Is public confidence enough to revive the economy?

[WhoWee]

A big role. More government involvement (regulation of derivative investment products for instance, and requiring heavy capitalization levels for companies engaging in very risky investments, for instance) might have saved us from some of the devastation. Instead, financial giants packaged over-rated "investment" products of dubious worth and made billions until the bubble collapsed, and the taxpayers found themselves on the hook for billions more. "Too big to fail" is a license to steal.

Perhaps LESS Government mandates that lead to some of these problems should be considered?

 

[turbo]

Perhaps LESS Government mandates that lead to some of these problems should be considered?

Where is the government mandate that made financial firms bundle risky loans, classify them as grade-A investments, and sell them to unsuspecting investors? We not only need to re-regulate the financial markets, we need to enforce the regulations already on the books. And actually punish the people who break the law. Fraud is and has been against the law for a long time - why aren't the crooks being prosecuted?

 

[mheslep]

A big role. More government involvement (regulation of derivative investment products for instance, and requiring heavy capitalization levels for companies engaging in very risky investments, for instance) might have saved us from some of the devastation. [...]

Good grief. We have a $3.5 trillion government employing some two million people, not including the military, and that's just the federal government. Yet the answer is "more government involvement"?

 

[mheslep]

Something to look forward to or ponder - what if -

California Will Default On Its Debt, Says Chris Whalen
http://finance.yahoo.com/tech-ticker/article/535616/California-Will-Default-On-Its-Debt%2C-Says-Chris-Whalen

He makes some interesting points.

I'm curious about the predicted results of a California default. I noted the other the day that roughly half of the states defaulted on their debts in the 19th century, from building canals and such, yet they and the union are still here.

 

[Al68]

Where is the government mandate that made financial firms bundle risky loans, classify them as grade-A investments, and sell them to unsuspecting investors?

You already know the answer to this. Fannie and Freddie sought to buy risky mortgages, ostensibly to make it easier for people to get credit.

Edit: As if the above isn't common knowledge, here's a link to Fannie bragging about their "chartered mission to increase the amount of funds available in order to make homeownership and rental housing more available and affordable": http://www.fanniemae.com/kb/index?page=home&c=aboutus

Here's a link to Fannie easing their underwriting standards: http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260

They were classified as grade-A because their value was ensured by the demand of government sponsored enterprises.

So the mistake that private companies made was to go along with that government scheme. And your conclusion is to blame private companies for their participation instead of the politicians who devised the scheme?

And you are well aware that mortgages meeting private lending standards were not a part of the problem.

 

[WhoWee]

Where is the government mandate that made financial firms bundle risky loans, classify them as grade-A investments, and sell them to unsuspecting investors? We not only need to re-regulate the financial markets, we need to enforce the regulations already on the books. And actually punish the people who break the law. Fraud is and has been against the law for a long time - why aren't the crooks being prosecuted?

Are you serious?
http://www.ffiec.gov/CRA/
http://www.federalreserve.gov/dcca/cra/

 

[Astronuc]

Are you serious?
http://www.ffiec.gov/CRA/
http://www.federalreserve.gov/dcca/cra/

Yes he is serious. From the second link:

Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution's individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner.

The CRA wasn't responsible for the subprime crisis. If one disagrees - please provide the evidence that supports such a view. For example, please provide the volume of subprime loans by type and year for the GSEs, and then provide the default rates. Then provide the same data for the non-GSEs, e.g, Bear Stearns, Merrill Lynch, Lehman Bros, Citibank, Goldman Sachs, AIG, . . . . .

http://www.law.cornell.edu/uscode/12/usc_sec_12_00002901----000-.html

The federal spending and the GSEs were part of the problem, but perhaps a bigger problem with the distressed corporate debt that exploded in the 2000s, and in conjunction with the CDOs, CLOs, and various derivatives undermined the financial markets.

Making risky subprime loans is actually in violation of the CRA.

The government didn't force, bribe or coerce anyone in making fraudulent (illegal) or risky loans. People freely chose (as in free market) to do so.

And at the moment, government spending and lack of revenue is a really big problem - and it's unsustainable.

