A Question About Public Debt in Western Nations - Page 2 - Politics Forum.org | PoFo

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#13987108
Eran (emphasis added) wrote:1. Make it very clear (not quite sure how) that no more bail-outs will ever rescue failed financial institutions

This really is the big question of our times, isn't it? How to get regulators to act in the interests of people other than those who they purport to be regulating.
#13987121
I'm pretty sure they'll tell you the only time the regulatory regime can possibly be wrong is when they're not in charge of it.


I am not going to dive into the lunitic notion that the way to stop abuses of unregulated derivitives is to keep them unregulated. That is just stupid.

It was a lack of oversight that caused this problem not too much.

And please spare us the utterly discredited and frankly stupid notion that government forced banks to make bad loans. That is simply untrue and not a single credible source maintains that it is.

I will not descend into another Rush Limbaugh fueled debate about that nonsense.
#13987127
hums Flight of the Valkyries

GermanOgre wrote:I would agree with most of the list, but would make the repeal of the Glass Stegle Act as the original creator (or tip of the iceberg) of this mess. It allowed banks to invest in the markets.


Dealbook: Reinstating an Old Rule Is Not a Cure for Crisis

Andrew Ross Sorkin wrote:Call it the Glass-Steagall myth.

Since JPMorgan Chase announced its surprise $2 billion, and growing, trading loss there have been renewed calls from economists, pundits and politicians to reinstate the Glass-Steagall Act, a Depression-era law that prevented commercial banks from participating in investment banking activities.

Elizabeth Warren, the Democratic candidate for Senate in Massachusetts, sent an e-mail to thousands of her constituents, pressing to bring back the law, which she said, “stopped investment banks from gambling away people’s life savings for decades — until Wall Street successfully lobbied to have it repealed in 1999.”

A meme around Glass-Steagall has been created, repeated so often that it has almost become conventional wisdom: the repeal of Glass-Steagall led to the financial crisis of 2008. And, the thinking goes, has become almost religious for some people, that if the law were reinstated, we would avoid the next crisis.

The facts — basic facts — just aren’t that convenient. While the repeal of Glass-Steagall has seemingly become the sine qua non of the financial crisis, it is pure historical revisionism.

Before we go any further on this topic — which is likely to incite heated debate — let me stipulate at the outset that this column is not meant to argue against reinstating Glass-Steagall or adopting the Volcker Rule (sometimes known as Glass-Steagall lite.)

Bringing back something akin to Glass-Steagall would clearly help limit risk in the system. And that’s a very good and worthy goal. Letting banks sell securities and insurance products and services allowed them to grow too big too fast, and fueled a culture that put profit and pay over prudence.

But here’s the key: Glass-Steagall wouldn’t have prevented the last financial crisis. And it probably wouldn’t have prevented JPMorgan’s $2 billion-plus trading loss. The loss occurred on the commercial side of the bank, not at the investment bank. But parts of the bet were made with synthetic credit derivatives — something that George Bailey in “It’s a Wonderful Life” would never have touched.

When I called Ms. Warren and pressed her about whether she thought the financial crisis or JPMorgan’s losses could have been avoided if Glass-Steagall were in place, she conceded: “The answer is probably ‘No’ to both.”

Still, she said that the repeal of the law “had a powerful impact to let the big get bigger.” She also contended that its repeal, brought about by the Gramm-Leach-Bliley Act, “mattered enormously. It is like holding up a sign to regulators to back up.”

Let’s look at the facts of the financial crisis in the context of Glass-Steagall.

The first domino to nearly topple over in the financial crisis was Bear Stearns, an investment bank that had nothing to do with commercial banking. Glass-Steagall would have been irrelevant. Then came Lehman Brothers; it too was an investment bank with no commercial banking business and therefore wouldn’t have been covered by Glass-Steagall either. After them, Merrill Lynch was next — and yep, it too was an investment bank that had nothing to do with Glass-Steagall.

