Intrinsic in the financial markets are the seeds of its destruction and, thank goodness, re-birth.
We have one hope and one hope only for forestalling, not eliminating, but merely delaying another financial meltdown. That hope is Elizabeth Warren and a robust Consumer Financial Protection Board ("CFPB"). At bottom, such an agency can at best "level the playing field" between tens of millions of consumers — main streeters — and the financial institutions, large and small, who prey upon them. The great economist Hyman Minsky explained nearly a generation ago how meltdowns like the one in 2008 was inevitable. Capitalism just gets overheated; incentives, greed, and innovation in financial markets will carry us away again. Intrinsic in the financial markets are the seeds of its destruction and, thank goodness, re-birth.
As we are just recovering from the last near brink disaster, I attended a conference of $1000/hr. lawyers debating how they can design the next financial instrument to decouple risk from lending: "synthetic derivatives". Yep. Buying "air" really to hedge risks. No doubt billions if not trillions will be created over the next few years — destabilizing indeed, little economic molotov cocktails if you will. And why do you need $1,000 lawyers? Simple, so you can design financial instruments in a way that avoids the regulation of the CFTC.
So Congress, let’s not bemoan Professor Warren’s appropriate role in discussions regarding mortgage servicing reform. Answer to your constituents on main street and let Professor Warren do her job.