What is the goal of capitalism?

[ralfy]

Hmm... that seems like the goal of any economic system.
Let me give a try with the most common systems.

Slavery... give a comfortable life to free people; use enemy states as a source of cheap labour.
Feudalism... Provide goods for the lord, wariors and king.
Socialism... Distribute wealth in an equitable manner, independently of the market value of labor.
Capitalism... Increase development and production through competition and profit maximization.

I've skipped communism, that is just a pipe dream with a flawed principle: to each according to its needs, from each according to its capacity. A family made of 1 husband 2 wives and 20 children has a lot more needs than a couple with no kids. So the first family will get 10 times the income of the second one because it has more "needs"...

The word comes from "capitale," which means head. It refers to heads of cattle. You engage in husbandry, i.e., take care of livestock and let it increase while selling the surplus.

As technology advanced, people could go beyond that, using machinery to produce, which is the point I gave.

What about communism, etc? They actually all practice capitalism, but the differences lie in ownership of the means of production. That is,

If private individuals own machines, etc., and hire workers to produce, then that's bourgeois capitalism. The bourgeois was the middle class that earned from rent or from others they hired to do the work.

If workers themselves own the machines, etc., then that's a cooperative system.

If the state owns the machines, etc., then that's state capitalism, and businesses are usually referred to as public corporations.

Beyond all that is capitalism involving financial speculation, where people don't produce things using machines but bet on companies, the weather, etc., and earn if they win.

Socialism refers to a range of regulations involving social ownership or responsibility.

Communists don't support bourgeois capitalism because it leads to concentration of wealth among a few, which not surprisingly is what happened. For example, 10 pct of Americans own 70 pct of total wealth of the U.S., and worldwide only a few corporations control the global economy, and most of them are in financing:

Revealed – the capitalist network that runs the world

As anti-capitalist protesters take to the streets, mathematics has teased apart the global economic network to show who's really pulling the strings

www.newscientist.com

Communists also argue that the richest will obviously take control of the government, which is also what happened in countries like the U.S., where Washington essentially works for Wall Street.

Most people don't support communism because they dream of becoming like the 10 pct, even though concentration of wealth among the 10 pct won't allow for that. But they dream anyway, and they try to make that dream real by working hard and buying lots of "nice stuff".

Meanwhile, both people and companies want laws to protect themselves from each other or to make things more efficient, which is why there are legal systems to protect private property rights and to ensure limited liabilities. At the same time, there are services that are publicly funded, like road networks and security, because it doesn't make sense to put them in private hands.

Hence, most countries are mixed economies, i.e., with private and public corporations, follow socialist principles in one way or another, and follow up to half of the requirements for Communism given by Marx, including public education and progressive taxation.

 

[otto105]

Who is kicking your commie ass........

What the fuck are you posting about small hands.

 

[otto105]

Obviously because of the lack of logic.

Hilarious

 

[TruthNotBS]

It's important to recognize that for many individuals, the choices in employment and financial services are not made on an even playing field.

Who said it's an even playing field? So, they didn't force you?

Work is not a choice for most; it’s a necessity for survival.

Not a choice to work, but many, many choices of employers.

Executives often have a wide array of choices due to their position and wealth, whereas a worker reliant on a paycheck to feed their family does not have the luxury of choice to the same extent.

Same extent? No. Still no force.

When discussing "force," it is imperative to think beyond the narrow definition of physical coercion. In sociological and economic contexts, force can encompass various forms of coercion, including those born out of systemic inequalities and power imbalances.

While an employer might not physically force someone to work for an unlivable wage, the economic system can. In a capitalist society with stark economic disparities, many individuals have no real choice but to accept employment under less-than-ideal conditions to avoid homelessness or starvation. This is a form of economic coercion that is systemic in nature.

Regarding predatory lending, the argument extends beyond individual knowledge or lack thereof. The financial industry, often through deliberately complex terms and high-pressure tactics, can exploit informational asymmetries. This exploitation is a form of systemic coercion where the financial institutions use their position of power to effectively corner individuals into suboptimal agreements.

In these contexts, it's crucial to recognize that power dynamics and systemic structures can exert a form of 'force' that, while not physical, is still very much real and can have substantial adverse effects on the lives of individuals. This broader understanding of force acknowledges the complexities of social systems and the often-hidden pressures that can limit individual agency.

 

[Toddsterpatriot]

Let's clarify certain aspects:

1. Glass-Steagall Act (GSA) indeed mainly aimed at separating commercial and investment banking to avoid conflicts of interest and risky use of depositors' funds. The primary intent was to protect the consumer from speculative risks taken by investment banks.
2. While you rightly mention that commercial banks could engage in mortgage lending under Glass-Steagall, what changed post-repeal was the extent to which these institutions could also securitize those mortgages and engage in speculative trading. The repeal allowed commercial banks not only to issue mortgages but also to securitize them and trade the securities, which led to the loosening of lending standards.
3. Regarding Citigroup, while it did write mortgages under GSA, it is the securitization and trading of these mortgages where the issue lies. The ability to securitize these mortgages and offload them to investors led to a decrease in lending standards, contributing to the financial crisis.
4. For investment banks like Lehman Brothers and Bear Stearns, the issue was not access to deposits but rather their level of leverage and involvement in the mortgage-backed securities market. While GSA would not have impacted their access to deposits, regulatory oversight on investment banks regarding leverage ratios and risk-taking could have mitigated the scale of their involvement in risky mortgage-backed securities.
5. Now addressing the final point where you mention your posts are based on facts, it's crucial to understand that the financial crisis was a complex event with numerous contributing factors. The repeal of Glass-Steagall was not the sole cause, but many experts and analysts believe that it played a role in the build-up to the crisis.

In conclusion, it is the amalgamation of reduced regulation, securitization, excessive risk-taking, and various other factors that contributed to the financial crisis. Glass-Steagall’s repeal is viewed by many as a contributing factor because it is a part of the larger deregulation trend that enabled excessive risk-taking in the financial sector. It is important to approach this with a nuanced understanding of the various elements at play, rather than boiling it down to a single factor.

