Indeed, even one of my fellow "conspiracy theorists" (FromLori) debunks Taibbi's "naked short selling" video linked in this thread. (Taibbi didn't bother to link it. Or maybe he had other tapes in mind? Who knows?)
I agree that the government is one of the guilty parties, but the way I see it, separating "the government" from "Wall Street" is impossible.
In 2004 the big Wall Street firms (Paulson was still at GS) pushed the government to allow much higher leverage ratios for the "big investment firms." Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley. But not for any other firms, because the SEC favored those 5 firms.
Now I expect someone will flame me for making an argument that Dems have also used, but I think we should be honest about the Bush years. Obama is much worse. I have no hope whatsoever that Obama will become an honest POTUS.
Regulation has unintended consequence
Very true. I say it is foolish to believe that regulation is always good.
I don't believe the 2008 crash had a single cause, and I would guess you don't believe that either.
This selectivity is truly problematic. As much that I am against the widespread regulation (I actually did and published some work in this field in peer reviewed journal), I am absolutely appalled at the accommodation of higher leverages. Joe and Jane in Peoria, whose failure will not affect the economy at all, are allowed a 2:1 leverage on their margin accounts, but Bear Sterns is allowed 33:1? That does not make any sense to me. None whatever. The leverage had to be held in check and, in my opinion, this is yest one more example of the government failure (SEC).
Having said that and to be fair to the motives of the lobbyists, one has to remember that higher leverage provides higher returns in good times. It is intellectually dishonest, therefore, on the part of most critics to point to the disastrous events of 2008 as the result of leverage and other "unreasonable risk-taking by the execs." They said nothing of a kind when their stocks were going up as a result of that leverage.
What I said here is not an excuse --- am still adamantly against the leverages assumed by the WS banks. The (minor) point is that the banks' management were true to their mission, the job they were given to do: to provide the highest return to their shareholders. It's the government, whose job is to care about the MACROeconomic consequences, to oppose that tendency (which manifested itself as lobbying). If the managers assumed that their companies would be bailed out as too big to fail, they were UNFORTUNATELY correct: that was the message consistently given to them (until Lehman) by the government at least since the 1908s S&L bailout.
So I see here two GOVERNMENT (rather than MARKETS failure, as the Left is trying to convince the public): conveying a consistent message that the "too-big" will not be allowed to fail, and being lax on the leverage ratios.
[Actually, there is a third: the mark-to-market requirement that actually brought Lehman down, but I don't want to expand the scope of discussion. The main GOVERNMENT failure --- the ONE that precipitated the crash --- was of oourse the Community Reinvestment Act that MANDATED bad loans that could not have possibly been repaid. The rest was the reaction to that force that moved the market in search of an unsustainable equilibrium]
" I think we should be honest about the Bush years."
Exactly. Thank you for standing on position of principle rather than taking sides.