The Fraus of Government Intervention

[Elias824]

Obviously we needed some type of intervention to avoid a massive financial collapse, but cant anyone think of a 3rd option other then having a few people pick a few companies they don't want to flounder, and effectively handing them money out of everyone else's pocket by printing more money. The problem is maybe not so much the bail out, but how it is being handled by dems and reps alike.
The larger the organization, the more inefficiently they handle their money, and the US govt is a rather large organization.

 

[BoberFett]

Originally posted by: LegendKiller

What a pathetically weak dodge. You won't share your incredible amount of market insight with us? You can't tell us, right now, how much these efforts have aided in stabilizing the system? Yet you make such profound statements?

Gosh, you're holding your cards awfully close to your chest. Let me guess, you're a massive market mover and refuse to acknowledge your latest trades in this volatility?

That must be it.

There's no dodge. I just question how you apparently have insight that nobody else has. Why isn't Paulson out and you in his position? You think pretty fucking highly of yourself, but apparently you're the only one or you'd be in a position of authority.

 

[Jhhnn]

Free market capitalism is essentially a myth, bamacre. It never existed, never will. Commerce has always depended on the existence of semi-autonomous authority, if for no reason other than to prevent the strong simply from taking from the weak.

But that doesn't mean the whole concept hasn't been exploited as convenient to power holders, or that existing economic structures haven't been gamed in the name of free market capitalism. That's what happened with the GSE's- rather than following their usual protocols wrt home loans, they were forced by the Bush Admin to act as conduits and guarantors for other people's loans, loans that were flimflams coming and going. Not that the management objected- they sucked down huge bonuses even as they rode their mounts, the GSE's, right into the dirt.

The whole notion of deregulated capitalism depends on the idea of enlightened self interest, after all, with the enlightenment part being largely absent from the Reagan era forward, at least among those responsible for the current situation. They didn't convince us to deregulate so that we could do better, but rather so that they could do better. When it all turned into a looting spree opportunity, perfectly legal, of course, they weren't about to pass it up... hell, they went to a lot of trouble to set it up.

 

[LegendKiller]

Originally posted by: BoberFett

Originally posted by: LegendKiller

What a pathetically weak dodge. You won't share your incredible amount of market insight with us? You can't tell us, right now, how much these efforts have aided in stabilizing the system? Yet you make such profound statements?

Gosh, you're holding your cards awfully close to your chest. Let me guess, you're a massive market mover and refuse to acknowledge your latest trades in this volatility?

That must be it.

There's no dodge. I just question how you apparently have insight that nobody else has. Why isn't Paulson out and you in his position? You think pretty fucking highly of yourself, but apparently you're the only one or you'd be in a position of authority.

I'm 30 (just turned in Nov), went to a 3rd tier b-school, yet every one of my coworkers is at least 7 years older than I am and went to Ivy. I'm at the same level as a guy who went to Cornell under and Columbia MBA, he's 37. I've far exceeded any of my peers. What the fuck do you do? Did you pass the CFA exams on the first try? Something only 5% of people can do?

Where the fuck is your market intelligence? You're so connected into the capital markets you should know how much more stable things have become, yet you have no fucking clue. You're an outsider bitching about something you've got no idea about.

 

[bamacre]

Originally posted by: Jhhnn
Free market capitalism is essentially a myth, bamacre. It never existed, never will.

I just wish you all would remember that when you point fingers.

 

[LegendKiller]

Originally posted by: bamacre
Debating the economy with Legendkiller is like debating Dick Cheney on foreign policy. His experience is much greater than your's, so you're wrong.

Debating economics with you is like listening to a teenager who has been told by his parents that he shouldn't/should do something. The kid sits there arguing with them based upon ignorant logic, he has no working relationship of life or the world, yet he thinks he is right.

You're the kid. You have no working experience, nothing to peer in, other than websites that skew the viewpoint.

