Evaluating Policies to Prevent another Crisis: An Economist's ViewPaul S. Willen
NBER Working Paper No. 20100 I consider four policies created to address the financial crisis: (1) the ability-to-repay requirement in mortgage underwriting; (2) reform of rating agency compensation, (3) risk retention in securitization, and (4) mandatory loan renegotiation. I show that according to standard models, policies (1)-(3) do not address the standard asymmetric information problems that afflict financial markets. Policy (4) could reduce the deadweight losses associated with asymmetric information but requires that policy makers allocate gains and losses.
Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w20100 Cato Papers on Public Policy, forthcoming. Users who downloaded this paper also downloaded* these:
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