Malkiel

Paulson's Plan Fails to Understand the Problem; Madoff Is a Perfect Example

It seems clear that the Treasury and Fed should know how much "money" exists in the economy; and since the organs of government have the capability of raking in W-2 forms from every worker and matching them up with the paperwork, or chasing down every villain who dares to withdraw $10k from their bank accounts by using small amounts, it should in principle be possible for them to maintain a database into which all loans or other products created by public entities such as banks or brokerages could be entered. Electronic reporting could be facilitated by standardizing loan forms for various transactions (they can vary by jurisdiction so long as essentials such as principal, interest format, and down payment are included). Hedge funds of course should be regulated just like brokerages and should be reporting their activity. The object is not to prevent players in the economy from doing what they do, the object is for the essential public players like Treasury to have the data needed to manage what they do. The argument that hedgies should be allowed to do their dirty business in secret or banks would be burdened by extra paperwork rings pretty hollow at this point--if actors in the economy can "create" money outside the banking system, then the agencies of government which protect the value of the currency the rest of us use are entitled to the particulars of that process, even if some of the information (just like tax info) is kept non-public...

AIG Downgrades Should Create an Endgame

I'm with JasonC, it is truly bizarre to see how sincerely some of these "free market" radicals believe in that concepts so implicitly, like God or the tooth fairy, when the evidence for the manipulative nature of corporate capitalism and its reliance on government for its very existence is everywhere evident. Capitalism is not about free markets and is only possible as an interaction of government and corporations at their highest levels. Unless you're naive enough to believe the engines of wealth creation are going to be reconstructed after a crash without a central bank and monetary policies it would be better to use the organs of government to head off the crash. It will be interesting to see if the former chairman of Goldman Sachs could really be such a naive true believer in "free markets" as treasury secretary that he fails to use his powers to save the goose that lays the golden eggs...

AIG, Fannie and Freddie Put the Crunch on Condo Mortgages

This discrimination against condominiums vs other kinds of housing is irrationall would probably meet with regulatory scrutiny. Condominiums make up most of the affordable housing in many markets, and are usually LESS price-inflated than other kinds of housing. If a first-time buyer qualifies for an FHA, and is only able to come up with a 3% down payment which would trigger mortgage insurance provisions, what justification would the mortgage insurer have for refusing to cover simply because the housing in question is a condominium? What about coops and neighborhood associations?