 

[LegendKiller]

Originally posted by: bamacre
What is laughable is that people think this crisis was caused by free market capitalism. As if people like Ron Paul have been pleased with the way the economy has been run the past 30 years. And I had no idea that GSE's could exist within a free market capitalist system. But I guess war is peace, freedom is slavery, debt is wealth, and Bill Clinton did a good job managing the economy.

Like we'd give a flying fuck what the Career Politician ex-gyno would think. He's been wrong the past 30 years.

The problem never was the GSEs.

 

[bamacre]

Originally posted by: LegendKiller

Originally posted by: bamacre
Debating the economy with Legendkiller is like debating Dick Cheney on foreign policy. His experience is much greater than your's, so you're wrong.

Debating economics with you is like listening to a teenager who has been told by his parents that he shouldn't/should do something. The kid sits there arguing with them based upon ignorant logic, he has no working relationship of life or the world, yet he thinks he is right.

You're the kid. You have no working experience, nothing to peer in, other than websites that skew the viewpoint.

I'm a kid? That all ya got? Anything that's actually true?

Originally posted by: LegendKiller
The problem never was the GSEs.

Yeah, much of the problem was the Fed's artificially low interest rates.

 

[BoberFett]

Originally posted by: LegendKiller

Originally posted by: BoberFett

Originally posted by: LegendKiller

What a pathetically weak dodge. You won't share your incredible amount of market insight with us? You can't tell us, right now, how much these efforts have aided in stabilizing the system? Yet you make such profound statements?

Gosh, you're holding your cards awfully close to your chest. Let me guess, you're a massive market mover and refuse to acknowledge your latest trades in this volatility?

That must be it.

There's no dodge. I just question how you apparently have insight that nobody else has. Why isn't Paulson out and you in his position? You think pretty fucking highly of yourself, but apparently you're the only one or you'd be in a position of authority.

I'm 30 (just turned in Nov), went to a 3rd tier b-school, yet every one of my coworkers is at least 7 years older than I am and went to Ivy. I'm at the same level as a guy who went to Cornell under and Columbia MBA, he's 37. I've far exceeded any of my peers. What the fuck do you do? Did you pass the CFA exams on the first try? Something only 5% of people can do?

Where the fuck is your market intelligence? You're so connected into the capital markets you should know how much more stable things have become, yet you have no fucking clue. You're an outsider bitching about something you've got no idea about.

I've already told you what I do. I'm 33 and I'm the IT Director at a medium sized company. Whether you choose to believe that or not doesn't concern me.

With a long background in IT what I know is systems. Algorithms. Equations. And I know that you can't start tweaking variables in an equation as complex as the US economy and know what's going to pop out on the other side.

Besides, you're the fool who yammers on about irrationality when coming from the consumer/investor side, but then expect perfect rationality when it comes to pumping taxpayer money back to those same people you claim are irrational.

You're the very definition of insane, and people like you are a part of the reason we're in the economic position we're in. You think you know everything but you don't know jack shit.

 

[LegendKiller]

Originally posted by: bamacre

Originally posted by: LegendKiller

Originally posted by: bamacre
Debating the economy with Legendkiller is like debating Dick Cheney on foreign policy. His experience is much greater than your's, so you're wrong.

Debating economics with you is like listening to a teenager who has been told by his parents that he shouldn't/should do something. The kid sits there arguing with them based upon ignorant logic, he has no working relationship of life or the world, yet he thinks he is right.

You're the kid. You have no working experience, nothing to peer in, other than websites that skew the viewpoint.

I'm a kid? That all ya got? Anything that's actually true?

Originally posted by: LegendKiller
The problem never was the GSEs.

Yeah, much of the problem was the Fed's artificially low interest rates.

I guess real world economics and finance aren't the only things that go way over your head. Simple things like metaphors are even too difficult. I'll draw stick figures for you next time.

Credit spreads had just as much to do with this as cost of funding.

