Europeans point out that U.S. monetary authorities kept interest rates too low for too long because inflation showed up in the one place we are delighted with it: in our home prices.
Or as Williamson puts it: "If the price of gasoline doubles, there's a whole Wagner opera of angst. But housing prices doubled between January 2000 and November 2005, and then climbed another 13 percent by June 2006, and there was no howling, no angry congressional hearing — there was celebration."
Our banks are faltering in part because too many of the securities they hold are now worthless. How did they get in that mess? Weren't our credit-rating agencies guaranteeing that those securities were triple A? It turns out that the criteria they used is different from the criteria they say they used.
The French give an "F" grade to our credit rating agencies, Moody's, Standard & Poor's, and Fitch , called NRSROs —Nationally Recognized Statistical Rating Organizations that decide whether a security is triple A or not.
"The agencies themselves are the stuff of B-movie villainy, " writes Williamson. "In one e-mail message, an executive describes a set of investments as a 'monster' and concludes, 'Let's hope we are all wealthy and retired by the time this house of cards falters.' Then he adds a smiley face.'"
The French are suggesting we keep closer tabs on bank assets that are kept off the books. The four largest U.S. banks had off-balance-sheet assets valued at $5.2 trillion at the end of 2008, according to the Wall Street Journal. That's more than one-third of U.S. GDP.
This article makes a good case for better, not increased regulation.
