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A bank's purpose is to manage credit risk. If a bank's management can't make money on the spread between the Fed lending rate and the mortgage lending rate, the
by pjmorris 9y ago
A bank's purpose is to manage credit risk. If a bank's management can't make money on the spread between the Fed lending rate and the mortgage lending rate, they should get out of the business. I don't know whether the top echelon of circa-2007 bank management should be in prison or not, but I do know they ought to be working as baristas or something rather than continuing to run businesses they aren't competent to manage.
- qaq 9y agoFinance sector is 40% of US GDP so while it's cool to throw around theoretical "solutions" they would need to account for this simple fact. So let them fail was not a realistic solution.
- pjmorris 9y agoFree-market fundamentalism, as I have advocated for above, may be too much to ask of capitalism. I do think it's fair to ask whether US citizens, who have been asked to spend Trillions on the 'free market's' behalf (see the Fed's balance sheet pre- and post-crisis [0]), were best served by the way in which it was done. Keeping housing prices high and the existing management in place was not the only way to use those new funds. [0] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...