Reply to Barney Frank is being quite candid

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]People like to say break up the banks because it is a simple solution they can understand.  It actually is neither possible nor desirable.  Better to focus on areas where there are almost no regulation but tons of money like shadow banking and off book assets, much of which is still related to mortgages . People don't like complexity but the financial world is indeed complex.  Pretending it isn't just leads to ineffective solutions.[/quote]

sorry the math for 30 year mortgages has been around for 400 to 500 years.

it is not that complex.  it hasn't changed that much.

any company could do it except regular companies can't borrow at the rates Fannie and Freddie can because of the gov guarantees.

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Repeating the same simplistic solution over and over doesn't make it any more,appropriate, sorry.  Banks do a lot more than offer mortgages.[/quote]

Yes, but real estate, either residential or commercial, has almost always played a prominent role in all of our most recent bank hiccups or crises. The math for 30 year mortgages may have been around for hundreds of years, but 30 year mortgages have not.  Add to that Americans culturally expect 30 year fixed rate mortgages with free prepayment options.  This creates negative convexity that is complex to manage.  Securitize these mortgages, and the complexity of the risk management challenge goes up exponentially.

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Splitting up the banks would not materially affect the market for mortgage backed seecurities, it is the investment banks creating the instruments.[/quote]

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