Reform of American Business Law

What if, instead of asking complicated questions concerning liquidity and derivatives, one just came up with a simple answer? When asked what the origin of the crisis was, then-President George W. Bush came up with this kind of answer: "We built too many houses". Don't be dismissive: that I know of, he was, after all, the first American President to hold an MBA.

You all know that originally, "subprime" mortgage-backed loans were granted to people who would not qualify as "prime" risk, to put it mildly: NINJA debtors are but one example of this category of "subprime" debtors.

Before those of you familiar with risk management suggest that subprime risks should not be granted loans at prime rates, I would like to note that you be implying that the poor should pay more than the rich. Which might not be the best way of "moralizing capitalism", if that is what you intended at all.

Alternatively, and rule of Law permitting, one could still act generously and grant loans to the poor as if they weren't poor, and still comply with what you were taught in Risk Management, if one splits the risk.

Why not after all? You Banks grant loans to a sizable group of debtors, some of which are solvent, while others are not. Hopefully the more solvent will want better, more expensive houses, and demand higher loans; people with modest income will go for more modest houses and demand lower amounts of money.

Wel, OK, last time I looked the poor were more numerous than the rich, but adding many probable insignificant defaults and many good credits for a lot of money does not necessarily place you on the wrong side on risk management.

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