I wonder what Hillary Clinton means by "Wall Street". Her speech in New York calling for mortgage lenders to freeze rates on sub-prime mortgages and for a 90-day moratorium on house foreclosures was heavy on rhetoric against the Street.
Wall Street needs to be part of a comprehensive solution that brings to the table all those responsible and calls on them to do their part. Wall Street helped create the foreclosure crisis and Wall Street needs to help solve it.
OK, but does she mean that mortgage lenders and retail banks have to step forward or does she include investment banks that packaged collateralised debt obligations and sold them to investors?
These are clearly uncomfortable times for mortgage lenders such as Countrywide. They are becoming very sensitive times for investment banks as well.
The latter are already under investigation by Andrew Cuomo, the New York State attorney general, for their packaging and selling of sub-prime mortgages. The New York Times carried a front page story yesterday about Goldman Sachs’ packaging of $6bn of securities backed by sub-prime mortgages earlier this year despite its bearish view of the market.
Maybe the New York Times had a interest in providing post-hoc evidence for Ben Stein’s column about Goldman on Sunday. And I don’t think there was anything necessarily bad in an investment bank that hedged its balance sheet against a fall in the housing market also selling sub-prime securities to institutional investors.
But Wall Street’s reputation is still at risk. I do not think it was an accident that Mrs Clinton used the term "Wall Street" when talking about mortgage lenders. She knew that populist sentiment is against financial institutions making big profits in times of financial crisis.
