The argument against self-regulation.

[KissMy]

...Leverage is simple. Take a rich retired person who has amassed a lifetime of wealth & assets that is 25 times more than the average citizens. They leverage all that 40 to one on a bet & lose. They just lost 40 times more than their life's work or 1,000 times more than the average citizens life's work. Now 1,000 other peoples life savings & assets have go to pay for that one idiots bad bet.

This is exactly what's wrong these days.

Wait, not that silly 'leverage' nonsense you were spewing. What's wrong is that this is what too many otherwise intelligent people are actually believing.

When a large bank or GSE increases leverage & lowers credit standards it is increasing the money supply & velocity of money. This causes inflation for the rest of us. There needs to be limits otherwise we have bubbles. Engines have throttles for a reason. If they did not they would run wide open & blow up. Of course that means it completely seizes up & stops. We need some sort of throttle that is not revved up & down by politicians.

The congress "regulated" GSEs did worse than the private sector with leverage. The private sector was bad with credit standards. "low-doc" or "stated-income" mortgages defaulted at a higher rate.

It is possible that switching from the regulated to unregulated system blew up all the bad apples at one time that were previously kept in check & that it won't happen again, but that is an unknown. Maybe all the bad "stated-income" barrowers have now trashed their credit & there will be minimal defaults from here on out.

 

[Toddsterpatriot]

...Leverage is simple. Take a rich retired person who has amassed a lifetime of wealth & assets that is 25 times more than the average citizens. They leverage all that 40 to one on a bet & lose. They just lost 40 times more than their life's work or 1,000 times more than the average citizens life's work. Now 1,000 other peoples life savings & assets have go to pay for that one idiots bad bet.

This is exactly what's wrong these days.

Wait, not that silly 'leverage' nonsense you were spewing. What's wrong is that this is what too many otherwise intelligent people are actually believing.

When a large bank or GSE increases leverage & lowers credit standards it is increasing the money supply & velocity of money. This causes inflation for the rest of us. There needs to be limits otherwise we have bubbles. Engines have throttles for a reason. If they did not they would run wide open & blow up. Of course that means it completely seizes up & stops. We need some sort of throttle that is not revved up & down by politicians.

The congress "regulated" GSEs did worse than the private sector with leverage. The private sector was bad with credit standards. "low-doc" or "stated-income" mortgages defaulted at a higher rate.

It is possible that switching from the regulated to unregulated system blew up all the bad apples at one time that were previously kept in check & that it won't happen again, but that is an unknown. Maybe all the bad "stated-income" barrowers have now trashed their credit & there will be minimal defaults from here on out.

Unregulated system? Where/when was that?

 

[KissMy]

This is exactly what's wrong these days.

Wait, not that silly 'leverage' nonsense you were spewing. What's wrong is that this is what too many otherwise intelligent people are actually believing.

When a large bank or GSE increases leverage & lowers credit standards it is increasing the money supply & velocity of money. This causes inflation for the rest of us. There needs to be limits otherwise we have bubbles. Engines have throttles for a reason. If they did not they would run wide open & blow up. Of course that means it completely seizes up & stops. We need some sort of throttle that is not revved up & down by politicians.

The congress "regulated" GSEs did worse than the private sector with leverage. The private sector was bad with credit standards. "low-doc" or "stated-income" mortgages defaulted at a higher rate.

It is possible that switching from the regulated to unregulated system blew up all the bad apples at one time that were previously kept in check & that it won't happen again, but that is an unknown. Maybe all the bad "stated-income" barrowers have now trashed their credit & there will be minimal defaults from here on out.

Unregulated system? Where/when was that?

Gee - I don't know. Maybe when Chris Cox was watching porn while Bernie Madoff with the cash. Did the SEC send anyone to jail from 2001 until Madoff turned himself in in 2008?????????????

