The argument against self-regulation.

[Toddsterpatriot]

[If I understand you we should change the law because it might be a problem, not because it has been. Right?

Quantum Windbag, no, because it has been a severe problem before the 1933 Glass-Steagall Act was enacted.

There’s good reason to question if the other additional laws and regulations that have been enacted are themselves sufficient to prevent history from repeating itself. Finance and economic academia’s cannot predict when the repeal of the 1933 act will again cause grievous U.S. and probably global economic harm but they have good reason to expect that such disasters will again occur.

I sense the majority of practical and experienced executives” disagree with the academias. The backgrounds and credentials of these executives are similar to the proponents of prior policies that led to all of the prior economic disasters we’ve experienced.

[Unlike the academias, the executives and their enterprises as a class generally had a vested interest and very well profited from the policies they advocated; (until those policies failed)].

Respectfully, Supposn

How was Glass-Steagall going to stop banks from writing bad mortgages?

 

[Quantum Windbag]

[If I understand you we should change the law because it might be a problem, not because it has been. Right?

Quantum Windbag, no, because it has been a severe problem before the 1933 Glass-Steagall Act was enacted.

There’s good reason to question if the other additional laws and regulations that have been enacted are themselves sufficient to prevent history from repeating itself. Finance and economic academia’s cannot predict when the repeal of the 1933 act will again cause grievous U.S. and probably global economic harm but they have good reason to expect that such disasters will again occur.

I sense the majority of practical and experienced executives” disagree with the academias. The backgrounds and credentials of these executives are similar to the proponents of prior policies that led to all of the prior economic disasters we’ve experienced.

[Unlike the academias, the executives and their enterprises as a class generally had a vested interest and very well profited from the policies they advocated; (until those policies failed)].

Respectfully, Supposn

It wasn't a severe problem, it was a perceived problem. The severe problem was foreign banks and investors pulling their gold deposits out of the US banking system.

 

[Supposn]

It wasn't a severe problem, it was a perceived problem. The severe problem was foreign banks and investors pulling their gold deposits out of the US banking system.

Quantum Windbag, no, the perceived problems were actual problems due to banks acting as investment banks and thus they exposed themselves to significantly risks.

Prior to 1933 this was of great detriment to some banks. Now that the 1933 Glass-Stealgall Act’s been repealed, we cannot predict when and to what extent banks’ financial positions will suffer, but we can be reasonably expect that such situations will occur.

There’s nothing that limits the amounts or numbers of such occurrences; but pour historic experience with this particular condition is compatible with Murphy’s Law. We can expect that our repeal of the 1933 act will come back to bite us, and take out the largest hunk of our flesh at a moment when our economy will be the most vulnerable.

You correctly point out “runs on the banks” also significantly reduced bank’s financial conditions. The question of which condition was the greater or lesser detriment to individual banks must vary and I don’t pretend to know the aggregate answer to that question. The FDIC is a bank-run preventative.

Respectfully, Supposn

 

[Supposn]

[If I understand you we should change the law because it might be a problem, not because it has been. Right?

Quantum Windbag, no, because it has been a severe problem before the 1933 Glass-Steagall Act was enacted.
There’s good reason to question if the other additional laws and regulations that have been enacted are themselves sufficient to prevent history from repeating itself. Finance and economic academia’s cannot predict when the repeal of the 1933 act will again cause grievous U.S. and probably global economic harm but they have good reason to expect that such disasters will again occur. .....................................Respectfully, Supposn

How was Glass-Steagall going to stop banks from writing bad mortgages?

ToddsterPatriot &Quantum Windbag, I have never stated that the banks would be enabled or induced to make bad mortgage loans due to repeal of the 1933 Glass-Stealgall Act.

Preventing banks with accounts insured by the FDIC from behaving or associating themselves with entities functioning as investment banking increases those banks’ risks, thus increasing the risks to their insurer, (the FDIC).
Anything that increases the risks assumed by the FDIC, or increases the rates that banks must pay for FDIC insurance, or leaves our nations’ banking systems financially less stable are detrimental to our national economy.

