Bad Math Strikes Again

Arnold Kling has produced a great analysis of the mortgage mess. WARNING – it’s pretty technical. Here’s my summary: The root problem was bad regulation. The regulators knew this, and many wanted things changed, but there was great political pressure to use “bad math”. The political pressure came from two groups: housing advocates (and everyone who profits from more home building) and Wall Street firms which saw a way to exploit the “bad math” and make some money. Needless to say, this was a bi-partisan effort.

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