On Sun, Jan 17, 2010 at 6:48 PM, paul stenquist <pnstenqu...@comcast.net> wrote:
> Those in favor of more government would have us believe that under-regulation > caused the meltdown. But it was actually more a matter of government pressure > to make bad loans. That mistake was the result of a well-intentioned effort > to make sure that everyone had a home of their own. Mortgages for all. Credit > ratings be damned. Yes, the banks went along with it, and compounded the > error by packaging the loans and reselling them, but congressional pressure > was the motivator. That is a profoundly ideological position, and unsupported by the numbers. You think you need political pressure to explain behavior that is short-term profitable and long-term disastrous? The banks did what they did because their executives and traders, the insiders of the system, were making sufficient short-term buckets of money that they simply didn't care about the long term. The oldest question is still the wisest one to ask: "cui bono"? A bank is defined as an institution that loans long and borrows short: thus by definition is unstable. Capitalism quite properly rewards profit-seeking, and the most profitable behaviors in banks are the most risky; thus such institutions will fail predictably and regularly at immense social cost, absent a set of sanity-enforcing rules. The notion that any bank could survive in even the medium term in an unregulated environment is beyond silly. Nonetheless, the functions they serve are considered useful and thus we need a regulatory framework and in certain cases publicly-backed insurance. Humanity being what it is, the managerial class will try to figure out how to game this system; in the recent past they did an admirable job. The result being that most of us with retirement portfolios saw them savaged while our tax contributions were shoveled into the gap to keep the credit markets from simply going up in smoke. So they could pay each other record-breaking bonuses this year. Educational reading from a really good writer with extensive experience of the industry: http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom/ -T -- PDML Pentax-Discuss Mail List PDML@pdml.net http://pdml.net/mailman/listinfo/pdml_pdml.net to UNSUBSCRIBE from the PDML, please visit the link directly above and follow the directions.