This is why I’m opposed to the repeal of the 1933 Glass-Stealgall Act.
//////////////////////////////////

There’s nothing within the law that prevents a bank originating a mortgage, to then immediately sell the entire mortgage. A bank originating a bad loan, (if they’re able to sell the mortgage), will henceforth evade all legal and financial responsibility for what they originated.

GSE’s are the practically the entire market for liquidating mortgages. In my opinion we must devise a method to make banks at least partially accountable for the mortgages they originate. They needn’t retain responsibility for 30 years but they should share some portion of any default losses occuring within some shorter period, (3 or 5 years?).

Respectfully, Supposn

 

[Toddsterpatriot]

Quantum Windbag, no, because it has been a severe problem before the 1933 Glass-Steagall Act was enacted.
There’s good reason to question if the other additional laws and regulations that have been enacted are themselves sufficient to prevent history from repeating itself. Finance and economic academia’s cannot predict when the repeal of the 1933 act will again cause grievous U.S. and probably global economic harm but they have good reason to expect that such disasters will again occur. .....................................Respectfully, Supposn

How was Glass-Steagall going to stop banks from writing bad mortgages?

ToddsterPatriot &Quantum Windbag, I have never stated that the banks would be enabled or induced to make bad mortgage loans due to repeal of the 1933 Glass-Stealgall Act.

Preventing banks with accounts insured by the FDIC from behaving or associating themselves with entities functioning as investment banking increases those banks’ risks, thus increasing the risks to their insurer, (the FDIC).
Anything that increases the risks assumed by the FDIC, or increases the rates that banks must pay for FDIC insurance, or leaves our nations’ banking systems financially less stable are detrimental to our national economy.

This is why I’m opposed to the repeal of the 1933 Glass-Stealgall Act.
//////////////////////////////////

There’s nothing within the law that prevents a bank originating a mortgage, to then immediately sell the entire mortgage. A bank originating a bad loan, (if they’re able to sell the mortgage), will henceforth evade all legal and financial responsibility for what they originated.

GSE’s are the practically the entire market for liquidating mortgages. In my opinion we must devise a method to make banks at least partially accountable for the mortgages they originate. They needn’t retain responsibility for 30 years but they should share some portion of any default losses occuring within some shorter period, (3 or 5 years?).

Respectfully, Supposn

The crisis wasn't caused by banks doing investment banking.
The crisis was caused by banks writing and holding bad mortgages.
Keeping Glass-Steagall would have done nothing to prevent the crisis and may have made it worse.

 

[EdwardBaiamonte]

The crisis was caused by banks writing and holding bad mortgages.

of course our great newspapers and economists on left and right disagree. I t was liberal government that caused crisis:

"First consider the once controversial view that the crisis was largely caused by the Fed's holding interest rates too low for too long after the 2001 recession. This view is now so widely held that the editorial pages of both the NY Times and the Wall Street Journal agree on its validity!"...John B. Taylor( arch conservative, author of the Taylor Rule)


" The Federal reserve having done so much to create the problems in which the economy is now mired, having mistakenly thought that even after the housing bubble burst the problems were contained, and having underestimated the severity of the crisis, now wants to make a contribution to preventing the economy from sinking into a Japanese Style malaise....... - "Joseph Stiglitz"

 

[konradv]

We agree so much I consider this obvious.

The same human failings that make socialism an unrealistic system make self regultion unrealistic.

Toronado3800, your response is more concise and thus more eloquent than my message.
Respectfully, Supposn

I agree, Marxism and Libertarianism are flip sides of the same coin, in that they both require a basic change in human nature to work.

 

[Oddball]

We agree so much I consider this obvious.

The same human failings that make socialism an unrealistic system make self regultion unrealistic.

The same logical failings that make non sequiturs irrelevant make strawmen irrelevant.

 

[KissMy]

How was Glass-Steagall going to stop banks from writing bad mortgages?

