8 Comments

• Digg
• Bury

Just put things back the way they were before Reagan and the Bush's started to gut the laws that were put into place right after the great depression.

The US had absolutely NO major market issues until Reagan and the Bush's started removing the post-great depression regulations.

• Reply
• 1 Reply

• Digg
• Bury

The financial reform bill should have broken the banks up, reinstated the Glass Steagall Act and audited the Federal Reserve, anything less then that is a dog and pony show.

• Reply

• Digg
• Bury

Phhhllleeeeessseeee

* The biggest monsters in these disasters where Fannie Mae and Freddie Mac. Two institutions that had implicit government backing, now made explicit. These two alone are sucking more money than all other "two big to fail" combined can ever hope to make.
* They financed most of the loans with the artificially low interest rates provided by the FED, a semi private institution that has a legal monopoly on setting interest rates and printing money. See here to see how much money the FED has created out of thin air in the last decade http://mises.org/content/nofed/chart.aspx?series=TMS
* The banks were pushed to give bad loans by laws like the CRA. http://en.wikipedia.org/wiki/Community_Reinvestment_Act
* Government gave further incentives for people to buy houses they could not afford by making the interests tax free.
* Government gave incentives to flippers by not taxing capital gains on properties. Last two made houses seem artificially better investments than other assets.
* Alan F*cking Greenspan even praised the banks for the ARM mortgages and other crap loans. http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm
* Government created moral hazards by guaranteeing deposits. People no longer cares whether the banks are solvent before depositing money in them. If people were more vigilant, these banks would not have the funds to be so irresponsible.

Given all this, do you think further regulation would have helped? if anything, they would have used it to push even more people into buying houses.

Essentially, government poured alcohol in the punch, and then claim that the broken china is the result of lack of police. The worst part is that they have not stopped pouring the alcohol: interests are at record low, incentives are increasing, and now by bailing big banks out, we have effectively told everyone that if they break something, they don't have to pay for it.

The only real solution is to have separation of economy and state. To stop all these guarantees, distortions, and moral hazards. To let people know that if they are irresponsible with people's money, they will go bankrupt. And the most important of all, to STOP PRINTING MONEY that inflates bubble after bubble and destroys the currency. The regulation just passed does none of this, it simply sets the stage for another bubble in some other asset.

• Reply
• 1 Reply