September 23, 2008
Bailing in
This story on Morning edition made me laugh and laugh. The setup for the joke is that, as a result of the commitments that the Secretary of the Treasury has made over the last two weeks, the United States government is in the business of processing home mortgages and credit-card debt. This means that someone from the government will have to scrutinize all of those risky loans that our financial institutions made. Among recent mortgage loans, only about one in ten was evaluated properly by the financiers, but the government is going to have to look carefully at all of them if it expects to recover any of the money we’re shelling out.
It goes without saying, though, that the existing staff of regulators is far too small and too poorly trained to do all this difficult work. We need some experts. We need to outsource the problem to people who really know how to assess mortgage loans accurately and in detail. Where will we find such people? Where, oh where?
Well, it turns out that there are quite a few folks who have just lost their jobs with large financial institutions and have lots of experience in just this kind of work! Why don’t we hire them on? And, in addition, there are some surviving large financial institutions who are at somewhat loose ends, now that they aren’t making so many loans. They’re perfect sources of expertise about mortgage loans — they’ve made millions of them! Why don’t we just contract out the whole troublesome job to them?
The news story barely mentioned the next problem: oversight. Obviously neither the Congress nor the existing government regulators are capable of managing such a large staff of loan examiners to make sure that they work efficiently and accurately in the service of the public. Where, oh where, can we find administrators who really know how to manage financial institutions overseeing large quantities of iffy mortgage loans?
Along the lines suggested above for the loan examiners, I have a modest proposal. I hear that there are quite a few senior executives at investment banks and institutions like Freddie Mac and Fannie Mae who are now looking for new jobs. They have exactly the kind of experience that the government needs to manage the bailout programs! Admittedly, they’re used to receiving exorbitant salaries — but, what the hell, we’ve got seven hundred billion dollars to play around with! We can afford to hire the best!
Filed by stone at 22:19 under Uncategorized
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