Republicans Are Obsessed With Deregulating Wall Street

The 2008 crash was not caused by Socialism by any means, it was caused by greed and the inability of the investment banks to wrap their heads around the fact that mortgage-backed securities and credit default swaps only deliver the goods under a select set of circumstances - ie: when the market is booming. They were regarded as a brilliant idea that would make lots and lots of money. And they did - when the market was booming.
Then the great housing boom bubble went pop in 2006-2007 and the market suddenly realised that all these wonderful financial tools were crap.
Matters were not helped by the fact that Lehman Brothers was let by a pair of cretins who allowed their real estate team to build up a massive - and I mean that in every sense of the word - real estate portfolio of properties that were bought at the very top of the market and which were therefore nowhere near as valuable a year or so later. As a result what they thought were assets turned out to be liabilities.
So yes, Dodd-Frank needs to remain in place. It needs to be strengthened. And anyone who suggests abolishing it needs to be taken somewhere and shown the wreckage of Lehman Brothers and Bear Sterns. Investment banks need to be controlled via regulation. The 'free market' tends to be obsessed with greed and blows up on a frequent basis.

originally posted by: Krazysh0t
a reply to: gladtobehere

The problem with this solution is that if the banks fail, so do all the accounts of people that the banks manage. So you are effectively punishing customers of the bank for the banks shady practices that resulted in them going bottom up. I wouldn't be opposed to bailing out the bank's customers though.

To play devil's advocate...

If the bank fails, then it would be "investor beware" -- the customer should be informed and choose to park/invest their money with a reputable bank that has a history of being solvent and responsible.

OTOH -- This isn't always 100% realistic, as large banks can often times be doing things that the average American isn't aware of.

IMO -- we should have never listened to big money/lobbists and gotten rid of Glass–Steagall...if anything it should have been amended and tweaked to enable the banks to be more competitive with the European banks (which was an argument for the repeal).

Oh and one more thing - the GOP is still obsessed with the myth that trickle-down economics works. Guess what? It never has and it never will.

a reply to: greencmp

This lie never made sense. How can homeowners bring down the global economy. Maybe it was derivatives, a bankers made up scheme.

originally posted by: MOMof3
a reply to: greencmp

This lie never made sense. How can homeowners bring down the global economy. Maybe it was derivatives, a bankers made up scheme.

Bush drive for home ownership fueled housing bubble

originally posted by: AngryCymraeg
Oh and one more thing - the GOP is still obsessed with the myth that trickle-down economics works. Guess what? It never has and it never will.

I created a thread about trickle down economics when Romney was running for POTUS:

No Mr. Romney, Rich People Do Not Create Jobs

There is A LOT of great points made by everyone here on ATS from every side. I learned A LOT from having so many people's perspectives brought into the discussion. Instead of re-creating the entire argument, just go read through that behemoth of a thread

I'm pretty tired of 'free marketeers' and 'de-regulate' mumbo-jumbo - as a counterpose I offer from the daily reading:

www.commondreams.org...

Congressional Republicans certainly were not a do-nothing or obstructionist caucus during the presidency of George W. Bush. From budget-busting tax cuts for the rich, to making bankruptcy more onerous for people (but not for corporations, which on other occasions Republicans claim are people); from the Patriot Act that dismantled constitutional protections, to doubling the Pentagon’s budget, to creating the third largest cabinet agency, the DHS, to respond to the tragedy ensuing from Bush’s refusal to take his CIA briefings seriously, Republicans were the very model of activist governing. They turned a $236 billion budget surplus in 2000 into a $459 billion deficit in 2008, while in those same eight years doubling the national debt.

While many will blanch at this catalogue of horrors and respond that it was not responsible governance, that reaction dodges the question: responsible governance for whom? In 2010, the incoming Republican chairman of the House Financial Services Committee, Spencer Bachus, memorably expressed the Republican philosophy of public service as follows: “In Washington, the view is that the banks are to be regulated and my view is that Washington and the regulators are there to serve the banks.” Talk about constituent service!

Who wants to regulate? Who wants to legalize theft of public goods?

A very well written article. Longish piece but worth it's weight in gold. The content and skill are both 'outstanding' (nods to verteran's day)

originally posted by: greencmp

originally posted by: MOMof3
a reply to: greencmp

This lie never made sense. How can homeowners bring down the global economy. Maybe it was derivatives, a bankers made up scheme.

