2016 Postmortem
In reply to the discussion: PSA: How many people here who love to hate "Wall Street" actually know what it means? [View all]DanTex
(20,709 posts)And as much as Bernie likes to yell about Wall Street, neither breaking up big banks nor reinstating Glass-Steagall will do anything at all to prevent private equity firms like Blackstone from buying up homes and securitizing rental payments.
And, no, Bill Clinton did not enable securitization of payment streams like mortgages or rental payments. This predates the Clinton Administration by decades. And by the way, securitization is not a bad thing. The first securitized loans in the US are made by the government, by Ginnie Mae, and by reaching out to capital markets, they were able to offer affordable home loans to people that otherwise wouldn't have been able to get them.
As far as securitizing rental payments, rather than simply declaring it "wrong", what actually needs to happen is that regulations should be put in place to ensure that it doesn't get out of hand. One of the problems cited in the article is that these securities might blow up and investors in them could lose a lot of money. Of course, the same is true with any security. One thing that definitely needs to happen is that credit rating agencies need to be better regulated to ensure that they aren't stamping garbage bonds triple A. Dodd-Frank has already taken steps in this direction. Another thing that needs to happen is that if derivatives are written against these new bonds, they need to be traded transparently, and there need to be rules regarding margin requirements and so on so that the financial system doesn't get excessively leveraged in a way that a downturn could bring the whole thing down. Again, this is also addressed in Dodd Frank. And so on.
This is part of the reason that, as people like Krugman have pointed out, Hillary is the stronger candidate on financial regulation. Fixing the financial system requires understanding how it actually works, and finding solutions that will solve the problems that exist, not just things that sound good but won't make any difference.