Posted on 02/19/2009 4:29:12 PM PST by Ernest_at_the_Beach
In the long run, when we are all dead, historians will be debating the root causes behind the global financial meltdown of 2008. They will join up multiple dots, just as they did after the September 11 terror attacks. Among the precipitating factors, toxic mortgage debt securities grossly inflated banks’ balance sheets and investors’ portfolios. Credit rating agencies blessed those assets’ illusory values. Real estate tumbled in a vicious downward spiral, while steep oil prices helped reverse the business cycle.
Inadequate regulation, in America and elsewhere, clearly exacerbated all the other drivers. Specifically, when regulators permitted major American investment banks to take on more leverage, they “made the dollar amounts larger and the margin of safety less,” describes Barry Ritholtz, director of Equity Research at Fusion IQ. Imagine climbing up the outside of a building. The leverage lets you climb higher, and also takes away the safety equipment.
(Excerpt) Read more at realclearmarkets.com ...
I recall those buttons. I also recall how many folks in my conservative area took them, turned them 180 degrees so it read NIM..."No Immediate Miracles".
You are knocking down a straw dog
What is needed is proper regulation
Intelligent regulation
I suppose the libertarians want zero regulations
Like an NBA game with no referees because you all trust the innate intelligence and fairness in people. A major miscalculation. Libertarians I see are smart and fair people...they project this on other people. This can be fatal
As you can see, liberals and politicians keep coming up with different lame reasons to point fingers on, as long as it's away from themselves. "Deregulation," "lack of effective enforcement of laws and regulations" and "Republican incompetence" are very high on their list of "causes" to blame for any failed government policy, notwithstanding that about 90% of bureaucrats in government are Democrats.
I never said there should be no regulation, and there is no need to confuse free market capitalists ("libertarians") with anarchists - that's a straw dog argument. I said there was an excess of fickle, constantly changing regulations, showed examples and has not seen the arguments against them.
Libertarians I see are smart and fair people... they project this on other people.
Some are, some aren't. Same can be said about any political group - social conservatives, fiscal conservatives, liberals / progressives / socialists, nihilists, environmentalists...
If you want to get personal and insult Libertarians, that's fine with me, just pick someone who is... But we are already kind of off topic and off point, aren't we?
I agree, and think we have run into a terminology trap. In my way of looking at it, removing restrictions on leverage ratios (as in Cox in 2004), weakened or removed regulation, but you might say the problem was caused by regulation. Similarly, Fannie and Freddie were supposed to be regulated, but they were not regulated where it mattered the most.
Suppose the cops in my town spent most of their shift busting girl scouts for selling cookies, thereby violating an obscure city ordinance which was really unconstitutional, and after that they ate doughnuts while a bank got robbed. I would not say that the bank robbery was enabled by too much enforcement, but the main problem was that they were not enforcing the law where it really mattered, and were enforcing it too much in other areas where enforcement was not only not needed, but the exercise of petty authority was actually harmful, in the case of the girl scouts.
"Proper regulation." Sounds good.
Proper and intelligent regulation of financila markets. I just get immensely irritated at libertarian type freepers who live in a fantasy land and want zero regulation of Wall St and banks. We just had that and look at the ungodly mess
During GW’s eight years OSHA and the EPA chugged along just fine with their stupid and destructive regulations. Only Wall St got set free, left to its own devices. If anything it should hvae been the reverse with Wall St over regulated but EPA and OSHA told to ignore all infractions
Pay attention to Chris Cox. He will be judged very harshly and same for the entire damn SEC
My apoligies to cute puppy who is not a libertraian.
I never said there should be no regulation, and there is no need to confuse free market capitalists ("libertarians") with anarchists - that's a straw dog argument. I said there was an excess of fickle, constantly changing regulations, showed examples and has not seen the arguments against them.
Those libertarians are anarchists. They were bomb throwing anarchists with warped view of human nature. They fronted for the anarchists of Wall St. They give ideological cover to Wall St anarchists. Gave them respectability because during the Bush years the (self correcting) free market was hailed above all else
Only difference is these libertarian free market anarchists are simplistic stooges who don't get paid much for their philosophizing and editorializing
But the Wall St destroyers and anarchists took home billions in bonuses for creating trillions in destruction
*****I love free markets but they need intelligent regulation and enforcement mechanism especially on Wall Street
***** That senile old mumbling fool Alan Greenspan often hailed derivatives. He is an Ayn Rand acolyte and libertarian. His easy money policies are also responsible for this mess. You might want to meditate on that, cutepuppy
http://robertghansen.blogspot.com/2009/02/2004-banking-leverage-rule-change.html
You should check the comments at that link to Hansen's blog.
They pretty much destroy Hanson's take on the SEC 2004 easing of leverage which absolves Wall St
I know what the history of the repeal of Glass Steagel was
It only came after titanic efforts by powerful Wall St entities especially Bob Rubin (Treasury) Larry Summers, Phil Gram, Sanford Weil at AMEX and CitiCorp. Citi really spent the most in lobbying.
I'll bet the 2004 repeal of leverage rules was the same
Those SEC directors are industry stooges or were pressured/bribed/bought off to act as such
IOW---- The 2004 SEC did what the financial industry demanded------ Not your scenario of the hapless idiots of Wall St leveraging to the moon because of the irresponsible SEC
If you want to find anti-industry regulators you should stick to the EPA. Just look at its efforts to kill coal. Look to OSHA enforcers who have killed many small businesses. Please include the racists at EEOC.
