> It was within memory that you were defending sub-prime mortgages -
> while doug was saying they weren't a good idea.
You can find most of it here:
http://search.lbo-talk.org/search/swish.cgi?query=jordan%20sub-prime
I still believe that there's nothing inherently wrong with sub-prime mortgages. I'll step out on a limb and say: I'm for them. I think the development of that market was a net positive for mankind. It has been abused, but I'm okay with that: most everything that's good get abused at some point. I believe that the long-term trend away from proprietary lending decisions ("Sorry, you're not our kind of people") and toward objective criteria-based decisions (FICO, et al) is Good For You. I think I would go further than the GSEs presently do and make "sub-prime" mortgages *cheaper* than prime ones. Maybe more detail in another post ...
I also continue to believe that the sub-prime mortgage market is not to blame for the current mess we're in. I'll further clarify that I don't think Doug's position was that they "weren't a good idea" -- but rather, that the extent to which they had been pitched-and-thus-sold was, his word, "crazy" ... and I guess it seems convenient to blame the product ... or even the people who got sub-prime mortgages. I do not believe that returning to "the old days" of lending criteria (redlining, et al) would be progress.
I think my record on this list shows that I don't blame them (similar to how I don't blame SUV drivers for global warming). Maybe you do? There's a lot of that going around, I suppose.
---
My current claim is that if the CDS market had been regulated when it got huge in 2004-2005, none of this would have happened[*]. Regulatory bodies must be vigilant and keep up with/against the urge to find loopholes. Man is imperfect, and regulation more-so. That's no reason to give up: I believe, for instance, the the continual improvement of FMAC/FNMA loan criteria is a good model for this kind of thing. You can read their press releases on the subject of subprime as a voyage of discovery of potential hucksters and positive steps taken against them. Unfortunately, the US Congress disagrees and thinks they should shrink rather than expand (no one asks me!) ...
/jordan
[*] Simple rule: when an OTC market gets big enough that "no one understands it!" then it's time for it to move to an exchange.