He’s anti-clearing house, but I still don’t know why. Nothing solves every problem, and clearinghouses have less problems than non-cleared derivatives. Yes, they are still open to systemic risk, but these would be largely known, and so much easier to firewall, too. And why isn’t he talking about MF global? It’s downright weird. MF global could not have happened under a clearinghouse.
“So how may this turn out? It’s a no-brainer that we will continue to have a housing market dependent on the willingness of the Federal government to continue to guarantee pretty much all mortgages. The GSE wind-down is on auto pilot. It is not inconceivable that the Republicans will try to rein in FHA lending, either in terms of tightening quality standards or imposing limits on the total guaranteed per year, which will further limit overall mortgage credit, again relying on the mistaken belief that if the government “got out of the way,” private sector lending would resume. While there is a price at which private loans would get done ex better investor protections, it’s at a much bigger premium than borrowers can stomach (one investor said he’d lend at a 5% premium to Fannie and Freddie rates. He’s greedy, so let’s reduce that by 50%. That’s still a deal-killer for most prospective buyers).”