The idea is to use checks & balances between companies prevent the bank from packaging crap loans in a AAA rating & selling it to everyone & betting against them to profit when they blow-up creating a systemic problem. If a bank wants to commit suicide by making bad loans that is their own problem. At least with Glass-Steagall & fiduciary responsibilities they can't profit from lying about bad loans to defraud investors & pack the system full of this crap taking us all down with them.

 

[Toddsterpatriot]

How was Glass-Steagall going to stop banks from writing bad mortgages?

The idea is to use checks & balances between companies prevent the bank from packaging crap loans in a AAA rating & selling it to everyone & betting against them to profit when they blow-up creating a systemic problem. If a bank wants to commit suicide by making bad loans that is their own problem. At least with Glass-Steagall & fiduciary responsibilities they can't profit from lying about bad loans to defraud investors & pack the system full of this crap taking us all down with them.

Banks were able to sell mortgages while Glass-Steagall was in place.
And if it didn't prevent them from writing bad mortgages, it wouldn't have prevented the crisis.

 

[KissMy]

How was Glass-Steagall going to stop banks from writing bad mortgages?

The idea is to use checks & balances between companies prevent the bank from packaging crap loans in a AAA rating & selling it to everyone & betting against them to profit when they blow-up creating a systemic problem. If a bank wants to commit suicide by making bad loans that is their own problem. At least with Glass-Steagall & fiduciary responsibilities they can't profit from lying about bad loans to defraud investors & pack the system full of this crap taking us all down with them.

Banks were able to sell mortgages while Glass-Steagall was in place.
And if it didn't prevent them from writing bad mortgages, it wouldn't have prevented the crisis.

They could not manipulate the rating & use insurance to profit from the mortgage going bad. Brokers had fiduciary responsibilities.

 

[Toddsterpatriot]

The idea is to use checks & balances between companies prevent the bank from packaging crap loans in a AAA rating & selling it to everyone & betting against them to profit when they blow-up creating a systemic problem. If a bank wants to commit suicide by making bad loans that is their own problem. At least with Glass-Steagall & fiduciary responsibilities they can't profit from lying about bad loans to defraud investors & pack the system full of this crap taking us all down with them.

Banks were able to sell mortgages while Glass-Steagall was in place.
And if it didn't prevent them from writing bad mortgages, it wouldn't have prevented the crisis.

They could not manipulate the rating & use insurance to profit from the mortgage going bad. Brokers had fiduciary responsibilities.

They didn't rate their own securities.
And Glass-Steagall wouldn't have prevented the crisis.

 

[Supposn]

The crisis was caused by banks writing and holding bad mortgages.

of course our great newspapers and economists on left and right disagree. I t was liberal government that caused crisis:

"First consider the once controversial view that the crisis was largely caused by the Fed's holding interest rates too low for too long after the 2001 recession. This view is now so widely held that the editorial pages of both the NY Times and the Wall Street Journal agree on its validity!"...John B. Taylor( arch conservative, author of the Taylor Rule)


" The Federal reserve having done so much to create the problems in which the economy is now mired, having mistakenly thought that even after the housing bubble burst the problems were contained, and having underestimated the severity of the crisis, now wants to make a contribution to preventing the economy from sinking into a Japanese Style malaise....... - "Joseph Stiglitz"

ToddsterPatriot, Quantum Windbag and Edward Baiamonte, you didn’t understand message #64?

The 1933 Glass-Stealgall Act prohibited the association or participation of FDIC insured banks with any investment banking enterprises. Such associations significantly increase the risks to the FDIC and our economy.

It has not been claimed that the 1933 act prevents origination of insufficiently collateralized mortgages or that the Federal Reserve induced such originations.

Excerpted from message #64 of this discussion thread:

There’s nothing within the law that prevents a bank originating a mortgage, to then immediately sell the entire mortgage. A bank originating a bad loan, (if they’re able to sell the mortgage), will have been able to evade all legal and financial responsibility for what they originated.

GSE’s are the practically the entire market for liquidating mortgages. In my opinion we must devise a method to make banks at least partially accountable for the mortgages they originate. They needn’t retain responsibility for 30 years but they should share some portion of any default losses occurring within some shorter period, (3 or 5 years?).

