The far-right take on the RMBS debate

My friend and sometime sparring partner, Dr Stephen Kirchner, gives the standard far-right critique on the government's RMBS support. Interestingly, the first comment in his post offers a much more intelligible analysis. The essential point here is that "matched" securitisation funding is a theoretically much safer financing approach than using the inherently very fragile asset-liability mismatches that are the basis for traditional bank business models and which require truly extraordinary state subsidies. The immense logical flaw in Kirchner's analysis is that he never acknowledges these frailties and the intrinsic taxpayer support that they crucially rely on to survive. The objective behind the RMBS policy was to make a tiny step towards leveling the competitive playing field between these two forms of funding, with appropriate costs, which, unfortunately, have yet to materialize.