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Who or What is Responsible?

 
 
Reply Fri 10 Oct, 2008 02:50 pm
The current world financial crisis is largely the result of a tendency among Western and Western-oriented (e.g. Japan, China) governments to practice a laissez faire attitude toward big business in general and big financial institutions in particular.

Please discuss.
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Type: Discussion • Score: 12 • Views: 6,166 • Replies: 48
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cicerone imposter
 
  1  
Reply Fri 10 Oct, 2008 02:55 pm
@Merry Andrew,
Fortunately or unfortunately, banks and finance companies make up a huge portion of all of our economies. Deregulation and laissez faire attitudes of governments and commerce created this crisis. Government failed to maintain the necessary controls and oversight, and the banks and finance institutions played the shell games of those mortgage funds based on greed and self-aggrandizement. Both failed, and now everybody pays.
0 Replies
 
Foxfyre
 
  1  
Reply Fri 10 Oct, 2008 03:06 pm
@Merry Andrew,
I think that most people don't really know what happened this time. I think, however, that history, if honest, will show that it was abandoning solid economics and financial principles in favor of well intended, but ill advised social engineering that created the current financial crisis. Such engineering in itself, did not cause the avalanche, but the policies that favored it also opened the door to speculators who saw opportunity to make a fast buck in an artificially manufactured economic climate.

Then, when the world who for better or worst chose to make the United States the center of the financial universe, it could not avoid being caught up the avalance once the whole thing began sliding.

Who is responsible?
1. Those who put personal ideology ahead of sound financial principle.
2. Those who sought to capitalize on unsound financial principle hoping to benefit from riding the artificial bubble.
3. Those who failed to accept responsibility and correct their error.
4. Those who failed to sufficiently regulate and prevent the problem.
5. Those who proposed and enacted unsound schemes to save the day.
6. Those who panicked and exacerbated the problem.

(I didn't include but could have included the people who elected a bunch of incompetent numbnuts who allowed all this to happen.)

I am sensing that we are rattling around near or at the bottom now. From its low at the beginning of the day to it's highest point today, the Dow moved almost 1000 points and then fell back to a less than a disastrous loss. It's probably a really good time to get in. Having lost a huge chunk of the paper value of our portfolio in all this, its really hard to muster up the nerve to make additional investments though.
cicerone imposter
 
  2  
Reply Fri 10 Oct, 2008 03:09 pm
@Foxfyre,
From Fox's list:

Who is responsible?
1. Those who put personal ideology ahead of sound financial principle.
A: Greed
2. Those who sought to capitalize on unsound financial principle hoping to benefit from riding the artificial bubble.
A: Greed.
3. Those who failed to accept responsibility and correct their error.
A: Failure of government oversight.
4. Those who failed to sufficiently regulate and prevent the problem.
A: Failure of government oversight.
5. Those who panicked and exacerbated the problem.
A: Everybody.
Merry Andrew
 
  1  
Reply Fri 10 Oct, 2008 03:27 pm
@cicerone imposter,
So then we're agreed that "failure of government oversight" -- which is just another way of saying "laissez faire policy" -- is a major factor here?
Foxfyre
 
  1  
Reply Fri 10 Oct, 2008 03:30 pm
@Merry Andrew,
I think that was only one of many major components. I think active flawed government POLICY and failure to reverse that was the catalyst.
0 Replies
 
dyslexia
 
  1  
Reply Fri 10 Oct, 2008 03:31 pm
@Merry Andrew,
"failure of government oversight" defined by wingnuts as socialism.
Merry Andrew
 
