1eds

"The fact that incentives for greed were put in place, which Lewis outlines, is the fault of the government."

What??!

Yes, regulators need to understand reality and not cop out like Greenspan and Cox did. If that's what you mean, okay, but it sure looks like you are blaming the Feds for Wall Street internal practices.

November 16, 2008

2Noah Brier

@eds: Thanks for the comment. I meant the former ("regulators need to understand reality and not cop out like Greenspan and Cox did"). I'm not saying Wall Street behavior was okay, just saying it should have been recognized and regulations should have been put in place that at the very least didn't incentivize it.

November 16, 2008

3chrisff

wall street did what they are supposed to, move the money around trying to drive more efficiencies in the markets.

the root cause of it all was failed social policies by a select few that believed that home ownership was as panacea to poverty. A trillion dollars of demand (or poison) was created by negligent lending policies driven from gov't controlled Freddie and Fannie.

November 22, 2008

4R Bruce

What concerns me is the dollar amounts being thrown around in connection with credit default swaps and the like.Doesn't this mean that there does not exist enough funds from the beginning of time to the present to bail this mess out? 700 billion doesn't scratch the surface.

November 30, 2008

5JJ Cozzi

I too read the Lewis article with interest and thought it to be very poignant.

The issue of regulation to me is a no brainer and as far as that is concerned the government droppeed the ball and in the worst way.
Since reganomics the general view from the hill - and I might add globally as far as western countries are concerned has been that the best approach to the market is to leave it alone and let it self-regulate...cause you know generally we think these are good people who won't ever consider how the market might be manipulated...I hear you all groan now but actually this is the apporach government has taken. not just finanacial markets but telco's, energy, consumer credit all have been allowed to run riot and given relative carte blanche to work their patch as they like.

The other great catch cry has been "Caveat Emptor" - what this has meant is the consumer became the very low end of the totem and not the market driver many thinnk it is - they were the scape goat as things got bad - you know consumer credit debt blows out and the media blames mr. and mrs. middle america for being spendhrifts. In fact it is the credit companies who created overly easy credit with the out that if you signed that preapproved $10k increase but couldn't really pay for it then it is your fault...clever. When CC companies are made to reveal exactly how onerous their credit can be in a manner which fully forewarns the consumer then I think we can say caveat emptor - but they don't. Instead of 14 point bold type plain english for the terms and conditions we get 6 point legalese in a separate booklet which they know the consumer wont read!

Unfortunately when you create a situation where you have an inordinate amount of wealth concentrated in the hands of a relatively small group of human beings and then leave it to chance that these humans are going to do the right thing for the collective good - well you just gotta be joking if you think that works!

The really ugly side to the current crisis is how much of the mess was created by not so much greed but ridiculous economic ignorance -
over-sophisticated investment mechanisms which if not created to deceive were certainly dubious(Eisman himself points out how many within the IB industry don't even understand or can explain the produts they tout-an experience I have had myself); complete dillusion that markets or economies are an ever-expanding universe; and a reserve bank which with the best intent reduced the cost of capital post 9/11 for too long which resulted in just too much underpriced debt.

Makrets work best when there is a level of predictable stability -I don't profess to know what that level is but it is something we desparately need. The stability can only be maintained when everyone plays on the same field and knows the boundaries.

It is an independent umpire who has to set the rules of the game and not the players themselves. This will not hinder the game but it makes for safe play and all participants have the potential to win - and lose - as individuals or sectors...but hopfully without the domino effect we are witnessing now.

February 2, 2009

6common sense, inc.

Given that government policy correlates much more closely with Wall Street opinion than with, gasp!, public opinion, there's something extremely peculiar, borderline schizophrenic, about your claim that fault lies with the government. Fix the democratic deficit that exists in the U.S., and proper regulation will follow as a consequence.

More generally, I'd be interested in seeing more lively discussions of the public good of any for-profit insurance, banking, or health care institution, given, as we have seen, the great propensity for reflexive 'short-circuits' to occur. Compare, for instance, the run on the banks with the health insurance's investing in the cigarette industry (to put it reflexively -- safes are not safe, and health providers promote unhealthy industries).

All the old models are based on ever-expanding growth. The challenge is now to replace the old with a zero-growth or planned-growth model. Returning to the issue of the democratic deficit, we see clearly, as in the case of climate change, that public opinion proves much more reasonable that private, corporate opinion. If we're interested in ever having grandchildren, it's time to give them their proper (democratic) voice.

July 30, 2009