[JohnInIndy]

Here's a modest proposal, anyone who claims that a particular president or party in congress caused the financial crisis must point to a specific law that party passed or blocked that was a cause.

If passing a bill by reconciliation renders one a "little Hitler" do we need to start with Nuremberg trials for those who passed the tax cuts which are about to expire?

I didn't say he WAS Hitler. It has the word "like" as just a comparison about this particular action.

[GeneV]

I didn't say he WAS Hitler. It has the word "like" as just a comparison about this particular action.

The did something like Hitler?

So they invaded another country? Exterminated Slavs and Jews? Burned down the legislature? Killed themselves in a bunker?

[jolepp]

...
Some can't accept that people outside governmenbt can cause serious problems, and that we have laws and even crimes because some conduct that people choose is harmful.
...

I suppose the current crisis should drive home the point that leaving things to be sorted out by "the market" can lead to other than optimal outcomes.

[Ratmagiclady]

I suppose the current crisis should drive home the point that leaving things to be sorted out by "the market" can lead to other than optimal outcomes.

You can say that again.

If we're very lucky, there'll be history classes in the next lifetime, from which we'll look back and say of present-day 'us,' "Well, duh. What were they thinking? They should have known better than that!"

I've always found that one of the great ironies of history... class.

[magkelly]

Oh please, it IS Bush who is directly responsible for getting us into this mess. You can't start and then wage a war for years, spend countless millions every DAY and not bleed the country dry. If he hadn't decided to go to war this country wouldn't be hurting half so much financially speaking. This country won't recover financially until we stop making war, period.

Obama pulled people out of Iraq, whoopee. We're still sending millions there and also to Afghanistan. You want to know where all that national debt came from? Well, it's hardly a secret. Weapons cost money, paying soldiers to wage war costs money, LOTS of money.

America's habit of playing "big brother" to the world is killing our economy and affecting the economy world wide. Pull us out of these conflicts, cut off foreign aid for a few years, and outlaw outsourcing and curtail immigration while we recoup and within a decade or two you'd see the American economy rebound all right.

It's a simple matter of more money going out than we're taking in, too many people coming in for this country to support, and too much work being done outside our borders instead of inside them.

[JohnInIndy]

The did something like Hitler?

So they invaded another country? Exterminated Slavs and Jews? Burned down the legislature? Killed themselves in a bunker?

Like Republicans are the "enemy" instead of the opponent? Or that Republicans are "hostage takers" or "terrorists"?

I made the comparison. A private individual. But it's ok when the CIC says crap like that nationally? So long as hes a liberal anyway.

And Magkelly, you forget or don't know what really got us into this crisis. This isn't something that happens in just one term. This has been building. Like a snowball rolling down a steep steep hill. It started during Carter festered, fueled by Clinton and ACORN forcing banks to loan to those who could never repay, and also by Bush wanting everyone to own a house. Sorry chum, some people aren't meant to own a house.

And if Clinton had taken care of the Bin Laden problem nothing would have happened on 9-11-01 yada yada yada

[Coeurdechene]

If passing a bill by reconciliation renders one a "little Hitler" do we need to start with Nuremberg trials for those who passed the tax cuts which are about to expire?

Bush (and company ie Cheney,Rumspheld,...), Aznar, and Blair SHOULD be judged for breaking international law, they should be judged for all the human right's violations (like the hijacks, torutre and detention without guarantees nor trial for several years...)...that will never happen since the Geneva penal court is only for the defeated (not for the war criminals..the states funded the ODESSA network and recruited several famous war criminals for the cold war back in the 50s...).

It's a simple matter of more money going out than we're taking in, too many people coming in for this country to support, and too much work being done outside our borders instead of inside them.

The argument about immigration is incorrect, immigrants pay taxes (even if in some cases it's just the indirect ones..) produce wealth and take the jobs the nationals are not willing to do..immigrants are necessary in a postindustrial society..and since western societies are not industrial anymore i don't think it's population would be willing to return to the industrial type of work and it's condition, having immigrants lets it's population focus on formation, management and other non-manual work...you should be thankfull that immigrants are there and you can focus on other activities...
(Maybe if we forced bankers and stockbrockers altogether with middle and upper management to work in the industrial sector you would be able to come back to the 50s industrial distopia..XD
maybe we would flourish in a new way without having to pay for their foolish mistakesXD.)

[JohnInIndy]

The argument about immigration is incorrect, immigrants pay taxes (even if in some cases it's just the indirect ones..) produce wealth and take the jobs the nationals are not willing to do..immigrants are necessary in a postindustrial society..and since western societies are not industrial anymore i don't think it's population would be willing to return to the industrial type of work and it's condition, having immigrants lets it's population focus on formation, management and other non-manual work...you should be thankfull that immigrants are there and you can focus on other activities...
(Maybe if we forced bankers and stockbrockers altogether with middle and upper management to work in the industrial sector you would be able to come back to the 50s industrial distopia..XD
maybe we would flourish in a new way without having to pay for their foolish mistakesXD.)