  2  
Reply Fri 10 Oct, 2008 03:35 pm
@dyslexia,
D'ya think, Dys, that it's this irrational fear of any hint of socialism in our Federal structure that leads to this failure of government oversight? I don't think it's only the right wingnuts; that word "Socialism" has such an undeserved evil reputation among most of the electorate. No?
0 Replies
 
cicerone imposter
 
  2  
Reply Fri 10 Oct, 2008 03:38 pm
@Merry Andrew,
Pure laissez faire will never work, but the idea of free trade must have some "controls" to make sure fraud and non-competitive actions by participating countries do not create imbalances and protectionisms favoring one country over others. In reality, every country participating in the world marketplace will try to get away with advantages; that's only human. How that is controlled in a equitable manner is not an easy problem to solve.
0 Replies
 
rosborne979
 
  1  
Reply Fri 10 Oct, 2008 03:42 pm
@Merry Andrew,
As a leader in world economics, the US set a lax standard of control which everyone else eventually replicated in one form or another. It turns out that governments must establish an economic foundation upon which free market enterprise can grow (and be allowed to fail). But without a protected foundation, the largest free market entities evolved into the role of foundation, but they could not be allowed to fail. And here we are.

Now the governments have been forced to consume the free market entities and protect them as a foundational class. Unfortunately, these entities were not designed from scratch to be what they are now, so they are imperfect in their new roles. Governments will now have to change their own structure in order to incorporate these newly functioning entities.

Economies now dominate governments instead of the other way around. This will change the way the world works, especially as the global economy evolves into the dominant force on the globe. The walls between nations are about to fall, not because they have been breached but because they have become irrelevant.



rosborne979
 
  2  
Reply Fri 10 Oct, 2008 03:46 pm
@Merry Andrew,
Quote:
So then we're agreed that "failure of government oversight" -- which is just another way of saying "laissez faire policy" -- is a major factor here?

Yes. Greed had nothing to do with it. The people who made the money were only doing what the system allowed (and in many cases "required") them to do.

Granted there were illegal activities going on in a few places, but that is always the case in everything. But the majority of the money managers were duty bound to try to produce the highest gains for their customers that they could.

cicerone imposter
 
  1  
Reply Fri 10 Oct, 2008 03:46 pm
@rosborne979,
rosborne, Good post.
0 Replies
 
cicerone imposter
 
  2  
Reply Fri 10 Oct, 2008 03:48 pm
@rosborne979,
I disagree that greed didn't have any part of the current financial crisis. Even with laws and regulations about commerce, people break laws based on greed.

Enron and Worldcom are good examples.
Foxfyre
 
  1  
Reply Fri 10 Oct, 2008 04:03 pm
It's pretty difficult to attach any definition of 'socialism' to a policy of helping people obtain real property. Please people, can we not make this a mud slinging thread? I would so appreciate that.

The flawed policy was the encouraging of, hell insisting that banks make loans to people who had little or no track record of being able to repay them, and the banks did so under the protection of Fannie Mae and Freddie Mac who were guaranteeing and absorbing those loans and Fannie Mae and Freddic Mac were in turn backed by U.S. government guarantees. But it was that flawed policy that started the snowball rolling.

The next lack of responsible oversight began when Congress did nothing and denied there was any problem when the first alarm bells sounded that Fannie Mae and Freddie Mac were absorbing too much shaky debt and was bundling it and selling it off to other institutions while Fannie and Freddie continue to take on more and more bad debt. The Clinton and Bush administrations were enjoying strong economic prosperity and share culpability in unwillingness to rock that boat when those alarm bells were sounded. So they trusted that the bubble wouldn't burst and failed to order the regulatory agencies do their jobs. The investers and foreign financial structures were greatly enjoying and benefitting from swelling portfolios and the allusion of prosperity and were dealing in highly speculative properties and stocks.

Then when the inflated property values exceeded available money, the property values seized up and began to decline while the outstanding bad loans did not. Unpaid bad loans further dried up the money supply and the whole thing--property values, financial institutions, insurance companies heavily invested in those institutions, the stock market--caved in. That probably would have been a bearable hit, but the investors who had trusted those institutions began panic selling further driving down the value of anything while the debt remained unchanged.

Could this have been prevented by maintaining sound banking principles requiring that people who borrow money demonstrate a reasonable inclination and ability to repay it? Yes it could.

Could it have been headed off when those with ability to act recognized that a serious crisis was building? Probably not entirely, but it would have been a whole lot less deep and severe.

