Markets Fail When Humans Are Unregulated

[Contessa_Sharra]

Problem with regulations are, they are always chasing a problem with 20/20 hindsight, rarely having foresight and usually crating unforeseen negative consequences once they are implemented.

Solutions usually do follow problems, and so on....

Or to put a "Christian" swing on it, God didn't write the BIG TEN BEFORE THERE WAS MURDER, THEFT, AND SCREWING AROUND, now did he? Nope, nope, nope, that set of regulations came AFTER all that stuff got to be a major problem, along with the move from single focus adulation to O - M - G "idol worship!"

Actually, I think 'twas Hammurabi set down the first set of rules, but the reasons were the same, and having written rules saved a lot of time and effort, along with all those audience days when he had to sit for hours, and hours, and hours, and hours EXPLAINING that this or that was a bad thing and if they didn't cut it out he was gonna kill 'em!

 

[Nosmo King]

Tell me how you get rid of markets.

C'mon, dazzle me.

Now, did you make up the premise of getting rid of the markets all by yourself?

What you did do was opt for a ham-handed diversion.

How about regulating the markets and enforcing those regulations so those trapeze artists on Wall Street don't try another triple back flip with bank depositors money? Simple easy to understand, enforce and comply with regulations that limit the access to the casino in lower Manhattan.

 

[Vast LWC]

And when, exactly, did Franklin Raines, become "Obama's Buddy" except in e-mail hoaxes from the RNC and attack ads from the McCain campaign?

Fannie Mae Contributions to Obama & others in congress. Obama ranked #2 after only a short time in senate. Obama's top contributors were involved in meltdown. Congressional Black Cacus [ame="http://www.youtube.com/watch?v=YED5imIUyVw"]Frank Raines[/ame]

TulipMania almost destroyed the Dutch nation. Hypotheticals about government programs aren't necessary to find insane behavior by individuals in the market.

Freddie and Fannie as the underlying cause of this crisis isn't a serious argument, and is usually pushed by people with an ideological axe to grind. This is a simple argument. If you believe that the GSEs were the primary cause of the financial crisis, then the homes backed by GSE loans would have gone up the most. In fact, the opposite happened. As for subprime, total GSE backing of subprime loans was a minority of the market, and the subprime market was in full swing before Fannie and Freddie got involved. Also, if the GSEs were the primary cause of the financial crisis, why did housing prices rise more in other nations, such as Spain and Ireland? Many countries had housing bubbles. Were the GSEs also responsible for housing bubbles in the UK and Canada as well?

Certainly, the GSEs were a contributing factor, as were many others. But it was not the reason why we are in the mess today.

An apt assessment as usual Toro.

I had a question for you from the other day though:

If the Laffer Curve doesn't apply at the moment, then why can't we raise taxes during a recession?

I mean, if raising taxes lowers GDP, then the Laffer Curve applies... and if the Laffer Curve doesn't apply, then taxes must have no effect on GDP... Just a thought.

I'm off for the night.

 

[saveliberty]

I guess what I"m saying here, in summary is simply this:

Bad mortgages were given out. They shouldn't have been. That is true.

But the bad mortgages are not what caused the crisis.

Sure, if there were defaults, some people would have lost their homes, and the banks might be out a bit of money, but insurance would cover most of the losses.

The hyperinflation of the value of the mortgages, through derivatives, and the credit default swaps associated with them WERE the cause of the crisis.

Fannie Mae and Freddie Mac were at fault for a good number of the problems, but private firms were at fault for a majority of them.

It's just like the derivative trading in the 1920's that led to over-leveraging and the market crash of '29, only in this case it was based on the Real Estate market.

And this was all made possible by the deregulation of the market included in federal legislation in 1999 and 2000.

Don't be stupid. Of course the bad mortagages were the problem. Government encouraged bad mortgages. A regulated industry to boot. The thread fails.