 

[Toddsterpatriot]

When a large bank or GSE increases leverage & lowers credit standards it is increasing the money supply & velocity of money. This causes inflation for the rest of us. There needs to be limits otherwise we have bubbles. Engines have throttles for a reason. If they did not they would run wide open & blow up. Of course that means it completely seizes up & stops. We need some sort of throttle that is not revved up & down by politicians.

The congress "regulated" GSEs did worse than the private sector with leverage. The private sector was bad with credit standards. "low-doc" or "stated-income" mortgages defaulted at a higher rate.

It is possible that switching from the regulated to unregulated system blew up all the bad apples at one time that were previously kept in check & that it won't happen again, but that is an unknown. Maybe all the bad "stated-income" barrowers have now trashed their credit & there will be minimal defaults from here on out.

Unregulated system? Where/when was that?

Gee - I don't know. Maybe when Chris Cox was watching porn while Bernie Madoff with the cash. Did the SEC send anyone to jail from 2001 until Madoff turned himself in in 2008?????????????

There were no laws against what Madoff did?
Didn't a bunch of guys from Enron get thrown in jail?
You sound confused.

 

[KissMy]

Unregulated system? Where/when was that?

Gee - I don't know. Maybe when Chris Cox was watching porn while Bernie Madoff with the cash. Did the SEC send anyone to jail from 2001 until Madoff turned himself in in 2008?????????????

There were no laws against what Madoff did?
Didn't a bunch of guys from Enron get thrown in jail?
You sound confused.

I said from 2001 on until Madoff turned himself in. Enron happened in 2001. Even then they were closing the barn doors after the horses left the stable. They did not regulate or catch Madoff. He turned himself in.

 

[EdwardBaiamonte]

We agree so much I consider this obvious.

The same human failings that make socialism an unrealistic system make self regultion unrealistic.

that of course is idiotic since you have human regulation in both socialism and capitalist self-regulation.

The huge huge difference is that you have a few regulators under Socialism and 300 million under capitalist regulation. Got it?

Under socialism you can one housing crisis that sinks the entire nation. Under capitalism a problem is localized, others see it, and the disease does not spread!!

Ohh the disease has spread thru over leveraging.

what?????????????

 

[Toddsterpatriot]

Gee - I don't know. Maybe when Chris Cox was watching porn while Bernie Madoff with the cash. Did the SEC send anyone to jail from 2001 until Madoff turned himself in in 2008?????????????

There were no laws against what Madoff did?
Didn't a bunch of guys from Enron get thrown in jail?
You sound confused.

I said from 2001 on until Madoff turned himself in. Enron happened in 2001. Even then they were closing the barn doors after the horses left the stable. They did not regulate or catch Madoff. He turned himself in.

Yeah, the Enron guys were jailed while Bush was President.
So what was your original point?
When were there no regulations that somehow caused the mortgage crisis?

 

[Quantum Windbag]

The argument against self-regulation.

Refer to
Glass-Steagall Act: The Senators And Economists Who Got It Right

The Glass-Steagall Act of 1933 defined the differences and prohibited the practice of commercial banks participating in enterprises that were the functions of investment banking, (not to be confused with their 1932 which had different purpose).

I do not pretend to understand the conflicts of interests and opportunities of fraud that’s possible when single entities have their feet within the doors of less risky forms of banking and the more risky investment and brokerage houses.
It is enough for me to appreciate that having just experience the 1929 Wall street crash and the significant deconstruction of much world’s economies, governments in 1933 were inclined to be more financially prudent and Wall Street “experts” were subject to diligent cross examination. ...........................................

Suppose you tell me how Glass Steagall being repealed actually contributed to the problem we had.

Quantum Windbag, I’m opposed to additional risk inherent to collusion between investment banking and other types of banks.

The FDIC insures their client banks accounts but the insurance does not cover some bank products or the banks themselves. Banks are required to inform their clients that they accept those products at their own risks. Congress passed the1933 Glass-Steagall Act because they believed any lesser “fire walls” would be insufficient. I believe the act’s prohibition of savings or commerce banks participating in investment banking activities is logical and prudent.