Our leaders were exposed as incompetent or asleep at the switch.

Too often flawed policy does not produce obvious negative consequences for sometimes years or decades.

But we should all be standing up and accusing them as they deserve and demanding that never again.
realjohnboy
 
  2  
Reply Fri 10 Oct, 2008 04:23 pm
@Foxfyre,
I agree with yall on assigning blame. I would add the credit rating agencies (like Moody's) or the outside auditors (a business I was in in an earlier life) for being too cozy with the clients. At best they were naive; at worst they were complicant.
cicerone imposter
 
  1  
Reply Fri 10 Oct, 2008 04:29 pm
@realjohnboy,
From foreclosure data online:

Quote:
The sub prime mortgage crisis was born in a decade-long housing boom fueled by low interest rates and excess liquidity. During these ‘boom’ years, mortgage brokers enticed by the lure of big commissions, talked buyers with poor credit into accepting housing mortgages with little or no down payment and without proper tax documentation and credit checks. And so the groundwork was established for the coming mortgage meltdown.


Simply put; greed.

Also from Wiki (before Clinton's time):

Quote:
The crisis began with the bursting of the United States housing bubble[1][2] and high default rates on "subprime" and adjustable rate mortgages (ARM), beginning in approximately 2005"2006.


That doesn't absolve Clinton of any fault, but the majority of those sub-prime loans were during the Bush years.
Foxfyre
 
  1  
Reply Fri 10 Oct, 2008 04:42 pm
@cicerone imposter,
Yup. And most of the Bush years in which most happened was during the period after the Democrats took over control of Congress.

Mud slinging is not useful at this time other than to point to those specific people who stood up and denied that the avalanche was beginning to slide down the hill and/or who went out of their way to see that nothing was done to prevent or mitigate the damage from it. Those individuals I have no respect for and their behavior borders on criminal. The rest we can write off as exceedingly naive, stupid, or incompetent.

Count me as one who is mad as hell.
cicerone imposter
 
  1  
Reply Fri 10 Oct, 2008 05:00 pm
@Foxfyre,
Two wrong assumptions; 1) the dems took over congress in 2006, and 2) the do nothing congress ... stems largely from the Senate Republican minority's shameless use of the filibuster.

Show us how many times since 2006 the republicans stopped any legislation from passing?
Foxfyre
 
  1  
Reply Fri 10 Oct, 2008 05:01 pm
@cicerone imposter,
Show me any legislation the Democrats introduced that could have alleviated this problem that the Republicans blocked. I can show you some the Republicans proposed that the Democrats refused to vote for.

However,

I'm trying not to do mud slinging here CI. Could you please try also?
0 Replies
 
cicerone imposter
 
  1  
Reply Fri 10 Oct, 2008 05:05 pm
@cicerone imposter,
REPUBLICANS SET NEW RECORD FOR BLOCKING ANY & ALL LEGISLATION
Gary Ater

Even though the Democrats seldom used it their advantage, the Republicans in the Senate had gripped for years about the Democrats capability of using the "filibuster" when the Democrats had their long-time, large Senate majority. But today, now that the Democrats have the potential to gain their Senate majority back in the coming November elections, the Republicans are actually following through on what they had complained about when the Democrats previously had the ability to stop any legislation by using the age-old "filibuster method".

Since the Democrats won their razor-thin majority back in 2006, the Republicans have now used the filibuster a record 80 times to halt any legislation offered by the Democrats. Even with the small majority of 51 to 49 that the Senate Democrats have today, it still takes 60 votes to pass a Senate bill that would also over-ride a possible filibuster or a presidential veto. Based on these numbers, the Republican Senate leadership has decided to only "rarely" allow any "moderate" Republicans to vote on the Democratic side of an issue, whether the legislation is good for the country or not. All the Republican Senators have to do today is open up the debate on the Senate floor and keep it going until the Democrats eventually give in and give up. This action virtually stops the bill in its tracks, and they then move on to other bills or new business.
0 Replies
 
 

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