Why no "Banking Crisis" from 1935 to 1979

[rdean]

Republicans want to be spoon fed every iota in information and even then, they still don't believe it. Lookt at evolution, GW, vaccines, economic policies, the list is endless.

Hilarious is when a Republican says only the fringe of the party don't believe in evolution and then it turns out the fringe is like 70 or 80% of the party.

 

[CrusaderFrank]

[ame=http://www.youtube.com/watch?v=i-g2iGskFPE]DE GAULLE predicted the US monetary crisis in 1965 - YouTube[/ame]

 

[CrusaderFrank]

For six years, Bush and the Republicans controlled all three branches of government. That was when "Freddie/Fannie" were at their height. Then there were the "temporary tax cuts", the two unpaid for wars, the drugs for votes bill, deregulation, many trillions in debt and on and on. If Republicans block everything Democrats try to do now, how did Democrats have so much power then? Short answer: They didn't. You need to try again from a different angle.

Which deregulation?

Please be specific.

How Deregulation Eviscerated the Banking Sector Safety Net and Spawned the U.S. Financial Crisis - Money Morning

"The Depository Institutions Deregulation and Monetary Control Act of 1980, signed into law by President Jimmy Carter, was the first major reform of the U.S. banking system since the Great Depression.

While touted as a boon to consumers, the law was actually a gold mine for bankers. Among other requirements and banker "gifts" the 1980 Act's provisions:

Lowered the mandatory reserve requirements banks keep in non-interest bearing accounts at U.S. Federal Reserve banks.

Established a five-member committee, the Depository Institutions Deregulation Committee, to phase out federal interest rate ceilings on deposit accounts over a six-year period.

Increased Federal Deposit Insurance Corp. (FDIC) coverage from $40,000 to $100,000.

Allowed depository institutions, including savings and loans and other thrift institutions, access to the Federal Reserve Discount Window for credit advances.

And pre-empted state usury laws that limited the rates lenders could charge on residential mortgage loans."

To which we add derp derp derp derpa derp derp derp derp derp herp derp derp

 

[CrusaderFrank]

Republicans want to be spoon fed every iota in information and even then, they still don't believe it. Lookt at evolution, GW, vaccines, economic policies, the list is endless.

Hilarious is when a Republican says only the fringe of the party don't believe in evolution and then it turns out the fringe is like 70 or 80% of the party.

You might to go back and read the article you attached

[ame=http://www.youtube.com/watch?v=OHVjs4aobqs]Inconceivable! High Quality - YouTube[/ame]

 

[Oddball]

Yeah that's what will happen when you ask questions requiring a doctoral thesis to explain, mate.

But if you have a single easy answer that fully explains the state of the economy today, I've love read it.


And if you tell me that GLASS STEAGAL is the answer, I will ask you at what SPECIFIC DATE (and what specific change) do you think set us on this inevitable path to meltdown?

Please do educate me.

I can take it.

Nobody asked for an easy answer, Captain Strawman...What was asked for was a specific answer.


The question was to be specific about this "deregulation" which allegedly occurred, which neither you or rdunce can because the banking industry is and has remained one of the most heavily regulated areas of the economy.

Just throwing around the leftbat buzzword "deregulation" doesn't make it so.

Specific answer means a simple answer, lad.

Even when one of the events leading up to the meltdown is correctly identified, thinking that that is the definitive answer is misleading.

Specific means specific, no matter how you may try to cynically redefine the term....It doesn't necessarily mean simple, geezer.

 

[EdwardBaiamonte]

the banking industry is and has remained one of the most heavily regulated areas of the economy.

You are so right as usual!!

Here's what John Allison( bank president) said,

"In fact regulatory cost was at an all time cost during the peak of the bubble. Banks' operating statements reflect this cost increase, as does the multi thousand page increase in various government regulatory documents. Government spending alone (excluding costs that the industry incurred and that must be paid by the companies being regulated) in financial regulations (not company bailouts) in adjusted dollars, increased from $725 million in 1980 to $2.07 billion in 2007.
The financial industry was not deregulated, it was massively misregulated"

Just throwing around the leftbat buzzword "deregulation" doesn't make it so.

yes a liberal imagines government regulation is magic and always works despite the Soviet Chinese Cuban East German and current European experience and many many others including our own recent financial collapse that indicate regulation is far more likely to fail and do grave harm.

A liberal simply lacks the IQ to understand how freedom world

 

[Oddball]

But, but, but, but, but.....Credit default swaps didn't drive the housing value bubble, either.

And the housing value bubble was immense...Anyone who says it wasn't clearly isn't dealing in reality.

It wasn't a 180 times the collective GNP of all the nations on the planet!