The existence of an FDIC insured bank participating as investment bank too large to be permitted to fail is beyond imprudence and contrary to the public interest; it’s a potential economic disaster.

Respectfully, Supposn

Nice, but it did not answer my question. What, specifically, did the repeal of Glass Steagall do to cause the problem we just had?

 

[Supposn]

Suppose you tell me how Glass Steagall being repealed actually contributed to the problem we had.

Quantum Windbag, I’m opposed to additional risk inherent to collusion between investment banking and other types of banks......................
......................... The existence of an FDIC insured bank participating as investment bank too large to be permitted to fail is beyond imprudence and contrary to the public interest; it’s a potential economic disaster.

Respectfully, Supposn

Nice, but it did not answer my question. What, specifically, did the repeal of Glass Steagall do to cause the problem we just had?

Quantum Windbag, it’s (i.e. the 1933 Glass-Steagall Act’s repeal’s) a potential economic disaster. In my opinion permitting GSE’s to handle non-government insured mortgages greatly contributed to their volumes of defaults.

Respectfully, Supposn

 

[Supposn]

Suppose you tell me how Glass Steagall being repealed actually contributed to the problem we had.

Quantum Windbag, I’m opposed to additional risk inherent to collusion between investment banking and other types of banks......................
......................... The existence of an FDIC insured bank participating as investment bank too large to be permitted to fail is beyond imprudence and contrary to the public interest; it’s a potential economic disaster.

Respectfully, Supposn

Nice, but it did not answer my question. What, specifically, did the repeal of Glass Steagall do to cause the problem we just had?

Quantum Windbag, it’s (i.e. the 1933 Glass-Steagall Act’s repeal’s) a potential economic disaster. In my opinion permitting GSE’s to handle non-government insured mortgages was a (if not the) primary contribution to GSEs' volumes of defaults. Those defaults were in turn the primary cause of the problem.

Respectfully, Supposn

 

[editec]

What part of decoupling the RISK TAKING BEHAVIOR FROM CONSEQUENCES is really confusing us here?

When we set up the system whereby morgage originators no longer needed to care about the qualify of the loans they issued, we created the a MORAL HAZARD.

Really is there any part of the above embolded statement that anybody here, be ye conservative or liberal, is failing to understand?


The mortgage originators had no reason whatever to CARE if the loans were dubious because they were making their money originating the loans, not holding onto them.

The Mortgage originators did not hold the notes.

The mortgage originators other larger financial insitutions bundled those dubious motgages and THEN LIED TO THE BUYERS OF THOSE BONDS ABOUT THE RISKS ASSOCIATED WITH THEM.

They were, therefore, off the hook when those dubious mortgages failed thus also causing those bundled RE mortgage bonds to lose their value.

Now is that really that difficult for us to understand?

But wait there's more...those banks that bundled those dubious RE Bonds, KNEW that the bonds they were selling had much more rish associated with them then they told the buyers of those bonds.

They knew it, and their subsequent actions prove it...

Those same too big to fail banks and financial orgganizations then BET AGAINST THE VERY BONDS they were selling to their customers!

They did that KNOWING they were selling the bond equivalent of LEMON CARS.

And who went down because of that?

Well AIG for one since AIG sold DERIVATIVES insuring that the RE Bonds wouldn't go down.

But WAIT THERES STILL MORE TO GET OUTRAGED ABOUT BE YE CONSERVATIVE OR LIBERAL... and this is where regualtions come into play.

The selling of dereivatives were not regulated. (thanks to Bill Clinton and Co)

So folks like AIG could sell insurance on those bonds without having any money in reserves to back up THAT insurance.

Now encentivized by the fact that it COST THEM NOTHING to insure those bonds, they wanted to insure every bond they could get!.

AIG, the world's largest insurance company was out there on a limb.

It had TRILLIONS of dollars worth of insurance issued and very little money to back up that insurance.

Think about it what a sweet deal that was for AIG.