Glass-Steagall Act (GSA) indeed mainly aimed at separating commercial and investment banking to avoid conflicts of interest and risky use of depositors' funds.

None of which involved banks writing crappy mortgages.
They could before GS, during GS and after GS.

While you rightly mention that commercial banks could engage in mortgage lending under Glass-Steagall, what changed post-repeal was the extent to which these institutions could also securitize those mortgages and engage in speculative trading.

Which commercial banks got in trouble because they were securitizing mortgages or engaging
in speculative trading?

Regarding Citigroup, while it did write mortgages under GSA, it is the securitization and trading of these mortgages where the issue lies.

Every crappy mortgage they could securitize and sell was one less crappy mortgage that would explode on their balance sheet when it went bad.

The ability to securitize these mortgages and offload them to investors led to a decrease in lending standards

There were no lending standards in GS.

For investment banks like Lehman Brothers and Bear Stearns, the issue was not access to deposits

Now you understand, the repeal of GS didn't impact them.

regulatory oversight on investment banks regarding leverage ratios and risk-taking could have mitigated the scale of their involvement in risky mortgage-backed securities.

Exactly, but not GS.

Now addressing the final point where you mention your posts are based on facts, it's crucial to understand that the financial crisis was a complex event with numerous contributing factors.

I know, that's why I react so strongly when I see simplistic, ignorant claims about the repeal of GS.

Glass-Steagall’s repeal is viewed by many as a contributing factor because it is a part of the larger deregulation trend

And on the other side, we see the increased regulatory pressures for subprime lending
and mandating the GSEs larger and larger participation in subprime. Not to mention the Fed
holding rates too low for too long.

 

[TruthNotBS]

Glass-Steagall Act (GSA) indeed mainly aimed at separating commercial and investment banking to avoid conflicts of interest and risky use of depositors' funds.

None of which involved banks writing crappy mortgages.
They could before GS, during GS and after GS.

While you rightly mention that commercial banks could engage in mortgage lending under Glass-Steagall, what changed post-repeal was the extent to which these institutions could also securitize those mortgages and engage in speculative trading.

Which commercial banks got in trouble because they were securitizing mortgages or engaging
in speculative trading?

Regarding Citigroup, while it did write mortgages under GSA, it is the securitization and trading of these mortgages where the issue lies.

Every crappy mortgage they could securitize and sell was one less crappy mortgage that would explode on their balance sheet when it went bad.

The ability to securitize these mortgages and offload them to investors led to a decrease in lending standards

There were no lending standards in GS.

For investment banks like Lehman Brothers and Bear Stearns, the issue was not access to deposits

Now you understand, the repeal of GS didn't impact them.

regulatory oversight on investment banks regarding leverage ratios and risk-taking could have mitigated the scale of their involvement in risky mortgage-backed securities.

Exactly, but not GS.

Now addressing the final point where you mention your posts are based on facts, it's crucial to understand that the financial crisis was a complex event with numerous contributing factors.

I know, that's why I react so strongly when I see simplistic, ignorant claims about the repeal of GS.

Glass-Steagall’s repeal is viewed by many as a contributing factor because it is a part of the larger deregulation trend

And on the other side, we see the increased regulatory pressures for subprime lending
and mandating the GSEs larger and larger participation in subprime. Not to mention the Fed
holding rates too low for too long.

Glass-Steagall Act did indeed serve as a barrier that discouraged banks from engaging in excessive risk-taking by keeping commercial and investment banking separate. When you say that banks could write “crappy mortgages” during the era of Glass-Steagall, it is essential to recognize that the scale and nature of these mortgages were vastly different before the erosion of the Act.

You ask which commercial banks got into trouble for securitizing mortgages or engaging in speculative trading. Well, it is important to note that the likes of Citigroup and Bank of America faced tremendous difficulties due to their exposure to mortgage-backed securities post-repeal. The nature of integration between commercial and investment banking allowed for a significant intermingling of high-risk investment practices with traditional banking operations.

While you claim that “every crappy mortgage they could securitize and sell was one less crappy mortgage that would explode on their balance sheet,” this oversimplifies the mechanics of the crisis. The securitization created perverse incentives for banks to issue more subprime loans without concern for the quality, as they could quickly offload the risk to other investors. This fueled the housing bubble.

Regarding the claim that there were no lending standards in Glass-Steagall, it’s vital to recognize that Glass-Steagall was a part of a larger regulatory framework. The Act itself might not have explicitly set lending standards, but its separation of commercial and investment banking indirectly encouraged more prudent lending.

Investment banks like Lehman Brothers and Bear Stearns did not have deposits; that's true. However, their behavior was symptomatic of a broader culture of excessive risk-taking that was enabled by the deregulation environment, of which the repeal of Glass-Steagall was a part.

Now, addressing the complexity of the crisis, you are absolutely right. The financial crisis was a result of numerous factors including but not limited to the repeal of Glass-Steagall. However, the repeal symbolized a broader move towards deregulation that many economists and experts, including Nobel laureate Joseph Stiglitz, have argued contributed to the environment that allowed the crisis to occur.

It's essential to have nuanced discussions on this topic. Simplifying it as merely an issue of mortgages doesn't encompass the full complexity, and the repeal of Glass-Steagall was certainly a piece in the larger puzzle of the financial crisis. This is supported by a multitude of studies and expert opinions.

 

[Foxfyre]

Forxfyre,
I will mostly ask questions about your conclusions. I find it useful to poke at ideas you will either uncover new evidence or data that changes your perspective on problems.

How did you reach the conclusion "The reason we have problems with housing and healthcare is irresponsible in harmful meddling by the U.S." ?
Did you analyze the data from other countries with varying degrees of intervention? Are there any countries with a healthcare system similar to the US? Are prices stable and affordable?Healthcare is a complex topic, much depends on life habits and population's age but I find it difficult to establish a causal relationship between government intervention and prices. Alas there is a great variation between the insurance prices among states from $350 to 712? If the main cause is government intervention what explains the difference between states?

I find the case of housing particularly suspicious. What measures did the government take that broke the housing market?