Non squitur.

Neither credit default swaps nor "deregulation" nor the repeal of Glass-Stegal were the driving forces behind the wildly overinflated housing bubble or its inevitable collapse.

 

[EdwardBaiamonte]

Press Release: SEC Votes for Final Rules Defining How Banks Can Be Securities Brokers; 2007-190; Sept. 19, 2007



SEC Votes for Final Rules Defining How Banks Can Be Securities Brokers
Eight Years After Passage of the Gramm-Leach-Bliley Act, Key Provisions Will Now Be Implemented
FOR IMMEDIATE RELEASE
2007-190
Washington, D.C., Sept. 19, 2007 - Ending eight years of stalled negotiations and impasse, the Commission today voted to adopt, jointly with the Board of Governors of the Federal Reserve System (Board), new rules that will finally implement the bank broker provisions of the Gramm-Leach-Bliley Act of 1999. The Board will consider these final rules at its Sept. 24, 2007 meeting. The Commission and the Board consulted with and sought the concurrence of the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Office of Thrift Supervision.




Is this all lies?

dear the crisis was well underway long before the rules would have been implimented so are you trying to prove SEC had nothing to do with crisis??

 

[william the wie]

How about a little sanity:

Bank returns on investment, Profits/Assets under management, is less than 1% in almost all cases in almost all years.

Because banks are a crappy investment the vast majority of banking is done by non-banks, such as money markets, hedge funds and private equity funds.

Banking is an industry based on the high cost of data and information. In other words this thread ranks right up there with bringing back street cars and dirigibles. Would somebody stick a stake through the heart of this silliness?

 

[Billo_Really]

Non squitur.

Neither credit default swaps nor "deregulation" nor the repeal of Glass-Stegal were the driving forces behind the wildly overinflated housing bubble or its inevitable collapse.

The housing bubble was not the biggest reason for the collapse.

And if the repeal of Glass-Steegal wasn't a factor, then how come we had no collapse during the over 50 years since its inception? But just a few years after it's repeal, we have a repeat of '29?

 

[EdwardBaiamonte]

Non squitur.

Neither credit default swaps nor "deregulation" nor the repeal of Glass-Stegal were the driving forces behind the wildly overinflated housing bubble or its inevitable collapse.

The housing bubble was not the biggest reason for the collapse.

And if the repeal of Glass-Steegal wasn't a factor, then how come we had no collapse during the over 50 years since its inception? But just a few years after it's repeal, we have a repeat of '29?

why be an ass?? Find one expert who thinks Glass was the proximate cause if you can't you ought to shut up for once!!!

 

[Billo_Really]

why be an ass?? Find one expert who thinks Glass was the proximate cause if you can't you ought to shut up for once!!!

Glass-Steegal made it illegal for savings banks and investment banks to do business under the same roof, because that's was one of the biggest reasons for the '29 crash. It's repeal, once again, legalized derrivitives, much like the end of prohibition, only with a much larger impact on the economy. Banks were free to practice "casino capitalism", which replaced real growth, with speculated growth.

In March 2008 there were five giant Wall Street investment banks, banks which underwrote Mortgage-Backed Securities (MBS), corporate bonds, corporate stock issues. They were not deposit banks like Citibank or Bank of America; they were known as investment banks—Morgan Stanley, Merrill Lynch, Goldman Sachs, Lehman Brothers, Bear Stearns.

The business of taking deposits and lending by banks had been split during the Great Depression from the business of underwriting and selling stocks and bonds—investment banking—by an act of Congress, the Glass-Steagall Act of 1933. The law was passed amid the collapse of the banking system in the United States following the bursting of the Wall Street stock market bubble in October 1929.

That Glass-Steagall act was a prudent attempt by Congress to end the uncontrolled speculative excesses of the Roaring Twenties by New York finance. It established the Federal Deposit Insurance Corporation to guarantee personal bank deposits to a fixed sum that restored consumer confidence and ended the panic runs on bank deposits.

The repeal allowed commercial banks such as Citigroup, then the largest US bank, to underwrite and trade new financial instruments such as Mortgage-Backed Securities (MBS) and Collateralized Debt Obligations (CDOs) and establish so-called structured investment vehicles, or SIVs, that bought those securities. Repeal of Glass-Steagall after 1999, in short, enabled the Securitization revolution so openly praised by Greenspan as the “revolution in finance.” That revolution is today devouring its young.

That securitization process is at the heart of the present Financial Tsunami that is destroying the American credit structure.

We no longer have an economy based on goods and services. We have a phoney, speculative economy based on hedge funds that have no benefit for average American's and is turning us into a third world nation.

 

[oldfart]

Find one expert who thinks Glass was the proximate cause if you can't you ought to shut up for once!!!

