Wall Street Occupation

[gammadust 12]

Anyone can - like Walker - Google and find some nugget of information to make whatever point it is that they are trying to make. The only reason no one calls Walker out is because everyone views him as the crazy uncle at your birthday party that is rambling on about an alien invasion he knows is coming because his friends on on his ham radio said so. You don't dare say anything because you fill sorry for him, while laughing inside.

That quote that Walker took is often, if not most of the time, misunderstood to mean private banks. Private banks is not what Thomas Jefferson despised. He despised a central bank, that which is ran by the government or is private organization (Federal Reserve) that is given powers to regulate or create monetary policy. Why? If you have a bank that can print money on whim then it will devalue your money, give money to prop up failed companies/governments, fund wars that are unnecessary and create rampant inflation while saying that a stimulus is needed to fix the economy and a etc... etc...

I see you keep reading people. Assuming as much...

Walker will talk for himself, but my interpretation of the quote and its timely use is refering exacly to the current Federal Reserve Bank, the "America's current position was feared by its founding fathers." part. If that wasn't what he meant, its verified by reality anyways...

This is not a blanket comment on private Banks in general.

That's why the consumer is rational.

Funny, how much you are into your own ramblings that you missed the sarcastic tone. I was stating what is obviously NOT the case. Large sections of the society nowadays have to choose between pharmaceutical products or food, go to a doctor or lunch that day...

People do move on... while they can. Current unemployment levels and trend will exacerbate these unwelcome consequences.

Don't put this in the same level as skipping a video game or anything of the kind. It is TOTALY different and at great society's expense.

"That is why the consumer is rational"??? Dear me.

Have a good night sir.

[walker 0]

Hi all

In reply to this portion of Hans Ludwig's post:

Anyone can - like Walker - Google and find some nugget of information to make whatever point it is that they are trying to make. The only reason no one calls Walker out is because everyone views him as the crazy uncle at your birthday party that is rambling on about an alien invasion he knows is coming because his friends on on his ham radio said so. You don't dare say anything because you fill sorry for him, while laughing inside...

Insults do not an argument make.

The quote is one I remembered from 20 years or so ago when I worked as a librarian.

As to the more worthy part of Hans Ludwig's post:

You are incorrect to ascribe the quoted words as being about a particular entity or its form of ownership, Jefferson is being far more blunt than that; he is agreeing with John Taylor describing the dangers of banking's power.

Power is held by many bodies, the danger is when it becomes unbalanced, as it is now.

That is why the American people are so angry.

To put it bluntly too much power in the control of a cartel. That this cartel also controls the FED is just an example of that power.

Kind regards walker

Edited October 11, 2011 by walker
damn predictive text

[Baff1 0]

There is a very small group of very large banks that controls the majority of transactions. While it's true that there are a lot of small, local banks, these banks are generally backed up by the huge financial institutions such as Citibank, JPMorgan Chase and Bank of America. The failure of just one of these banks has the potential for major economic damage, as the subprime mortgage crisis has showed us.

Small banks are not "backed up" by big banks.

They are in direct competition with.

The failure of a banking giant would indeed be a major damage to any economy it contributes towards.

The same of course is true of Boeing or Ford or an oil or steel industry. In order to compete on a global scale, some types of industry must necessarily be large enough to achieve economies of scale equal to it's rivals... or fail.

Can you even imagine how private companies could fund enormous engineering projects without giant sized banks?

Who can lend Boeing the money needed to develop a new airliner. Or a ship builder to build a new ship. Or a dam builder to build a new dam. how much money do you need to build a skyscraper?

I think Citibank is arguably the worlds biggest bank?

The question for you is a simple one.

Do you want the worlds biggest bank to be in your country or someone elses?

And of course the major damage caused by the collapse of a bank or two once every hundred years or so, does not even begin to counteract all the zillions of profits the sector has made in that 100 years. The amount of jobs it has provided and taxes it has paid. The industries it has supported.

So what if Citibank fails? It's not like you (as a nation) haven't made the most massive profit out of it already. It's not like the bailouts the government handed out even come close to it the tax it has taken from the banks it bailed out or the banking sector in general.

It's not like there is no real expectation for those banks bailed out to go on and make loads of money in the future. To have been sound investments.

You don't know when you are ahead.

The Subprime mortgages show us that banks must not be over-regulated in order to placate the far left.

The banks were forced to make those subprime loans through regulation. Left to their own devices they would not have done so.

The core problem is not the system the banks used to underwrite those subprime loans amongst each other, the real problem is that they were forced to make the bad loans in the first place.