 

[LegendKiller]

Originally posted by: BoberFett

Originally posted by: LegendKiller

Originally posted by: BoberFett

Originally posted by: LegendKiller

What a pathetically weak dodge. You won't share your incredible amount of market insight with us? You can't tell us, right now, how much these efforts have aided in stabilizing the system? Yet you make such profound statements?

Gosh, you're holding your cards awfully close to your chest. Let me guess, you're a massive market mover and refuse to acknowledge your latest trades in this volatility?

That must be it.

There's no dodge. I just question how you apparently have insight that nobody else has. Why isn't Paulson out and you in his position? You think pretty fucking highly of yourself, but apparently you're the only one or you'd be in a position of authority.

I'm 30 (just turned in Nov), went to a 3rd tier b-school, yet every one of my coworkers is at least 7 years older than I am and went to Ivy. I'm at the same level as a guy who went to Cornell under and Columbia MBA, he's 37. I've far exceeded any of my peers. What the fuck do you do? Did you pass the CFA exams on the first try? Something only 5% of people can do?

Where the fuck is your market intelligence? You're so connected into the capital markets you should know how much more stable things have become, yet you have no fucking clue. You're an outsider bitching about something you've got no idea about.

I've already told you what I do. I'm 33 and I'm the IT Director at a medium sized company. Whether you choose to believe that or not doesn't concern me.

With a long background in IT what I know is systems. Algorithms. Equations. And I know that you can't start tweaking variables in an equation as complex as the US economy and know what's going to pop out on the other side.

Besides, you're the fool who yammers on about irrationality when coming from the consumer/investor side, but then expect perfect rationality when it comes to pumping taxpayer money back to those same people you claim are irrational.

You're the very definition of insane, and people like you are a part of the reason we're in the economic position we're in. You think you know everything but you don't know jack shit.

Ohhh gawd, as an IT director you're so much more qualified to opine on economics as somebody schooled, trained, and steeped in it. Thanks, thought so.

Yeah, I'm "insane". Please, I was around 5 years ago speaking against this and still do. I never claimed to know everything and, if anything, I acknowledge that I lack in many areas, which is why I am where I am.

 

[BoberFett]

I don't claim to understand capital markets, but as I said I understand complex systems and how changing one variable can be volatile. That's why I don't trust the federal government to lead us out of any depression as they're who caused it in the first place with their artificially low rates and easy money.

But I'll admit, that's the first time you've ever claimed not to know everything. Until now you've claimed omnipotence when it comes to the market.

 

[LegendKiller]

Originally posted by: BoberFett
I don't claim to understand capital markets, but as I said I understand complex systems and how changing one variable can be volatile. That's why I don't trust the federal government to lead us out of any depression as they're who caused it in the first place with their artificially low rates and easy money.

But I'll admit, that's the first time you've ever claimed not to know everything. Until now you've claimed omnipotence when it comes to the market.

I'd love for you to come up with one example where I claimed that. I'll give you $100 bucks if you can.

 

[dmcowen674]

Yum, the popcorn is good

 

[CME25]

Originally posted by: Craig234
Another huge oversimplification of the OP is that this whole 'free market' idea is a myth - when the downturn has a major factor of harmful behavior that regulation can but did not prevent, the issue is that regulation, not broad generalizations about the market 'correcting its problems' as if they were simply 'market cycles'.

For example, remove the laws on insider trading, and watch the reulsting chaos and harm and profit for some and losses for others, and try to explain it in terms of 'market cycles'.

You'd be wasting your time - it's simply an iissue, like credit default swaps and other behaviors, of what the market is permitted to do.

The actual market cycles are another matter and don't seem to me to be the sort of thing that's behind the big crashes.

I agree with you from what I've learned so far. There's a gray area, somewhere between socialist and complete free-market economics; the question is, how do we figure out that gray area? The trial-and-error of the past ~140 years has not been pain-free...

