So you're saying AIG gambled with it's assets that covered insurance policies. But insurance wasn't the problem. The credit swap division had the problem and they were negotiating solutions.
Anyway, I found this: http://www.forbes.com/forbes/2009/1005/opinions-glass-steagall-on-my-mind.html It was after the repeal that banks got deeply into underwriting mortgage-backed securities, and it was mortgage securities that triggered the crisis. But this doesn't mean that the expansion of underwriting was an important cause of losses at these banks. If this argument were true, we would expect to see the portfolios of big banks crammed with low-rated mortgage paper that they could not sell in their underwritings. In fact, big banks held primarily the mortgage securities with the highest ratings, which they would have been permitted to hold under Glass-Steagall. It could also be argued that large banks would be tempted to make bad loans to companies in order to get their underwriting business. While such practices have periodically occurred, they have for years been prohibited by several federal statutes. Moreover, when the sec looked at the banks that became insolvent during 2008, it found that the main cause of insolvency was losses on traditional bank loans unrelated to their securities underwritings. On Sat, Nov 7, 2009 at 12:01 PM, Gruss Gott <grussg...@gmail.com> wrote: > >> Sam wrote: >> Please correct me, I'm still in a cloud. >> > > Yeah, you're still not there yet. Here's the simple equation: > > Regulated company (e.g., ins company) > + > Non-regulated company (e.g., hedge fund) > = > Non-regulated company > > And that's the key. Under Glass, an insurance company COULD NOT sell > ANY unregulated products in any division of it's company or > financially dependent holdings. > > Again, this was for a simple reason: you as a consumer need to be > confident in the products you buy or you won't buy them. > > This is the simplest form of a well-regulated market. > > Think of a food market: if you think - from experience - that 10% of > the food at your local Krogers contains poison you won't shop there. > In other words the food "market" will collapse due to lack of minimum > standards. Thus the FDA. > > Same is true with financial products: thus Glass gave you confidence > in your insurance company by regulating it's operations and preventing > it from taking risks that would jeopardize your claims - like creating > a hedge fund. > > If you eliminate Glass, now a regulated insurance company can start a > hedge fund and THAT company can take massive risks with your insurance > money. > > Because if you deregulate financial markets it turns out that - LIKE > EVERY OTHER MARKET - they eventually collapse! > > Which is what happened in the 30s and what happened in 2008. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Want to reach the ColdFusion community with something they want? Let them know on the House of Fusion mailing lists Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:307300 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