So I agree with you the failure of a large bank would be a major damage to it's host economy.

I agree that the last thing a sane person wants is for one that size to fail.

The people in these protests, they want it to fail.

They are trying to kill it.

They are anti-social types. Self destructive. A damage to their host economies.

Edited October 11, 2011 by Baff1

[walker 0]

Hi all

As I said the problem is that the major banks are acting as a Cartel.

Kind Regards walker

[Baff1 0]

I heard that the CIA made a secret autonomous master bank.

Housed on the dark side of the moon it has become self-sentient and now controls all the other banks into a giant secret cartel of banks known only as "Conspiracy Bank".

[maddogx 13]

I heard that the CIA made a secret autonomous master bank.

Housed on the dark side of the moon it has become self-sentient and now controls all the other banks into a giant secret cartel of banks known only as "Conspiracy Bank".

I would never leave the house without my Conspiracy Card. True story.

[walker 0]

Hi all

Are you denying that major Banks are acting as a Cartel?

Kind Regards walker

[dmarkwick 261]

They are anti-social types. Self destructive. A damage to their host economies.

It seems to me that the host economies are dying anyway, and in any case, how does a massive banking system impact on any individual's lives really? Aside from massive money-grabs funded by our descendents that is. This is what people are demonstrating against, money in politics. They caused it, yet they (governments) assume they're the ones also to fix it, by bulldozing money into it.

Dunno. Maybe smaller economies is the way to go?

[st_dux 26]

"Not even remotely close"?

I give you two very significant examples of letting the market settle for itself. The first which removed existing preventive legislation and the second which prevented regulation to be instated.

Commercial+Financial mergers - Gramm-Leach-Bliley Act 1999 (nail in the coffin for Glass-Steagall and peoples savings)

under Securities and Exchange Commission inaction

Derivatives market deregulation - Commodity Futures Modernization Act 2000 (nail in the coffin for financial markets)

under Commondity Futures Trading Commission inaction

These are both hallmarks of Austrian School of economics. Supported by both "ends" of the American political spectrum. There is no point in denying evidence. It is also relevant to understand the causal effect of this as enabling the bust of 2007, and to a lesser extent the 2001 internet bust.

For every example you find of market de-regulation, you can find 100 more of increased regulation. Markets are regulated in more ways today than they ever have been before, and the economy is suffering because of it.

An argument could be made that the two regulations you mentioned here could have delayed the collapse of the housing bubble or at least broken our fall a little bit. But this is like jumping off of a cliff and thinking, "gee, if only I had a parachute." The real problem was jumping off the cliff in the first place, and that jump was the direct result of government intervention compelling people to take out loans for houses they couldn't afford. If we hadn't jumped off the proverbial cliff, we wouldn't need the proverbial parachute, and I would argue that the housing bubble would have burst with or without these regulations -- it might have just happened a little later is all.

Current Capitalist System is a Austrian School of Economics wet dream, and everyone else pratical bloody nightmare.

It really isn't. The Austrian School is still considered heterodox, and Austrian economists are some of the most vocal critics of contemporary economic policies that you will find anywhere. They would agree with you 100% that the bank bailouts were both illegal and wrong.

Of course they are! They favour monopolistic practices because their in a position to benefit from it at the expense of everyone else. Some areas of the economy should simply be barred from private control. Hold this tought for a sec even if you do not agree with it...

You don't have to agree with their position, but it is unfair to say that it is derived from a selfish desire for self-advancement. The Austrian objection to competition laws has a strong theoretical basis, and they honestly believe that competition laws do more to hurt the consumer than help. It's not some greedy conspiracy to take over the world.

The Subprime mortgages show us that banks must not be over-regulated in order to placate the far left.

The banks were forced to make those subprime loans through regulation. Left to their own devices they would not have done so.

The core problem is not the system the banks used to underwrite those subprime loans amongst each other, the real problem is that they were forced to make the bad loans in the first place.

QFT; this is exactly right. It is government intervention that caused the problem in the first place; more government intervention in the form of regulations is not the way to solve it.

[weaponsfree 46]

QFT; this is exactly right. It is government intervention that caused the problem in the first place; more government intervention in the form of regulations is not the way to solve it.

As far as I can tell, the CDO's that were the main force in inflating the real estate bubble were wonderful money makers for the banks. Using mortgage debt to create profitable financial products was something the banks did not need to be forced into. They dived into sub-prime because the money had to keep rolling after "safer" debt had gone through the grinder. The smarter banks did bail out of the housing sector towards the end, as some of them knew the bubble would obviously pop. Government was not telling these banks to package debt in such a way, and did not tell them to expose themselves to such a degree to the housing bubble.