I think regulation is the key. Not necessarily more regulation, not necessarily less regulation, but smarter regulation. I think asswipes who spend more time manipulating their financial statements than actually competing in the market deserve to fail. But taking down honest investors and creditors is what I think the OCC and FRB are trying to avoid. I don't know that they've made the best choices in the last three months, but hindsight is 20/20.

 

[CME25]

Originally posted by: Jhhnn
What's missing from these discussions is any recognition of the simple fact that New Deal rules of banking and finance effectively prevented the kind of systemic collapse that has prompted, demanded govt intervention. The financial sector was segmented- Insurance, commercial banking, savings and loan, investment banking and stock brokerages were separate entities, and insurance, commercial banking and S&L's were regulated at a state and federal level. Derivatives were basically non-existent, particularly the more exotic and riskier varieties. Corporate entities were much smaller and more numerous, and what are essentially conflicts of interest in today's system were rendered impossible by the structure of the system itself.

In listening to the advocates of free market consolidation and convergence, we set ourselves up for this kind of crisis. It's not that entities like Citi were too big to fail- they were too big to be allowed to fail, and the few existing are so interdependent that the failure of one basically dictates the failure of them all...

As all of this shakes out, I hope we have the wisdom to force the wheeler-dealers back into a system and a structure that will reflect the need to prevent this kind of stuff in the future, where govt constructs the framework in such a way that further interventions aren't necessary on the scale demanded atm. After the fact rescue efforts are always more difficult than the sort of controls that prevent the need for rescue. Yeh, sure, it limits "growth" to some degree, but not all growth is good. Sometimes that growth turns out to be cancerous...


...Free market capitalism is essentially a myth, bamacre. It never existed, never will. Commerce has always depended on the existence of semi-autonomous authority, if for no reason other than to prevent the strong simply from taking from the weak.

But that doesn't mean the whole concept hasn't been exploited as convenient to power holders, or that existing economic structures haven't been gamed in the name of free market capitalism. That's what happened with the GSE's- rather than following their usual protocols wrt home loans, they were forced by the Bush Admin to act as conduits and guarantors for other people's loans, loans that were flimflams coming and going. Not that the management objected- they sucked down huge bonuses even as they rode their mounts, the GSE's, right into the dirt.

The whole notion of deregulated capitalism depends on the idea of enlightened self interest, after all, with the enlightenment part being largely absent from the Reagan era forward, at least among those responsible for the current situation. They didn't convince us to deregulate so that we could do better, but rather so that they could do better. When it all turned into a looting spree opportunity, perfectly legal, of course, they weren't about to pass it up... hell, they went to a lot of trouble to set it up.

Okay, so ignore my previous post. That's about as close of an answer as I could get. Thanks, great posts!

 

[ModerateRepZero]

I agree with Jhh. If anything, what we have learned is that the "efficient market hypothesis" and the ability of the economy to "self-regulate", "self-police" itself is a JOKE. The pressure and willingness to take risks for greater profit and bigger bonuses, the constant short-term versus long-term focus of business, the lobbying/bullying/cajoling to preserve the status quo, all that as WELL as political policies and political pressure led to the meltdown.

The Wall-Street/Big business mentality has not really changed from what I've read about the S&L scandal, Milken/Boesky/Siegel (chronicled in Den of Thieves), Enron/Worldcom etc. Greed, pressure and focus for short-term profits, hubris, and attempts at muzzling regulators, doubters, dissenters were recurring characteristics. I don't believe that most people in business are inherently immoral or sleazy, but without regulation AND adequate enforcement of said laws, there's plenty of pressure and little downside to abetting or participating in unethical and reckless if not illegal behavior.

There is, as others have pointed out, a DIFFERENCE between centralized state planning, and government involvement in the economy. The Federal Reserve was created PRECISELY to insulate the government from such centralized/socialistic planning. Now, it certainly is true that the bailout and other Treasury/Reserve actions have been very sweeping if not unprecedented. But the choice is between preventing/limiting a depression or overcompensating and risking inflation. So far the Reserve has chosen the latter.

