Comment on: Re: Different Way of Looking at the Sub-Prime Mortgage Crisis

Bigthink — Tue, 01 Apr 2008 18:54:27 +0100

@ WaltB. You are wrong. The clip does not purport to be a solution, first of all, it purports to be a way to look at a problem.

But I disagree further that it does not offer ideas for solutions. It offers two ideas, one general, one specific.

General: "products for the mind" (like loans) could or should be designed as thoughtfully as products for the body, like phones, keyboards, cars. Valid and relevant.

Specific: To avoid bubbles (caused when credit is too loose, and people collectively begin to act irresponsibly) lenders could/should to be required to help borrowers determine the right amount to borrow, given their financial capabilities. Very interesting, relevant, valid and unusual approach to the problem, and a very interesting idea for a class of solutions.

That said, big, rich banks, hedge funds, etc, with friends in high places will find ways, laws be damned, to sell whatever they can if it's profitable. So it's not clear to me that telling the fox to guard the henhouse better will help.

Still, it is a worthy goal for a buyer to discover the optimal amount to borrow, given his financial wherewithal. Markets in which buyers only buy what they can afford, by a more rigorous definition of the word "afford", do not suffer from bubbles of the kind that's busting in the US right now.

Bigthink - Idea Comments Feed

Comment on: Re: Different Way of Looking at the Sub-Prime Mortgage Crisis