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Think Tank: FinReg edition

Since the blog -- and Washington -- is shifting focus from health-care reform to financial-regulation reform, this week's Think Tank is something of a primer. As it happens, all the links are to reports put out by the Roosevelt Institute, because it has been publishing the best introductory articles by far. For anyone who has the time and the inclination to really get up to speed, download the whole of the 'Make Markets Be Markets' report (pdf). For those who want selections, here are my favorites:

1) Mike Konczal writes up Financial Reform 101. Anyone who doesn't feel up to speed on FinReg should start here.

2) Richard Scott Carnell explains that "in banking, the debacle was above all a regulatory failure."

3) Elizabeth Warren makes the case for a Consumer Financial Protection Agency.

4) Raj Date argues that it's time to get ride of Fannie and Freddie.

5) Rob Johnson lays out what it will take to end the 'Too Big to Fail' threat.

By Ezra Klein  |  March 29, 2010; 11:30 AM ET
Categories:  Think Tank  
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Next: Three out of four developed countries agree: Tax the banks!


Most of the Roosevelt pieces are quite good. But the Raj Date piece is full of simply bad data and information and reads like an American Enterprise Institute or Cato ideological screed on how the GSEs caused the crisis. Arguments like the GSEs purchased subprime securities solely due to the affordable housing goals are just false. And it completely misses the point that the GSE-purchased loans in RMBS and portfolio (not the subprime securities it owned) performed quite well until housing prices had already dropped by 20% and unemployment was up to 9% - conditions under which pretty much any loans would be stressed. And they are still far better than any private-label loans of similar vintage.

This is not to defend the GSEs. But their problem was that they were allowed to invest in subprime RMBS, and later, purchased Alt-A whole loans.

Yes, they should not be reconstituted as they were, but to suggest that the government should have no role in securitization is to invite subprime securitization redux. Good luck with that!

Posted by: danimmer | March 29, 2010 7:36 PM | Report abuse

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