White On The Crisis

If you aren’t reading Larry White’s commentary on the crisis, you should be (see here, here, and here). Here are some of my favorite quotes:

• “Uh-huh. Now explain to me how an “auction facility” works when there’s only one buyer.”
• “On greed, let me repeat: If unusually many airplanes crash during a given week, do you blame gravity? No. Greed, like gravity, is a constant. It can’t explain why the number of crashes is higher than usual. And let me add: This isn’t a morality play. What we’re seeing are the consequences of monetary-policy distortions of interest rates and regulatory distortions of incentives, amplified in some degree by private imprudence, not the consequences of blackheartedness.”
• “Proponents suggest that it would be (kinda, sorta) like the Resolution Trust Corporation that liquidated failed savings and loans after 1989. But the RTC only acquired assets from closed thrift institutions in liquidation. It did not subsidize ongoing institutions, and did not buy dubious assets. Once the assets were sold for whatever they would fetch, the RTC closed up shop. The newly proposed institution is a very different animal. It is hard to imagine how that institution — given its mission — could be designed so as not to subsidize Wall St. imprudence at taxpayer expense, and thereby foster rent-seeking and moral hazard on a colossal scale.”