It was disorienting when I happened across this article a few weeks ago by Justin Fox in Time mag. (I wouldn’t want Time in our house; it was something I saw while making a cup of coffee in the lunchroom at work.)
Talking about the sub-prime loan crisis, he says:
Does this mean we need more regulation? Maybe, maybe not. It does indicate, though, that the mortgage business might be due for a return to its roots.
The disorienting part was that he seems to care what kind of regulation might be needed. Usually you have lefties crying for more regulation, and righties wanting less. It’s frustrating, because what usually matters is the kind of regulation.
Do people want regulation that creates new bureaucracy with the power to play favorites? Do they want regulation that uses market forces to the maximum extent possible? We hardly ever get into those discussions.
That’s not exactly what Fox wants to talk about, but he does seem to keep his head about him. And I think he makes a plausible point about the need to “shift mortgage risk back into the banking industry.” Maybe I’m prejudiced, because I think that too often the God of Almighty Liquidity creates situations where people-to-people interactions vanish, which is what happens when banks freely sell off loans to other companies that have had no relationship with the borrower.