Mohamed A. El Erian Don T Fear The Credit Crunch
Views differ on who is responsible for the crisis—reckless lenders, imprudent borrowers or lax regulators. What is undeniable is that it was facilitated by an innovation that is having an impact on many segments of the financial industry: the use of derivative products and “structured” securities. They are traded just like stocks or bonds and form the basis of what are more commonly known as exotic mortgages. Over the long term, such financial innovation is welfare-enhancing....