But the SEC is a joke. Totally in the pocket of powerful economic interests
Actually all this BS started with NAFTA and other trade treaties. You ship jobs out of America making an unbalanced and dishonest economy....It is dishonest to run up 700 billion dollar trade deficits because you shipped those jobs out of America
This out of kilter economy which you then keep trying to rev up with bubbles like the internet bubble and housing bubble and easy money and hyper active Wall Streeters writing derivatives. Honest labor out with house flipping, mortgage writing and writing derivatives. in
The fallacy in your statement is “shipped jobs out of the country”. No jobs were shipped overseas.
The job holders and their high wages and benefits and their politics of tax and regulation made them non competitive. The companies employing them would have ceased operations anyway because the cost of production was too high.
NAFTA is good for America because it eliminates unnecessary stumbling blocks to trade between the USA and Canada and Mexico.
It is not 1955. There is a big competitive world out there ans if America is to survive, America must engage and be competitive.
This crisis is summed up by one word, “trust.”
You cannot have a market without trust. What is credit? It is trust that you will get the money back from the person you lent it to.
With Credit Default Swaps, what happens to trust? It became irrelevant. Who cares if the person defaults, I’ve pawned that risk off to some other poor sucker, who cares, I got mine. And then the next person pawns it off, and so on..until inevitably, somebody ends up holding the bag.
But the problem is, that in this case, inevitably everybody wound up holding the bag, because the assessment of risk got so darned tangled. Remember the Russian quote, that Reagan used to say, “Trust, but verify.” How now can you verify? So if you cannot verify, you cannot trust, and then markets break down. Re-establishing trust is the only thing that will get us out of this mess, not government stimulus plans and bailouts, and pumping even more fiat money into the system. As Seinfeld would say, “Good luck with all that.”
“Re-establishing trust is the only thing that will get us out of this mess, not government stimulus plans and bailouts, and pumping even more fiat money into the system.”
And we reestablish trust with the thieves who did this in first place just how? So far as I can see, all the big crooked operations have to fail, their leaders from Asst. VP on up have to be sacked and at least a few need to go to jail for a long time. In the meantime, the whole house of cards comes down unless the stimulus works. Politics aside, we’d better hope it does because there’s no other game in town for the majority of Amereicans.
The other problem is that through lobbying, Washington and Wall Street have become so intertwined. You think Madoff didn’t have moles in the SEC? Money can buy a lot of power in Washington, and that won’t change under Obama.
Maybe the only way to re-establish trust is for the house of cards to come down.
The job holders and their high wages and benefits and their politics of tax and regulation made them non competitive. The companies employing them would have ceased operations anyway because the cost of production was too high.
BS... You impose intelligent tariffs
NAFTA and GATT killed our textile industries and lot other industries
You can call them lousy jobs but millions of Americans depended on them
You destroyed America's work ethic
People like to work and you killed their jobs by sending them abroad
Now that you all killed our real industries we are left with scum of the earth derivatives traders who have the nerve to call themselves an industry. The so called "financial industry"
And the biggest lie of NAFTA was that it would provide Mexico enough jobs to stop illegal immigration
Connect the dots
The same globalists that brought you NAFTA love illegal immigration and brought us Wall St going berserk with derivatives and making billions doing so. They took home the profits while you, Mr Bert, get to bail them out (via taxes) because they are "too big to fail"
You have been used and you still don't get it and never will
NAFTA is good for America because it eliminates unnecessary stumbling blocks to trade between the USA and Canada and Mexico.
It is not 1955. There is a big competitive world out there ans if America is to survive, America must engage and be competitive.
Total bull...
You NAFTA guys won. I was always against it
You all sure made American real competitive
In house flipping and writing derivatives
An honest nation does not run up 700 billion dollar trade deficits
Did you hear Hilary sucking up to China today to keep buying US Treasuries?
That's where your BS "free trade" treaties have taken us too
You might like post #115.
This whole mess started with NAFTA and sending good and lousy jobs too out of America. Men are gradually reduced to nothing type jobs so what is next? House flipping. And millions more women on welfare because what woman wants to marry a guy who makes shit wages. Shit wages due to NAFTA/GATT and illegal immigration killing many working man’s jobs
We had a mad frenzy of home building and commercial construction to keep lots of regular Joe six pack guys employed. It kept them busy along with the illegal aliens Jorge put out the welcome mat for. Those working Americans are shit out of luck now. The ilegals can go to hell and go home
What a great post! You know, there are a good number of us here on FR who remember very clearly the streams of workers leaving the factories and mills when the shifts changed; some of us remember leaving ourselves.
In my town, the mills are all closed and the shoe industry is dead. We still have shoes and sheets...from China and Vietnam and Indonesia and Malaysia. The names on the products are the ones we grew up with and the owners of those companies are richer than ever...and the children and grandchildren of their former workers are flipping burgers or collecting welfare to support their 3 illegitimate kids.
And is the elimination of the border with Mexico, either though non-enforcement or something pushed through congress, or some combination of both, a good thing? For some, the border is an "unnecessary stumbling block."
The job holders and their high wages and benefits and their politics of tax and regulation made them non competitive.
Are "job holders" the enemy? If the goal is to lower the total amount of wages made by US workers, we are off to a good start.
I think there are some benefits to NAFTA. For example, if Canada cut off oil exports to the USA, it would hurt.
I saw a lot of granite moving at Home Depot
I saw kitchens where I live gutted
And the new younger owners put in granite and the other fine stuff
I saw one house that did this go into foreclosure
They also put a new roof on when they could waited
There must be new hi-tech ways of cutting granite that makes it less expensive plus maybe lots of it is imported
We prefer Formica in the kitchen/baths and it was put in, in 1975.
“We prefer Formica in the kitchen....”
That’s what we have. Its held up good over the decades too! :)
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