John At The Center

long but agree wholeheartedly with the main argument. not necessarily with some of the details (ie the coverage of GSEs).

Moreover, blaming the current economic crash on the Chicago School is about as rational as chastising Shakespeare for Nicholas Hytner’s production of Henry IV. The structure of the market in mid to late 2008 bore such little resemblance to anything the Chicago School represented that it seems near impossible to even mention the two in the same paragraph without straining the prose to such an extent as would grate even a Bloomberg reporter’s literary sense. That hasn’t stopped anyone though.

Though I do agree with the incentives. The most important thing we’re talking about here is setting up a system that will work the way it’s designed and putting in the right incentives

Underwriting became divorced from the mortgage writing process because none of the incentives created by government intervention rewarded careful underwriting and several incentives created by government intervention explicitly penalized careful underwriting. What exactly did everyone expect? Disneyland?

http://equityprivate.typepad.com/ep/2008/12/death-of-cook.html