Next in line was the American International Group, an insurance company that was also unrelated to Glass-Steagall. While we’re at it, we should probably throw in Fannie Mae and Freddie Mac, which similarly, had nothing to do with Glass-Steagall.

Now let’s look at the major commercial banks that ran into trouble.

Let’s first take Bank of America. Its biggest problems stemmed not from investment banking or trading — though there were some losses — but from its acquisition of Countrywide Financial, the subprime lender, which made a lot of bad loans — completely permissible under Glass-Steagall.

What about Wachovia? Its near-collapse was largely a function of its acquisition of Golden West, a mortgage lender that saddled it with billions of dollars in bad loans.

Citigroup’s problems are probably the closest call when it comes to whether Glass-Steagall would have avoided its problems. It gorged both on underwriting bad loans and buying up collateralized debt obligations.

In that case, Glass-Steagall would have done two things: it would have prevented the trading losses and it also would have kept Citigroup from getting so big, which was one of the reasons it required a bailout.

But Citi’s troubles didn’t come until after Bear Stearns, Lehman Brothers, A.I.G., Fannie Mae and Freddie Mac were fallen or teetering — when all hell was breaking loose.

Why do we have financial crises? Why do banks lose money?

If history is any guide, it hasn’t often been the result of speculative bets. It has been the result of banks making loans to individuals and businesses who can’t pay them back.

Yes, standards became so lax that buyers didn’t have to put money down or prove their income, and financial firms developed dangerous instruments that packaged and sliced up loans, then magnified their bets with more borrowed money.

But it often starts with banks making basic loans. Making loans “is one of the riskiest businesses banks engage in and has been a major contributing factor to most financial crises in the world over the last 50 years,” Richard Spillenkothen, former director of the division of banking supervision and regulation at the Federal Reserve, wrote in a letter to Politico’s Morning Money on Monday. He said that if Glass-Steagall still existed, it “alone would not have prevented the financial crisis.”

Still, Mr. Spillenkothen said: “If banks had been limited to ‘plain vanilla’ lending, notwithstanding its admitted riskiness, the financial crisis may well have been less severe or more easily managed and contained.”

In my conversation with Ms. Warren she told me that one of the reasons she’s been pushing reinstating Glass-Steagall — even if it wouldn’t have prevented the financial crisis — is that it is an easy issue for the public to understand and “you can build public attention behind.”

She added that she considers Glass-Steagall more of a symbol of what needs to happen to regulations than the specifics related to the act itself.

So would Glass-Steagall make things slightly better? Sure.

But the next time someone says that it is the ultimate solution, think again.


Dealbreaker: Whom Should We Prevent From Blowing Themselves Up, And Why? - riffs on the same tune, but it's rather funnier.

GermanOgre wrote:That with the advent of unregulated derivatives in the 90's brought us this mess. Getting paid to share the risk of high risk subprime mortgages sounds like a great way to make lots o' money. Even some German banks bought into that.

When I think working as an engineer, how much financial due diligence we had to do, when working on a project costing maybe $50,000 and these MBA types at the big banks (who learned the trade of working with money) made derivative contracts in the billions so callously. And we bailed them out without any future oversight in place. This in my opinion is a greater danger to western society than any debt crisis. The debt is mostly out there and visible (only the Greeks lied about their debt and took out derivatives). Derivatives are still invisible and in 10 to 15 years we will have the same problem.


See, derivatives are a little like Glass-Steagall too - kind of a mythical bogeyman that people don't understand and blame for everything that goes wrong. Because for starters...I'm guessing that a contract saying that I'm going to buy a barrel of oil from you for $100 a year from now doesn't strike you as a dangerous financial instrument. But that's one kind of derivative (a forward contract).

There are other derivatives that are more controversial, like credit default swaps, but to be honest...none of these derivatives are dangerously new in themselves.

The financial crisis was much simpler: there was a global housing bubble, the banks were way overleveraged (borrowed up to their eyeballs)...and then they started blowing up when the bets went bad.

