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 ...
Really? What is it about the capitalist system that brought this about? What part did government intervention play? I’m anxious to hear your thoughts. Please enlighten me.
Excellent reply. I would add that statists = Wickard Commerce Clause supporters.
“No, they weren’t, they were dumping money into the system, creating absurd accounting rules and passing out specious federal loan guarantees, among other things.”
To the benefit of their plutocrat buddies on Wall Street and the the various bourses across the world. Personally, A, I think they are a bunch of traitors who sold their countrymen down the tubes for “free trade” and money.
That makes it pretty plain.
mark
“What is it about the capitalist system that brought this about?”
Greed, unrestrained self interest which lead to the closing of factories, the loss of middle class jobs and the greatest divide between executive pay and worker pay in over 100 years; an ideology that elements of the political elite in this country packaged as a good thing.
In any event, right or wrong, capitalism is dead in the West. The majority of the people believe they have been robbed and all the arguing and remonstrating on the part of the devotees of the “ancien regime” will make no difference to them, no more difference than the complaining of Tsarist aristocrats in 1920s Paris made a difference in Russia. Maybe the fact that the thieves of Wall Street never got a hold of Social Security will stave off a real blow up, but I doubt it. I think, at a minimum, “examples” will be made.
The evil Karl Rove said something interesting last night on Fox...................
After the Democrats in congress filibustered the Bush administrations attempt to regulate Fannie and Freddie in 2005. Freddie and Fannie then went on to insure as much $ in mortgage debt in the next 3 years as it had in the previous 30 years.
FOLLOW THE MONEY-——
Who made the most money off this mess?
Wall St/large banks with their securitized mortgages and derivatives
Your posts are very good. But one must also blame the Fed’s excessively easy money policy. So blame Alan Greenspan and the Fed for that
The easy money was the rocket fuel for Wall Street. They are natural born thieves but needed easy money to leverage their businesses 30 to 1 the way Lehman did
And yes mortgages to unqualified minorities and other poor folks is a small part of the problem
Yeah, like the fuse is a small part of a bomb.
Where’s that quote from? Do you have a link to the original? (It’s brilliant, by the way.)
Ignorant hyperbole.
“Ignorant hyperbole.”
Charming delusion! :)
I’m thinking that the thieves in govt will lay their hands on the savings of the “proletariat” (taking 401K savings and IRA’s) and putting it in the federal retirement system will light the spark of another revolution. Quite the opposite of your contention that preventing wall street from controlling social security was to be the spark. Contrasting theories. It will be interesting to see which is correct. Your Marxist theory of state control or mine of freedom and capitalism.
“Yeah, like the fuse is a small part of a bomb.”
Tell me, TOS, do you really believe the loans given out to minorities and poor people are responsible for, say, Madoff or Bear Stearns or Lehman Brothers; maybe for the excessive leveraging of the banks and AIG’s irresponsible insurance practices? Really?
“Your Marxist theory of state control or mine of freedom and capitalism.”
So far yours isn’t working out to well, unless of course you think bailing out the banks and brokers is best for the rest of us serfs.
But you are of course right. It will be interesting to see what system is in the driver’s seat in say 10 years. My bet is your so called “freedom and capitalism”, if by that you mean what prevailed here since the mid 1980s, is finished. The big banks will be nationalized within 18 mos, probably less. They’ll never come out of that as anything we recognize. They’ll be as gone as the “trusts” that TR broke up...and so will the thieves who ran them. What the rest of the system will look like is anyone’s guess but I’ll speculate that the system in this country will be as different economically from what we have come to know from Reagan through Bush as the post WWII system was from the pre Great Depression one.
I disagree with your assertion that unbridled greed was the cause of the current banking crisis and your example of 29 year old’s getting McMansions is merely anecdotal. Government intervention played a far larger role in the current distortion but I will grant you that the future will be very different than it is now. It all depends on who gets the blame and we all know that doesn’t necessarily reflect reality but instead who
has better PR machine.
I’m wondering since you post here on FR but are so adamnatly opposed to free market capitalism, what brings you to this site? It certainly can’t be your philosophy of govt.
I think you underestimate the unabashed desire of most Americans to have more stuff than anyone else. While I agree the structure of financial markets may change, the individuality of the great majority of Americans is strong.
What has changed is a sense of entitlement that everything is a right (housing, medicine, comfy retirement, higher education, etc.)
The problem is that when the bill comes due, the individualism thing kicks in again. Like everything else it will be cyclical. However, the bill that is coming due will create an electoral revolt someday that brings the pendulum back. The pendulum always swings.
I find the idea of America becoming a social democracy like Western European nations laughable. It may happen for a while, but people want too much and expect too much. Can you imagine people sitting still for 12% unemployment during boom years? ha
Once the state gets their toe in (1930's), it leaves behind a gangrened foot when you try to take it out. The two bipartisan acts mentioned above "deregulated" the banks in name only and set the stage for the biggest banking bubble of all time (in reality just an echo of the dot-com equity bubble).
I agree wholeheartedly with the commenter that the root of all bubbles is state-sponsored loose credit.
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