Ed, since you have a peculiar idea of what an "expert" is that rules out all competent economists, perhaps you could list a few experts acceptable to you in the area of banking crises and depressions?

 

[oldfart]

he business of taking deposits and lending by banks had been split during the Great Depression from the business of underwriting and selling stocks and bonds—investment banking—by an act of Congress, the Glass-Steagall Act of 1933. The law was passed amid the collapse of the banking system in the United States following the bursting of the Wall Street stock market bubble in October 1929.

Two quick notes here. First the Banking Act of 1933 was part of a package which included the Securities Act of 1933 and the Security Exchanges Act of 1934 (and eventually the Regulated Investment Company Act of 1940) that provided a consistent integrated framework for regulating financial markets. [I always wonder why everyone wants to call it "Glass--Steagall" instead of the Banking Act. I think using the sponsors name allows people to propose gutting it without the public figuring out what they are doing.]

Second, the financial collapse was the result both of a pattern of deregulation and the evolution of new products that were unregulated. These two factors created the "shadow banking" phenomena which was the root cause of the crash.

 

[EdwardBaiamonte]

Second, the financial collapse was the result both of a pattern of deregulation and the evolution of new products that were unregulated. These two factors created the "shadow banking" phenomena which was the root cause of the crash.

Of course thats stupid because you can't have a huge huge bubble without the Fed printing the money to blow it up. Second, you had the GSE's buying or guaranteeing most of the mortgages. Third, you had much of federal and state government organized to get people into homes the free market said they could not afford, and lastly you had a history of home prices always going up.

Now you know your ABCs too.

 

[william the wie]

Second, the financial collapse was the result both of a pattern of deregulation and the evolution of new products that were unregulated. These two factors created the "shadow banking" phenomena which was the root cause of the crash.

A bit too innocent. Clinton's economic team deliberately sabotaged attempts to start outcry auctions for derivatives in order to line up golden parachutes for themselves. But these were not new products. CDSs are simply bond insurance and bond insurance goes back centuries as in the Bank of England in effect wrote CDSs for the crown in the late 1600s. What changed was volume and range of application.

That did in fact amount to a change in kind and not just degree. But the lack of enforcement of existing regulations not deregulation was the problem. Lehman Brothers and Bear Stearns were on the ropes and admitted it in 1998 at the Long Term Capital Management bailout conference. By law and regulation they should have been subjected to more intense supervision right then but were not. The Bush White House contributed mightily to that mess but not as much as Dodd and Frank for example.

 

[Oddball]

Non squitur.

Neither credit default swaps nor "deregulation" nor the repeal of Glass-Stegal were the driving forces behind the wildly overinflated housing bubble or its inevitable collapse.

The housing bubble was not the biggest reason for the collapse.

You are fucking high.

And if the repeal of Glass-Steegal wasn't a factor, then how come we had no collapse during the over 50 years since its inception? But just a few years after it's repeal, we have a repeat of '29?

Begging the question, non sequitur and post hoc ergo propter hoc all rolled into one....You hit the logical fallacy trifecta.

 

[Oddball]

Second, the financial collapse was the result both of a pattern of deregulation and the evolution of new products that were unregulated. These two factors created the "shadow banking" phenomena which was the root cause of the crash.

Of course thats stupid because you can't have a huge huge bubble without the Fed printing the money to blow it up. Second, you had the GSE's buying or guaranteeing most of the mortgages. Third, you had much of federal and state government organized to get people into homes the free market said they could not afford, and lastly you had a history of home prices always going up.

Now you know your ABCs too.

Well, it is documented that F&F didn't guarantee the nonconforming paper...Nonetheless, they still got caught holding the bag for a shitload of overvalued conforming mortgages when the price bubble burst.

 

[Billo_Really]

Two quick notes here. First the Banking Act of 1933 was part of a package which included the Securities Act of 1933 and the Security Exchanges Act of 1934 (and eventually the Regulated Investment Company Act of 1940) that provided a consistent integrated framework for regulating financial markets. [I always wonder why everyone wants to call it "Glass--Steagall" instead of the Banking Act. I think using the sponsors name allows people to propose gutting it without the public figuring out what they are doing.]

Second, the financial collapse was the result both of a pattern of deregulation and the evolution of new products that were unregulated. These two factors created the "shadow banking" phenomena which was the root cause of the crash.

The repeal of Glass--Steagall decriminalized derrivitves, which will enventually turn this country into a third world nation.

 

[editec]

So many of you are getting parts of the problem absolutely right.

Completely understandable of course, that none of us can easily describe all the errors, crimes or failures of government AND the market, given how complex the macro-economy really is.