Progressive Economics = Poverty

[EdwardBaiamonte]

Todd is lying through his teeth. The poorly regulated system of business allowed the corporatists to take us all for ride, .

the issue is whether capitalism,i.e., self-correcting free markets regulate better the liberal government guessing. Red China has discovered that capitalism regulates far better.

 

[EdwardBaiamonte]

Todd is lying through his teeth. The poorly regulated system of business allowed the corporatists

A corporatist forms an alliance with government to avoid the rigors of free market capitalism.

A Republicans intellectual knows that if you limit liberal government power you limit corporatism. Then the only way a corporation can win is to improve our standard of living with a better product and a lower price,

 

[Dragon]

Actually, "how much regulation" is a stupidly ham-handed way of looking at it. You can "regulate" a business to prevent problems or block harm to society, or you can "regulate" it so as to suppress small-business competitors. There's also such a thing as regulatory capture.

The big problem with the financial industry was the repeal of Glass-Steagal, which would have prevented much of the crap leading to our latest meltdown if it had remained in force. That happened under Clinton's watch and he signed the bill.

 

[EdwardBaiamonte]

The big problem with the financial industry was the repeal of Glass-Steagal, which would have prevented much of the crap leading to our latest meltdown if it had remained in force. That happened under Clinton's watch and he signed the bill.

And he still suppports the bill because it had nothing to do with the crisis. If you think it did you would not be so afraid to say what

 

[Toddsterpatriot]

Todd is lying through his teeth. The poorly regulated system of business allowed the corporatists to take us all for ride, and now the weirdos of the far right want to go back to less regulation.

Not going to happen.

Sarbanes Oxley didn't give us all the regulations we need? I'm shocked.

We just need 1000 more pages of regulations to make the country perfect, right Jakey?
Or is it 10,000?
100,000?

 

[Toddsterpatriot]

Actually, "how much regulation" is a stupidly ham-handed way of looking at it. You can "regulate" a business to prevent problems or block harm to society, or you can "regulate" it so as to suppress small-business competitors. There's also such a thing as regulatory capture.

The big problem with the financial industry was the repeal of Glass-Steagal, which would have prevented much of the crap leading to our latest meltdown if it had remained in force. That happened under Clinton's watch and he signed the bill.

Glass-Steagall would have prevented bad mortgage underwriting?

 

[EdwardBaiamonte]

Todd is lying through his teeth. The poorly regulated system of business allowed the corporatists to take us all for ride, and now the weirdos of the far right want to go back to less regulation.

Not going to happen.

Sarbanes Oxley didn't give us all the regulations we need? I'm shocked.

We just need 1000 more pages of regulations to make the country perfect, right Jakey?
Or is it 10,000?
100,000?

the liberal will have a low IQ and so believe in more and better regulation like a child believes in Santa Claus. Even a Soviet level of regulations will not convince them simply because they lack the IQ to understand that the free market is self regulating.

Warren Buffett: "There are significant limits to what regulation can accomplish. As a dramatic illustration, take two of the biggest accounting disasters in the past ten years: Freddie Mac and Fannie Mae. We're talking billions and billions of dollars of misstatements at both places".

Now, these are two incredibly important institutions. I mean, they accounted for over 40% of the mortgage flow a few years back. Right now I think they're up to 70%. They're quasi-governmental in nature. So the government set up an organization called OFHEO. I'm not sure what all the letters stand for. [Note to Warren: They stand for Office of Federal Housing Enterprise Oversight.] But if you go to OFHEO's website, you'll find that its purpose was to just watch over these two companies. OFHEO had 200 employees. Their job was simply to look at two companies and say, "Are these guys behaving like they're supposed to?" And of course what happened were two of the greatest accounting misstatements in history while these 200 people had their jobs. It's incredible. I mean, two for two!

 

[EdwardBaiamonte]

Glass-Steagall would have prevented bad mortgage underwriting?

of course thats little more than a lie which explains why the liberal is so afraid to present evidence for what he says.

 

[DSGE]

The big problem with the financial industry was the repeal of Glass-Steagal, which would have prevented much of the crap leading to our latest meltdown if it had remained in force. That happened under Clinton's watch and he signed the bill.

How do you figure? It wasn't a problem of investment and commercial banks being separate. Everything still would have happened even if they were separated.

 

[Dragon]

Glass-Steagall would have prevented bad mortgage underwriting?

It would have prevented the edifice of risky mortgage-backed derivatives built on top of bad mortgage underwriting, without which bad mortgage underwriting would have been a trivial problem.

 

[Dragon]

The big problem with the financial industry was the repeal of Glass-Steagal, which would have prevented much of the crap leading to our latest meltdown if it had remained in force. That happened under Clinton's watch and he signed the bill.

How do you figure? It wasn't a problem of investment and commercial banks being separate. Everything still would have happened even if they were separated.

Unlikely without the transfer of resources from one to the other, but even if it did, the meltdown would have been contained in the investment banking side, which would have had a much less severe impact on the general economy.

 

[EdwardBaiamonte]

The big problem with the financial industry was the repeal of Glass-Steagal, which would have prevented much of the crap leading to our latest meltdown if it had remained in force. That happened under Clinton's watch and he signed the bill.

How do you figure? It wasn't a problem of investment and commercial banks being separate. Everything still would have happened even if they were separated.

