walkitout (walkitout) wrote,

Safety First

I haven't read the proposed financial regulation, but the it's-not-good-enough commentary I've been reading from Krugman and others I do not necessarily find particularly compelling. In particular, the people who think that the ratings agencies need to be regulated, I think, have entirely missed the point. The proposed regulations seem to go a long way towards reducing the amount of shit paper out there by putting a stop to making loans that are bad for the people who are borrowing -- which, despite what a lot of people convinced themselves and others, are _actually_ even worse for the people who are lending the money. Systemically bad lending environments are like a game of hot potato in which the hot potato has been replaced with a nuclear reactor that is about to go critical. It's still going to burn your fingers, and it's really crucial to pass that sucker along to the next, er, sucker, but it isn't going to cool down as it moves along and eventually, it will destroy everything in the vicinity.

To switch analogies midstream (er), we're looking at the aftermath of an extremely bad car wreck. A large, fast moving vehicle has gone through a barrier and right over a cliff. The passengers in the vehicle who weren't killed as it bounced along the cliff mostly drowned in the deep and cold waters below. Obviously, no one wants to have that happen again, barring some people who watched it all on TV and happened to really, really, hate someone in the vehicle and is overjoyed that They Got Theirs. So to speak.

A variety of factors contributed to those deaths. Deep cold water. Can't do a lot about that, other than Not Go There. Cliff. Ditto. We could reinforce the barrier (do something about the ratings agencies), and that might help, but this particular vehicle was so large and so fast that the kind of barrier required to not fail would probably have the side effect of killing a lot of other people who hit it in smaller vehicles moving less quickly. (Jersey barriers are designed to redirect for a very good reason.) Enforcing a speed limit is probably important. But if an investigation leads us to conclude that the vehicle in question _had no brakes or steering, and the throttle was permanently pressed to the maximum_, then the real problem lies in not letting vehicles like that have people in them, get on the road, etc.

If you make sure you don't have a crazy lending environment, the details of the ratings agencies is a lot less important. And if you don't have a crazy lending environment, there probably won't be so much money sloshing around that someone is tempted to hand a lot of it over to the executives.

I don't _know_ that the proposed regulations are necessary and/or sufficient. But I'm not really that impressed by arguments against them based on ratings agencies and executive compensation. Even if the ratings agencies and executives are currently topping my Hope They Get Theirs list.

ETA: My LJ posts are propagated automagically over to Facebook. Weirdly, this entry resulted in a libertarian edging into Republican Talking Points comment from a man who I vastly admire, a friend, ex-coworker, great dad and super-cool-thrower-of-parties (with the Best Christmas Lights Ever), a response from another man I vastly admire, a friend, great dad, bicycle commuting, garden growing, air travel avoiding, I Wish I Were That Good a Human Being, and then lively back and forth thereafter. Neither, needless to say, had any particular impact on the opinions of the others. While I may complain about Krugman on occasion, my opinion falls far more on the side of G. than of B. -- and watching the back and forth, it's quite clear what was going through Obama's head when he put this package together.
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