixed rate mortgage two years ago....now I could have taken an ARM or interest only deal and bought a bigger house but I didn't....I bought what I knew I could afford long-term....and yet now the government wants to take my tax dollars and use it to bail out people in McMansions who got in over their head? That's bullshit if you ask me.