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-- -- call -- housing bubble began to -- much of the blame was put on reinstate you mortgage brokers who gave unsuspecting homebuyers loans they couldn't afford.
But the thing about that theory is that these bankers were only following policy policy set by the government.
And actually house financial services chairman Barney Frank which as my next -- calling the congressman the real.
Predatory lenders goes way beyond health care and housing is just in general -- bill Allison is with the American enterprise it's.
-- dangerous right now -- -- to -- great to be here on so he started it.
Yeah of course he started I mean there has been a government policy in since the 1990s.
To increase homeownership.
And the thing that this.
-- it reveals this in the Wall Street Journal today.
Is that most of that bad mortgages they're 25.
Million bad mortgages in the United States today but up what I mean by that is sub prime.
And alt a mortgages 25 million it's almost 50% of all mortgages.
But it turns out that two thirds of those mortgages.
Were bought by the government itself.
They had encouraged by the government now.
It would go Frank's office and he wouldn't -- but we did get a response again he declined.
What here's what he said essentially the -- try to get to the point.
-- Wallace -- out that fails to point out that it was the Bush Administration pushed Fannie and Freddie is affordable housing -- to 55% over the objections.
Of the congressional Democrats.
Like represented Barney Frank our economy is suffering from -- policies of President Bush.
And his congressional.
That's what -- Well actually.
The article doesn't deal that all with -- questions what it feels who it is who is really to blame.
For creating all of these mortgages and in fact it was government policy that did that.
No resume once upon which -- were encouraging getting more folks -- not sure that and that was that the -- behest of congress right that's right congress and it began of course in the Clinton administration but it did continue on through the Bush Administration I think you're right it's a bipartisan way I -- -- to.
But we should when there was a point in the middle of this with Freddie and Fannie that -- is frank was recommending that it is right the stocks are sound and it was found some that was and -- -- I isn't when -- wrong on something you admit you're arguably had a guy -- everyone say we were we wrong and stupid.
All right so what happens now I mean.
They're gonna -- be demanding a lot more of the financial industry everything from front paid -- how loans -- repackaged or package from the start.
-- -- Well.
Right now things are taken up in congress of course with a health care issue.
Legislation has begun to move.
India in the house committees that and especially by Frank's committee but it's it's not the most important legislation the most important legislation from my perspective.
It's legislation that requires.
Banks and non bank institutions to be regulated by the government now bank should always be -- But to extend regulation to the rest of the financial community to insurance companies and hedge funds and securities firms.
And finance companies would really reduce.
All of the risk taking and.
Our -- well I don't know what -- so a lot of people very powerful CEOs really people's -- say that hedge funds have gotten past.
And that at least if you're gonna be looking at regulating.
Your mind as we'll get them up to speed.
Well I don't I don't agree with that you know -- people who think that in fact before.
This crisis arose everyone was saying that the hedge funds.
Are an accident waiting to happen if we have a crisis it will be because of -- turns out.
We have had a crisis but it's because of the banks and the banks would the most regulated institutions in our society.
So you have your argument is we don't need more regulation we need to take better advantage of the regulation we already have but -- that's not gonna happen -- and they're gonna have.
This consumer protection agency and all that that will be a layer over against this SEC the CFTC and all these other opponents what happens.
Actually one of the most amazing things in Washington is that whenever regulation fails as it did with the SEC and Madoff of course as it did that the banks.
Which caused this crisis the banks with the ones who -- the weakest.
They -- given more power the regulators seek and are frequently given more power by congress.
That's the wrong way to go we ought to be looking at much different ways of controlling.
Like one well one of the ways is market discipline market discipline works very well if creditors.
Get the information that they need to discipline companies to understand the risks that companies are taking.
Right now we rely too much on regulators to know what kinds of risks companies to take but you don't.
Build them -- and -- -- -- its list of the fact sold very clear now that in the middle of the housing right up.
I probably should have seen that when when when condos in Florida -- were roughly the GDP of Latin America that was I think that was getting excessive but.
In the middle of the the party you don't realize you're getting drunk right so so how do you or -- -- -- or should you police that.
I think there are ways to police that we haven't tried them.
-- it is possible to have metrics of risk taking.
Analysts would assists regulators in making up these metrics.
Short term -- the liabilities of a bank.
Compared to be long term assets that it's carrying that creates a lot of liquidity problems.
And so if you go beyond a certain ratio than you can't do it well yeah it was policing that -- that would be the market if the market understands that the banks are taking that kind of risk.
Then they will insist on higher interest rates for loans.
To look at the market.
Knew that countrywide was lending -- anyone with a pulse.
And must have known that there was a great deal congress to -- -- -- and country -- was selling like if I'm not sure the market did understand what all of the kinds of links to -- so how would that information be made known.
Well keep what you have to do is have people in the back in the institution who are required by the regulators to make.
This information public so the market gets a bit of sense.
What countrywide is carrying on its balance sheet and that cut the quality of the mortgages that it's carrying on its -- I don't think people understood that at the time and what we what we really should do is make sure the creditors understand perfectly well.
What the what the risks of these banks and other institutions taking -- -- Is dismissed but it's -- but we'll make it worse by bringing the government in and giving it control over the financial industry.
-- -- -- -- -- -- Etc.
I don't agree on a fish out of there and I did Allison thank you very much decision be.
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