 

[bamacre]

Originally posted by: ModerateRepZero
I agree with Jhh. If anything, what we have learned is that the "efficient market hypothesis" and the ability of the economy to "self-regulate", "self-police" itself is a JOKE.

Then you haven't learned a damn thing.

 

[LegendKiller]

Originally posted by: bamacre

Originally posted by: ModerateRepZero
I agree with Jhh. If anything, what we have learned is that the "efficient market hypothesis" and the ability of the economy to "self-regulate", "self-police" itself is a JOKE.

Then you haven't learned a damn thing.

What's your education and work experience in finance and economics, o wizened veteran of YouTube?

I'd love for you to impart some learned wisdom on us unwashed cretins.

 

[bamacre]

Originally posted by: LegendKiller

Originally posted by: bamacre

Originally posted by: ModerateRepZero
I agree with Jhh. If anything, what we have learned is that the "efficient market hypothesis" and the ability of the economy to "self-regulate", "self-police" itself is a JOKE.

Then you haven't learned a damn thing.

What's your education and work experience in finance and economics, o wizened veteran of YouTube?

I'd love for you to impart some learned wisdom on us unwashed cretins.

:roll:

 

[LegendKiller]

Originally posted by: bamacre

Originally posted by: LegendKiller

Originally posted by: bamacre

Originally posted by: ModerateRepZero
I agree with Jhh. If anything, what we have learned is that the "efficient market hypothesis" and the ability of the economy to "self-regulate", "self-police" itself is a JOKE.

Then you haven't learned a damn thing.

What's your education and work experience in finance and economics, o wizened veteran of YouTube?

I'd love for you to impart some learned wisdom on us unwashed cretins.

:roll:

How would you deal with this situation? Really, I'd love to see an in-depth analysis of your great ideas. How would you deal with the lack of credit, liquidity, and capital in a non-fed situation starting today? How would you prevent an utter collapse of business? How would you prevent a global depression that would probably last 5-10 years, without providing *any* economic aid provided by the government?

I really love libertopians and their grandiose ideas on how to deal with things. It really reminds me of most economics majors who think that everything can derived from formulas, or the same dumbasses at the rating agencies who never had depreciation built into their default models. You live in a vacuum of theory, not practicality.

 

[BoberFett]

It amuses me every time you use the word libertopian. It means you have nothing of value to say.

Collapses cannot be prevented. Government can only choose what collapses. They're going to prevent collapse of the banking and auto industries at the expense of something else. Your foolish belief that you can create value from nothing is the same thing that got us into this mess in the first place. Forcing liquidity into a bubble. That's pure genius. :roll:

It's going to be funny in a couple years when things have collapsed anyway. I look forward to your excuses.

 

[LegendKiller]

Originally posted by: BoberFett
It amuses me every time you use the word libertopian. It means you have nothing of value to say.

Collapses cannot be prevented. Government can only choose what collapses. They're going to prevent collapse of the banking and auto industries at the expense of something else. Your foolish belief that you can create value from nothing is the same thing that got us into this mess in the first place. Forcing liquidity into a bubble. That's pure genius. :roll:

It's going to be funny in a couple years when things have collapsed anyway. I look forward to your excuses.

No, when I say that it sums up a whole paragraph into one word.

There's preventing a collapse and trying to guide it into a safe landing. After my 2nd knee surgery I wouldn't give up downhill skiing. One thing I learned is that preventing a fall completely contorts your body and leads to more knee injuries. However, guiding my body down into a smooth landing prevents injury in both ways.

 

[mAdMaLuDaWg]

This whole collapse did not happen because of free-market capitalism but rather "political-crony" capitalism. Whenever government interferes with the market it hampers or hinders the safeguards that the market-place provides. In a free-market capitalistic system, there is a constant tug between the desire to make more money and the risk of losing money. These two forces keep excessive risk out of the market. Now what happens if you remove/cushion the fear portion out of the equation. Well you have massive-unwarranted leveraging against assets.