Businesses make idiot decisions all the time, from truck stop diners to the biggest banks in the world. The difference is that our savings and retirements aren't dependent on a truck stop's performance. Hence it's understandable that the people's concerns (expressed through elected government) should rightly be felt by powerful non-elected entities such as banks.

There is a world of difference between telling a truck stop diner to only serve hamburgers of a certain shape (idiotic), and setting standards for banks (reasonable if you care about grandma's pension or you know... the economy).

[st_dux 26]

As far as I can tell, the CDO's that were the main force in inflating the real estate bubble were wonderful money makers for the banks. Using mortgage debt to create profitable financial products was something the banks did not need to be forced into.

No doubt, but this is missing the forest for the trees. The bad mortgages that these CDOs were made out of would never have existed in a free market. The money simply wouldn't have been loaned without the Fed keeping interest rates artificially low and the legislature taking a myriad of legal measures to encourage home-ownership among poorer people so that everyone could live the new "American Dream." The securitization and subsequent leveraging of this bad debt compounded the problem to catastrophic proportions, but it was not the primary cause; rather, it was the most severe result of the real cause, government intervention. Events like this demonstrate why it's dangerous to allow the government to "guide the market"; it creates market distortions that may seem small at first but eventually can lead to serious problems.

Edited October 11, 2011 by ST_Dux

[gammadust 12]

For every example you find of market de-regulation, you can find 100 more of increased regulation. Markets are regulated in more ways today than they ever have been before, and the economy is suffering because of it.

An argument could be made that the two regulations you mentioned here could have delayed the collapse of the housing bubble or at least broken our fall a little bit. But this is like jumping off of a cliff and thinking, "gee, if only I had a parachute." The real problem was jumping off the cliff in the first place, and that jump was the direct result of government intervention compelling people to take out loans for houses they couldn't afford. If we hadn't jumped off the proverbial cliff, we wouldn't need the proverbial parachute, and I would argue that the housing bubble would have burst with or without these regulations -- it might have just happened a little later is all.

It really isn't. The Austrian School is still considered heterodox, and Austrian economists are some of the most vocal critics of contemporary economic policies that you will find anywhere. They would agree with you 100% that the bank bailouts were both illegal and wrong.

Is the glass half empty or half full? For deregulation defenders the market is always seen as too much regulated. Of course others think otherwise. "Too regulated" is not an objective way of measuring. We have to take into account two sides at least, regulatory inheritance and opening of new markets (or previsouly closed to private enterprise). As markets develop into new areas, by inherited standards of required regulation, naturaly there would be new regulations introduced, therefore increasing the perceived amount of regulations, but "free market" apologists (greatly influenced by Autrian School) they both vision new markets to be opened without any regulations, destabilizing the inherited economic equilibrium, but also defend the existing markets regulations to be retired, further exacerbating the destabilization.

Doesn't really matter how Austrians shout and scream criticism about economic policy being introduced. They are getting it exacly they're way, just not as comprehensive as they would appreciate. Current economic policy is almost their own definition of Economy if we take into account theoretical and applied heritage of 20th century in Capitalist societies. It is also very significant how influencial economic schools have been by these "free market" theories, even Nouriel Roubini considered a moderate (and which also predicted the 2007 bust) looks up to those theories with almost no cepticism.

You don't have to agree with their position, but it is unfair to say that it is derived from a selfish desire for self-advancement. The Austrian objection to competition laws has a strong theoretical basis, and they honestly believe that competition laws do more to hurt the consumer than help. It's not some greedy conspiracy to take over the world.

Of course they might "honestly believe" in the benefit of deregulated competition. The problem is that reality is showing how wrong that theory presents itself when put to practice. Unless we accept that Economy is going fine and dandy looking at these huge corporations profits and at the same time negleting the rest of the society grievances.

The Subprime mortgages show us that banks must not be over-regulated in order to placate the far left.

The banks were forced to make those subprime loans through regulation. Left to their own devices they would not have done so.

The core problem is not the system the banks used to underwrite those subprime loans amongst each other, the real problem is that they were forced to make the bad loans in the first place.

QFT; this is exactly right. It is government intervention that caused the problem in the first place; more government intervention in the form of regulations is not the way to solve it.