But don't blame the derivatives. I know derivatives, I work with derivatives, some of my very best friends are interest rate swaptions.

Joe Liberty wrote:The CRA, Fannie Mae and Freddie Mac, and bad fiscal policy by the Fed...those things were significant factors in the creation of the mess.


CHART OF THE DAY: Proof That Fannie And Freddie Didn't Cause The Housing Bubble

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Eran wrote:Everybody seems to agree that the latest financial crisis represents regulatory failure. Clearly, the mandate of regulators included prevention of such crisis.

Now then, why is it that when X fails, you call for more X? Is there any level or degree of regulatory failure that will persuade you that the problem is with the regulatory regime itself?


I see. Clearly when my house burns down, it's an indication that we shouldn't be hiring any more of those useless firefighters.

There's hours and hours of documentaries and stuff talking about how the regulatory frameworks were gutted in the 80s and 90s. Brooksley Born has been almost canonized for trying to get OTC derivatives trading regulated under Clinton (and obviously she failed).

Eran wrote:For the banking system, how about the following simple solution:
1. Make it very clear (not quite sure how) that no more bail-outs will ever rescue failed financial institutions
2. Allow banks to opt-out of the FDIC insurance scheme, provided that they clearly display in all their marketing material the words "Not FDIC Insured".
3. Restrict government regulation to FDIC-insured banks


Mmm. I see that the solution is to go back to pre-1929. I can't imagine why we ever bothered setting up the Fed and the FDIC in the first place.

Ah, wait, it's coming back to me - it's because financial crises happen. Why did we do this? Well, it turns out that from time to time the financial system does stupid things, lends into bubbles, bubble blows up, etc. Now that's fine, and obviously there should be penalties for that...but the question is how much of the rest of the economy do we want to let burn while the financial system is getting its comeuppance?

Turns out that Americans just plain don't like letting the whole economy burn because the bankers made a booboo. So we set up the FDIC and the Fed and an empire of regulatory institutions to try and contain/prevent the damage that happens when the financial system implodes.

Eran wrote:4. Create 100%-reserve bank accounts. Money deposited in such accounts has to be backed 100% by deposits with the Federal Reserve Board, and would be available to account-holders without delay or risk in the event of bank bankruptcy. Similar accounts are available for government securities, but not for cash.


Ahh, full-reserve banking. I love it.

But I like earning interest more. If you want full-reserve banking you can have it, I'll stick with Wells Fargo personally.
#13987131
Drlee wrote:I am not going to dive into the lunitic notion that the way to stop abuses of unregulated derivitives is to keep them unregulated. That is just stupid.


Not if one understands their origin. But acknowledging root causes can get in the way of agendas.

And please spare us the utterly discredited and frankly stupid notion that government forced banks to make bad loans. That is simply untrue and not a single credible source maintains that it is.


Right, and of course any source that claims otherwise is automatically not credible.

I will not descend into another Rush Limbaugh fueled debate about that nonsense.


That's the second time you've responded to one of my posts with a clumsy sideways dig by mentioning Rush Limbaugh. It sounds like you listen to him more than I do, which is not at all. So how you react when somebody doesn't fit one of your stereotypes? What excuse do you use to dismiss their views then?
#13987208
You OBVIOUSLY did not read Lexington's excellent post before responding to mine. I suggest you do that.

I frequently mention Limbaugh when dealing with folks who sould like parrots of his ideas. You may not listen to him but Hannity, Coulter and any number of right wing corporatist tools will do just fine. Just plug in your own poison.

You see Joe, I am just tired of this old bullshit. We have hashed it out time and again on this forum. Time and again we have posted research, opinion by nobel prize winners, statistics and court decisions only to have some right wing asshat ignore it and fume about regulation bringing down the house of cards created by a lack of regulation in the first place. But you go ahead and trust the banks to always do the right thing. You do that. Let us know how that works out for you.
#13987268
Hi you Ogre, I agree with some, but not with all.
GermanOgre wrote:Somehow Germany is weathering the current crisis pretty well. Of course long before the boom that started about 5 years ago they took "extreme" austerity measures under Schröder. Being in the Euro zones helps as well. The currency stays low even with huge trading surplus.