Respectfully, Supposn

 

[Oddball]

The crisis was caused by banks writing and holding bad mortgages.

of course our great newspapers and economists on left and right disagree. I t was liberal government that caused crisis:

"First consider the once controversial view that the crisis was largely caused by the Fed's holding interest rates too low for too long after the 2001 recession. This view is now so widely held that the editorial pages of both the NY Times and the Wall Street Journal agree on its validity!"...John B. Taylor( arch conservative, author of the Taylor Rule)


" The Federal reserve having done so much to create the problems in which the economy is now mired, having mistakenly thought that even after the housing bubble burst the problems were contained, and having underestimated the severity of the crisis, now wants to make a contribution to preventing the economy from sinking into a Japanese Style malaise....... - "Joseph Stiglitz"

ToddsterPatriot, Quantum Windbag and Edward Baiamonte, you didn’t understand message #64?

The 1933 Glass-Stealgall Act prohibited the association or participation of FDIC insured banks with any investment banking enterprises. Such associations significantly increase the risks to the FDIC and our economy.

It has not been claimed that the 1933 act prevents origination of insufficiently collateralized mortgages or that the Federal Reserve induced such originations.

Excerpted from message #64 of this discussion thread:

There’s nothing within the law that prevents a bank originating a mortgage, to then immediately sell the entire mortgage. A bank originating a bad loan, (if they’re able to sell the mortgage), will have been able to evade all legal and financial responsibility for what they originated.

GSE’s are the practically the entire market for liquidating mortgages. In my opinion we must devise a method to make banks at least partially accountable for the mortgages they originate. They needn’t retain responsibility for 30 years but they should share some portion of any default losses occurring within some shorter period, (3 or 5 years?).

Respectfully, Supposn

Problem being that you're trying to cross Glass-Stegall over into a context where it doesn't apply.

Glass-Stegal is not responsible for the existence of the Fed, mortgage banks, GSEs like Fannie & Freddy, sub prime no-qualifying 110% mortgages, etcetera.

Also, the notion that banks should be held accountable for loans they were, by hook or by crook, pressured into making is, after a fashion, blaming the victim...In fact, it's those who took the bailout (F&F, Goldman Sachs, AIG, Citi, GE Capital) who were the ones willing to take the absurd of risk of buying the bad paper from those banks smart enough to get it off their books, yet they're the ones portrayed as the innocent dupes.

 

[Supposn]

of course our great newspapers and economists on left and right disagree. I t was liberal government that caused crisis:

"First consider the once controversial view that the crisis was largely caused by the Fed's holding interest rates too low for too long after the 2001 recession. This view is now so widely held that the editorial pages of both the NY Times and the Wall Street Journal agree on its validity!"...John B. Taylor( arch conservative, author of the Taylor Rule)


" The Federal reserve having done so much to create the problems in which the economy is now mired, having mistakenly thought that even after the housing bubble burst the problems were contained, and having underestimated the severity of the crisis, now wants to make a contribution to preventing the economy from sinking into a Japanese Style malaise....... - "Joseph Stiglitz"

ToddsterPatriot, Quantum Windbag and Edward Baiamonte, you didn’t understand message #64?

The 1933 Glass-Stealgall Act prohibited the association or participation of FDIC insured banks with any investment banking enterprises. Such associations significantly increase the risks to the FDIC and our economy.

It has not been claimed that the 1933 act prevents origination of insufficiently collateralized mortgages or that the Federal Reserve induced such originations.

Excerpted from message #64 of this discussion thread:

There’s nothing within the law that prevents a bank originating a mortgage, to then immediately sell the entire mortgage. A bank originating a bad loan, (if they’re able to sell the mortgage), will have been able to evade all legal and financial responsibility for what they originated.

GSE’s are the practically the entire market for liquidating mortgages. In my opinion we must devise a method to make banks at least partially accountable for the mortgages they originate. They needn’t retain responsibility for 30 years but they should share some portion of any default losses occurring within some shorter period, (3 or 5 years?).

