Posted on 10/23/2008 8:09:39 AM PDT by Conservative Coulter Fan
The risks were well known and ignored.
GLASS-STEAGALL ACT:
COMMERCIAL VS. INVESTMENT BANKING
Updated June 29, 1987
Evidence:
http://digital.library.unt.edu/govdocs/crs/permalink/meta-crs-9065:1
Glass-Steagall was a stupid law, and the only problem with the partial repeal is that it didn't go far enough and included even more new regulations. To say that there is something economically dangerous for the same financial institution to be able to offer financial services like insurance is as silly as saying that it hurts the economy for supermarkets to sell meat. Sure, their competition (brokerage houses or butcher shops) might not like it, but the additional competition has done wonders for the consumer.
Foreign banks were already allowed to engage in the activities Glass-Steagall prohibited; the only thing that law did was put US companies (especially smaller institutions) at a disadvantage.
The lowering of reserve rates to historic lows and the exemption of many deposits from reserve requirements allowed banks to become more leveraged.
Do you even know what Glass-Steagall did? It had nothing to do with this; it just let US consumer banks offer other financial services like insurance and commercial/investment banking.
From a practical standpoint, the repeal could not possibly have ANY impact on the current situation, since the activities it prohibited were already happening through other means (Travelers had already bought out Citibank, proving that any large bank with sufficient political clout could just get a waiver). The biggest consequence of the law was the merger of Norwest and Wells Fargo, and that institution is probably the strongest and most stable one the United States has right now (despite attempts by the Treasury to put in in the same boat as the less-well-managed banks by forcing it to accept government loans it doesn't want).
The only part of Gramm-Leach-Bliley that contributed in any way to the current economic difficulty was the strengthening of the anti-redlining provisions of the Community Reinvestment Act, and (for those of you who seem to be clue challenged) that is an example of more regulation, not less. EXCESSIVE REGULATION (and the very existence of GSEs like Fannie Mae, whose implied government backing resulted in junk bonds being rated AAA) IS WHAT CAUSED THIS PROBLEM.
You socialists don't seem to grasp that you can't fix this problem, because you caused it.
That’s the article that helped me figure out how evil credit default swaps are. They are instruments of financial anarchy and I’ll bet the people who deployed them are far more likely to be Democrats and liberals because they tend towards anarchy and running roughshod over decorum and boundaries.
No one will a gree with you. You are talking about theory and how things look on paper. Marxism also looks great on paper
Fact is repeal of Glass-Steagall lead to financial anarchy.
FACT is that Citibank and other Wall St firms made massive campaign donations and lobbying effort to get it repealed
There was no deregulation: loose lending policies forced
by democrats caused the meltdown!
Oh well hey if its ok for the nations financial system lets deregulate the transportation system too. Repeal limits on speed, signage, signals, design and construction. The system can operate much more efficiently in a free-for-all environment.
in the meantime more jobs are lost and congress is taking more money from the future to keep people in homes they cant afford. whats the point. no matter what the country is being killed by the people we elect.
It doesn't make me any less right or the silly idea that the partial repeal of Glass-Steagall caused this any less wrong.
You are talking about theory and how things look on paper. Marxism also looks great on paper
Yeah, the only thing I have on my side is theory and facts. Like the fact that if this was a problem with the Glass-Steagall repeal then Wells Fargo would be in the worst position of the banks instead of the best.
Fact is repeal of Glass-Steagall lead to financial anarchy.
Fact is it did no such thing. Fact is that the markets are over-regulated. Fact is that the government interferes in the market in ways that are absolutely disastrous, and then tries to blame the "free market" for being distorted when government distorts it.
FACT is that Citibank and other Wall St firms made massive campaign donations and lobbying effort to get it repealed
The Citibank/Travellers merger happened BEFORE the repeal (in direct violation of Glass-Steagall. The law doesn't apply to people who have enough money and sufficient political connections). I'll agree with you that the massive campaign donations from corporations are suggestive of corruption, but I don't think anyone would argue against the fact that Washington is corrupt.
Your crazy idea has been tried. And it works:
"In Haren, the Netherlands, for example, the number of accidents at one intersection dropped by 95 percent, from 200 a year to about 10, Hilbricht said. "You can't deny the numbers," he added."
http://www.washingtonpost.com/wp-dyn/content/article/2007/12/23/AR2007122302487.html
Not quite...
Only two traffic rules remain. Drivers cannot go more than 30 mph, the German speed limit for city driving. And everyone has to yield to the right, regardless of whether it's a car, a bike or a baby carriage.
Somewhat true (it is unlikely that your ultimate scenario will ever be allowed to play out), but what part of it that was implemented does demonstrate the fact that a significant (drastic in this case) reduction in burdensome regulation (in this case even traffic regulation and signage) resulted in the exact opposite outcome as the nanny-state regulators would have predicted.
Similar outcomes have occurred in just about every area where deregulation (real deregulation, not simply a change in the rules or California-style imposition of a new set of rules) has been attempted. When you deregulate traffic, traffic gets safer. When you deregulate firearms, crime goes down. When you deregulate markets, economies prosper. In almost every area of life, government is not the solution to our problems, it is the cause of our problems.
“I made a mistake in presuming that the self-interest of organisations, specifically banks and others, was such that they were best capable of protecting their own shareholders,” he said.
Seems some are beginning to see the reality of the situation, its pretty hard to ignore.
Greenspan has made more than one mistake; his recent statements just compounds them.
Seems some are beginning to see the reality of the situation, its pretty hard to ignore.
The reality of the situation is that the biggest "mistake" Greenspan made was trying to prop up bubbles with poor monetary policy in a vain attempt to avoid minor recessions. While his earlier writings might be valid, he spent most of his career attempting to do things that his avowed philosophy asserted couldn't be done. For well over the past decade the Fed has been even more interventionist, with one result being that the market behaves erratically before just about every meeting of the Fed. These are NOT laissez faire market conditions.
The reality of the situation is that we've had Keynesians running an economy based on an artificially large fiat money supply, with the inevitable consequences of a bubble whenever some asset (in this case, home real estate) couldn't be properly priced (in this case, as a result of FNM's implied government backing which made junk look like AAA). All other problems are just derivative of these fundamentals.
Every part of this problem is a consequence of government intervention. While Greenspan's comments might suggest that he is either delusional or senile (or that he has been corrupted by his extensive interaction with and career in quasi-government), it doesn't have any effect on reality. Even if his comment was accurate (Adam Smith voiced a similar opinion on the concept of collective ownership via stock arrangements), it wouldn't make any difference. Even if the self-interest of organizations isn't sufficient to protect stockholders, they'll still do a better job of protecting their assets than government bureaucrats will.
You socialists think that you can exercise central control over the economy and achieve better results than the free market can. The fact is that you can't. The free market might not be perfect (although it would be a lot better than what we have now), but recent events prove that your interventions (such the mere existence of GSEs like Fannie Mae or government requirements that banks loan a percentage of their money to people who would not qualify in a free market) cause these sorts of problems.
But you socialists have a long history of doing precisely this sort of thing. You artificially inflate the cost of health care with Medicare and Medicaid, then claim that the free market doesn't work for health care. You create obtuse rules about fuel additives and formulations, limit exploration and production, and then complain that the free market isn't working because gasoline prices are too high. Everywhere you go, you people create misery and then blame others for your sins.
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