Those were courageous measures for a social democrat government, but I wouldn’t call them “extreme.” Schroeder has my respect for putting his job on the line to get the measures through which were necessary to get the country going again (of course with a CV like that you can always find employment in industry.)

> I truly believe Germany has a few long term competitive advantages
>that will help it stay competitive and being able to pay off debts.
Yes, but to stay competitive on the World markets is a struggle that has to be fought each day anew. But most of all, Germany has credibility (as a debtor, as a business partner, as a political partner). People believe that Germans will not renege on their promises.

> 1. A free university system;
It is still cheaper than elsewhere, but not necessarily free. Anyway, that is not so important. Many countries, especially poor countries, have too many academics. In my life, I have seen too many academics driving a taxi cab. The German secrete is a dual education system with an emphasis on practical on-the-job training that is available to almost the entire population. It is the great number of qualified workers, technicians and engineers not the small number of academics that makes the difference.

> 3. Patent per capita similar to the east coast, doesn't reach silicon valley levels,
>but nobody does. And do computer patents help many American jobs anymore?
That is not true. Germany has the highest number of patents per capita in Europe, followed by Finland and the other Nordic countries. In the UK, the numbers are actually falling. Most of the South of Europe has only a fraction of the inventions made in Germany. However, the US has about 50% more and Japan and Korea have 5 times more patents per capita than Germany. The total numbers for China are already considerable, but due to the large population, the per capita figures are still in the medium range. But the growth figures are considerable.

>5. Compact cities; making citizens have to engage with their neighbors.
That’s a funny one. Many neighbors never talk to each other in the cities.

>6. Spending only $625/capita on military spending vs $2150 in the US
I fully approve of this one. Military spending should be reduced.

>7. People who hold their politicians to very high standards
Yes, but they tend to overdo it with a culture of nagging and envy that seems to be spreading the richer people get.

>8. Governmental policies based on facts and science
Well, I don’t know about the science, I would rather call it pragmatism and distaste for abstract theories.

You forgot the “consensus” between employers and employees which has been one of the most important factors in post-war economic development. Unions are quite powerful and can get demands through, but mostly they accept that it is no good to kill the goose that lays the golden eggs. In other words, they generally avoid actions that can seriously cripple German industry.

Regarding low exchange rates for German exports, I disagree with what has been said. Prior to the Euro, Germany has had a trade surplus even though the value of the DM has continually increased. The Euro has actually made Germany poorer and the South of Europe richer. After each of the numerous DM revaluations it was speculated that German exports would be hit, it never happened. German exports have alwasy increased even despite a higher DM. The higher DM reduced the price of imports, lowered inflation and made Germans generally richer. And since German exports contain 40% foreign made components, a higher DM makes German exports more competitive by reducing component cost and energy costs from imported fossil fuels etc.

Germany has closed most low cost manufacturing many years ago. The trend is now towards “knowledge-based” industries, hence the importance of inventions. To compete on low cost products you need to reduce you living standards to below that of China. To maintain a high living standard, you have to produce high-value goods. High value goods are sold more on quality than on price. High value goods can be sold even with a highly valued currency. The more your currency is worth, the more you get for your money.

PS: The monetary policies that resulted in a strong and stable currency have also been important to the economic develpment in Germany. The idea was, that the Euro would do the same for Europe.
#13987295
Drlee wrote:That is a recipe for disaster as it amounts to business as usual.

That's mind-bogglingly retarded. Business as usual is: SPENDSPENDSPEND, ease consumer credit (further eating away at business capital), cut taxes that do fuck-all for the supply side but still get lambasted for it.

Blue Puppy wrote:I personally prefer trying to free up the market by breaking up the biggest companies in order to create a more flexible and competitive environment, which would likely raise revenues without a tax increase.