The rest of the rant talks about the form of government. I am not really talking about changing the form of government, so I consider that part of the discussion irrelevant. That's why I made the distinction in the previous post. I am talking about changing the form of production. In the case of healthcare single-payer healthcare seems the easiest fix. Turning all private hospitals into public institutions ( as is the case in Europe) seems a daunting task full of risks and points of failure.

I was once credit manager of a small rural hospital which meant I met with all the people who lacked insurance or were underinsured and couldn't pay their hospital bills at the time. I worked out payment plans for them and for most it was pay $10 or $20 or so a month because hospital costs weren't crippling for people back then. Not even for most of the uninsured. Health insurance was mostly for hospitalizations and we paid our doctor's modest fees for office calls and vaccinations for the kids and such out of pocket. Almost all common medications were affordable for pretty much everybody including us low income people. In other words paying for healthcare was a problem for some, but for the most part it was manageable. The federal government wasn't involved.

From almost Day #1 that Medicare and Medicaid went into effect, costs began escalating. The government was a deep well of cash and everybody in the medical field from hospitals, doctors' offices, pharmaceutical companyies, pharmacies, medical supply and equipment companies, ambulance services etc. all were cashing in on it. An Xray machine tube that cost $100 in that small country hospital before Medicare, 10 years later would cost $10,000. Then Obama double downed on all that adding thousands of pages of new rules and regs with Obamacare and costs escalated even more. An injection that would have cost about $50 out of pocket back then now costs insurance almost $3,000. You can't blame inflation for all that.

To not have insurance in the 1960s was an inconvenience but also not financially crippling for the vast majority. Only the financially wealthy can afford healthcare now without having insurance or else they have to depend on charity and the taxpayers pick up the bill or the doctor or hospital has to eat the cost to the detriment of all the other patients.

College was once affordable for the vast majority of Americans who wanted a college education and those of us who had to do it ourselves could work out way through our education, live in the dorm on campus that included three meals a day, and not accumulate much if any debt. Once the federal government got involved--it now funds colleges and universities almost as much as it funds the Defense Dept.--college costs are out of reach for most without grants, loans, scholarships.

The government does very few things more efficiently, effectively, or economically than the private sector does it.

 

[Toddsterpatriot]

The assertion that government bailouts are the result of too much regulation is fundamentally flawed and displays a lack of understanding of the dynamics that led to the necessity for bailouts, particularly during the financial crisis of 2007-2008.

1. Deregulation as a Catalyst: The financial crisis was, in significant part, precipitated by a lack of regulation and oversight. A prime example is the Gramm-Leach-Bliley Act of 1999, which effectively repealed the Glass-Steagall Act, leading to a blurring of the lines between investment banks and commercial banks. This deregulation allowed for riskier investments using depositors’ money. A study by the Journal of Economic Issues asserts that deregulation played a significant role in the crisis. (Source: Journal of Economic Issues, "Did Deregulation Cause the Financial Crisis?" 2011)
2. Insufficient Oversight of Mortgage Lending: The crisis was fueled by poorly underwritten mortgage loans. The absence of proper oversight allowed for predatory lending practices and the granting of loans to individuals who could not afford them, known as subprime lending. When housing prices collapsed, this led to a domino effect where those loans defaulted en masse.
3. Over-reliance on Rating Agencies: There was a systemic failure in relying on credit rating agencies, whose assessment of securities turned out to be overly optimistic or outright flawed. The agencies had conflicts of interest, as they were paid by the very issuers of the securities they rated. Regulation to ensure transparency and independence was lacking.
4. Derivatives and Securitization: Financial innovation outpaced regulation with the growth of complex financial products like derivatives. Banks and financial institutions built investment products based on these shaky mortgages and sold them worldwide. This market was largely unregulated, which contributed to the uncertainty and the severity of the crisis.
5. Leverage: Many financial institutions were highly leveraged, meaning they had a high proportion of debt relative to their equity. They could borrow excessively with little capital of their own, and this was permitted because of the lack of regulation surrounding leverage ratios.
6. The Cost of No Bailout: When the crisis hit, the government had to step in to prevent a total collapse of the financial system. Not bailing out would have had even more catastrophic consequences for both the national and global economy. The bailouts can be seen as a response to the failure caused by lack of regulation.

To argue that the bailouts were the result of too much government intervention is to ignore the substantial body of evidence to the contrary. It is crucial to recognize that it was the lack of effective regulation and oversight that allowed systemic risks to build up in the financial system, which ultimately led to the crisis and subsequent bailouts. The bailouts were not the disease; they were a bitter medicine applied to a patient already infected by the virus of deregulation and uncontrolled financial recklessness.

Insufficient Oversight of Mortgage Lending: The crisis was fueled by poorly underwritten mortgage loans. The absence of proper oversight allowed for predatory lending practices and the granting of loans to individuals who could not afford them, known as subprime lending. When housing prices collapsed, this led to a domino effect where those loans defaulted en masse.

Which regulations were removed to allow subprime lending?

Over-reliance on Rating Agencies: There was a systemic failure in relying on credit rating agencies, whose assessment of securities turned out to be overly optimistic or outright flawed. The agencies had conflicts of interest, as they were paid by the very issuers of the securities they rated. Regulation to ensure transparency and independence was lacking.

New regulations were needed, not that old regulations were removed.

The bailouts can be seen as a response to the failure caused by lack of regulation.

And the failure caused by government subprime mandates for the banks and GSEs.

 

[Toddsterpatriot]

So, how come the meltdown didn’t happen before the G-S Act was diluted by a republic Congress.

Just because one happened after the other doesn't mean it was the cause.

 

[TruthNotBS]

I was once credit manager of a small rural hospital which meant I met with all the people who lacked insurance or were underinsured and couldn't pay their hospital bills at the time. I worked out payment plans for them and for most it was pay $10 or $20 or so a month because hospital costs weren't crippling for people back then. Not even for most of the uninsured. Health insurance was mostly for hospitalizations and we paid our doctor's modest fees for office calls and vaccinations for the kids and such out of pocket. Almost all common medications were affordable for pretty much everybody including us low income people. In other words paying for healthcare was a problem for some, but for the most part it was manageable. The federal government wasn't involved.

