Tuesday, April 27, 2010

Asness: "Keep the Casinos Open"

Great essay by Clifford Asness debunking the absurd argument that Wall Street is solely to blame for the financial crisis (I debunked the Goldman fraud case here).
Stepping back, nowadays the popular narrative is that this economic crisis was caused by Wall Street and derivatives. It was not...Government was a prime culprit through the creation of disastrous GSEs, implementing politically correct social policy that warped the housing market, enacting land use restrictions in the bubble's worst epicenters and, of course, promoting 20+ years of too-big-too-fail when it was not at all needed, including pursuing exceptionally easy monetary policy for years after the "dot com" bubble.

...Government is using a disaster it had a primary role in creating as cover for further takeovers in a cloud of class warfare and lies...

...The reviled Goldman transactions did not cause, or even inflate, the real estate bubble, it just made one financial institution (Paulson) a bigger winner, and another a bigger loser. It was bet each wanted to make, and was by definition considered a fair one by each party at the time. How do we know this? Easy, it was voluntary. Now government wants to rewrite history and say that this type of fair bet caused all our problems, and they'll never bother us again if we just give them much more power, again. Do you believe them?

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