Gigantic conglomerates are actually good for the economy, as they have better economies of scale. Further, the idea that "freeing up competition" is necessary is really ridiculous, considering that it's completely impossible for any company within its point of constant returns to scale to not face competition -- the economy is globalized; the world's largest conglomerates face competition from equally gigantic conglomerates abroad.

Japan and Korea, two of the most prosperous and egalitarian economies in the world, largely rely on corporations so big they'd violate every American antitrust law in the history of ever.
#13987304
Gigantic conglomerates are actually good for the economy, as they have better economies of scale.


No they are not. Google "conglomerate".

Tell me how easing consumer credit cuts into business capital. :roll:

Major corporations are sitting on boatloads of cash right now. We need them to spend that. So tax the fuck out of them if they don't. Apple = $100 billion in cash. Fuck them.
#13987325
Dr House wrote:Japan and Korea, two of the most prosperous and egalitarian economies in the world, largely rely on corporations so big they'd violate every American antitrust law in the history of ever.


Asian companies function very different from those in the West. People constantly reach the wrong conclusions by comparing applies with pears.
#13987513
Drlee wrote:No they are not. Google "conglomerate".

I know what a conglomerate is. What's your point?

Drlee wrote:Tell me how easing consumer credit cuts into business capital.

Credit comes from savings, of which there's only X finite quantity in the economy (the American gross savings rate is an embarrassingly low 12% at present). The more consumers use, the less businesses can use to invest -- in practical terms this means higher interest rates, which raise the cost of doing business (especially for high-value industries, which rely majorly on capital over labor costs).

Drlee wrote:Major corporations are sitting on boatloads of cash right now. We need them to spend that.

What we need is to turn that into more jobs. And a real corporate tax incidence twice that of most "durr soshalizt" European countries is not helping.

Riddle me this: Switzerland has the second-lowest overall tax incidence of any country in Europe (behind Estonia), and the lowest of any fully industrialized nation. It has a Gini quotient of 33, compared to 41 in much more spend-happy Britain (not to mention the lowest unemployment rate in Europe and the highest real median wage rate in the world). If more social spending equals more equality, how does that make any sense?
#13987562
Greetings!

Zenno I agree with you as well.

Maybe I should have been more clear on this. Sorry.
>5. Compact cities; making citizens have to engage with their neighbors.
That’s a funny one. Many neighbors never talk to each other in the cities.
>

When living or visiting friends in the suburbs of major American cities I was struck how isolated one was from poverty and from people of different backgrounds. I could enter my car, remotely open the garage door and be off to work or shopping without ever having to see anybody outside of my "class". At the big box stores in my suburb I would encounter some impoverished people, but still no real homeless or persons of other ethnic backgrounds. Maybe this experience was abnormal, but I doubt it. I had several friends (age 27) who had never in their life taken the bus.

Here in Germany:
[*]the malls are a collection of downtown stores where beggars and panhandlers can mingle in front of.
[*]people don't buy as much from big box stores, but, outside of the grocery-market market, they are becoming more popular here.
[*]Public transportation is an option used by many in the middle and upper class
[*]My car is parked on a public street, so I may have to be social when getting into it.

This probably has to due with several factors:
[*]Many German's rent or own apartments, thus urban sprawl is not as wide spread as in the US. This may be due to the fact that buying houses is not subsidized as it is in the US (mortgage payments being tax deductable, etc.)
[*]For the distribution of city sizes in Germany the arithmetic mean imo hovers around 100-200 thousand with very few (3-4) cities with above 1 million. These smaller cities are "stand alone" cities and not suburbs or part of a "city complex". Cities of this size can't support a stratified development, as is possible with the sprawling newer mega cities in the US.

I know there are places in Germany and the US that don't fit my experiences, yet it seems that the trend definitely is there. In my opinion this suburban setup in the US has contributed greatly to the current inability to have a meaningful political dialogue as well. People cannot see the big picture anymore and truly believe that poverty isn't as bad as it is.

