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 ...
Those are all good points but I think you missed the most important one. Inflation is headed our way and if the govt gives you a 3% return (or even less) they are taking more valuable dollars out of your account now and replacing them with worthless dollars down the road even if they do what was proposed in that congressional hearing last year and restore your investment to it’s value in Aug 08.
Greed is a normal human trait. God warned us about it from the beginning. This mess had government help - moral hazard was completely removed in the secondary market.
Good point.
Not defending Bush or even the actions of his regulators, but if what you say is true then we are fools to rely on regulators who's enforcement policies change with the political winds, no?
In the end it is up to each individual to manage their own financial affairs, but human beings live in a short hand world. We don't always take the time to check everything out. We cannot. So we rely on others when we make decisions.
The problem with government regulation is it is inconsistent and whimsical. It is political and not practical in an economic sense to the individual.
Given this inherent unreliability in government regulation, why have it when you cannot trust it?
What you are naming is the inherent impossibility of managing financial markets. Highly regulated markets still have crooks who game the system to their favor.
Regulatory bureaucrats are forever playing catch up to predatory and nimble crooks.
Or did financial fraud not exist until now?
You're right that it always existed. But until now we didn't have the combination of fraud and loose credit to create systemic risk when the credit unwound. In the past an unwinding involved defaults that penalized the defaulter and were the last resort. Now we have a interwoven credit structure that is too big to fail and too big to survive.
Incorrect!!! It was due to lack of proper regulation
We have had a free market in derivatives, CMOs and credit default swaps .....essentially they were un regulated. Do you trust a five year old left at home with matches? Wall St/AIG/bankers have proved to me they cannot be trusted
Libertarians are exceedingly naive about the insane greed in some people
You had your libertarian free markets in derivatives and now you as a taxpayer will pay for bailout. Your reply will be that you were against all bailouts
And your solution is to get rid of all regulation
Lets get rid of the police and courts while we are at it
It seems to me that the government’s actions in regards to financial markets have been comparable to the government’s actions in regard to forest management. In trying to put out even the smallest fires it has allowed the accumulation of so much dead wood that an inferno was inevitable.
These two sentences directly contradict one another. One states there wasn't enough regulation, the next states that a change to the regulations set up the first domino to fall.
They ignore the fact that absent those regulations, there would have been no domino.
We're doomed if this is all the more logic that goes into articles like this.
You do know what the meaning of the term is don't you?
Looking at how things are currently running? This isn't an absurd idea. Privately contacting for these services would be a lot more efficient, "just", and fair.
If the park district puts up a faulty railing at a cliff side look out are you really better off?
Huh? The second sentence says that weakening the regulations contributed to the disaster.
They ignore the fact that absent those regulations, there would have been no domino.
"The fact???" More like your opinion, and a highly dubious one at that.
I am opposed to the Community Reinvestment act, but not to all regulation.
No further discussion is necessary until you read a few more books. Try those not penned by devotees of Marx.
Are you on drugs or alcohol? Fine, don't post to me if you can't make more sense than that.
Socialists in congress killed it off, and brought on this depression by forcing banks to give mortgages to dead beats. They did it on purpose specifically in order to bring about the collapse of the economy and the nationalization of the banking system. This is not a failure of the capitalist system. It is yet another failure of socialism which has failed economically every time it has been tried.
Want to feel what it was like to live in the Soviet Union during the 80’s or what it was like during FDR's New Deal depression during the 30’s. You are about to get your chance thanks to our socialist politicians. I include Bush, and McCain as well as Obama and 90% of congress because they are all card carrying socialists even while claiming they aren't.
“We really need a chart showing how much of the total mortgage debt was forced by government. “
All that is really important is that close to 100% of the mortgage debt that is currently in default and which has caused the economy to fail was forced by the government.
I like that analogy...
“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.”
I am calling you a troll from DU. You sound like a communist. Why don’t you move to Cuba or Venezuela if you hate capitalism so much. I think you would be much happier there as Castro and Chavez are much further along in creating the socialist utopia you so crave.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.