The Financial Regulation Law: What Was Completely Missed
This is Gary Becker, writing at his blog:
One of the most serious omissions is that the bill essentially says nothing about Freddie Mac or Fannie Mae. In 2008 these organizations were placed into conservatorship of the Federal Housing Finance Agency. During the run up to the crisis, Barney Frank and others in Congress encouraged Freddie and Fannie to absorb most of the subprime mortgages. In 2008 they held over half of all mortgages, and almost all the subprimes. They have absorbed even a larger fraction of the relatively few mortgages written after 2008. Freddie and Fannie deserve a considerable share of the blame for the crisis, but they continue to have strong political support. I would like to see both of them eventually dissolved, but that is unlikely to happen.
I second everything Becker wrote.
I also agree with Becker. This is truly scandalous.
What’s happening is ludicrous.
The Wall Street Journal had an article in the July 14th edition about how firms that deal with commodities (e.g. farmers, ranchers, feed lots, meat packers) are afraid they will be unable to hedge risk using derivatives after the new financial regulations take effect. These are precisely the firms that derivatives protect. Rather than lowering risk; the new regulations will increase the risk for many firms.
Government seems to want to “fix” everything … except government.