Case in point, in the mid 90's a fellow by the name of Richard Syron from the Boston Fed issued a report that laid out a plan to increase homeownership. One of the many recommendations in the report was to aggressively target low-income workers with mortgages. The report, for some reason, came to the conclusion that low-income workers do a better job of paying off their mortgages than middle-income folks. In 2005, Freddie Mac aggressively starts marketing subprime loans. Guess who just became in charge of Freddie Mac... surprise, suprise... Mr. Syron.

People tend to blame the exotic instruments for the mess but the fact is that they were functioning like they were supposed to. The problem was that they were being over-leveraged against a quasi-government backed security so investors went on a binge and created credit default swaps upon credit default swaps against credit default swaps against a government backed subprime based Mortgage backed security. Again we come back to the basic market forces: greed and the risk of losing money. The government interfered in the market and took fear out of the equation and hence investors went on a binge and overleveraged themselves creating a bubble.

Sadly, the bailout is just propping up this system of this phony-capitalistic system we have. The government is basically instructing the banks to continue to overleverage themselves by handing out more and more credit. Which in-turn encourages people to go out and spend the credit they have, which in turn causes mal-investment which will eventually lead to another bubble... repeat ad-infinitum. The day of reckoning for this phony-credit based economy is near and the more the government encourages this reckless behavior in the market, the worst the problem is going to become. What needs to happen is for the market to correct itself... sure there will be pain but it will force the banks to make their lending standards stronger and hence force the American consumer to spend within its means.

 

[LegendKiller]

Originally posted by: mAdMaLuDaWg
This whole collapse did not happen because of free-market capitalism but rather "political-crony" capitalism. Whenever government interferes with the market it hampers or hinders the safeguards that the market-place provides. In a free-market capitalistic system, there is a constant tug between the desire to make more money and the risk of losing money. These two forces keep excessive risk out of the market. Now what happens if you remove/cushion the fear portion out of the equation. Well you have massive-unwarranted leveraging against assets.

Case in point, in the mid 90's a fellow by the name of Richard Syron from the Boston Fed issued a report that laid out a plan to increase homeownership. One of the many recommendations in the report was to aggressively target low-income workers with mortgages. The report, for some reason, came to the conclusion that low-income workers do a better job of paying off their mortgages than middle-income folks. In 2005, Freddie Mac aggressively starts marketing subprime loans. Guess who just became in charge of Freddie Mac... surprise, suprise... Mr. Syron.

People tend to blame the exotic instruments for the mess but the fact is that they were functioning like they were supposed to. The problem was that they were being over-leveraged against a quasi-government backed security so investors went on a binge and created credit default swaps upon credit default swaps against credit default swaps against a government backed subprime based Mortgage backed security. Again we come back to the basic market forces: greed and the risk of losing money. The government interfered in the market and took fear out of the equation and hence investors went on a binge and overleveraged themselves creating a bubble.

Sadly, the bailout is just propping up this system of this phony-capitalistic system we have. The government is basically instructing the banks to continue to overleverage themselves by handing out more and more credit. Which in-turn encourages people to go out and spend the credit they have, which in turn causes mal-investment which will eventually lead to another bubble... repeat ad-infinitum. The day of reckoning for this phony-credit based economy is near and the more the government encourages this reckless behavior in the market, the worst the problem is going to become. What needs to happen is for the market to correct itself... sure there will be pain but it will force the banks to make their lending standards stronger and hence force the American consumer to spend within its means.

Please, the "free market" is a joke to a certain extent. The government needs to intervene, in many cases, because the abusiveness of the system to those without capital and without the ability to defend themselves.

As far as the banks keeping levered, the leverage ratio for almost all of the banks have come down from 30-40x to 10-15x.