Stocks hit trifecta; will you hail Obama?

cawacko said:
Technically Glass Steagal was only partially repealed but that aside what about its repeal do you think caused the crisis?
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Allowing the banking industry to operate as a casino.
Allowing predatory lenders to have a free hand in producing shoddy loans.
Selling and investing in that debt as though it were a commodity.
 
Legionthecat said:
Allowing the banking industry to operate as a casino.
Allowing predatory lenders to have a free hand in producing shoddy loans.
Selling and investing in that debt as though it were a commodity.
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How did the glass Steagal repeal allow that to happen? How did it prevent it prior?
 
cawacko said:
How did the glass Steagal repeal allow that to happen? How did it prevent it prior?
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I ask you these questions because I believe you're wrong. Greenspan wanted a soft landing from the tech bubble he helped fuel so cut interest rates way too low. Cheap money fueled the fire that was the housing bubble.
 
cawacko said:
I ask you these questions because I believe you're wrong. Greenspan wanted a soft landing from the tech bubble he helped fuel so cut interest rates way too low. Cheap money fueled the fire that was the housing bubble.
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There were many factors in many sectors world wide that contributed to the 2008 economic meltdown. It was somewhat of a "perfect storm". Anyone of these factors could have lessened the impact had they been mitigated in time, but the reckless repeal of Glass-Steagall can not be ignored as a primary cause.
Prohibiting commercial banks from engaging in the investment business served us well for almost seventy years. It is not a coincidence that once they were allowed to, we seem to have gone back to the the boom bust cycles of the early 20th century before it was passed.
 
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Legionthecat said:
There were many factors in many sectors world wide that contributed to the 2008 economic meltdown. It was somewhat of a "perfect storm". Anyone of these factors could have lessened the impact had they been mitigated in time, but the reckless repeal of Glass-Steagall can not be ignored as a primary cause.
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Which banks did the things you listed that weren't allowed to do it before? Was Bear Sterns not allowed to over leverage itself prior?

It's interesting, was watching a video on the Fed last night and they clearly shot down the "perfect storm" idea.
 
cawacko said:
Which banks did the things you listed that weren't allowed to do it before? Was Bear Sterns not allowed to over leverage itself prior?

It's interesting, was watching a video on the Fed last night and they clearly shot down the "perfect storm" idea.
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You baffle me, I usually find that you are sane and rational but when it comes to the causes of the 2008 meltdown you seem to have lost the plot!

The oldest propaganda technique is to repeat a lie emphatically and often until it is taken for the truth. Something like this is going on now with regard to banks and the financial crisis. The big bank boosters and analysts who should know better are repeating the falsehood that repeal of Glass-Steagall had nothing to do with the Panic of 2008. In fact, the financial crisis might not have happened at all but for the 1999 repeal of the Glass-Steagall law that separated commercial and investment banking for seven decades. If there is any hope of avoiding another meltdown, it's critical to understand why Glass-Steagall repeal helped to cause the crisis. Without a return to something like Glass-Steagall, another greater catastrophe is just a matter of time.

History is a good place to begin. After the Depression of 1920-21, the United States embarked on a period of economic prosperity known as the Roaring Twenties. It was a time of innovation, especially in consumer goods such as automobiles, radio, and refrigeration. Along with these goods came new forms of consumer credit and bank expansion. National City Bank (forerunner of today's Citibank) and Chase Bank opened offices to sell securities side-by-side with traditional banking products like deposits and loans.

As the decade progressed, the stock market boomed and eventually reached bubble territory. Along with the bubble came market manipulation in the form of organized pools that would ramp up the price of stocks and dump them on unsuspecting suckers just before the stock collapsed. Banks joined in by offering stocks of holding companies that were leveraged pyramid schemes and other securities backed by dubious assets.

In 1929, the music stopped, the stock market crashed and the Great Depression began. It took eight years from the start of the boom to the bust. Subsequent investigations revealed the extent of the fraud that preceded the crash. In 1933, Congress passed Glass-Steagall in response to the abuses. Banks would be allowed to take deposits and make loans. Brokers would be allowed to underwrite and sell securities. But no firm could do both due to conflicts of interest and risks to insured deposits. From 1933 to 1999, there were very few large bank failures and no financial panics comparable to the Panic of 2008. The law worked exactly as intended.

In 1999, Democrats led by President Bill Clinton and Republicans led by Sen. Phil Gramm joined forces to repeal Glass-Steagall at the behest of the big banks. What happened over the next eight years was an almost exact replay of the Roaring Twenties. Once again, banks originated fraudulent loans and once again they sold them to their customers in the form of securities. The bubble peaked in 2007 and collapsed in 2008. The hard-earned knowledge of 1933 had been lost in the arrogance of 1999.

The bank supporters' attacks on this clear-as-a-bell narrative deserve a hearing to show how flimsy they are. One bank supporter says you cannot blame banks for fraudulent loan originations because that was done by unscrupulous mortgage brokers. This is nonsense. The brokers would not have been able to fund the loans in the first place if the banks had not been buying their production.

