Mr. Perfect wrote:Parodite wrote:
First off: if the subprime credit market were the only sick baby, what is the rest of the world so worried about now?
Ask them, it is not my problem.
As for the US it is more to do with our national debt, which has little to do with the subprime market.
As I understand it, the non-regulations allowed banks to mix-up whatever value and trash scraped from around the world into subprime port-folios creating a real estate asset bubble of money that had nowhere else to go but to naive consumers told they'll be OK buying those mortgages that were way above their heads.. but hey... real estate grows...grows...grows!! Until etc. You know the story.
Right. So the root cause is the crap debt, ie subprime mortgages, born and bred by Democrats. Root cause bingo. Unpackaged debt is no less dangerous than packaged debt.
No. The root cause is that the financial industry did not protect itself and its customers against those political hooligans of type Fanny McMay pushing subprime crap through everybodies throat poisining the well. It seems you consider banks as mere consumers within their own industry that are not responsible to regulate it properly and keep those type of dem politicians out, set your own standards when it concerns how high people's mortgages can be, check if the financial products being produced meet standards that you yourself established.
Now you explain how this could happen with the banks knowing it was happening, a typical asset bubble that with healthy restrictions and monitoring could have been defused much earlier.
You can only regulate what you are aware of.
You already repeatedly claimed implicitly that all this bad regulation was produced by filthy outsiders and that bankers and their clients are the victim here. Maybe you are right: people in the financial industry, bankers, investment companies, all those CEOs as from Goldman Sacks, City Bank.. are powerless onlookers that shake their heads in dismay with you... how a few slick dem hooligans via Fanny Dismay ruin it for everybody. Yes, everybody.. World Wide. What could they know? They just shove around boxes with money, lending as much money to anyone as much as they want. It is after all not their business to inform people when they start borrowing above their means.
The reality being that of course if you follow the money, especially where it is made most.. those bankers and traders being quite happy making their millions. No
need to change the rules.. at least not yet! But the Ponzi scheme is closing in on its end.. and the betting of the junkies on who will be the last and final sucker is on. Ah! All hard working taxpayers in the world who have kids to feed... how convenient!
/P, this is NOT an issue of deregulation/regulation. The regulators were behind it. We would have been better off if we were truly deregulated.
When I talk about regulation.. it means regulation in general, not in the least the regulations produced by a given industry itself. You know.. people who take pride in their type of business and being part of that industry. Who value honesty, quality, professionalism and craftsmanship. That usually have internal control mechanisms to fence off abuse or being abused.
I conclude from what you are saying that the financial industry has not any of such an internal mechanism of quality control and guarantee re your products, moral aspects, protecting your customers especially Jo. Your
own regulations should have kept the Fanny Macmay disaster out, and weeding out some of the criminal mindsets and behaviors by some of your
own people and Ponzi boys.
But then of course.. why would banks change anything as long as they make money on that growing bubble.
Because they would eventually lose money.
They won't. When their boat started making water and after they squeezed the last dollars out of even that process of going bankrupt, they made sure that privately they already cashed in their millions and invested it in real value like land, mansions.. So
eventually they will never be in pain.. which is another cause of this crisis. A good banker or trader will never loose.
Bankers could have acted morally and go sit together... and promote normal smart regulation instead of stupid politics-induced disturbances.
Regulators work for politicians, you cannot separate regulators from politics, that is the fatal error in your logic. We would have been way better off with more deregulation.
The powerful people of the financial industry are quite able to influence the political regulators, if necessary bribe them (all politicians have a weak spot for that), develop their own regulatory body as a powerhouse to regulate your own industry properly. Because regulation, monitoring, controls and the rule of law you need...as every industry needs them. Of course it needs the
right set of regulations and controls.. preferably produced and managed by the industry itself. But IMO not without also politics participating in the oversight and controls, ie those that represent Jo and his family. It is
our money and I want to know what happens with my money when I trust it to a bank.
But you will understand I'm sure that as long the financial cowboys make their lovely millions by shoving around money and hot air, cash in their bonuses.. little action can be expected from them.
That's the thing, they are not making that money anymore.
But have their private capital and profits, bonuses...safely invested in real estate, anything other than just paper value that is now in the process of being burned up.
Aside: bubbles are a natural phenomenon, aren't they?
Depends on how you define natural. This bubble was government created. If you define government as natural then it was natural.
I'm not sure that real estate asset bubble would not have developed anyways on its own. Bubbles are self-fulfilling prophecies in the market of speculation; real estate is always a good candidate it seems to me to turn into a speculation-Ponzi bubble.
You can't entirely prevent them but you can have an architecture and regulation that prevents "too big to fail" situations to arise by separating the three financial circuits, don't allow for any and all weird new fancy product that nobody understands, i.e. keep it more simple, allowing for easier oversight, transparency etc. Like in any healthy industry in the world.
The fancy products you are so superstitiously afraid of operated without fail in every other debt market.
Maybe the damage directly caused by derivatives is overestimated. But it begs the question what products and transactions served the customer Jo best.. also representing real economic value.. or were just there as speculative gamble assets and short selling casino activity at Wallstreet. Even if the real damage is relatively small... I don't see why people should go to Las Vegas with my savings that they supposedly guard and invest in real economy. If they hadn't used it for the little dirty casino hobbies... they could have put it to use more for my own benefit. It is still stealing IMO.
The only market they failed in was the government created one.
Your claim that all toxic hot air was caused by only government officals I find idiotic. The financial industry did not regulate and organize itself properly, included protecting it against the politicians you mention.
Now somebody explained that the people of the financial industry that have the power to influence regulation.. are in fact a small handful in the top. The 1% of the 1% so to speak. That most people working in the financial industry included bankers/bank managers themselves have not one iota of power to influence internal or external regulation. You think this is true in fact? If so... who are they?
Can you please tell me why if general deregulation was at fault why there was not a general default crises across the debt market, and why it was acutely contained to the government created debt market?
Forget "deregulation", it is a decoy. The financial industry failed to regulate itself properly, did not protect itself against Fanny Dismay politicians and other external regulators like the FED, allowed Greenspan to do things he now openly regrets... ("what did we all know then..." blah bla) allowed a tested architecture where commercial banking, investment banking and insurance money operated in separated segments to be destroyed .. exposing the world to insolvable risks and we all float on One Big Bubble too big to fail.
Of course individuals and governments that can't do simple math living above their means borrowing way too much money are also to blame: it is human greed and weakness we all suffer. That is why we need regulations, law, courts, police.. prisons. There is no game that can escape it. Not even Capitalism. Especially Capitalisms needs the
right set of regulations and controls to make it work. In fact only very few... but they must be upheld, monitored, checked, sometimes adapt to new realities.. very carefully. The financial top shots failed to protect theirs and our main game. Probably because the current “non-rules” served them a bit better than the majority.
Securitization by private banks makes it easier to distribute risk and incentivized lax lending standards. Private banks were perfectly willing to underwrite and deal in such securities. Nobody forced them to do this. A larger and far more involved intervention than the $200B bailout of Fannie and Freddie has been necessary for the banks, and that's before we even begin to assess the damage beyond US borders. It's absolutely ridiculous to lay this at the feet of one (or two) companies, let alone a single party.
This of course only leaves Fanny McFish and their democronies as the responsible evildoers here. Bankers just do what they are supposed to do: eat the cash. 