tag:blogger.com,1999:blog-4509173218981631666.post9162303667712837275..comments2023-11-05T07:47:39.708-05:00Comments on The Blog of Diminishing Returns: Don’t Take Candy from Strangers, Especially Strange EconomistsSeth Gitterhttp://www.blogger.com/profile/05419336947867237619noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-4509173218981631666.post-10677694314624073132008-11-10T12:11:00.000-05:002008-11-10T12:11:00.000-05:00It is also interesting to think about the role of ...It is also interesting to think about the role of trust in the recent housing crisis. Essentially, as I see it, banks and other institutions were able to sell mortgages because rating agencies said the package of loans had an extremely high likelihood of almost everyone paying off the loan. The banks hired the rating agencies. If the rating agency gave a bad evaluation to the package of loans, then the bank would not hire them. The loan rating agencies realized that the only way to get business was to give favorable ratings. Investors would buy these packages of mortgages trusting the rating agencies. Yep, trust is important and too often overlooked in economics. <BR/><BR/>Much of this is my interpretation of Blinder's piece in the New York Times. http://www.nytimes.com/2007/09/30/business/30view.htmlBob Gitterhttps://www.blogger.com/profile/14044726462116314459noreply@blogger.com