When securitization was done properly and responsibly, it was a tremendous boon to the credit markets in many sectors from mortgages to credit cards to car loans and the rest.
When was it done "properly and responsibly"? Once these things get going, and the bankers see a huge pot of gold from fees and leverage, they will keep on truckin' until something stops them.
People complain about government being irresponsible, lol, the bankers have been far more irresponsible in the Age of "Greed is Good" Reagan. They were irresponsible before then as well, but they lacked the subtle techniques and the size to do the same harm. At least since the New Deal, at any rate--they had plenty of chutzpah back in the Gilded Age, and led the country into 3 depressions over a 30 year period between 1870 and 1900, then a panic in 1907 where JP Morgan had to step in and play "central banker" to save the financial system from itself, after which the Progressive Era came in and clamped down a little bit, with the finale coming with FDR. Self regulation will never work with this or, for that matter, any other sector. But this one is more central than almost any other, and should be treated as such.
The period since 1980 hasn't been as bad as the Gilded Age was, but it could have been, and could still be. Regulators have to regulate, and need the authority as well as the administrative backing to do so. If financial instruments are so complicated that bright regulators with that backing can't do their job, or if the financial transactions become so interlocked and opaque that no one can really tell who is solvent and who isn't, then they need to be banned. At least at that kind of scale. The financial system should not be put at risk so that the bankers can pay themselves obscene amounts of money. There is no social purpose for that. |
