Big Rock Candy Mountain

The official voice of the Deseret Liberation Organization

Bow down before Big Stiggy

Apparently, Joseph Stiglitz knows everything and if we heed his advice all will be well. Twenty years ago, he predicted the current economic crisis:

…When banks retained the mortgages which they issued, they had greater incentives to screen loan applicants. The brokers who write the mortgages often receive commissions on the loans they write, with little or no accountability on their efficiency in screening. Their incentives are thus only to ensure that the loans meet (on paper) the requirements of the loan… [T]he broker has an incentive to find an appraiser who will appraise the property accordingly. The question is, has the growth in securitization been a result of more efficient transactions technologies, or an unfounded reduction in concern about the importance of screening loan applicants? It is, perhaps, too early to tell, but we should at least entertain the possibility that it is the latter rather than the former.

Bow down before Big Stiggy. At least put him in charge of something. Stiglitz is king.

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Filed under: Politics,

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