Unlikely without the transfer of resources from one to the other, but even if it did, the meltdown would have been contained in the investment banking side, which would have had a much less severe impact on the general economy.

the contagion had spread throughout the commercial banking and investment banking and far beyond so it would not have mattered at all.

Glass Steagall was essential to the mergers that took place to bail out the industry

The purpose of Glass was to prevent mixing funds and that was not done after repeal so mostly liberals have no idea what they are talking about.

That said we ought to have something like it to break up the newly consolidated industry to reduce the too big to fail problem


.

 

[CrusaderFrank]

Fannie and Freddie are the binary financial blackholes at the center of the meltdown, they set lower and lower standards until they settled on No Income No Asset.

They gave AAA rating to the worst paper

 

[DSGE]

The big problem with the financial industry was the repeal of Glass-Steagal, which would have prevented much of the crap leading to our latest meltdown if it had remained in force. That happened under Clinton's watch and he signed the bill.

How do you figure? It wasn't a problem of investment and commercial banks being separate. Everything still would have happened even if they were separated.

Unlikely without the transfer of resources from one to the other, but even if it did, the meltdown would have been contained in the investment banking side, which would have had a much less severe impact on the general economy.

You're going to have to justify that further. Investment banks still would have originated all the terrible mortgages that commercial banks securitized. They still would have been packaged into CDOs and held by everybody. There would be no difference if Glass-Steagall was still in effect.

 

[DSGE]

Fannie and Freddie are the binary financial blackholes at the center of the meltdown, they set lower and lower standards until they settled on No Income No Asset.

They gave AAA rating to the worst paper

Most subprime mortgages were originated by private investment banks. They did so voluntarily because they could package them into hard-to-value asset backed securities, get it rated AAA and sell it for a bunch of money. Fannie and Freddie were tame in comparison until near the end when they decided to get in by buying, not originating, asset backed securities.

Fannie and Freddie don't rate securities. Private credit rating agencies do.

 

[Toro]

How do you figure? It wasn't a problem of investment and commercial banks being separate. Everything still would have happened even if they were separated.

Unlikely without the transfer of resources from one to the other, but even if it did, the meltdown would have been contained in the investment banking side, which would have had a much less severe impact on the general economy.

You're going to have to justify that further. Investment banks still would have originated all the terrible mortgages that commercial banks securitized. They still would have been packaged into CDOs and held by everybody. There would be no difference if Glass-Steagall was still in effect.

I agree that Glass-Steagall had little to do with the crisis. It doesn't mean it's a good idea though.

 

[Toddsterpatriot]

Glass-Steagall would have prevented bad mortgage underwriting?

It would have prevented the edifice of risky mortgage-backed derivatives built on top of bad mortgage underwriting, without which bad mortgage underwriting would have been a trivial problem.

Mortgage based derivatives? Like what?

 

[Toddsterpatriot]

The big problem with the financial industry was the repeal of Glass-Steagal, which would have prevented much of the crap leading to our latest meltdown if it had remained in force. That happened under Clinton's watch and he signed the bill.

How do you figure? It wasn't a problem of investment and commercial banks being separate. Everything still would have happened even if they were separated.

Unlikely without the transfer of resources from one to the other, but even if it did, the meltdown would have been contained in the investment banking side, which would have had a much less severe impact on the general economy.

How would losses on bad mortgages been contained to the investment banking side?

 

[Dragon]

You're going to have to justify that further. Investment banks still would have originated all the terrible mortgages that commercial banks securitized. They still would have been packaged into CDOs and held by everybody. There would be no difference if Glass-Steagall was still in effect.

Commercial banks wouldn't have securitized them. The damage to the investment banking sector might have been comparable (although maybe not; would there have been more caution about investing without the extra resources to draw upon?), but there was a whole chain of interacting circumstances that led to the Great Recession. The interconnection of the entire financial sector meant that when the mortgage backed securities took a dive, the whole financial industrial wobbled, and the maldistribution of wealth in our society meant that the financial industry's troubles acted as a trigger to bring on a full-scale recession.

The real root problem is the turn away from progressive economics over the last thirty years, but as far as the immediate trigger within the financial industry itself, the end of the compartmentalization meant that commercial banks were endangered by the problems within the investment banks.

 

[Dragon]

Mortgage based derivatives? Like what?

HowStuffWorks "How can mortgage-backed securities bring down the U.S. economy?"

Mortgage-backed securities (MBSs) are simply shares of a home loan sold to investors. They work like this: A bank lends a borrower the money to buy a house and collects monthly payments on the loan. This loan and a number of others -- perhaps hundreds -- are sold to a larger bank that packages the loans together into a mortgage-backed security. The larger bank then issues shares of this security, called tranches (French for "slices"), to investors who buy them and ultimately collect the dividends in the form of the monthly mortgage payments. These tranches can be further repackaged and sold again as other securities, called collateralized debt obligations (CDOs). Home loans in 2008 were so divided and spread across the financial spectrum, it was entirely possible a given homeowner could unwittingly own shares in his or her own mortgage.

It sounds innocuous enough, and it is. It's also an excellent and safe way to make money when the housing market is booming. And in the early 21st century, the U.S. housing market was booming. A person who bought a new home in January 1996 for $155,000 could reasonably expect to make a profit of $100,000 when selling it in August 2006 [source: U.S. Census Bureau, CNN Money].

But 2008 wasn't 2006; the housing market in the United States was no longer booming. And it was the mortgage-backed security that killed it.