From almost Day #1 that Medicare and Medicaid went into effect, costs began escalating. The government was a deep well of cash and everybody in the medical field from hospitals, doctors' offices, pharmaceutical companyies, pharmacies, medical supply and equipment companies, ambulance services etc. all were cashing in on it. An Xray machine tube that cost $100 in that small country hospital before Medicare, 10 years later would cost $10,000. Then Obama double downed on all that adding thousands of pages of new rules and regs with Obamacare and costs escalated even more. An injection that would have cost about $50 out of pocket back then now costs insurance almost $3,000. You can't blame inflation for all that.

To not have insurance in the 1960s was an inconvenience but also not financially crippling for the vast majority. Only the extremely rich can afford healthcare now without having insurance or else they have to depend on charity and the taxpayers pick up the bill or the doctor or hospital has to eat the cost to the detriment of all the other patients.

College was affordable for the vast majority of Americans who wanted a college education and those of us who had to do it ourselves could work out way through our education, live in the dorm on campus that included three meals a day, and not accumulate much if any debt. Once the federal government got involved--they now fund colleges and universities almost as much as they fund the Defense Dept.--college costs are out of reach for most without grants, loans, scholarships.

The government does very few things more efficiently, effectively, or economically than the private sector does it.

The argument presented attributes the rise in healthcare costs primarily to the involvement of the federal government through Medicare and Medicaid, and by extension, the Affordable Care Act (Obamacare). It is imperative to scrutinize this claim with a multi-dimensional lens and consider various factors that contribute to healthcare costs.

1. Context and Comparisons: The claim lacks a comparison of the healthcare systems across the world. Almost every developed country, except for the United States, has some form of universal healthcare system, many of which are more heavily government-regulated than the U.S. According to data from the Organization for Economic Co-operation and Development (OECD), these countries often have lower per-capita healthcare expenditures and better health outcomes compared to the United States. This undercuts the notion that government involvement inherently leads to higher costs.
2. Administrative Efficiency: Medicare has been found to have lower administrative costs compared to private insurance. A study published in the Annals of Internal Medicine found that in 2017, administrative costs were 34.2% of total health expenditures for private insurers, compared to only 1.4% for traditional Medicare. This challenges the argument that government programs are inherently less efficient.
3. Cost Controls and Negotiations: One of the major drivers of increasing healthcare costs is the high prices of services and medications. In most countries with universal healthcare, the government has the power to negotiate prices with providers and pharmaceutical companies. In contrast, Medicare is prohibited from negotiating drug prices due to the Medicare Modernization Act of 2003. This indicates that it’s not the existence of government programs that are driving costs, but specific policy choices within those programs.
4. Innovation and Services: The argument presented neglects the fact that the cost of healthcare has also risen due to advancements in medical technology and treatments. The introduction of new, often expensive, medical technologies and drugs has contributed significantly to the increase in healthcare costs. This would have happened irrespective of government involvement.
5. Preventive and Comprehensive Care: Government programs like Medicare and Medicaid ensure that more people have access to preventive care which, in the long run, can lead to lower healthcare costs for society as a whole. Many people without access to healthcare end up in emergency rooms for conditions that could have been managed or prevented, which is significantly more expensive.
6. Education Costs as a Comparison: The mention of rising college costs is also a simplification of a complex issue. The decrease in state funding for public universities, increase in administrative positions, and the amenities arms race are among the factors contributing to the rise in tuition costs. Moreover, comparing education and healthcare is akin to comparing apples and oranges; both are complex systems influenced by a myriad of factors.

In conclusion, while government programs are not without flaws, they play a vital role in ensuring access to healthcare for millions of Americans. The issue of rising healthcare costs is multi-faceted and cannot be solely attributed to government involvement. There is a plethora of evidence suggesting that a more coordinated effort between government and the private sector, with an emphasis on value-based care, price negotiation, and preventive services, can lead to more sustainable healthcare costs and improved outcomes.

• 
  OECD Health Statistics - for comparing healthcare systems and expenditures across the world:
  • OECD Health Statistics 2021
• Administrative Efficiency - for information on Medicare having lower administrative costs compared to private insurance:
  • Himmelstein, D. U., & Woolhandler, S. (2020). Medical Administrative Costs in the United States and Canada, 2017. Annals of Internal Medicine, 172(2), 134-136. Link to Abstract
• Cost Controls and Negotiations - information on Medicare not being allowed to negotiate drug prices:
  • Medicare Modernization Act
• Innovation and Services - for information on how advancements in medical technology and treatments contribute to healthcare costs:
  • Newhouse, J. P. (1992). Medical care costs: how much welfare loss?. Journal of Economic perspectives, 6(3), 3-21. Link to Full Text
• Preventive and Comprehensive Care - for the role of preventive care in managing healthcare costs:
  • Maciosek, M. V., Coffield, A. B., Edwards, N. M., Goodman, M. J., Flottemesch, T. J., & Solberg, L. I. (2006). Priorities among effective clinical preventive services: results of a systematic review and analysis. American journal of preventive medicine, 31(1), 52-61. Link to Abstract
• Education Costs - for information on factors contributing to the rise in college tuition costs:
  • State Higher Education Finance (SHEF) Report

 

[Toddsterpatriot]

What the fuck are you posting about small hands.

You missing my boot?

 

[TruthNotBS]

Insufficient Oversight of Mortgage Lending: The crisis was fueled by poorly underwritten mortgage loans. The absence of proper oversight allowed for predatory lending practices and the granting of loans to individuals who could not afford them, known as subprime lending. When housing prices collapsed, this led to a domino effect where those loans defaulted en masse.

Which regulations were removed to allow subprime lending?

Over-reliance on Rating Agencies: There was a systemic failure in relying on credit rating agencies, whose assessment of securities turned out to be overly optimistic or outright flawed. The agencies had conflicts of interest, as they were paid by the very issuers of the securities they rated. Regulation to ensure transparency and independence was lacking.

New regulations were needed, not that old regulations were removed.