Another apologist says the fact that no big banks failed in the crisis proves they were not the cause of the problem. This is also ludicrous. The reason the big banks did not fail was because they were bailed out by the government. Clearly the banks would have failed but for the bailouts. Bank balance sheets were neck-deep in liar loans and underwater home equity lines of credit. The fact that banks did not fail proves nothing except that they were too big to fail.

Yet another big bank spokesman says that nonbanks such as Lehman and Bear Stearns were more to blame for the crisis. This ignores the fact that nonbanks get their funding from banks in the form of mortgages, repurchase agreements, and lines of credit. Without the big banks providing easy credit on bad collateral like structured products, the nonbanks would not have been able to leverage themselves.

It is true that the financial crisis has enough blame to go around. Borrowers were reckless, brokers were greedy, rating agencies were negligent, customers were naïve, and government encouraged the fiasco with unrealistic housing goals and unlimited lines of credit at Fannie Mae and Freddie Mac.

Yet, the fact that there were so many parties to blame should not be used to deflect blame from the most responsible parties of all—the big banks. Without the banks providing financing to the mortgage brokers and Wall Street while underwriting their own issues of toxic securities, the entire pyramid scheme would never have got off the ground.

It was Glass-Steagall that prevented the banks from using insured depositories to underwrite private securities and dump them on their own customers. This ability along with financing provided to all the other players was what kept the bubble-machine going for so long.

Now, when memories are fresh, is the time to reinstate Glass-Steagall to prevent a third cycle of fraud on customers. Without the separation of banking and underwriting, it's just a matter of time before banks repeat their well-honed practice of originating garbage loans and stuffing them down customers' throats. Congress had the answer in 1933. Congress lost its way in 1999. Now is the chance to get back to the garden.
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http://www.usnews.com/opinion/blogs...of-glass-steagall-caused-the-financial-crisis
 
Milagro said:
You baffle me, I usually find that you are sane and rational but when it comes to the causes of the 2008 meltdown you seem to have lost the plot!


http://www.usnews.com/opinion/blogs...of-glass-steagall-caused-the-financial-crisis
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This is one man's opinion above. I've seen no one declare him the defined expert on the subject. And for whatever reason he chooses to leave the main driver of both the '20's boom/bust and the same more recently and that's the Fed and it's easy money policies. That's what allowed the massive speculation during the '20's and is what created the housing bubble trying to recover from the dot com bust.

You would know this better than all of us probably in that our partial repeal of Glass Steagal only made our laws match all the other industrialized countries laws in this area.
 
cawacko said:
We had a Fed induced housing bubble last decade from low rates and now we are repeating it on steroids with QE. Does the Fed need a higher form of government to regulate it to keep from continually f'ing us?
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Oh for Christs sakes Wacko would you quit repeating the WSJ thoroughly debunked mythology.

Instead why don't you try using logic and point out his argument is a correlation equals causation logical fallacy.
 
Mott the Hoople said:
Oh for Christs sakes Wacko would you quit repeating the WSJ thoroughly debunked mythology.

Instead why don't you try using logic and point out his argument is a correlation equals causation logical fallacy.
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Who thoroughly debunked the Fed's role? It was Bob Woodward who labeled Greenspan "the Maestro" and other liberals who celebrated that Greenspan had the econony on a string with his mastery of lowering rates when the economy needed a boost. People who were celebrating him now don't want to admit they were wrong?

You are also correct that the Glass-Steagal argument is a case of correlation does not equal causation.
 
cawacko said:
This is one man's opinion above. I've seen no one declare him the defined expert on the subject. And for whatever reason he chooses to leave the main driver of both the '20's boom/bust and the same more recently and that's the Fed and it's easy money policies. That's what allowed the massive speculation during the '20's and is what created the housing bubble trying to recover from the dot com bust.

You would know this better than all of us probably in that our partial repeal of Glass Steagal only made our laws match all the other industrialized countries laws in this area.
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And they're still recovering as their governments have used austerity measures to punish their public for the misdeeds of the large banks.
 
cawacko said:
Who thoroughly debunked the Fed's role? It was Bob Woodward who labeled Greenspan "the Maestro" and other liberals who celebrated that Greenspan had the econony on a string with his mastery of lowering rates when the economy needed a boost. People who were celebrating him now don't want to admit they were wrong?

You are also correct that the Glass-Steagal argument is a case of correlation does not equal causation.
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Believe what you want too the facts speak otherwise.
 
I mean Wacko if you can't see the inherent conflict of interest of permitting depository banks to act also as investment banks then you're blind to the primary cause of the 2008 meltdown.
 
Mott the Hoople said:
And they're still recovering as their governments have used austerity measures to punish their public for the misdeeds of the large banks.
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This is monetary policy, not fiscal policy. And I was speaking about the law we repealed. It had not been in omace in other countries
 
cawacko said:
Which banks did the things you listed that weren't allowed to do it before? Was Bear Sterns not allowed to over leverage itself prior?

It's interesting, was watching a video on the Fed last night and they clearly shot down the "perfect storm" idea.
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Thoughts on the first question Leon?
 
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