I shared this article with some people at work to discuss what they thought of arguments coming from the other side. What I found was that people were so angry at "Wallstreet", that it was nearly impossible to hear any discussions on the merits of what he was saying. The fact that he was at all defending banks was enough to turn most people off. (I do admit that his use of rhetoric like "pogroms" and "totalitarian state" is so hyperbolic that it detracts from a lot of his points worth considering)

The article is here APPALLED IN GREENWICH

He is appalled because Obama's narrative is to blame the financial collapse on the evil bankers. Mr. Asness agrees that there is blame to be had with his banker buddies (he runs an invest firm), but thinks the problem lies in a lot of places where the finger is not being pointed. He does all this with some fun pop culture references.

I'm curious to hear comments. (this article is also posted on businessinsider.com and the article mentioning it seems mostly negative) I suspect it will have a warmer audience here.

There's certainly plenty of blame to go around. In 2005, 24 percent of all mortgages were done without any down payments, up from 3 percent in 2001. More than 40 percent had limited documentation. One-third of new mortgages and home-equity loans were interest-only, up from 1 percdent in 200, and 43 percent of first-time home buyers put n o money down.

And the federal "regulators" did nothing about it; rather they were thrilled. Greenspan gave a speech in which he said that borrowers would benefit from using adjustable-rate mortgages and that "a national severe price distortion seems most unlikely." And Mand Freddie Mac became insatiable for the high-interest mortgage bundles. And then Moody's and S & P blessed the motgage pools with top ratings.

IMO, Obama ought to stop blaming and start governing. As he pointed out, the Dems have had the biggest majority in the congress in a long time and people expect them to get things done.

Don't worry, the FHA has picked up the slack of low down payment loans where those greedy bankers have been falling behind in.

1) We need as a society to let go of the notion that home ownership is a good thing for all people....and we PROBABLY need to phase out SOME of the inducements we give for people to buy homes.

In a modern economy where many people need mobility and flexibility(i.e. you got to move from Southeastern Michigan if you want a good paying job right now) its not attractive to have so many tens of millions completely shackled to a particular area by underwater mortgages/just plain mortgages.

2) The bankers MUST be reigned in. The fact that all this money seems to have been handed over with no strings attached is ridiculous. The fact that our central bank is now lending money basically at 0% and in effect giving banks a license to sit back and print money without taking on risk...and therefore they are able to "pay us back" is irrelevant.

Our govt took on trememndous risk/leverage to SAVE THIS INSTITUTIONS AND INDIVIDUALS FROM RUIN. They are owed NOTHING. Now it is time to bring them back into reality.

They failed....they have little or no footing to argue against sweeping new regulation and limits on compensation.

If we lose some marginal business....sobeit. Some of the more exotic stuff we could do without obviously.

If we lose a lot of IB or something....then we are merely accelerating a process that would have happened anyway as there will always be a "wild west" is Asia or Moscow where people can operate with less "interference" than in the US. Tax/confiscate the hell out of it on the way out.

I agree generally, but the "exotic" business and the "marginal" business isn't anything but fictitious bets that are made with the certainty that even if a loss incurs they will some out ahead. Those are useless businesses and should be removed, and by all means of the marketplace should have been removed already.

the problem isn't regulating, it's poorly done regulation.

regulating such that the banks lose their ability to be successful does no one good except for politicians campaigning on an "anti-fatcat" message

Government created perverse incentives. These incentives should be eliminated. I'm with you so far.

Despite acting rationally in the face of perverse incentives and the moral hazard of implicit guarantees, banks are the problem.

Government lavishly rewarded bad behavior. Proceed.

Government continues to reward bad behavior. Proceed.

You're right. They should operate in a world with honest incentives and actual consequence. This sounds more or less like the foundational principle of this republic.

In part one we argued that government created perverse incentives.

We now present a solution: regulate the regulations. Wall Street will not game this system; it may have happened every time before but this time it's serious business.

We should limit innovation and productivity because the banks don't have the restraint to keep from bailing themselves out.

I thought we established that US "interference" with the finance industry is absolution of any and all business sins. This sounds like an ideal circumstance under which to operate.

If all else fails, I then advocate tyranny.

There is a pretty simple mechanism by which banks are punished for poor lending decisions. Oh wait.

Oh I missed Riverman.

You win the thread.

My formerly rich uncle lives in Greenwich. He told me his house could've gone for $9M at the top of the market. It looks like a pos outhouse compared to the castle next door. Somehow I can't feel sorry for those people.

i just wonder how can it be the bankers fault when they were forced by government to stop redlining. bad as it was you need to have incomeworthy of your loan payment to get a loan. now you see 10% of all home loans underwater. im guessing most of these loans would not have been given out in the bad old days of fiscal responsibilty by bankers. so i think we should blame our friends clinton and frank for giving everyone a shot at the american dream. oh and wait a year or so until all those cars that got bought during clunker time start going under. we wont be able to blame that on anyone but his highness barack. think about it.

There is this instituton in the U.S. called the Federal Reserve. You might want to look into this institution before spouting off as some kind of authority on the subject of mortgage lending in America.

riverman how can you argue with common sense

I don't give much credit to Obama's bank bashing. There's a gulf between what he says and what he does. What he did was save them. Now, after doing the expensive deed, he talks a little trash.

I think his comments have more to do with using populism for a short term boost in polls. I think the bankers understand this. They've been bad, they're gonna be used for a few months as whipping boys, but they've already been saved, so aren't going to freak. We might get a few bones out of the rhetoric. Re-separating banking from investment would be nice.