The bailouts can be seen as a response to the failure caused by lack of regulation.

And the failure caused by government subprime mandates for the banks and GSEs.

Insufficient Oversight of Mortgage Lending: The erosion of The Glass-Steagall Act through the Gramm-Leach-Bliley Act in 1999 allowed commercial banks, investment banks, and insurers to consolidate, which contributed to risky lending practices. Furthermore, the Federal Reserve’s failure to implement stricter lending standards, despite having the authority to do so under the Home Ownership and Equity Protection Act of 1994, permitted the proliferation of predatory lending practices and the origination of poorly underwritten loans.

Source:

• FRB: Testimony--Bernanke, Home mortgage foreclosure rates--November 8, 2007

Over-reliance on Rating Agencies: While it’s true that new regulations were needed, it’s worth mentioning that the Financial Services Modernization Act of 1999 and the Commodity Futures Modernization Act of 2000 did not include proper oversight of credit rating agencies or derivatives trading. The absence of regulation in these emerging areas allowed for the unchecked growth of complex financial products that played a significant role in the financial crisis.

Source:

• The Financial Crisis: What Happened and Why? - Stanford Law School

Government’s Role in the Crisis: While government policies encouraged home-ownership, blaming government mandates for subprime lending ignores the fact that the majority of subprime loans were issued by institutions not subject to such mandates. Furthermore, Fannie Mae and Freddie Mac entered the subprime market late and purchased the safer tranches of MBS, rather than the riskiest ones. The private-label securitization market, not government-backed entities, led the subprime mortgage boom.

Source:

• Fannie, Freddie, and the Subprime Mortgage Market - Center for American Progress

The narrative that the financial crisis was solely due to government intervention oversimplifies a complex crisis that resulted from the interplay of multiple factors, including deregulation, financial innovation without oversight, misaligned incentives, and systemic failures in the financial sector. There is extensive literature that critically examines the role of both private and public institutions in the crisis.

 

[Toddsterpatriot]

When discussing "force," it is imperative to think beyond the narrow definition of physical coercion. In sociological and economic contexts, force can encompass various forms of coercion, including those born out of systemic inequalities and power imbalances.

While an employer might not physically force someone to work for an unlivable wage, the economic system can. In a capitalist society with stark economic disparities, many individuals have no real choice but to accept employment under less-than-ideal conditions to avoid homelessness or starvation. This is a form of economic coercion that is systemic in nature.

Regarding predatory lending, the argument extends beyond individual knowledge or lack thereof. The financial industry, often through deliberately complex terms and high-pressure tactics, can exploit informational asymmetries. This exploitation is a form of systemic coercion where the financial institutions use their position of power to effectively corner individuals into suboptimal agreements.

In these contexts, it's crucial to recognize that power dynamics and systemic structures can exert a form of 'force' that, while not physical, is still very much real and can have substantial adverse effects on the lives of individuals. This broader understanding of force acknowledges the complexities of social systems and the often-hidden pressures that can limit individual agency.

When discussing "force," it is imperative to think beyond the narrow definition of physical coercion. In sociological and economic contexts, force can encompass various forms of coercion, including those born out of systemic inequalities and power imbalances.

Your employer isn't coercing you to work there.
They can't prevent you from quitting and working elsewhere.

Regarding predatory lending, the argument extends beyond individual knowledge or lack thereof. The financial industry, often through deliberately complex terms and high-pressure tactics, can exploit informational asymmetries. This exploitation is a form of systemic coercion where the financial institutions use their position of power to effectively corner individuals into suboptimal agreements.

If the dozens of pages of disclosures are too complicated for you to understand, you still aren't being forced to take out the loan.

 

[TruthNotBS]

When discussing "force," it is imperative to think beyond the narrow definition of physical coercion. In sociological and economic contexts, force can encompass various forms of coercion, including those born out of systemic inequalities and power imbalances.

Your employer isn't coercing you to work there.
They can't prevent you from quitting and working elsewhere.

Regarding predatory lending, the argument extends beyond individual knowledge or lack thereof. The financial industry, often through deliberately complex terms and high-pressure tactics, can exploit informational asymmetries. This exploitation is a form of systemic coercion where the financial institutions use their position of power to effectively corner individuals into suboptimal agreements.

If the dozens of pages of disclosures are too complicated for you to understand, you still aren't being forced to take out the loan.

It is true that individuals have a responsibility to make informed choices. However, the argument that individuals have complete freedom to walk away or seek advice is somewhat idealized. It does not take into account the realities that many individuals face. For many people, especially those in economically precarious situations, taking a loan might be perceived as the only option to meet urgent needs such as medical expenses or housing. Additionally, seeking advice from a lawyer or financial advisor involves costs that may not be feasible for low-income individuals.

The concept of choice must be critically examined within the context of the options available and the systemic structures in place. When large financial institutions, which have significant resources and information at their disposal, are dealing with individuals who may be desperate, under-informed, or lacking in alternatives, there is an inherent power imbalance. This power imbalance can create a form of structural coercion, where individuals might feel they have no real choice but to accept the terms offered, even if they are predatory.

Furthermore, the history of predatory lending shows that these loans were often marketed in a targeted manner to vulnerable populations, sometimes with misleading information. This sort of targeted marketing to individuals who might not have the resources to fully understand the implications of the agreements they are entering into can be viewed as a form of exploitation, which is a component of structural coercion.

In an ideal world, all parties in a transaction would have equal information and negotiating power, and all individuals would have a genuine range of options available to them. However, in reality, systemic inequalities and power imbalances can limit the choices available to individuals and can exert a form of force or coercion that is not physical but is still very real.

References:

• Engel, K. C., & McCoy, P. A. (2002). A Tale of Three Markets: The Law and Economics of Predatory Lending. Texas Law Review, 80(6), 1255-1381.
• Willis, L. E. (2008). Decisionmaking and the Limits of Disclosure: The Problem of Predatory Lending: Price. Md. L. Rev., 65, 707.