Banks were not "forced" to make bad loans, they profited from it hugely through high interested rates characteristic of risky lending, and since they are driven by profits they went all the way to hell with it bringing the rest of the economy along.

-------------------------------------------------------------------------

I am pulling up some slides and accompaining legends which demonstrate my previous points more objectively: (emphasis and some comments are mine)

In december 2000 Congress passed The Commodity Futures Modernization Act.

Written with a help of financial industry lobbyists it banned the regulation of derivatives.

By the time George W. Bush took office in 2001 - the US financial sector was vastly more profitable,

concentrated and powerfull then ever before. Dominating this industry were five Investment Banks

(Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, Bear Stearns),

two Financial Conglomerates (Citigroup, JP Morgan), three Securities Insurance companies

(AIG, MBIA, AMBAC) and three Rating Agencies (Moody's, Standard & Poor's, Fitch).

And linking them all together was a securitization food chain, a new system which connected

trillion of dollars, mortgages and other loans with investors all over the world.

"30 years ago if you wanted get a loan for a home, the person lending you the money expected

you to pay him or her back, you got a loan from a lender who wanted you to pay him back,

we've since developed securitization, thereby people who made the loan are no longer at

risk if there is a failure to repay."

Rep. Barney Frank (D-MA) - Chairman House Financial Services Committee

In old system when an home owner paid their mortgage every month the money went to

their local lender. And since mortgages took decades to repay lenders were careful.

In the new system lenders sold the mortgages to investment banks.

The investment banks combined thousands of mortgages and other loans including car loans,

student loans and credit card debt to create complex derivatives called collateralized debt

obligation, or CDO the investment banks then sold the CDO's to investors.

Now when home owners paid their mortgages the money went to investors

all over the world. (A percentage of this money infact had no REAL wealth counterpart)

The investment banks paid rating agencies to evaluate the CDO's and many of them were

given a AAA rating which is highest possible investment rate.

This made CDO's popular with retirement funds which can only purchase highly rated securities.

(An obvious preentive regulation requirement, which was circumvented with

the AAA rating leading to pensionists REAL wealth being allocated for risky investments,

and later evaporate when the Bubble got busted)

This system was a ticking time bomb. Lenders didn't care anymore about whether a borrower

can repay. So they started making riskier loans.

The investment banks didn't care either. The more CDO's they sold the higher their profits

and the rating agencies which were paid by the investment banks had no liability if their ratings

of CDO's proved wrong. (lunatic of a system enough?)

The Investment Banks actually prefered subprime loans, because they carried higher interest

rates. This led to a massive increase in predatory lending. Borrowers were needlessly placed

in expensive subprime loans, and many loans were given to people who could not repay them.

"Last time we had a housing bubble was in the late 80's. In that case the increasing home praises

were relatively minor.

That housing bubble led to relatively severe recession.

From 1996 until 2006 real home praises effectively doubled."

Nouriel Roubini - NYU Business School

On Wall Street annual cash bonuses spiked, traders and CEO's became enormously wealthy

during the bubble. Lehman Brothers was the top underwriter of subprime lending.

And their CEO Richard Fuld took home 485 million dollars. On Wall Street this housing and credit

bubble was leading to hundreds of billions of dollars of profits. By 2006 about 40% of all profits

of S&P 500 firms was coming from financial institutions.

All this enabled by a Deregulation Act. The Commodity Futures Modernization Act. No wonder,

even if insufficiently aware of the complexity of all this, the Occuppy Wall Street movement

turns to Wall Street as a symbol of their grievances. They don't want economy to fail,

they just don't want economy to turn against them specially if they weren't in the slightest

responsible for its already ongoing failure.

Occupy Wall Street movement, though small, but growing, is representative of ALL which are taking

unbarable losses in the current crisis. And I would extend that representability far outside the

US borders.

Edited October 11, 2011 by gammadust

[Minutemen 10]

Current Capitalist System is a Austrian School of Economics wet dream,

This is realy the dumbest thing i ever heard in this thread, and there were a lot of dumb things writen.

There is a monopoly on Money. What has that to do with "Capitalism"?

There is not even "Capital" in this System, there are just debts. Nearly everything is created by credit!

If you looking for hallmarks, look at the central banks, owned by privat banking families. The centralization of credit and printing money is a hallmark of communism, so how could that fit with the austrian school?

[st_dux 26]

@gammadust:

Nice post; those slides are very informative, although I don't believe that anyone is really arguing against the fact that the securitization process was largely responsible for the magnitude of the housing bubble or that the ratings agencies were utterly wrong in their appraisal of many of those mortgage-backed securities. The question is what put this cycle into motion, and it is my contention that it was over-regulation of the market, mostly in the form of artificially low interest rates and legal incentives for low-income families to take out mortgages, that is the culprit, not under-regulation.

