What is the biggest policy mistake or shortcoming related to the current financial troubles?
Are significant reforms warranted? I point to two policy failures. First, changes in federal bankruptcy laws in 2005 allowed banks to take peoples’ homes away a lot more easily. Second, the 1999 Gramm-Leach-Bliley (GLB) Act, permitting banks, securities firms, and insurance companies to get into each others’ businesses, may have contributed to the current financial crisis. The law’s role in the current mess is hotly debated, but no one on the left or right disagrees that the lack of regulatory oversight contributed significantly. We need re-regulation of the financial services industry, and I have confidence in the judgment of Federal Reserve chairman Ben Bernanke in this matter. We also need to look at what’s happening in cities like Cleveland, where neighborhoods with a growing number of empty houses are becoming havens for crime. We need significant government help to allow people to renegotiate their mortgages so that they can keep their homes. The ideal situation would be to pair