Btw, anybody know how this list thing works?
#13987566
Dr House wrote:Japan and Korea, two of the most prosperous and egalitarian economies in the world, largely rely on corporations so big they'd violate every American antitrust law in the history of ever.

As other people have noted, I think you're over-reaching here. Which corporations are you referring to? Sony? Samsung? Toyota? They have tons of competitors. It's just not an apt comparison to our handful of large banks, but if you can explain yourself better then I'm listening.
#13989022
Blue Puppy wrote:As other people have noted, I think you're over-reaching here. Which corporations are you referring to? Sony? Samsung? Toyota? They have tons of competitors. It's just not an apt comparison to our handful of large banks, but if you can explain yourself better then I'm listening.

Google "Chaebol" and "Keiretsu." Over 90% of Japan's economic output is controlled by six colossal conglomerates.

The comparison is quite apt, because banks in the US do face heavy competition. Internal competition amongst savings and loans banks is fierce, and investment banks directly compete with investment banks from every other major country in the world, as 1) there are very few controls placed on FDI in the US, and 2) a great portion of assets owned by American investment banks are owned abroad anyway (50% of earnings posted in the NYSE come from facilities owned abroad).
#13989064
Greetings to you Ogre,

I never figured out that list thing either. I think it probably doesn't work.

The difference in (sub)urban life you notice between Germany and the US is not particular to Germany. It is the same for most European countries. A Danish friend I used to know during my time in Paris moved to LA while I moved to Tokyo. When we met in Paris 30 years later, he said that they never walked in the US like we do in Europe. They take their car to do everything. In Paris, we would spend hours walking the streets, sitting in restaurants and coffee houses. We would walk or take the Metro to work, to go shopping, to go to the movies or to concerts. There is a public space where everybody can meet, even though the upper classes only mingle seldom with the destitute, perhaps a quick coffee in some seedy café after the concert, but then it is back to the posh residential areas. It is the same in most European cities, even though not all have so much to offer in terms of entertainment as Paris.
#13989067
Dr House wrote:Google "Chaebol" and "Keiretsu." Over 90% of Japan's economic output is controlled by six colossal conglomerates.


I have done business for over 15 years in the Far East with Japanese Shoshas like Mitsubishi, Itochu, etc., Korean Chaebols like Hyundai, Samsung, etc. and Chinese state corporations like Citic. Any comparison with Western corporations is just nonsensical. They function by a very different logic. It is not possible to sum up all the differences in one post. However, one of the major differences is that Asian corporations take a long-term strategic view to conquer market share, while Western corporations are driven by the need for maximum short term profit. This makes it a very unequal game. There can be no doubt as to who is going to be the winner in the end.
#13989237
Drlee wrote:You OBVIOUSLY did not read Lexington's excellent post before responding to mine.


You OBVIOUSLY have a real hard time understanding that people can honestly disagree with you.

I frequently mention Limbaugh when dealing with folks who sould like parrots of his ideas. You may not listen to him but Hannity, Coulter and any number of right wing corporatist tools will do just fine.


None of whom I listen to. So the problem is your knee-jerk attempts at dismissal.

We have hashed it out time and again on this forum. Time and again we have posted research, opinion by nobel prize winners, statistics and court decisions


And I can post research and opinion by really smart people that disagrees with yours. So what?

But you go ahead and trust the banks to always do the right thing. You do that. Let us know how that works out for you.


When did I say I trusted banks? You go from dismissal to strawman. I don't trust the banks. That's why I don't want my government to have the power to force me to bail them out. I don't want my government to have the power to skew the marketplace to the point that bubbles appear and then burst. I want banks that employ failed business models, or commit outright fraud, to fail. I don't have to trust them if I'm not forced to support them.
#13989353
Joe Liberty wrote: I don't trust the banks. That's why I don't want my government to have the power to force me to bail them out.


It's very easy to say "Next time we shouldn't bail out the banks". A politician can even promise that to his supporters in order to be elected. But he will be lying.