 

[otto105]

I was once credit manager of a small rural hospital which meant I met with all the people who lacked insurance or were underinsured and couldn't pay their hospital bills at the time. I worked out payment plans for them and for most it was pay $10 or $20 or so a month because hospital costs weren't crippling for people back then. Not even for most of the uninsured. Health insurance was mostly for hospitalizations and we paid our doctor's modest fees for office calls and vaccinations for the kids and such out of pocket. Almost all common medications were affordable for pretty much everybody including us low income people. In other words paying for healthcare was a problem for some, but for the most part it was manageable. The federal government wasn't involved.

From almost Day #1 that Medicare and Medicaid went into effect, costs began escalating. The government was a deep well of cash and everybody in the medical field from hospitals, doctors' offices, pharmaceutical companyies, pharmacies, medical supply and equipment companies, ambulance services etc. all were cashing in on it. An Xray machine tube that cost $100 in that small country hospital before Medicare, 10 years later would cost $10,000. Then Obama double downed on all that adding thousands of pages of new rules and regs with Obamacare and costs escalated even more. An injection that would have cost about $50 out of pocket back then now costs insurance almost $3,000. You can't blame inflation for all that.

To not have insurance in the 1960s was an inconvenience but also not financially crippling for the vast majority. Only the financially wealthy can afford healthcare now without having insurance or else they have to depend on charity and the taxpayers pick up the bill or the doctor or hospital has to eat the cost to the detriment of all the other patients.

College was once affordable for the vast majority of Americans who wanted a college education and those of us who had to do it ourselves could work out way through our education, live in the dorm on campus that included three meals a day, and not accumulate much if any debt. Once the federal government got involved--it now funds colleges and universities almost as much as it funds the Defense Dept.--college costs are out of reach for most without grants, loans, scholarships.

The government does very few things more efficiently, effectively, or economically than the private sector does it.

Ya, what a load.

First, before healthcare and health insurance came about people faced early death and financial ruin from bad medical event.

Second, college costs have increased as state governments decreased funding for them. For example in 1982 WI financed 50% of the UW system while today just 17%.


Also, both hospitals and colleges compete for excellence by offered better care or education which doesn’t mean cutting the product.

 

[Toddsterpatriot]

Glass-Steagall Act did indeed serve as a barrier that discouraged banks from engaging in excessive risk-taking by keeping commercial and investment banking separate. When you say that banks could write “crappy mortgages” during the era of Glass-Steagall, it is essential to recognize that the scale and nature of these mortgages were vastly different before the erosion of the Act.

You ask which commercial banks got into trouble for securitizing mortgages or engaging in speculative trading. Well, it is important to note that the likes of Citigroup and Bank of America faced tremendous difficulties due to their exposure to mortgage-backed securities post-repeal. The nature of integration between commercial and investment banking allowed for a significant intermingling of high-risk investment practices with traditional banking operations.

While you claim that “every crappy mortgage they could securitize and sell was one less crappy mortgage that would explode on their balance sheet,” this oversimplifies the mechanics of the crisis. The securitization created perverse incentives for banks to issue more subprime loans without concern for the quality, as they could quickly offload the risk to other investors. This fueled the housing bubble.

Regarding the claim that there were no lending standards in Glass-Steagall, it’s vital to recognize that Glass-Steagall was a part of a larger regulatory framework. The Act itself might not have explicitly set lending standards, but its separation of commercial and investment banking indirectly encouraged more prudent lending.

Investment banks like Lehman Brothers and Bear Stearns did not have deposits; that's true. However, their behavior was symptomatic of a broader culture of excessive risk-taking that was enabled by the deregulation environment, of which the repeal of Glass-Steagall was a part.

Now, addressing the complexity of the crisis, you are absolutely right. The financial crisis was a result of numerous factors including but not limited to the repeal of Glass-Steagall. However, the repeal symbolized a broader move towards deregulation that many economists and experts, including Nobel laureate Joseph Stiglitz, have argued contributed to the environment that allowed the crisis to occur.

It's essential to have nuanced discussions on this topic. Simplifying it as merely an issue of mortgages doesn't encompass the full complexity, and the repeal of Glass-Steagall was certainly a piece in the larger puzzle of the financial crisis. This is supported by a multitude of studies and expert opinions.

Glass-Steagall Act did indeed serve as a barrier that discouraged banks from engaging in excessive risk-taking by keeping commercial and investment banking separate.

But it did nothing to prevent crappy mortgages.

When you say that banks could write “crappy mortgages” during the era of Glass-Steagall, it is essential to recognize that the scale and nature of these mortgages were vastly different before the erosion of the Act.

Obviously. Before Clinton forced Fannie and Freddie to make 50% of their mortgage purchases subprime, the market for them was much smaller.

You ask which commercial banks got into trouble for securitizing mortgages or engaging in speculative trading. Well, it is important to note that the likes of Citigroup and Bank of America faced tremendous difficulties due to their exposure to mortgage-backed securities post-repeal.

Right.
Crappy mortgages, which they could trade under GS, not other securities that they could not.

The securitization created perverse incentives for banks to issue more subprime loans without concern for the quality, as they could quickly offload the risk to other investors. This fueled the housing bubble.

They could unload crappy mortgages under GS.

Regarding the claim that there were no lending standards in Glass-Steagall, it’s vital to recognize that Glass-Steagall was a part of a larger regulatory framework.

If you want to talk about some other deregulation, outside of GS, go ahead.

Investment banks like Lehman Brothers and Bear Stearns did not have deposits; that's true. However, their behavior was symptomatic of a broader culture of excessive risk-taking

So, GS is off the hook, now it's culture?

 

[TruthNotBS]

When discussing "force," it is imperative to think beyond the narrow definition of physical coercion. In sociological and economic contexts, force can encompass various forms of coercion, including those born out of systemic inequalities and power imbalances.

Your employer isn't coercing you to work there.
They can't prevent you from quitting and working elsewhere.

Regarding predatory lending, the argument extends beyond individual knowledge or lack thereof. The financial industry, often through deliberately complex terms and high-pressure tactics, can exploit informational asymmetries. This exploitation is a form of systemic coercion where the financial institutions use their position of power to effectively corner individuals into suboptimal agreements.

