In the past the SEC and other regulatory authorities had no experience in the models that created the leverage that subsidized collateralized loans. So they permitted leverage to get higher and higher. Leverage went up from 10% to well over 30%, which made the loan values more volatile.
Today we still employ leveraged secured, collateralized debt in heavy volume. It’s an integral part of our commercial system despite the notoriety it received during the financial meltdown.
What can make us now believe that more regulation will help prevent any future financial mess from miscalculation? While we are still unsure of the type of loans we are currently permitting?
And we still permit homeowners to have special low down payment deals in our weak economy. All we are building is yet another bubble.
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