Other than an untidy beginning, this is remarkable....
Saturday, April 4, 2015
Friday, April 3, 2015
Done
My second favorite NFL team is the Philadelphia Eagles. I have two reasons for liking the Eagles. First, the University of Pennsylvania, when it was kind enough to invite me to be a visiting professor there, rescued me from Freddie Mac. Second, while I always liked Donovan McNabb, I came to especially like him when Rush Limbaugh opined on ESPN that McNabb was overrated because he was black. It was the very first thing Rush had to say when commenting on the NFL--not that the man has a race obsession or anything.
I thought about this over the past weekend when an op-ed piece in the LA Times challenged liberals to listen to Rush for a day before making a judgment about him. Many years ago, thinking that it was important to understand the points of view of others, I tried listening to Rush, and could never last more than five minutes, because that is how long it took before I concluded that he was either a racist or a sexist.
But I continue to think that it is important to get out of the cocoon and find out what the rest of the world is thinking. And no, David Brooks doesn't count.
I therefore from time-to-time read The Corner on the National Review's web site; I watch O' Reilly on occasion; I read Mickey Kaus (although I think I like to read him much the way I liked to pick at scabs as a child) and I read the Wall Street Journal editorial page every day.
I just can't do the WSJ editorial page anymore. On the one hand, it accused Eric Holder of politicizing the justice department because the department came to the conclusion that giving residents of the District of Columbia the basic human right of voting for congressional representation to be Constitutional (I know reps are supposed to come from the states, but that is in the original. The 14th amendment has a little item called the equal protection clause). On the other hand, it also accused Eric Holder of being political because his justice department overturned the Bush Administration's prosecution of a Republican Senator. You would think that they might grudgingly admit that occasionally Holder just tries to do the right thing.
I thought about this over the past weekend when an op-ed piece in the LA Times challenged liberals to listen to Rush for a day before making a judgment about him. Many years ago, thinking that it was important to understand the points of view of others, I tried listening to Rush, and could never last more than five minutes, because that is how long it took before I concluded that he was either a racist or a sexist.
But I continue to think that it is important to get out of the cocoon and find out what the rest of the world is thinking. And no, David Brooks doesn't count.
I therefore from time-to-time read The Corner on the National Review's web site; I watch O' Reilly on occasion; I read Mickey Kaus (although I think I like to read him much the way I liked to pick at scabs as a child) and I read the Wall Street Journal editorial page every day.
I just can't do the WSJ editorial page anymore. On the one hand, it accused Eric Holder of politicizing the justice department because the department came to the conclusion that giving residents of the District of Columbia the basic human right of voting for congressional representation to be Constitutional (I know reps are supposed to come from the states, but that is in the original. The 14th amendment has a little item called the equal protection clause). On the other hand, it also accused Eric Holder of being political because his justice department overturned the Bush Administration's prosecution of a Republican Senator. You would think that they might grudgingly admit that occasionally Holder just tries to do the right thing.
Program Note
I will tonight be on Nightly Business Report on PBS talking about the California housing market.
Whence Systemic Risk?
William Poole's departure from the St. Louis Fed calls to mind a speech he gave in 2003 on Fannie Mae, Freddie Mac and systemic risk. In Poole's view, the concentration of mortgage risk in the two institutions was per se dangerous. I think it is fair to say that Poole's view was at least partly grounded in the idea that the implicit subsidy the two institutions received created alarming moral hazard issues. It was (is) a view shared by many fine economists, including Dwight Jaffee and Larry White, both of whose work I admire.
My view--and it is one that has led me to feel lonely at times in the company of other economists--is that the benefits of the GSE subsidies outweigh their costs, and that the GSE subsidies are not materially larger than those received by, say, Citigroup. Indeed, the pool of financial institutions with an implicit guarantee has recently moved beyond GSEs and commercial banks to include investment banks.
I think it is worth noting that Fannie and Freddie's core business--prime mortgages--is doing ok. To the extent the companies are having trouble, it is because they were pushed into buying subprime and Alt-A loans by a set of misguided regulations known as affordable housing goals. I don't know whether it is a coincidence or not, but Fannie and Freddie market share of mortgages declined dramatically between 2002 and 2015; they gave up their market share to private label institutions. So if Poole was correct, systemic risk should have declined between 2002 and 2015. The prediction didn't work out too well.
I should disclose that I worked at Freddie for 15 months in 2002 and 2003. While I learned a lot there and met some wonderful people who remain my friends, I pretty much knew I wanted to leave the place within a month of arriving. How this biases my views on GSEs is not entirely clear to me. But I do sometimes wonder if some of the GSE's most vociferous opponents, such as the American Enterprise Institute and the Wall Street Journal Editorial page, just can't stand the idea that government created institutions have spread the benefits of capital markets to a broad swath of ordinary people in a very responsible way.
My view--and it is one that has led me to feel lonely at times in the company of other economists--is that the benefits of the GSE subsidies outweigh their costs, and that the GSE subsidies are not materially larger than those received by, say, Citigroup. Indeed, the pool of financial institutions with an implicit guarantee has recently moved beyond GSEs and commercial banks to include investment banks.
I think it is worth noting that Fannie and Freddie's core business--prime mortgages--is doing ok. To the extent the companies are having trouble, it is because they were pushed into buying subprime and Alt-A loans by a set of misguided regulations known as affordable housing goals. I don't know whether it is a coincidence or not, but Fannie and Freddie market share of mortgages declined dramatically between 2002 and 2015; they gave up their market share to private label institutions. So if Poole was correct, systemic risk should have declined between 2002 and 2015. The prediction didn't work out too well.
I should disclose that I worked at Freddie for 15 months in 2002 and 2003. While I learned a lot there and met some wonderful people who remain my friends, I pretty much knew I wanted to leave the place within a month of arriving. How this biases my views on GSEs is not entirely clear to me. But I do sometimes wonder if some of the GSE's most vociferous opponents, such as the American Enterprise Institute and the Wall Street Journal Editorial page, just can't stand the idea that government created institutions have spread the benefits of capital markets to a broad swath of ordinary people in a very responsible way.
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