If the dozens of pages of disclosures are too complicated for you to understand, you still aren't being forced to take out the loan.

The perspective that "Your employer isn't coercing you to work there. They can't prevent you from quitting and working elsewhere." is, indeed, an oversimplification of the realities of labor markets and the lived experiences of workers. While it's technically true that employees have the legal freedom to quit their job, this assertion overlooks the complex web of economic and social factors that constrain the choices available to workers.

1. Economic Constraints: Many American workers live paycheck to paycheck. According to a report from CNBC, approximately 61% of Americans were living paycheck to paycheck in 2020 (CNBC, 2020). This economic precarity means that leaving a job without having another one lined up is a gamble with potentially disastrous consequences, including the loss of housing or the ability to put food on the table.
2. Lack of Alternative Employment: The availability of alternative employment is often overestimated. The nature of local labor markets, educational qualifications, and the state of the economy can severely limit the employment options available to people. Moreover, job searching and hiring processes can take several months.
3. Employer Market Power: Monopsony power, where employers have significant market power and workers have little, means that workers are often in a poor position to negotiate wages and working conditions. A study by Naidu, Posner, and Weyl (2018) argues that monopsony power is more widespread than previously thought and has a detrimental impact on wages (Naidu, Posner, & Weyl, 2018).
4. Benefits and Healthcare: For many workers, especially in the United States, healthcare benefits are tied to employment. Leaving a job might mean not just loss of income but also loss of healthcare for themselves and their families. This ties workers to their jobs and makes it hard to leave even if working conditions are suboptimal.
5. Psychological and Social Factors: There is also a psychological aspect to consider. Job security and stability are critical components of a person’s mental well-being. The uncertainty of leaving a job, combined with the social stigma often associated with unemployment, can be daunting and act as a deterrent for workers considering leaving unsatisfactory employment.
6. Skill and Geographic Lock-in: Sometimes workers have skills that are highly specialized to their current employment, or they might be in a geographical location where options are limited. This makes switching jobs or careers not a viable option without significant retraining or relocation.

Taken together, these factors demonstrate that the idea of simply leaving a job is not as straightforward as it might superficially appear. The economic, social, and psychological costs of such a decision can be significant, and for many workers, it is not a realistic option.

Policies aimed at improving labor market conditions, ensuring a social safety net, providing affordable healthcare, and protecting worker’s rights are essential to grant workers the actual freedom to make choices regarding their employment.

References:

• CNBC Report
• Naidu, Posner, & Weyl, 2018

The assertion that "If the dozens of pages of disclosures are too complicated for you to understand, you still aren't being forced to take out the loan," reflects a lack of understanding of the realities faced by many individuals who are compelled to resort to such loans. Here's why this perspective is problematic:

1. Information Asymmetry: Financial documents are often very complex and use jargon that the average person may not comprehend. This creates an information asymmetry where the lending institution has significantly more information and understanding than the borrower. While technically no one is holding a gun to a person’s head, the inequality in information can lead to choices that are not in the person’s best interest.
2. Desperation and Urgency: Many people who resort to high-risk loans do so out of desperation. They might need money for urgent medical bills, repairs, or to avoid eviction. In such cases, the immediate need for funds can overshadow the long-term costs and consequences of the loan.
3. Lack of Alternatives: Often, individuals who turn to subprime loans do so because they have no other alternatives. Traditional banks might not lend to them due to low credit scores or lack of collateral. In such situations, saying that they aren’t being forced is ignoring the fact that their choices are severely limited.
4. Predatory Practices: Some lending institutions use high-pressure sales tactics, misleading information, or even outright deception to push individuals into taking on loans. These predatory practices can make it difficult for individuals, especially those who are desperate or lack financial literacy, to make informed decisions.
5. Social Determinants and Financial Literacy: A person’s background, education, and social environment play a significant role in their ability to understand financial documents and make informed decisions. To place the entire burden of understanding complicated financial documents on individuals, without recognizing the social determinants that might impair their capacity to do so, is unjust.
6. Cognitive and Emotional Factors: Behavioral economics has shown that people often don’t make purely rational choices, especially under stress. Emotions, biases, and cognitive limitations can lead to poor financial decisions. Expecting everyone to act as a perfectly rational agent is unrealistic and doesn’t account for the human element in decision-making.

In conclusion, while technically people have the ‘choice’ not to take out a loan, saying that they are not being forced ignores the context in which these decisions are made. Addressing this issue requires consumer protection, education, and policies that ensure fair lending practices and provide individuals with real, meaningful choices.

 

[TruthNotBS]

Glass-Steagall Act did indeed serve as a barrier that discouraged banks from engaging in excessive risk-taking by keeping commercial and investment banking separate.

But it did nothing to prevent crappy mortgages.

When you say that banks could write “crappy mortgages” during the era of Glass-Steagall, it is essential to recognize that the scale and nature of these mortgages were vastly different before the erosion of the Act.

Obviously. Before Clinton forced Fannie and Freddie to make 50% of their mortgage purchases subprime, the market for them was much smaller.

You ask which commercial banks got into trouble for securitizing mortgages or engaging in speculative trading. Well, it is important to note that the likes of Citigroup and Bank of America faced tremendous difficulties due to their exposure to mortgage-backed securities post-repeal.

Right.
Crappy mortgages, which they could trade under GS, not other securities that they could not.

The securitization created perverse incentives for banks to issue more subprime loans without concern for the quality, as they could quickly offload the risk to other investors. This fueled the housing bubble.

They could unload crappy mortgages under GS.

Regarding the claim that there were no lending standards in Glass-Steagall, it’s vital to recognize that Glass-Steagall was a part of a larger regulatory framework.

If you want to talk about some other deregulation, outside of GS, go ahead.

Investment banks like Lehman Brothers and Bear Stearns did not have deposits; that's true. However, their behavior was symptomatic of a broader culture of excessive risk-taking

So, GS is off the hook, now it's culture?

The repeal of the GSA should not be viewed in isolation. It is part of the larger picture of financial deregulation and the environment that allowed the 2008 crisis to occur.

