splicetoday.com — So what have we done to make sure we don't have our economy fall down around our ears in the near future? As far as I can tell, basically nothing. The financial institutions that got us into this mess have mostly been punished by having the Federal government shovel massive amounts of cash at them. There's been no serious effort at reform. Glass-Steagal has not been reinstituted. Too-big-to-fail banks have not been broken up, which means that the next time they fail, the taxpayers will have to bail them out just like we did this time. Our political class has squabbled over the debt ceiling and
Feb 6, 2012 View in Crawl 4
miklkitFeb 6, 2012
Restoring Glass-Steagall, which was designed to prevent another Great Depression, would be a huge first step to getting our economic house in order.
Then how about breaking up those "too big to fail" corporations, starting with AIG?
blinker1315Feb 6, 2012Submitter
I'm not sold on Glass-Steagal, but I was amazed that AIG was allowed to survive. It was strange how Bear, Stearns and Lehman were allowed to rot, but other huge companies propped up. I still don't get that logic. Sure, allowing the big banks to fail might've caused far more turmoil, but looking back at '08 and '09 it seems like there was a pin the tail on the donkey approach happening, under both Bush and Obama.
cosmicsurferFeb 6, 2012
I suspect Bear, Stearns didn't have the correct "in:" I think there is more to the issue as to why Bear Stearns was allowed to go down but not Goldman Sachs - Goldman holds paper on the EU for one.
AIG is an easy one.
They are the largest insurer of home mortgages. That said, there isn't a major bank in the US who didn't use their push to keep it solvent. (as well as FNMA and Freddie mac)
Once they became covered, those banks could put themselves back into a position of power on all mortgages.
I negotiated short sales and foreclosure pay offs for 5 years.
I also worked with the re-sale market for 10 years. There was a change in 2007-2008 while AIG was going down. The banks were amenable to any negotiation as long as we could assure 60% pay off of the principal or 60% of the appraised value, they were ecstatic.
They would sell the foreclosed properties at dirt prices and let anyone buy and flip - that was the year that flips became so common. EVERYONE with a license and an investor bought and remodeled homes.
Why? AIG stopped paying on claims - 1st the sub-primes, then the B paper, and finally the A paper and Jumbos were cut off
Once AIG was backed by the taxpayer, the majors pushed their negotiations to 80-95% of the BPO value (Broker's Price Opinion). Unless they could get that, they would kill any chance of negotiation and take the property.
Why? AIG now could pay the balance of any loss.
In other words - you and I were paying.
That is exactly what kicked foreclosures into high gear BUT killed the flip market - Banks that held the properties could now foreclose without any loss and viewed the flipper as stealing from them so now refusing to sell to flippers.
The major banks were the reason for AIG bail out.
kaelyiestaFeb 6, 2012
Glass Steagall is merely a substitute for the correct solution, which it tries to mimic. A good analogy is to suppose there were laws that determined by mandate who were to be married. Glass Steagall would be akin to another law designed to make sure these spouses got along.
The repeal of the regulation Q portions of GS, the portions that blocked banks from owning other commercial entities, and the parts that prohibited the federal reserve from even more control over interest rates are certainly proof that corporations want them gone, to have even more fun with financial markets. However, it does not show that re-implementation is the optimal solution. Just as in the analogy above, it simply provides a bandaid fix to the real problem: the other controls that grant privilege and protection to these favored institutions. The speculative environment the stock market has become as a result of compulsory participation in the form of 401ks and the like. And not least, the bizzaro effects of monopoly over currency, inflation and control over interest rates.
Remove these controls and all the other nonsense that pushes society to behave so terribly, and these suited assh**es with cigars in fancy conference rooms in wall street who are causing us so much trouble turn into pathetic bitter old men who have no more power than those you would find in a retirement home. Glass Steagall simply covers up the real solution, and permits more subtle abuses as we become complacent, thinking we are safe.
kantspelwriteFeb 6, 2012
Rather go to bed with out dinner than to rise in debt.
--Benjamin Franklin
Closed AccountFeb 6, 2012
It's all about the elections now, while the rest of us burn our government is sitting there with its collective thumb up it's ass.
They cant fix it. They wont fix it, because too many people profit from it.
We will fix it ourselves soon enough. Given the state of things I would say someone is going to get killed in Oklahoma, and then the great Riots of 2012 will be on to show these assh**es we really arnt putting up with it anymore after physically and violently removing them from office.
I dont want that, but seems a logical conclusion unless something radically changes this year. I have no faith they will though, they dont give two s**ts about regular people.
ferretmanFeb 6, 2012
Interesting article. I don't agree with all of the conclusions or the way some of the points are framed, but a good article nonetheless.
barackalypseFeb 7, 2012
Sorry, but at the core of this whole crisis was bad debt. The investment banker derivatives and other trickery did not cause millions of people to default on their mortgages, it merely made things much worse than they did.
Predictably every solution Congress and the President have pursued involves throwing more Government (in the form of more regulation or more debt fueled spending) at a problem Government helped create (absurdly loose monetary policy that enabled speculation, social engineering to try and encourage more poor and minority home ownership, GSE's like Fannae Mae and Freddie Mac backing bad mortgages).
Of course some people have a vested interest in only blaming investment banks, but the truth is the fault lies with all parties involved: the Government, the bankers, the stupid homeowners taking out mortgages they couldn't pay back and speculators.Comment is buried, click here to see the rest.
ialiFeb 6, 2012
http://www.faithofmuslims.com/Valentines-Day-and-Islam.html