Bush drive for home ownership fueled housing bubble

Partly true but also shoddy journalism. It wasn't 'toxic mortgages' it was toxic assets - the credit default swaps and mortgage backed securities that some Wall Street egghead had thought up and which had been noticed, misunderstood, copied and frankly bastardised. Greed again. That and stupidity.

I'm pretty sure that regulating wall street is something we all want and need.

It's not big government over reach or anything like that or socialism. it's because our whole economic well being is heavily tied to wall street. Deregulation sets the table for unethical practises and crooks to get in there and wreck the economy like they did about a Decade ago. We don't want that.

You have to question anyone who wants to deregulate wall street. That means there is something shady going on with that person.

originally posted by: amazing
I'm pretty sure that regulating wall street is something we all want and need.

It's not big government over reach or anything like that or socialism. it's because our whole economic well being is heavily tied to wall street. Deregulation sets the table for unethical practises and crooks to get in there and wreck the economy like they did about a Decade ago. We don't want that.

You have to question anyone who wants to deregulate wall street. That means there is something shady going on with that person.

Agreed. It's also worth asking who's funding that person.

originally posted by: AngryCymraeg

originally posted by: amazing
I'm pretty sure that regulating wall street is something we all want and need.

It's not big government over reach or anything like that or socialism. it's because our whole economic well being is heavily tied to wall street. Deregulation sets the table for unethical practises and crooks to get in there and wreck the economy like they did about a Decade ago. We don't want that.

You have to question anyone who wants to deregulate wall street. That means there is something shady going on with that person.

Agreed. It's also worth asking who's funding that person.

To me that's the key!

a reply to: greencmp

Ok. I kind of know all that from listening to the news when all this was crashing, but that article is written clearly. I clearly remember Bush always saying, spend, spend, spend. Now, I am not sure if I completely grasp deriviatives. Let's say, I buy a house with one loan from one bank, few hands in the pot so to speak. But with that derivative scheme, several hands are in the pot, wanting their part from it? Is this the fault of homeowners and does that scheme even sound safe?

originally posted by: greencmp
In a truly free market, reputation would be the only thing. That and satisfying consumer need most effectively.

This is one of the most naive positions you will ever hear. We can literally smash this idea with one example....

BP dumped around 200 million gallons of oil into the ocean and then tried to cover up the actual damage done. How about their reputation? Wouldn't BP's reputation in the free market dictated that consumers would have boycotted BP's production forcing them to take massive losses on their profit margin? And nothing the government would have done would have influenced the outcome, being as that the onus was on the consumer and the free market. If the free market was such an undeniable and powerful force why didn't we see a worldwide boycott?

Indeed BP's profits are now starting to take some hits, but it has nothing to do with the free market making them pay for their maleficence. For the most part their shareholders investments remained stable during and right after the crisis. Only recently have their bottom lines taken some minor hits because of a decline in the pricing of crude and a COMPENSATORY PAYOUT FOR DAMAGES FORCED ONTO THEM BY THE GOVERNMENT.

originally posted by: MOMof3
a reply to: greencmp

This lie never made sense. How can homeowners bring down the global economy. Maybe it was derivatives, a bankers made up scheme.

You get enough people who buy things on credit they have no business having and then they default on that? It causes a dent.

Given that almost the entire housing market is mortgage based and lots of people who should never have had mortgages issued to them got them and then got products like interest only or ARM mortgages when they did get them ... it caused chaos especially when the banks who issued them knew they were issuing a bad prospect the sold them off to avoid eating the loss when the inevitable default occurred. Selling them meant they got something for the paper.

a reply to: GD21D

How many competitors does BP actually have, and how many people know whether or not the are purchasing BP oil or gas?

originally posted by: MOMof3
a reply to: greencmp

Ok. I kind of know all that from listening to the news when all this was crashing, but that article is written clearly. I clearly remember Bush always saying, spend, spend, spend. Now, I am not sure if I completely grasp deriviatives. Let's say, I buy a house with one loan from one bank, few hands in the pot so to speak. But with that derivative scheme, several hands are in the pot, wanting their part from it? Is this the fault of homeowners and does that scheme even sound safe?

