On Apr 24, 2009, at 3:10 PM, Michael Pollak wrote:
> But the longer that this drought continues, the bigger the policy
> issues become. After all, no politician wants to see the government
> buying mortgage-backed bonds forever; but nobody really believes
> that traditional, old-fashioned lending can take up all the slack.
> So either the system needs to find a way to restart securitisation
> or we face a world where credit will remain a highly rationed
> commodity for a long time to come.
But what if securitization enabled excessive lending to people who shouldn't have been borrowing? This whole "get lending restarted" thing has some serious problems if you think that debt levels remain way too high, and that the real economy's dependence on credit got way out of hand over the last decade or three. It's one thing to prevent an implosion of the credit system, a la 1929-33, and another to try to restore the world of 2006.
Doug