It cost them nothing to issue the insurance, because that activity was not REGULATED.

Since they made money on premuims, AT NOT COST, they issed insurance on TRILLIONS in Bonds representing TRILLIONS in real estate mortgages.

And when those morgages finally started to fail, and when the bonds created out of them started to fail?

WEll guess who else started to fail?

The DERIVATIVES issuers like AIG.

And who made money hand over fist as a result of the failures?

The very BANKSTERS who'd sold dubious bonds, made from the dubious real estate motgages, and then who bought derivatives BETTING AGINST THEIR OWN BONDS (that they no longer owed but had sold to an unsuspecting public!).

Talk about cynical and greedy?

They'd bet (derivatives) against the very bonds they created and they sold to their own customers.

 

[Oddball]

What part of decoupling the RISK TAKING BEHAVIOR FROM CONSEQUENCES is really confusing us here?

When we set up the system whereby morgage originators no longer needed to care about the qualify of the loans they issued, we created the a MORAL HAZARD.

Really is there any part of the above embolded statement that anybody here, be ye conservative or liberal, is failing to understand?


The mortgage originators had no reason whatever to CARE if the loans were dubious because they were making their money originating the loans, not holding onto them.

The Mortgage originators did not hold the notes.

Right....Many of them ended up in the hands of Fannie & Freddie.

I noticed during your lengthy dissemblance about lack of accountability and moral hazards, that you failed to mention the towering moral hazard of using the taxpayer as a backstop for the mortgage banking industry.

 

[Supposn]

What part of decoupling the RISK TAKING BEHAVIOR FROM CONSEQUENCES is really confusing us here?

When we set up the system whereby morgage originators no longer needed to care about the qualify of the loans they issued, we created the a MORAL HAZARD.
Really is there any part of the above embolded statement that anybody here, be ye conservative or liberal, is failing to understand?
The mortgage originators had no reason whatever to CARE if the loans were dubious because they were making their money originating the loans, not holding onto them. /I]

Editec, you wrote it very well.
Remember W.C. Field’s line, “You can’t cheat an honest man”?

These interrelated laws regulations and the transactions carried out within our environment were the “perfect storm” of dishonesty. Everyone perceived how they might beat the system without regard for anyone or anything else.

Extremely few if any names should be changed whenever these historic events are written or described in pictures; rarely were innocent people involved and once involved, extremely few could remain innocent.
If a Diogenes walked in among them, they’d steal his lantern well before he could possibly find an honest man.

Respectfully, Supposn

 

[KissMy]

What part of decoupling the RISK TAKING BEHAVIOR FROM CONSEQUENCES is really confusing us here?

When we set up the system whereby morgage originators no longer needed to care about the qualify of the loans they issued, we created the a MORAL HAZARD.
Really is there any part of the above embolded statement that anybody here, be ye conservative or liberal, is failing to understand?
The mortgage originators had no reason whatever to CARE if the loans were dubious because they were making their money originating the loans, not holding onto them. /I]

Editec, you wrote it very well.
Remember W.C. Field’s line, “You can’t cheat an honest man”?

These interrelated laws regulations and the transactions carried out within our environment were the “perfect storm” of dishonesty. Everyone perceived how they might beat the system without regard for anyone or anything else.

Extremely few if any names should be changed whenever these historic events are written or described in pictures; rarely were innocent people involved and once involved, extremely few could remain innocent.
If a Diogenes walked in among them, they’d steal his lantern well before he could possibly find an honest man.

Respectfully, Supposn

Back in 2001 I went to a few seminars on how to make these liar loans to home & property owners in order to free up cash to invest in VUL life insurance. I could not in good conscience talk people who owned their homes free & clear into risking it in a stock market based insurance product. They had a bunch of their people there with fancy cars, big diamond rings, expensive suits giving testimony about their big nice new homes & boats. It was very tempting, but I knew this shit would blow-up & I could not look someone in the eyes & steal their money for some Wallstreet masters.