It was more complicated than that. You had a vast ocean of cheap cash come into the USA from China and the mortgage companies took one look at it and got greedy. There were also a lot of shadow mortgage companies around - ones that were set up to lend money but which had no assets. The housing boom went on for so long that they started to lend to people who didn't make much but could own the house of their dreams at the initial teaser interest rate level.
Now we get to the complicated stuff, so please ask if anything confuses you. People realised that mortgages are in a sense an asset, in that people pay their mortgage bills every month and in doing so provide their mortgage companies with an income. What someone then did was think: "Ok, so if I bundle a whole load of mortgages together, then I can sell them on to another corporation, as an asset. There'll be a very small number that default, but overall it'll still be an asset." As a result the banks started passing these things around, calling the eventual product a mortgage backed security (MBS). Credit default swaps were similar - if something else failed then they'd have these assets to make up the burden (I am of course simplifying a great deal).
Now we get to the insane part. There are always different levels of reliability and creditworthiness amongst mortgage owners, so some investment banks and financial institutions started to strip out certain levels of risk from these products and bundle them together. Let's give an example - a group of mortgage owners have a 5% chance of defaulting, another group has a 10% chance and yet another has a 25% chance. Strip out the 5% people, bundle them all together and hey presto! An MBS with a low level of default that can be sold on! So you had everyone bundling and splicing and writing products that they thought had a certain set level of risk.
The rating agencies took one look and went berserk with greed. They get a fee every time they rate something and that rating gets accepted. So guess what they did? They rated everything with rose tinted glasses.
But then the boom starts to fade, the cheap cash ends and the teaser rates for mortgages ends and the monthly payments double or even triple. Panic. The homeowner complains to the shadow lender, but they don't give a damn, they sold off the mortgage to an investment bank as soon as they could. The homeowner defaults. When a whole bunch of others join them then the MBS they have unwittingly been a part of them goes toxic - it's not an asset anymore, because people aren't paying their bills. It's a liability instead.
Result? A cascade of toxic assets.

originally posted by: ketsuko
a reply to: GD21D

How many competitors does BP actually have, and how many people know whether or not the are purchasing BP oil or gas?

And you further make my point..

Who has the time to research every product from every company they buy from? Do you know exactly every company tied to the BP name? Do you know about every single product produced that is tied to BP's production?

a reply to: GD21D

BP is going to be dealing with Deepwater Horizon for 50+ years. There are employees for BP just starting that are going to make their entire careers working on the Deepwater thing. BP sold off a HUGE chunk of its assets to afford dealing with Deepwater, and BP won't ever be the same.

originally posted by: MOMof3
a reply to: greencmp

This lie never made sense. How can homeowners bring down the global economy. Maybe it was derivatives, a bankers made up scheme.

it was derivatives, and they still do not have regulations for them

A couple of things to consider:

1.) It's not just Dodd-Frank. It's regulation in general. Regulations take a heavy toll on smaller businesses - the mom and pop outfits that you on the left claim to love and support. Every regulation makes it that much harder for those little guys to survive, thrive, heck, go on business in the first place.

2.) Dodd-Frank smothers the little banks. All the time, you on the left admonish people - Don't use the big banks! Big banks are evil. Use the little local banks. Well, Dodd-Frank smothers those little local banks making it harder and harder for them to stay in business, harder and harder for you to find one to use. I love little banks too. We use one as a backup for our savings for several reasons, but Dodd-Frank might kill it.

See? You guys LOVE the little businesses, but you never seem to stop and weigh the consequences for them when you start yelling for wholesale taxing and regulating. It's like with the regular guy. You also claim you LOVE the little guy, but you never stop to think about him when you start yelling for more taxes.

The hard truth of the matter is that you do not regulate only the very big businesses in isolation. You regulate them all, top to bottom, and every regulation has its cost. And the smaller guys have trouble coping with those costs, so you regulate them right out of business leaving only the large businesses around, the ones you hate.

It's the same with tax policy. You don't ever just tax the very wealthy in a vacuum. Your taxes fall on us all, and the less wealthy to poor are the ones whom you hurt the most.

I constantly hear about how we vote against our own best interests, but from my perspective it sort of looks to be the other way around. You create what you hate and hurt whom you love.