But because the needed change has political elements to it, I take my cue from speeches by two central bankers whom I respect greatly, Ben Bernanke in his 2005 “Global Savings Glut” speech, and Jaime Caruana in his 2012 speech at Jackson Hole, both of whom have raised similar concerns to mine, although from different perspectives.
The same cannot be said of many residential MBS created over the past couple of years and the many complex structured products that held MBS as collateral, where the complexity of the pay-off structures (including so-called cliff effects) made expected returns and risks more difficult to model.