Dressing Down the Securitization Industry

The fashion blog Go Fug Yourself, one of my guilty pleasures, opines on how celebrities clothe themselves (or, more often, barely clothe themselves). You can vote on whether an outfit is “fug” (short for “fugly”), "fab,” or - if you can't get worked up one way or the other - “meh.”

Right now, I'm feeling kind of "meh" about the Obama regulatory proposal.

Perhaps this is because the administration's White Paper has a Good Cop/Bad Cop thing going, in which the introductory rhetoric plays Bad Cop and the actual proposals play Good Cop. And it's not clear if the two are working together.

Take the way the Obama plan handles securitization, for instance.

(Setting: Police station interrogation room. I've made the cops speak PG-13, so use your imagination.)

Bad cop (fist poised to bloody some noses): “Hey, sleazeballs, so you think it’s OK to lie to some poor suckers so they’ll take out crappy mortgages, and then stick those piece-of-shit mortgages in a CDO and sell 'em to my mother's pension fund? Oh, you do, huh? Well, guess what? From now on I'm gonna make you “retain an economic interest in a material portion of the credit risk of securitized credit exposures.” Ha! Don't like that, do ya? Well, tough titty, cause I'm calling the shots now.”

(Leaves room, slamming door. Good cop enters, carrying a cup of coffee.)

Good cop (proffering the coffee): “Yeah, my partner's really pissed, but let’s you and I have a talk. See, I know you never meant to bring down the entire capitalist system. So how about from now on you and your friends promise you'll just keep five percent of the credit risk, and not weasel out by hedging it, and then we can all go home? Deal?”

Whether or not 5% provides meaningful "skin in the game," many serious analyses have bashed this particular proposal for missing the mark.

Anyhoo, if it’s skin you want, I suggest you check out this dress. Or whatever it is.

image credit: extratv.warnerbros.com