He offers a raft of suggestions: originators should retain the riskiest portion of securitised loans; prime brokers should stop lending to hedge funds that fail to disclose their balance sheets; trading of credit derivatives should be brought onto exchanges for the sake of safety, even if this raises costs; and some version of the old Glass-Steagall act, which separated commercial banking and capital-markets activities, should be re-introduced. Ultimately, he argues, after a quarter-century of “market dogmatism” it is time for the regulatory pendulum to swing the other way.
Wednesday, March 19, 2008
Lessons from sub-prime crisis (contd)
I had a post earlier on this topic. The Economist reviews a book, The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash -Charles R. Morris, that makes a number of suggestions: