Malkiel

Bill Gross: Fed Will Be Fixated On Housing For 'Next Several Years'

The Brave New World's problems, beginning in the roaring '80's and exemplified by Milken, Enron, and New Century Financial, stem from having accounting, reporting, and information-handling standards that are too primitive for the complex nature of the modern markets. As much as the anti-government crowd in business hates it, the cure for the problem is government-imposed requirements codified into law, with input from business on technical issues. Sarbanes-Oxley is the latest example of how government has stepped in to provide the rules that no market player would otherwise be in a position to impose. The mortgage crisis will result in more government regulation forcing lenders to adhere to prudent practices in the application process; conservatives will gripe, but the market will be a better place for having rules and that segment of the economy will stabilize and be less likely to hurt the economy in the future. The value that government regulation adds to American markets by stabilization of business practices is the dirty secret that few dare speak out loud...