Two weeks into Occupy Wall Street protests, movement is at a crossroads

The problem is, we can talk a lot about incentives and risk and moral hazards, but these are nebulous things that in many ways can't be proven.

This implicit guarantee means that profits are privatized but losses are socialized. If Fannie and Freddie do well, their stockholders reap the benefits, but if things go badly, Washington picks up the tab. Heads they win, tails we lose.

Regarding the idea that we can simply nationalize companies that go bad, and solve the problem that way: what happens when companies create a terrible situation, that we then have to inherit? Limiting the size of the companies (by using common-sense regulations requiring them to actually focus on, yaknow, banking OR investment, the ones that worked pretty well for 50 plus years) helps keep any of them from running up debts or bad investments to the level where it is a severe cost or risk to the rest of us.

I would also ask: what's the downside of what I propose?

By Ruy Teixeira | October 17, 2011

To conservatives such as House Majority Leader Eric Cantor (R-VA), they're a "growing mob." But the public feels quite differently about the Occupy Wall Street movement and the issues they're raising.

In a new Time/Abt SRBI poll, 54 percent say they’re favorable to the movement that has been protesting policies that "favor the rich, the government’s bank bailout, and the influence of money in our political system." Just 23 percent are unfavorable, and 23 percent say they don’t know enough to have an opinion. The movement’s favorability rating is actually twice as high as that of the conservative Tea Party movement: Just 27 percent are favorable to the Tea Party, compared to 33 percent who are unfavorable and 39 percent without an opinion.

If there were no government, there would be no hijacking of the government....

So even if your figure of 33% was the "only" share of the sub-prime mortgages that the government insured I think that is a big problem.

Why not address the crux of the argument instead of grasping so ineptly at statistical straws?

The moral hazard really isn't abstract at all though, just quantifying what it was responsible for in the crisis is. That is what I keep trying to say with the quibbling over just how much the government is to blame here.

The only way to regulate the market and prevent the widespread securitization is with government regulation george.

If you know of another way to control it, I would be happy to hear it but I doubt you can come up with any that doesn't require government involvement of some sort.

In general government does a lousy job of picking economic winners and losers - as the Solyndra fiasco so amply illustrates.

Critics have seized on the news of Solyndra’s bankruptcy to condemn the Department of Energy’s Loan Guarantee Program, which provided a $535 million loan guarantee in 2009. The National Review’s Greg Pollowitz writes that Solyndra’s failure shows “why the government should not play venture capitalist.” Yet the fact is that, when judged by its entire diverse portfolio of investments, the LGP has performed remarkably well. Indeed, with a capitalization of just $4 billion, DOE has committed or closed $37.8 billion in loan guarantees for 36 innovative clean energy projects. The Solyndra case represents less than 2% of total loan commitments made by DOE, and will be easily covered by a capitalization of eight to ten times larger than any ultimate losses expected following the bankruptcy proceedings.

In general government does a lousy job of picking economic winners and losers - as the Solyndra fiasco so amply illustrates.

But the moral hazard IS abstract. You keep changing it. Was it just the GSEs? Was it the GSEs and the FHA? Was it your claim of the 70% of entities subject to quotas?

The problem Robert is that you have a moral hazard that isn't quantified but is amorphous and keeps changing.

Your argument is no better than those that argue that Obama is a socialist.

Yes, compared to the stock market which precipitously dropped the value of Enron stock at the first indication that their earnings had been manipulated. With Solyndra the hapless and probably corrupt political sponsors were pumping in more public money even as this Ptomken corporation was closing plants and shutting down operations. Hard to beat that.

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

Quote:

In general government does a lousy job of picking economic winners and losers - as the Solyndra fiasco so amply illustrates.

Would you care to tell what you think the batting average is for the Small Business Administration has been for the past thirty years? Hmmm?

How about the Department of Energy's Loan Guarantee Program? Is it doing a lousy job? Wait, here's the news :

Quote:

Critics have seized on the news of Solyndra’s bankruptcy to condemn the Department of Energy’s Loan Guarantee Program, which provided a $535 million loan guarantee in 2009. The National Review’s Greg Pollowitz writes that Solyndra’s failure shows “why the government should not play venture capitalist.” Yet the fact is that, when judged by its entire diverse portfolio of investments, the LGP has performed remarkably well. Indeed, with a capitalization of just $4 billion, DOE has committed or closed $37.8 billion in loan guarantees for 36 innovative clean energy projects. The Solyndra case represents less than 2% of total loan commitments made by DOE, and will be easily covered by a capitalization of eight to ten times larger than any ultimate losses expected following the bankruptcy proceedings.

Joe(emphasis mine)Nation

No surprise in that the power so produced costs four times that of conventional sources (coal, nuclear, natural gas), and the capital cost ratios are even higher. (Believe it or not the capital cost per unit of deliverable electrical energy produced for a moderm nuclear powerplant is far less than that for either wind or solar power. The operating cost rtatio is even greater. These sources simply cannot compete without huge government subsidies.)