Of course they might "honestly believe" in the benefit of deregulated competition. The problem is that reality is showing how wrong that theory presents itself when put to practice. Unless we accept that Economy is going fine and dandy looking at these huge corporations profits and at the same time negleting the rest of the society grievances.

Where is reality showing how wrong the Austrians are with regard to competition laws? Presently, monopolies are broken up by law basically everywhere, so there are no examples to be found. The last time natural monopolies were allowed to form in the United States was during the Gilded Age, when economic growth was at an all-time high and the standard of living was rising rapidly all over the country. Companies like Standard Oil were able to beat out all competition simply because they offered the same product at a lower price, and prices continued to decline up until the passing of the Sherman Antitrust Act and the subsequent breaking up of these companies. The Neoclassical theory of deadweight loss and increased prices due to monopoly simply never happened.

[weaponsfree 46]

No doubt, but this is missing the forest for the trees.

When I look at the forest, I don't see a major reason for allowing markets alone to dictate where economic power will rest, and how we divide labour.

Events like this demonstrate why it's dangerous to allow the government to "guide the market"; it creates market distortions that may seem small at first but eventually can lead to serious problems.

Market distortions come from many different places. Hurricanes can force a change in how business is done in order to adjust to a new reality. New scientific discoveries change the market and companies have to adjust. When it works, government represents the people's will, and can and should be a force that influences the market (child labour laws is a perfect example). It is up to companies to adjust to it in the same way they have to adjust to the new technologies or natural disasters.

Look at the MP3 vs Record Companies situation a few years back. MP3's (itself developed in the non-market academic world) came and "intervened" in the music industry. Record Companies had built their business around CD's and albums, it worked, it was profitable, no problems. But here they were aghast at the pirating potential of MP3's. Most refused to adapt, and declared war on their customers base through ridiculous lawsuits. However those that adapted succeeded and are now viable in the new market environment (think iTunes).

Why is it acceptable that the natural world and technology can intervene in the market, making once profitable businesses flounder, but the will of the people through government is an unacceptable force for modifying the market?

[mrcash2009 0]

qWJ6Ci9cdEQ

One tag line for this is good, "Your ism is irrelevant" :)

A good message for this thread in places.

Edited October 11, 2011 by mrcash2009

[Hans Ludwig 0]

Market distortions come from many different places. Hurricanes can force a change in how business is done in order to adjust to a new reality. New scientific discoveries change the market and companies have to adjust. When it works, government represents the people's will, and can and should be a force that influences the market (child labour laws is a perfect example). It is up to companies to adjust to it in the same way they have to adjust to the new technologies or natural disasters.

You could have simply just said micro/macroeconomics.

[st_dux 26]

Why is it acceptable that the natural world and technology can intervene in the market, making once profitable businesses flounder, but the will of the people through government is an unacceptable force for modifying the market?

The reason is that government action is tantamount to violent coercion. You must do what the government says or men with guns will be sent to your home, and they will take you away to lock you in a cage. This is in direct opposition to the concept of individual liberty upon which the existence of contemporary Western governments is usually justified.

Natural occurrences, on the other hand, do not involve any such implicit threats of violence. Shifts in the market that result naturally merely reflect an amalgamation of changes in individual preferences made in the light of new information.

Accepting the validity of market regulations beyond the maintenance of basic property rights (e.g., laws against theft or fraud) is the same thing as accepting the validity of the use of force to take from peaceful people what they would not have otherwise given up voluntarily. In the case of democracy, the rationale is that it's okay because at least 51% of the people agree with it; the preferences of the remaining 49% are thereby rendered immaterial and without any value whatsoever.

The following thought experiment might be illuminating:

PGMQZEIXBMs

[nettrucker 142]

Hi

here's a nice article about who are the ones in the background of wall street

As Americans begin pouring into the streets with dissatisfaction, there seems to be some confusion as to who the source of their problem is. That 'who' is a corporate-financier oligarchy that has been destroying America

Contents

Introduction

1. The Federal Reserve Directors

2. The Group of Thirty

3. President Obama's Cabinet, Past & Present

4. America's Unelected Policy Makers & Their Corporate Sponsors

5. Solutions

Here's the link to the full article

http://www.globalresearch.ca/index.php?context=va&aid=27000

have a good read.