Apparently enough people believed in this crap to make it a systemic problem. These investment banker/broker/insurance execs are snake oil selling charlatans. They must be stopped before they ruin us all. Over 90% of the the population have no idea that they lose all their financial regulation protection when they sign a paper stating they are an "accredited investor." Once they sign that the broker has no fiduciary responsibility towards them. It is a license to legally steal everything they have.

 

[Quantum Windbag]

Quantum Windbag, I’m opposed to additional risk inherent to collusion between investment banking and other types of banks......................
......................... The existence of an FDIC insured bank participating as investment bank too large to be permitted to fail is beyond imprudence and contrary to the public interest; it’s a potential economic disaster.

Respectfully, Supposn

Nice, but it did not answer my question. What, specifically, did the repeal of Glass Steagall do to cause the problem we just had?

Quantum Windbag, it’s (i.e. the 1933 Glass-Steagall Act’s repeal’s) a potential economic disaster. In my opinion permitting GSE’s to handle non-government insured mortgages greatly contributed to their volumes of defaults.

Respectfully, Supposn

If I understand you we should change the law because it might be a problem, not because it has been. Right?

 

[samjones]

The selling of dereivatives were not regulated. (thanks to Bill Clinton and Co)

This makes zero sense. The Bush Financial Crisis of '08 developed, truthfully, from '00 to '06 with a Republican in the White House and Repubicans controlling both houses of Congress.

Blaming Bill Clinton is laughable.

 

[EdwardBaiamonte]

a Republican in the White House and Repubicans controlling both houses of Congress.

Blaming Bill Clinton is laughable.

of course if being in office even with a super majority meant BO could have gotten a public option or single payer he'd have gotten them.

Bush would have privatized Social Security and passed a Balanced Budget Amendment.

All but children and liberals know that in office and in power are very different things. Still waiting for Sam to get just one thing right. When it happens we'll have a huge celebration for him.

 

[EdwardBaiamonte]

Those defaults were in turn the primary cause of the problem.

Respectfully, Supposn

sorry but the problem was that liberals put too much water( money) in the river (economy) not that the levy's( financial markets) didn't hold.

The major newspapers and economists on right and left agree. Where have you been?


"First consider the once controversial view that the crisis was largely caused by the Fed's holding interest rates too low for too long after the 2001 recession. This view is now so widely held that the editorial pages of both the NY Times and the Wall Street Journal agree on its validity!"...John B. Taylor( arch conservative, author of the Taylor Rule)


" The Federal reserve having done so much to create the problems in which the economy is now mired, having mistakenly thought that even after the housing bubble burst the problems were contained, and having underestimated the severity of the crisis, now wants to make a contribution to preventing the economy from sinking into a Japanese Style malaise....... - "Joseph Stiglitz"

 

[Supposn]

[If I understand you we should change the law because it might be a problem, not because it has been. Right?

Quantum Windbag, no, because it has been a severe problem before the 1933 Glass-Steagall Act was enacted.

There’s good reason to question if the other additional laws and regulations that have been enacted are themselves sufficient to prevent history from repeating itself. Finance and economic academia’s cannot predict when the repeal of the 1933 act will again cause grievous U.S. and probably global economic harm but they have good reason to expect that such disasters will again occur.

I sense the majority of practical and experienced executives” disagree with the academias. The backgrounds and credentials of these executives are similar to the proponents of prior policies that led to all of the prior economic disasters we’ve experienced.

[Unlike the academias, the executives and their enterprises as a class generally had a vested interest and very well profited from the policies they advocated; (until those policies failed)].

Respectfully, Supposn

 

[EdwardBaiamonte]

We agree so much I consider this obvious.

The same human failings that make socialism an unrealistic system make self regultion unrealistic.

self-regulation works perfectly because there are 300 million self- regulators while socialist or liberal regulation fails because there are only a few regulators. Now we can see why the China switched to self- regulation and saved 10's of millions from slow starvation.