 

[Nosmo King]

I guess what I"m saying here, in summary is simply this:

Bad mortgages were given out. They shouldn't have been. That is true.

But the bad mortgages are not what caused the crisis.

Sure, if there were defaults, some people would have lost their homes, and the banks might be out a bit of money, but insurance would cover most of the losses.

The hyperinflation of the value of the mortgages, through derivatives, and the credit default swaps associated with them WERE the cause of the crisis.

Fannie Mae and Freddie Mac were at fault for a good number of the problems, but private firms were at fault for a majority of them.

It's just like the derivative trading in the 1920's that led to over-leveraging and the market crash of '29, only in this case it was based on the Real Estate market.

And this was all made possible by the deregulation of the market included in federal legislation in 1999 and 2000.

Don't be stupid. Of course the bad mortagages were the problem. Government encouraged bad mortgages. A regulated industry to boot. The thread fails.

If it was bad mortgages and only bad mortgages, how did the banking system in say Iceland fail as a result? Do you suppose Fannie Mae and Freddie Mac had branches in Reykjavik?

Nope! The derivative and credit default swaps oozed thoroughly threw the world banking system. If it was mortgages alone, the default may have been easily handled with federal capital, but when those wacky Capitalists smelled easy profits selling items based on nothing, the aroma was too tempting to resist.

 

[Mr.Fitnah]

Markets Fail When Humans Are Unregulated
Should they have tattoos or chips implanted ?

 

[Vast LWC]

Don't be stupid. Of course the bad mortagages were the problem. Government encouraged bad mortgages. A regulated industry to boot. The thread fails.

Wow, and here I thought we had a long and spirited debate talking about the points raised, pointing out the flaws in the system and in regulation...

And here you come to save us all by explaining to us "You're wrong, you're stupid, and you fail."

Well, thank God you came along to enlighten us all with you're seemingly infinite supply of wisdom on the subject!

Otherwise we might have all gone on trying to discuss ways in which we might address this problem so a similar crisis won't happen again. A foolish thing to do indeed!

But now, we can just sit back and relax in the knowledge that we're foolish, and that you'll take care of the problem!

Thank you SOOO much!

 

[beowolfe]

HELLO!!!! The government didn't encourage bad mortgages. The government encouraged expanding the pool of people to whom mortgages were offered. Nothing the feds did required banks, mortgage brokers, and other lenders to throw their non-discriminatory lending criteria out the window.

All of this money that was caught up in the housing bubble originated in China and the ME. They had soo much money they wanted to invest in the US they were willing to buy anything. And like good little capitalists, we sold it to them.

 

[Toro]

An apt assessment as usual Toro.

I had a question for you from the other day though:

If the Laffer Curve doesn't apply at the moment, then why can't we raise taxes during a recession?

I mean, if raising taxes lowers GDP, then the Laffer Curve applies... and if the Laffer Curve doesn't apply, then taxes must have no effect on GDP... Just a thought.

I'm off for the night.

It is bad policy to raise taxes during a recession because you want to increase demand. Raising taxes reduces demand. Similarly, you don't cut government spending in a recession because cutting government spending reduces aggregate demand. You cut spending and raise taxes in an expansion.

 

[Vast LWC]

It is bad policy to raise taxes during a recession because you want to increase demand. Raising taxes reduces demand. Similarly, you don't cut government spending in a recession because cutting government spending reduces aggregate demand. You cut spending and raise taxes in an expansion.

Yes, but doesn't the fact that by keeping taxes low, you increase demand enough to effect the GDP, prove the Laffer Curve applies to our economy?

If you say that we cannot increase or decrease GDP enough to have enough of an effect to even bother with the Laffer curve, then doesn't that mean that lowering or raising taxes will also have a minimal effect?

I guess what I'm saying is, isn't the significance of one directly related to the significance of the other?

 

[NYcarbineer]

Money is the root of all evil.

I would think some regulation might be in order.