Regards

[Baff1 0]

Banks were not "forced" to make bad loans, they profited from it hugely through high interested rates characteristic of risky lending, and since they are driven by profits they went all the way to hell with it bringing the rest of the economy along.

The banks were forced. It was legal requirement introduced by Clinton.

They either made Sub Prime loans or they got government penalities for not doing so.

And they didn't "profit through high intrest rates", they collapsed.

The Community Reinvestment Act of 1977, whose provisions were strengthened during the Clinton administration, is a federal law that MANDATES lenders to offer credit throughout their entire market and discourages them from restricting their credit services to high-income markets, a practice known as redlining. In other words, the Community Reinvestment Act encourages banks and thrifts to make loans to riskier customers.

They used this in the Clinton era to get rid of social housing. They brought down government spending by offloading welfare projects onto the private sector.

Here in the U.K. Blair copied this system, he called them PFI's. Private finance initiatives.

---------- Post added at 03:38 PM ---------- Previous post was at 03:18 PM ----------

It seems to me that the host economies are dying anyway, and in any case, how does a massive banking system impact on any individual's lives really?

A massive banking sytem impacts this individuals life by paying his pension.

That entire massive banking system is comprised of the savings of individuals.

It may seem like some big impersonal thing to you, but to hundreds of millions of us it is not. It is an industry we personally and directly contribute to, that's success our lives, incomes and retirements are dependant on.

Edited October 12, 2011 by Baff1

[weaponsfree 46]

Accepting the validity of market regulations beyond the maintenance of basic property rights (e.g., laws against theft or fraud) is the same thing as accepting the validity of the use of force to take from peaceful people what they would not have otherwise given up voluntarily.

Refusing to exist under a social contract (which may include putting you in a cage if you don't adhere to it), while demanding protection of basic property rights will unavoidably lead to violent upheaval. Just as it would if you focused all power in the hands of government. The Guilded Age led to unions for a reason.

The drive towards the concentration of power and wealth is a part of the human genome, it is perfectly predictable across all cultures: I must concentrate as much power as I can, through whatever means, and I must hold on to it at all costs. The system that "George" proposes is one where the state is a private security firm for those born into wealth, the ambitious, the predatory and the intelligent people in society. The rest will face the tyranny of being dependent on those people.

So yes, I accept the validity of the use of force to take from peaceful people what they would not otherwise have given up voluntarily. An inclusive social contract that addresses the problems of society as a whole is possible, and minimizes violence of concentrated power. The rich, the ambitious, the predatory and the intelligent will continue to do great things for society, even if they have to pay bills, they just shouldn't run the show.

[gammadust 12]

The banks were forced. It was legal requirement introduced by Clinton.

They either made Sub Prime loans or they got government penalities for not doing so.

And they didn't "profit through high intrest rates", they collapsed.

They used this in the Clinton era to get rid of social housing. They brought down government spending by offloading welfare projects onto the private sector.

Here in the U.K. Blair copied this system, he called them PFI's. Private finance initiatives.

I was mentioning investment banks, not your local lender. Sory if I cut one corner there and mislead you.

Since I suspect there might be some truth to that still, I would appreciate a source. What was the legislation in question? I will search for it anyways but some pointers would be nice. This is relevant to measure to what level that eventual requirement was imposed and its order of effect on the crisis.

Anyways, the loan banks, given the new regulation* were risk free through the selling of CDOs, getting rid of the risk to investment banks which by their turn got rid of it through CDSs (Credit Default Swaps) leaving the risk to investor funds and insurance. This was the scheme. It is important to make the destinction between all roles of each investor type if we're going to get deeper. But the general point is they weren't forced to make bad decisions, though in the end of the day that is exacly what they did.

Why woudn't they embrace the subprime market (even if enforced)? The subprime lending increased 20 fold to 600B/year from 3B/year in less than a decade.

Countrywide Corporate (lending bank) increased profits 5 fold in 4 years, from ~0.5B in 2000 to ~2.5B by 2006. They did profited while it lasted.

2008 bankrupt Lehman Brothers is an investment bank, not a bank which you turn to get a mortgage. They do provide the directives (with the money attached) for local lenders to ease credit criteria. If this was legaly enforced or not will just tell how deeply the government was involved in the scheme.

Of course they collapsed in the end, when the REAL wealth started to strike out the speculation from their balance sheets. Until then CEOs made their way (along with their "golden parachites") with a Jail Free card provided by the deregulation I mentioned.

*New Regulation which deregulated the market, see how deceiving this all is? There exists regulation to deregulate, just the concept is pure lunacy.

