The risks of traditional lending


An interesting essay in the New Yorker reminds us that despite the deadlines, the real root of the financial crisis was traditional lending, not out-of-control trading. Indeed, the very root of the CDO crisis was an abundance of shoddy individual loans to finance a home purchase. The author makes a call to require banks to hold more equity vs. debt. That idea has always been universally panned in the industry as a good way to kill profits, and I doubt regulators will ever embrace the idea fully. Article