In the wake of the bubble
Trying, but failing, to escape Pollock's Law

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The dominant financial and economic fact of 2011 is that we are still living in the wake of the great 21-st century bubble. The dominant problem with being in the wake of the bubble is that we cannot escape Pollock’s Law of Finance, which states: Loans that cannot be paid will not be paid. Because they will not be paid, the loans will default and impose losses. In the wake of a bubble, the losses are unavoidably massive. This applies both to the American housing and commercial real estate bubble, and to the European sovereign debt bubble. Because this iron law and its implications are highly unpleasant, financial actors and politicians strive mightily to escape them in spite of the fact that they cannot, with scheme after scheme. All to no avail, or course. The massive losses must ultimately be taken.

Alex J. Pollock is a resident fellow at AEI.

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About the Author

 

Alex J.
Pollock
  • Alex J. Pollock is a resident fellow at the American Enterprise Institute (AEI), where he studies and writes about housing finance; government-sponsored enterprises, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; retirement finance; and banking and central banks. He also works on corporate governance and accounting standards issues.


    Pollock has had a 35-year career in banking and was president and CEO of the Federal Home Loan Bank of Chicago for more than 12 years immediately before joining AEI. A prolific writer, he has written numerous articles on financial systems and is the author of the book “Boom and Bust: Financial Cycles and Human Prosperity” (AEI Press, 2011). He has also created a one-page mortgage form to help borrowers understand their mortgage obligations.


    The lead director of CME Group, Pollock is also a director of the Great Lakes Higher Education Corporation and the chairman of the board of the Great Books Foundation. He is a past president of the International Union for Housing Finance.


    He has an M.P.A. in international relations from Princeton University, an M.A. in philosophy from the University of Chicago, and a B.A. from Williams College.


  • Phone: 202.862.7190
    Email: apollock@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: (202) 419-5212
    Email: emily.rapp@aei.org

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