A massive banking sytem impacts this individuals life by paying his pension.

That entire massive banking system is comprised of the savings of individuals.

It may seem like some big impersonal thing to you, but to hundreds of millions of us it is not. It is an industry we personally and directly contribute to, that's success our lives, incomes and retirements are dependant on.

Being so, howcome we accept for them to leverage the system to ratios of the order of 30:1, why haven't we, as shareholders/investors of those banks, a voice in the decisions which are made at the high level which put our pensions and savings to incomprehensible risk? Just because the REAL money (with REAL collateral) I have there is a fraction of those of the main investors?

If just 3% of the bank perceived value evaporates in a bust ALL the wealth is put at risk when it collapses as a consequence. I will loose as much (all that I had there) as a big depositor (all that he had there). Unless the government intervenes (it is indeed trending) making the big depositor a much bigger burden on the taxpayer. This makes the scheme worthwhile and prone to fraudulent management decisions of which smaller investors have no influence.

Even if the issue here is of the private domain, can you see the injustice this leads to, that of: One Dollar One Vote?

EDIT: Either the banks are left to their demise, by their responsabilty in bad decisions OR government, with social concern in mind, bails the bank out. Having it both ways is the root of many injustices. In the first cenario one at least may inpect a private bank's historical decisions and act accordingly (under effective competition) and in the second cenario the Bank is a public service where only public authorities management.

Edited October 12, 2011 by gammadust

[Baff1 0]

I was mentioning investment banks, not your local lender. Sory if I cut one corner there and mislead you.

Since I suspect there might be some truth to that still, I would appreciate a source. What was the legislation in question? I will search for it anyways but some pointers would be nice. This is relevant to measure to what level that eventual requirement was imposed and its order of effect on the crisis.

Anyways, the loan banks, given the new regulation* were risk free through the selling of CDOs, getting rid of the risk to investment banks which by their turn got rid of it through CDSs (Credit Default Swaps) leaving the risk to investor funds and insurance. This was the scheme. It is important to make the destinction between all roles of each investor type if we're going to get deeper. But the general point is they weren't forced to make bad decisions, though in the end of the day that is exacly what they did.

Why woudn't they embrace the subprime market (even if enforced)? The subprime lending increased 20 fold to 600B/year from 3B/year in less than a decade.t.[/b]

Banks like making profits.

They didn't embrace the sub prime market because the sub prime market is too high risk.

They were forced.

It's no good you paying me back 10% a year or even 100% a year, if you can reasonably be expected to default before I get my investment back.

That's not profits from high intrests rates, that is a massive loss.

Banks won't do it.

They have to be forced.

My local lender, Northern Rock was wiped out in the America Sub Prime market.

Investment banks and High Street Banks are not seperated here.

All my local lenders in this country either operate in the U.S. or had lent money to banks that did.

In fact most banks around the world had. America has one of the biggest banking sectors world wide.

Credit default swaps is not the reason the banks collapsed. It is the reason banks on the other side of the world collapsed instead.

Bad debt is the reason the banks collapsed. Who sold who which bad debt and who was left holding those bad debts when the music stopped doesn't change that it was the American Sub Prime debts that were the bad debts in question.

Lehman brothers doesn't sell mortgages, but it does lend money to banks that do. If they can't repay them, Lehmans makes a loss. Unless it has sold those mortgages to another bank instead. In which case that other bank will take the same loss.

I previously posted you the name of the relavent law. My mouse finger is old and arthritic, so I'm sure you won't mind sourcing your own research this time.

---------- Post added at 05:40 PM ---------- Previous post was at 05:29 PM ----------

Being so, howcome we accept for them to leverage the system to ratios of the order of 30:1, why haven't we, as shareholders/investors of those banks, a voice in the decisions which are made at the high level which put our pensions and savings to incomprehensible risk? Just because the REAL money (with REAL collateral) I have there is a fraction of those of the main investors?

We do have a voice. I voted on any number of decisions the banks I am invested make. Particularly during the crisis.

But yes, my vote is not the ruling vote, it is equal in voice to the amount of shares I own.

I find the public companies I am invested in to be vastly more democratically accountable to me than say the country I live in, or the country you live in.

---------- Post added at 05:48 PM ---------- Previous post was at 05:40 PM ----------

If just 3% of the bank perceived value evaporates in a bust ALL the wealth is put at risk when it collapses as a consequence. I will loose as much (all that I had there) as a big depositor (all that he had there). Unless the government intervenes (it is indeed trending) making the big depositor a much bigger burden on the taxpayer. This makes the scheme worthwhile and prone to fraudulent management decisions of which smaller investors have no influence

What are you talking about?

