Now I'm confused again. Seems the root problem of the present financial difficulties is bad loans. I read that from the left, the right and the center. Seems to be pretty much agreed on (shoot, even Rick agrees). So who can explain to my why it's Bush's fault or the fault of deregulation, that lenders made all of these bad loans?
Oh come on John, I must have written 50 posts in this thread on this exact subject..
Gorgeous sailing day yesterday...hoping for the same today. When hurricane season ends, this is an excellent sailing area.
Hawg - so you mean the government has a responsibility not to let people and companies make stupid, unwise, or other bad decisions?
There a difference between Government regulations say for example concerning interstate trucking, and regulating finance. In the financial arena, companies are playing with other peoples' investments. Money. The regulations are in place to constitute a certain level of protection of those monies. Without regulation, what's to stop John from opening up Jim-Bobs investment group, grabbing a bunch of cash and heading for the Bahamas?
There was a reason these regulations were put in place after the Great Depression. I think that a part of the problem is that people who don't study history are doomed to repeat it.
Funny, but McCain tried to get oversight legislation passed 3 years ago, supported by Bush. The Dems said no, because it would have interfered with the subprime market.
Please post references for this. I haven't heard about this and on the face if it don't see how Mr. I'm a deregulator would have been involved.
Church, boat, sailing...... 'see you guys' tomorrow
Free, is the heart, that lives not, in fear.
Full, is the spirit, that thinks not, of falling.
True, is the soul, that hesitates not, to give.
Alive, is the one, that believes, in love. JCP
Laws concerning fraud, I can understand. That's a criminal act. Making stupid choices though, is not a criminal act. So if I understand what you think should be in place, it would be federal guidelines for loan qualification. That's the only way you could regulate bad lending decisions. The only other choice would be to criminalize bad business decisions.
The larger question, to my mind, is what made the lenders think they could survive making bad lending decisions? Simply having the freedom to do so (deregulation) does not explain it. It appears to me that the government bailout mentality that began in the '30's and was fortified with Chrysler, NYC, and the RTC decisions, has created, or at least contributed to, a sense of invincibility to failure. As current events would seem to show (as the automakers line up with their hands out).
The freedom to make bad choices is inherent to a free market. It is the likelihood of government intervention though, that make such short term gambles, worth the making. It seems to me, that if regulation is needed, it is on government intervention, not on non-criminal business practices. Any regulation concerning such business practices should be aimed at those making them in the way of personal asset forfeiture, in conjunction with the business assets. In other words, you don't just lose the business, you lose what you got from it as well. That though, could prove difficult as tax laws and other procedures can make the ownership of assets less than transparent.
So, to me, what is really needed at this point is a big STOP sign on any further bailouts. You can't legislate greed out of human nature. You can though, impose penalties on it and make people think twice before indulging in it.
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John
Ontario 32 - Aria
Free, is the heart, that lives not, in fear.
Full, is the spirit, that thinks not, of falling.
True, is the soul, that hesitates not, to give.
Alive, is the one, that believes, in love. JCP
There a difference between Government regulations say for example concerning interstate trucking, and regulating finance. In the financial arena, companies are playing with other peoples' investments. Money. The regulations are in place to constitute a certain level of protection of those monies. Without regulation, what's to stop John from opening up Jim-Bobs investment group, grabbing a bunch of cash and heading for the Bahamas?
There was a reason these regulations were put in place after the Great Depression. I think that a part of the problem is that people who don't study history are doomed to repeat it.
You're correct when you start out saying that there's a difference between interstate trucking and finance. In trucking we're interested in not only safety but have an expectation we can assure the end results. We cannot do that in finance. Nobody is alleging that anyone took off for the Bahamas in this case either; they acted within the law. The law that should be questioned is the Glass-Steagall act which had it's provisions that prevented commercial and investment banks from performing the same services.
Otherwise, for the most part, we're seeing investors, particularly real estate investors, reap exactly what they've sown. They not only should be allowed to fail, they must be allowed to fail. Just as the US auto industry must be required to pay the price for having no product in the works for an energy spike. (When gas nailed $3 I read a GM VP say that he saw no diminishment of SUV sales on the horizon. That was about two years ago now. He and his like-minded colleagues need to lose their jobs-maybe some time on the street will smarten them up.) Instead I think we're going to get the Katrina response: the tax payer bails everyone out and then gets criticized for it not being enough or soon enough. BS!
There was a reason these regulations were put in place after the Great Depression. I think that a part of the problem is that people who don't study history are doomed to repeat it.
Free, is the heart, that lives not, in fear.
Full, is the spirit, that thinks not, of falling.
True, is the soul, that hesitates not, to give.
Alive, is the one, that believes, in love. JCP
Wonderful link Beez... most credit Roosevelt with the end of the Depression...but it was WWII that did it. Regulation and oversight are necessary...but re-distribution of wealth ruins the economy.
I've made the point about the effects of the New Deal before, but Ms Shales does it much better.
__________________
John
Ontario 32 - Aria
Free, is the heart, that lives not, in fear.
Full, is the spirit, that thinks not, of falling.
True, is the soul, that hesitates not, to give.
Alive, is the one, that believes, in love. JCP
I believe that most of what is going on is simply a realignment of people's brains to the reality that the market does, in fact, go down sometimes. I think most people have a hard time admitting when they are wrong, and it is much easier to say that something is wrong with the market or the system, because it shouldn't be acting this way (they say). People remember reading "... doesn't guarantee future results", but they have been right (for all the wrong reasons) for so long that it takes a while for people to understand that the reasons they believed in were in error. It's a process, as they say, and I am sure it will take some time. It's a big loss to many people who have only been long this market, most investors don't even know how to get short, or even how to move into bonds, or cash, all they know is how to buy and hold, it's the only strategy they have needed for the past 20 years. The five stages of grief according to Kubler-Ross are: (1) denial, (2) anger, (3) bargaining, (4) depression, and (5) acceptance. It will take investors a while to work through it, until then I think we are going to see a lot of finger pointing, a lot of anger. It's hard for anyone to admit that a loss is their own fault, even experienced traders sometimes have trouble doing it.
When the market has been going up for two decades you could believe that it was going up because your neighbor's dog willed it, if you wanted, and you'd be "right". That has happened a lot on Wall Street, all kinds of "reasons" for things happening that were, in the end, total B.S., and now people have to come to terms with that and try to get their thinking right. Like they say, in a bull market, everyone is a genius.
You can really hear it as an under current in most of the press and things that people are saying, there really is a belief out there that stock prices "should" have kept going up, that something must not be working right if prices are going down.
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What are you pretending not to know ?
Last edited by wind_magic : 09-21-2008 at 12:30 PM.
Reason: spelling