Respectfully, Supposn

Problem being that you're trying to cross Glass-Stegall over into a context where it doesn't apply.

Glass-Stegal is not responsible for the existence of the Fed, mortgage banks, GSEs like Fannie & Freddy, sub prime no-qualifying 110% mortgages, etcetera.

Also, the notion that banks should be held accountable for loans they were, by hook or by crook, pressured into making is, after a fashion, blaming the victim...In fact, it's those who took the bailout (F&F, Goldman Sachs, AIG, Citi, GE Capital) who were the ones willing to take the absurd of risk of buying the bad paper from those banks smart enough to get it off their books, yet they're the ones portrayed as the innocent dupes.

Oddball, you’re repeating what I’ve written.
But you’re incorrect regarding the banks being innocent. It was the banks greed that impelled them to originate bad paper. The banks’ involvement with investment banking further exacerbated their situations.


Respectfully, Supposn

 

[Oddball]

Oddball, you’re repeating what I’ve written.
But you’re incorrect regarding the banks being innocent. It was the banks greed that impelled them to originate bad paper. The banks’ involvement with investment banking further exacerbated their situations.


Respectfully, Supposn

Baloney.

The banks were passive-aggressively coerced into writing up mortgages, under the Utopian rubric of "affordable housing" and via thinly veiled threats from everyone from the DoJ to race hustlers like Jackson and Sharpton.

The people who run big institutions like Goldman Sachs, Citi, F&F, et. al. aren't stupid....They knew they'd get bailed out (too big to fail), so there was little risk of them buying up the paper that they knew was shaky....Meanwhile, relatively smaller players (Wells Fargo, US Bank - y'know, the ones who didn't need the bailouts) could keep the scam running because they would always have buyers for their schwaggy paper.

The whole scam was engineered from the top, with the relatively smaller banks and mortgage lenders played for the patsies.

 

[Paulie]

Agree with everything you said. But if we had the investment banking side separate and distinct, maybe the credit crisis would not have been so bad.

Nonsense.

Look at US Bank, Wells Fargo and BoA (before the shotgun marriage with Merrill Lynch)...None of them required a bailout (in BoA's case, they wouldn't have needed it), yet were entirely free to have regular banking and investment services all under the same roof.

You guys are ahead of me on this, I don't mind learning a little something if I have to look dumb in the first place. Sure those guys didn't need a bailout, they could and did continue to have everything under the same roof. But - we still had and have a credit crisis anyway. I am suggesting that had they separated the investments out, along with everyone else, they might not have been so quick to leverage the amounts that they did, using the other side of the business as a backstop.

I just think doing away with G/S was not a smart move, that's all.

Banks invest their capital. They have forever. They make their most money in the housing business. So this all being said, why should they be forbidden to invest in the very industry they already profit from the most?

 

[Supposn]

Banks invest their capital. They have forever. They make their most money in the housing business. So this all being said, why should they be forbidden to invest in the very industry they already profit from the most?

Paulie, I’m pleased that banks risking their own money are profitable. I’m pleased that those investing in the banks are doing well.

I’m opposed to banks with accounts insured by the FDIC taking unjustifiable risks.
Banks insured by the FDIC can and should be held to a higher fiduciary standard. They should not be permitted to function or be associated with investment banking.

Respectfully, Supposn

 

[editec]

Industrial self-regulation !



Yeah, right!

Here's the final word a RECANTATION of that specious theory from the then HIGH PRIEST of deregulation

 

[Toddsterpatriot]

Banks invest their capital. They have forever. They make their most money in the housing business. So this all being said, why should they be forbidden to invest in the very industry they already profit from the most?

Paulie, I’m pleased that banks risking their own money are profitable. I’m pleased that those investing in the banks are doing well.

I’m opposed to banks with accounts insured by the FDIC taking unjustifiable risks.
Banks insured by the FDIC can and should be held to a higher fiduciary standard. They should not be permitted to function or be associated with investment banking.

Respectfully, Supposn

The banks lost money on mortgages, not on investment banking.