The banks wrote down 30% of their percieved value worldwide during the crisis.

3% ROFLMAO.

Try 60% and you will be closer to how much I expect to have lost before this debt crisis ends.

Very very few banks have collapsed wiping out all the investors savings completely.

And in the cases where the government did intervene, they completely destroyed working banks in the attempts to attach them to failing banks and hence avoid paying the bailouts themselves.

Don't for a minute think that banks were wanting bailouts form governments, they weren't they wanted them from other banks. Governments add to many pre-conditions. Too many regulations and petty vengeful (but crowd pleasing) punishments.

Edited October 12, 2011 by Baff1

[st_dux 26]

Refusing to exist under a social contract (which may include putting you in a cage if you don't adhere to it), while demanding protection of basic property rights will unavoidably lead to violent upheaval.

It's not a matter of refusing a social contract outright -- there would be no property rights without some sort of contract -- it's about the terms of the contract. Why can't the contract simply be the respect of property rights, i.e., the non-aggression principle? This seems like the ideal contract to me.

The drive towards the concentration of power and wealth is a part of the human genome, it is perfectly predictable across all cultures: I must concentrate as much power as I can, through whatever means, and I must hold on to it at all costs. The system that "George" proposes is one where the state is a private security firm for those born into wealth, the ambitious, the predatory and the intelligent people in society. The rest will face the tyranny of being dependent on those people.

I would take it a step further. I would say the drive toward the maximization of power is the fundamental essence of life itself, not merely human life. This is why the weak and the unlucky are in favor of the of the subversion of liberty and forceful redistribution of wealth: They could not attain it otherwise. The problem with this, in my view, is that it necessarily requires that we hold back (or outright destroy) the most excellent (meant literally, as in someone who excels) members of our society. The rationale seems to be that this is a worthwhile sacrifice in the quest for equality and the common good; however, I put it to you that historically that which has been common has never been good -- the very idea of "good" is derived from a quality that is considered above-average. The concept of "common good" is thus self-defeating; the best we can hope for in a system in which equality is considered to be the ultimate goal is utter mediocrity.

So yes, I accept the validity of the use of force to take from peaceful people what they would not otherwise have given up voluntarily.

Well hey, kudos for at least being intellectually honest.

---------- Post added at 12:21 PM ---------- Previous post was at 11:59 AM ----------

But the general point is they weren't forced to make bad decisions, though in the end of the day that is exacly what they did.

But from where does the incentive to make bad decisions originate? Wall Street played fast and loose with bad debt, no doubt, but where did the bad debt come from, and why wasn't it treated as such? The government only needs to force the hand of the people at the very beginning of the cycle: the original lenders and borrowers. This sets the rest of the catastrophe in motion whether or not any decisions being made higher up the chain are being forced. The damage had already been done well before the crash began.

[froggyluv 2130]

I would take it a step further. I would say the drive toward the maximization of power is the fundamental essence of life itself, not merely human life

Really? Fundemtal essence of life? I don't seek maximum power in that context -but rather peaceful equilibrium in as many aspects of life as possible. Get rid of laws, rules, constraints and regulations -and the most viscious man in town will murder his rivals -thereby maximizing his power.

This is why the weak and the unlucky are in favor of the of the subversion of liberty and forceful redistribution of wealth: They could not attain it otherwise.

The weak -lol! Maybe different people have different primary drives in life -also wishing for the greater good of their society over personal net worth -a wild concept I know. When it is fact that the wealthy are getting richer and widening gap grows between that "elite" and the rest -asking for more in taxes ain't gonna destroy the rich -it may irk them tho.

The problem with this, in my view, is that it necessarily requires that we hold back (or outright destroy) the most excellent (meant literally, as in someone who excels) members of our society.

Those who excel in their fields don't always have monetary success as their primary motivating force and those with huge coffers are't always the best at what they do nor the best quality people.

I have a 300 person client base -25% of those are what one would call "Super Rich". Of that 25%, 3 are CEO's of powerful companies and what I would consider 'Excelling in their fields". The rest are trustafarians and rich divorcees of which I know groundskeepers and janitors with better work ethic and fortitude. Oh and yes, the 25% all keep chanting the "Redistribution of wealth" mantra as well, even after Obama extended Bush's tax cuts. A puzzling bunch indeed.

Edited October 12, 2011 by froggyluv