 

[WhoWee]

Yes he is serious. From the second link:
The CRA wasn't responsible for the subprime crisis. If one disagrees - please provide the evidence that supports such a view. For example, please provide the volume of subprime loans by type and year for the GSEs, and then provide the default rates. Then provide the same data for the non-GSEs, e.g, Bear Stearns, Merrill Lynch, Lehman Bros, Citibank, Goldman Sachs, AIG, . . . . .

http://www.law.cornell.edu/uscode/12/usc_sec_12_00002901----000-.html

The federal spending and the GSEs were part of the problem, but perhaps a bigger problem with the distressed corporate debt that exploded in the 2000s, and in conjunction with the CDOs, CLOs, and various derivatives undermined the financial markets.

Making risky subprime loans is actually in violation of the CRA.

The government didn't force, bribe or coerce anyone in making fraudulent (illegal) or risky loans. People freely chose (as in free market) to do so.

And at the moment, government spending and lack of revenue is a really big problem - and it's unsustainable.

Sometimes all you need is a little light along the path to go in the wrong direction.

As we've discussed in other threads, this all dates back to the S&L mess - the problem was never solved - just delayed and re-packaged.

 

[Al68]

The government didn't force, bribe or coerce anyone in making fraudulent (illegal) or risky loans. People freely chose (as in free market) to do so.

They chose to freely accept the bribe. Demand for risky loans was artificially created by government. That's not what "free market" means. And the fact that the demand was created by government has been substantiated many times here, including recently in this thread. And the fact that banks were not forced to "take the bribe" doesn't make such an arrangement a "free market".

And at the moment, government spending and lack of revenue is a really big problem - and it's unsustainable.

One seventh of the entire nation's GDP collected by the federal government alone is a "lack of revenue"? On what planet?

 

[Gokul43201]

They chose to freely accept the bribe.

Are you saying that the entirety of the blame lies with the briber, and none of it with the bribee?

 

[WhoWee]

These guys are analphabets of economics.

Welcome to PF. You might want to take a quick look at the rules.

 

[WhoWee]

One seventh of the entire nation's GDP collected by the federal government alone is a "lack of revenue"? On what planet?

Tax revenues are down - look back a page or 2 - (could be in the other thread).

 

[Al68]

Are you saying that the entirety of the blame lies with the briber, and none of it with the bribee?

No, I'm saying that government's share of the blame lies in their bribery, not in their supposed failure to adequately regulate the bribees.

 

[Al68]

Tax revenues are down - look back a page or 2 - (could be in the other thread).

Yeah, they're down from way, way, way, way, way, way, way, way, way, way too much to way, way, way, way, way, way, way, way, way too much.

 

[mheslep]

Yes he is serious. From the second link:
The CRA wasn't responsible for the subprime crisis. If one disagrees - please provide the evidence that supports such a view.

Evidence that supports your statement of fact?

Making risky subprime loans is actually in violation of the CRA.

Source? No the fed link doesn't state that subprime loans are prohibited by the CRA. Risky is your characterization.

I'll grant that one can argue the CRA wasn't directly responsible for the financial crisis, or at least say the evidence connecting the CRA to the subprime crisis is convoluted. I don't grant that you can just announce here that there's no connection as a statement of fact, or in other words "absence of evidence is not evidence of absence".

 

[readaynrand]

Welcome to PF. You might want to take a quick look at the rules.

Thanks. Well, I already got two warnings. Guess I'm out of here pretty soon.

One last thing I'd like to express:Which is the bigger insult; to say "I want more government control" (i. e. "I want the you to sacrifice your interests, and I intend to imprison you if you try to control your own life"), or to say "Jesus Christ", thereby expressing my despair at this insolent attitude?

 

[WhoWee]

http://www.heritage.org/budgetchartbook/growth-federal-spending-revenue

 

[WhoWee]

Thanks. Well, I already got two warnings. Guess I'm out of here pretty soon.

One last thing I'd like to express:Which is the bigger insult; to say "I want more government control" (i. e. "I want the you to sacrifice your interests, and I intend to imprison you if you try to control your own life"), or to say "Jesus Christ", thereby expressing my despair at this insolent attitude?

Bye-bye.