The banks will always be bailed out. They were bailed out in New York. They were bailed out in London. And Dublin. And Madrid. All these countries banks were "saved", in some cases at ruinous cost, because the politicians saw no realistic alternative.

What else could they have done? If a major bank collapsed in an already strained environment, then any other bank from whom it had taken a loan would suddenly see a huge hole in it's balance sheet. More banks would collapse as well, falling like dominoes, and it would be hard to tell when the effect would end.

All politicians know that in order to remain in office they need to avoid doing anything that would cause a serious shock to the average person. Yes - they can gradually make moves that makes a person poorer, or less free, but a sudden shock would destroy their chances of re-election. So what would happen if, tomorrow morning, the cash machines of a major retail bank stopped working because the bank had no money? I can imagine we may see a huge number of ordinary people out on the streets begging for cash because they have nothing to feed their children. What would happen to shops and businesses connected to the bank. How could they trade if there was no one to process their credit card payments?

If a major bank shut it's doors for a week, riots on the streets would be almost guaranteed.

Last century, the collapse of the German financial system brought with it the rise of Naziism, and a world war during which millions of people died. That's how big the stakes are.

Our modern civilization is currently incredibly reliant on a functioning banking system. The banks have the ability to destroy us with their recklessness, and came very close to doing just that less than a handful of years ago. We must do anything we can to make sure that doesn't happen again - and that includes implementing a powerful, and effective system of legal oversight.
#13989412
What else could they have done? If a major bank collapsed in an already strained environment, then any other bank from whom it had taken a loan would suddenly see a huge hole in it's balance sheet. More banks would collapse as well, falling like dominoes, and it would be hard to tell when the effect would end.

This is not true. Most banks collateralize and/or hedge their mutual exposures. The net damage to a major bank due to bankruptcy of another shouldn't be major. There would be no domino effect, as Lehman's collapse demonstrated. In fact, surviving banks are likely to flourish in the short-term due to reduced competition.

If a major bank shut it's doors for a week, riots on the streets would be almost guaranteed.

There are simple measures that can be taken. Most major countries currently insure retail depositors. Honouring those insurance commitments would have mitigated any street riots.

Don't full yourselves. It wasn't the common man in the street that was bailed out. It was equity holders and executives in the banks themselves. This was pure crony capitalism, disguised through fear-mongering as a necessary system rescue.

Not to mention the degree to which banks' recklessness was cause and promoted by past rescues and guarantees.
#13989414
cathartic moment wrote:It's very easy to say "Next time we shouldn't bail out the banks".


It was even easier to say, "We shouldn't bail them out this time."

What else could they have done?


Nothing, that's what. Let. Them. Fail.

Of course, in addition to being somewhat beholden to them for campaign dollars, I think a lot of congresscritters realized that their policies had a large hand in the mess, so they felt a kind of responsibility.

The main thing, though, is that politicians are the first people to do something for the sake of doing something; whether it's the right thing or the wrong thing is wholly immaterial. It's not their job to do the right thing, it's their job to do anything and then try to convince everybody (and themselves, most likely) that it was the right thing. In this case, by predicting doom and gloom if they hadn't. Lots of people fall for that.

Last century, the collapse of the German financial system brought with it the rise of Naziism, and a world war during which millions of people died. That's how big the stakes are.


I rest my case.

We must do anything we can to make sure that doesn't happen again - and that includes implementing a powerful, and effective system of legal oversight.


So to stop government from implementing poor regulations and lousy fiscal policy which lead to government bailouts, we should give government (those politicians you just spent an entire post lambasting) even more power? That sounds quite counter-intuitive to me.

I agree, we should do something (not anything) to make sure it doesn't happen again: we reduce the power of government to screw up the marketplace, to push through bad fiscal policy and bad regulations, and to hand out shit-tons of taxpayer money to corporate cronies.
Last edited by Joe Liberty on 21 Jun 2012 19:30, edited 2 times in total.
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