First, while it is true that banks could originate and sell mortgages during the GSA era, the extent and nature were different. Before the partial repeal of GSA by the Gramm-Leach-Bliley Act in 1999, commercial banks were relatively conservative in their mortgage lending compared to afterwards.

Second, the argument that the scale of subprime lending was primarily due to government pressure on Fannie Mae and Freddie Mac to buy more subprime mortgages overlooks the fact that much of the subprime mortgage securitization was done by private investment banks. Investment banks such as Lehman Brothers and Bear Stearns were heavily involved in packaging and selling mortgage-backed securities (MBS), and they did so on a massive scale. Their involvement contributed significantly to the bubble in housing prices and the subsequent crash. The investment banks were not subject to the GSA, but their risky behavior was symptomatic of the broader culture of deregulation and risk-taking that permeated the financial sector.

Third, the securitization of these mortgages, particularly through the creation of complex financial products like collateralized debt obligations (CDOs), contributed to the spread and scale of the crisis. These financial products often obscured the risks and were based on the faulty assumption that housing prices would continue to rise. The ability to securitize mortgages into complex financial products was enabled by an environment that was progressively deregulating the financial sector.

Finally, it’s essential to recognize that deregulation and the consequent failure of regulatory oversight were multifaceted. The Financial Crisis Inquiry Commission, which was set up to investigate the causes of the 2008 financial crisis, identified widespread failures in financial regulation as a crucial cause. The culture of excessive risk-taking was not just an abstract concept; it was practically manifested in the actions of financial institutions and the products they created.

In summary, while the Glass-Steagall Act itself was not a panacea that could have prevented the crisis, its repeal was indicative of the larger trend of deregulation and lax regulatory oversight that set the stage for the 2008 financial crisis. The argument is not just about Glass-Steagall; it's about the need for a comprehensive and efficient regulatory framework that can safeguard against the excesses of the financial industry.

 

[Toddsterpatriot]

Insufficient Oversight of Mortgage Lending: The erosion of The Glass-Steagall Act through the Gramm-Leach-Bliley Act in 1999 allowed commercial banks, investment banks, and insurers to consolidate, which contributed to risky lending practices. Furthermore, the Federal Reserve’s failure to implement stricter lending standards, despite having the authority to do so under the Home Ownership and Equity Protection Act of 1994, permitted the proliferation of predatory lending practices and the origination of poorly underwritten loans.

Source:

• FRB: Testimony--Bernanke, Home mortgage foreclosure rates--November 8, 2007

Over-reliance on Rating Agencies: While it’s true that new regulations were needed, it’s worth mentioning that the Financial Services Modernization Act of 1999 and the Commodity Futures Modernization Act of 2000 did not include proper oversight of credit rating agencies or derivatives trading. The absence of regulation in these emerging areas allowed for the unchecked growth of complex financial products that played a significant role in the financial crisis.

Source:

• The Financial Crisis: What Happened and Why? - Stanford Law School

Government’s Role in the Crisis: While government policies encouraged home-ownership, blaming government mandates for subprime lending ignores the fact that the majority of subprime loans were issued by institutions not subject to such mandates. Furthermore, Fannie Mae and Freddie Mac entered the subprime market late and purchased the safer tranches of MBS, rather than the riskiest ones. The private-label securitization market, not government-backed entities, led the subprime mortgage boom.

Source:

• Fannie, Freddie, and the Subprime Mortgage Market - Center for American Progress

The narrative that the financial crisis was solely due to government intervention oversimplifies a complex crisis that resulted from the interplay of multiple factors, including deregulation, financial innovation without oversight, misaligned incentives, and systemic failures in the financial sector. There is extensive literature that critically examines the role of both private and public institutions in the crisis.

Government’s Role in the Crisis: While government policies encouraged home-ownership, blaming government mandates for subprime lending ignores the fact that the majority of subprime loans were issued by institutions not subject to such mandates. Furthermore, Fannie Mae and Freddie Mac entered the subprime market late and purchased the safer tranches of MBS, rather than the riskiest ones.

Entered late, but huge. How safe were those GSE tranches? $191 billion in bailouts safe?

The narrative that the financial crisis was solely due to government intervention oversimplifies a complex crisis that resulted from the interplay of multiple factors

Solely? Hardly.

 

[Toddsterpatriot]

It is true that individuals have a responsibility to make informed choices. However, the argument that individuals have complete freedom to walk away or seek advice is somewhat idealized. It does not take into account the realities that many individuals face. For many people, especially those in economically precarious situations, taking a loan might be perceived as the only option to meet urgent needs such as medical expenses or housing. Additionally, seeking advice from a lawyer or financial advisor involves costs that may not be feasible for low-income individuals.

The concept of choice must be critically examined within the context of the options available and the systemic structures in place. When large financial institutions, which have significant resources and information at their disposal, are dealing with individuals who may be desperate, under-informed, or lacking in alternatives, there is an inherent power imbalance. This power imbalance can create a form of structural coercion, where individuals might feel they have no real choice but to accept the terms offered, even if they are predatory.

Furthermore, the history of predatory lending shows that these loans were often marketed in a targeted manner to vulnerable populations, sometimes with misleading information. This sort of targeted marketing to individuals who might not have the resources to fully understand the implications of the agreements they are entering into can be viewed as a form of exploitation, which is a component of structural coercion.

In an ideal world, all parties in a transaction would have equal information and negotiating power, and all individuals would have a genuine range of options available to them. However, in reality, systemic inequalities and power imbalances can limit the choices available to individuals and can exert a form of force or coercion that is not physical but is still very real.

References:

• Engel, K. C., & McCoy, P. A. (2002). A Tale of Three Markets: The Law and Economics of Predatory Lending. Texas Law Review, 80(6), 1255-1381.
• Willis, L. E. (2008). Decisionmaking and the Limits of Disclosure: The Problem of Predatory Lending: Price. Md. L. Rev., 65, 707.

Poorly informed borrowers and low-skilled workers have less information and fewer choices than well-informed borrowers and high-skilled workers.

They still aren't forced. Don't understand the docs, don't borrow. Don't like your employer, quit.

Using the words force or coercion is just silly.