 

[Al68]

Yeah, they're down from way, way, way, way, way, way, way, way, way, way too much to way, way, way, way, way, way, way, way, way too much.

http://www.heritage.org/budgetchartbook/growth-federal-spending-revenue

Thanks for the link to support my (unnecessarily specific ) claim above.

 

[brainstorm]

Where is the government mandate that made financial firms bundle risky loans, classify them as grade-A investments, and sell them to unsuspecting investors? We not only need to re-regulate the financial markets, we need to enforce the regulations already on the books. And actually punish the people who break the law. Fraud is and has been against the law for a long time - why aren't the crooks being prosecuted?

The funny thing is that bundling mortgages is exactly what Freddie/Fannie had been doing since their inception, only they weren't privatized until I forget how recently. Bundling is indeed the cause of economic overheating and meltdown, but it is something that occurs in numerous ways from stock-sales to insurance policies. Basically, anything that pools large amounts of funds and makes them available as a single large budget creates the opportunity to spend excessively and with less discipline than an individual with an individual's budget, who is responsible for their own losses. Any market can meltdown when there is sufficient capital available to drive appreciation to the point of inflation and disconnect between sellers and buyers, no?

 

[WhoWee]

Yes he is serious. From the second link:
The CRA wasn't responsible for the subprime crisis. If one disagrees - please provide the evidence that supports such a view. For example, please provide the volume of subprime loans by type and year for the GSEs, and then provide the default rates. Then provide the same data for the non-GSEs, e.g, Bear Stearns, Merrill Lynch, Lehman Bros, Citibank, Goldman Sachs, AIG, . . . . .

http://www.law.cornell.edu/uscode/12/usc_sec_12_00002901----000-.html

The federal spending and the GSEs were part of the problem, but perhaps a bigger problem with the distressed corporate debt that exploded in the 2000s, and in conjunction with the CDOs, CLOs, and various derivatives undermined the financial markets.

Making risky subprime loans is actually in violation of the CRA.

The government didn't force, bribe or coerce anyone in making fraudulent (illegal) or risky loans. People freely chose (as in free market) to do so.

And at the moment, government spending and lack of revenue is a really big problem - and it's unsustainable.

Again, as we've discussed before, the CRA didn't cause all of the problems - Bill Clinton (unintended consequences) also helped.
http://2010.newsweek.com/top-10/history-altering-decisions/clinton-signs-securities-legislation.html

 

[Gokul43201]

One seventh of the entire nation's GDP collected by the federal government alone is a "lack of revenue"? On what planet?

The same planet where nearly every other other developed country collects more?

 

[Gokul43201]

Why then should capitalism take the blame today - when capitalism doesn’t even exist?

Since it doesn't exist, I suppose it can not take credit for anything either.

 

[turbo]

Government involvement NEVER solve problems, it CREATES problems.

Such free-market absolutism is disturbing. Can you provide any support for such statements?

 

[WhoWee]

Were we visited by Dr. Who (or something)?
(I meant this to post BEFORE turbo - not in response to)

 

[Evo]

Since it doesn't exist, I suppose it can not take credit for anything either.

He was copying directly from the Ayn Rand website gokul, these are not his thoughts or words.

 

[brainstorm]

He was copying directly from the Ayn Rand website gokul, these are not his thoughts or words.

Ironically, Ayn Rand was staunchly opposed to thought/speech conformity.

 

[Al68]

He was copying directly from the Ayn Rand website gokul, these are not his thoughts or words.

His (or her) attempts to hide the fact that he (or she) was a Rand supporter didn't work on me. The screen name and self description of "objectivist" tipped me off right away.

 

[brainstorm]

His (or her) attempts to hide the fact that he (or she) was a Rand supporter didn't work on me. The screen name and self description of "objectivist" tipped me off right away.

Don't say "Rand supporter." Say, "Rand dogmatist" or "Rand worshipper." I like Ayn Rand's ideas but I don't worship them. There's nothing wrong with finding validity in Ayn Rand's writing.

 

[Evo]

His (or her) attempts to hide the fact that he (or she) was a Rand supporter didn't work on me. The screen name and self description of "objectivist" tipped me off right away.