Actually that's wrong. And what happens is that since they are illegal and live in a shadow culture most are considered subs and if they were legal would be filing quarterly taxes. They don't. Another effect of the illegals is they are willing to work for less. All that does is drive down the salaries in that field.

[GeneV]

Like Republicans are the "enemy" instead of the opponent? Or that Republicans are "hostage takers" or "terrorists"?

I made the comparison. A private individual. But it's ok when the CIC says crap like that nationally? So long as hes a liberal anyway.

I can explain to you why what the Republicans are doing is like taking hostages. They are threatening to hold up an unemployment bill and withhold subsistence to the unemployed in order to get additional tax cuts for the rich. Agree or disagree with the policy, there is a parallel in the tactic.

I haven't heard any attempt at a rationale for comparing the Democrats to Hitler.

[Nesster]

And Magkelly, you forget or don't know what really got us into this crisis. This isn't something that happens in just one term. This has been building. Like a snowball rolling down a steep steep hill. It started during Carter festered, fueled by Clinton and ACORN forcing banks to loan to those who could never repay, and also by Bush wanting everyone to own a house. Sorry chum, some people aren't meant to own a house.

I'd written about this on another thread, which I don't think is productive for me to find right now... Essentially, what I see is that government, under all these administrations, made policy decisions that at the time did not have the capability of driving us to such a huge bubble and crisis. This is just talking about the mortage mess, not other laws or administrative items that may have contributed as well. What happened was that the private sector created new products and markets, and then, in the absence of both internal and external controls, mushroomed into the bubble, where everyone involved was acting out of (short term) best self interest, and as it was a nice profit all around, very few red flags were raised. That those who are supposed to have oversight failed to either see it or to take any action, for any reason, bear responsibility. This list would include the CEO and senior management, including the risk officiers, of all the companies involved in the chain; Barney Frank and the Bush administration; and individual home buyers.

But the fact remains: government policy and law set up unintended consequence as the financial firms engineered a massive profit machine that grew unchecked and little understood by anyone involved.

[Coeurdechene]

illegals is they are willing to work for less. All that does is drive down the salaries in that field

That may be true..but they are just illegal because of the complicated foreigner system..wich has been designed that way to provide cheap labour to some industries..
No one wants to live in fear of being deported, abused or exploited..since they got legal problems, employers exploit them blackmailing them they, de facto lose their rights...that's not the immigrants fault but the policymakers fault..(and immigration policy is made that way deliberately.)
Here in Spain they asked residence to give working permits and to give residence they asked for working permit..so the immigrants had to come up with awkward ways to prove the "arraigo" so they could apply for a residence permit...while all this was going on they have to work without contract (that means in the end without sindical or laboral rights..) to earn their living..That money is reinvested in rents and food that way generating income for the state and the industry...
It's biased and uncosiderate to blame the inmigrants for the situation in wich they dwell (in the first place because we, western societies, have intervened in their homeland politics and have taken lots of their countries resources...it's, in a big part, our fault that they have to leave their countries..)

[Ratmagiclady]

Actually that's wrong. And what happens is that since they are illegal and live in a shadow culture most are considered subs and if they were legal would be filing quarterly taxes. They don't. Another effect of the illegals is they are willing to work for less. All that does is drive down the salaries in that field.

Actually, they're 'willing to work for less' *because* of that 'free market' thing. And they *pay* plenty, even if not under a legal identity that still has pay taken out, or if the employer pockets the difference in pay that *would* be paying their taxes and/or benefits and/or documentation for immigration eligibility, etc.

That the rich don't want to pay.

To get the labor

To make the money

They don't want to pay taxes on.

If you add it up there's not much difference, as far as the tax and employment rolls are concerned. Just cause it may be a better deal for some immigrants than where they came from doesn't mean it's a good deal. For anyone. Living wage laws would take away the incentive to hire these illegals you're so worried about and make it what Americans consider 'a living wage.'

And that'd get the economy moving, just maybe in directions some ultra-rich don't like.

[Nesster]

As for the other major cause of the 2008 crisis, Credit Default Swaps, I've also written about before on another thread.

First, what's being talked about now:

Crisis Prevention: Trying to Tame Derivatives Markets - TheFiscalTimes.com

Congress tasked the Commodity Futures Trading Commission with shedding light on the opaque derivatives markets and bringing the majority of market activity -- possibly 80 or 90 percent -- into clearinghouses and centralized trading facilities. At stake is which market participants will profit and the cost of the new rules. Derivatives, financial contracts whose value is based on the price of an underlying asset such as a commodity, interest rate or currency, have been wildly profitable for Wall Street in recent years. The five largest U.S. dealers reaped an estimated $28 billion in 2009, according to an analysis by Bloomberg News.

The CFTC has received thousands of comments on its 30 separate rulemakings ordered by last summer's Dodd-Frank financial regulatory overhaul, with everyone from J.P. Morgan Chase and the Chicago Mercantile Exchange to the Air Transport Association and Cargill weighing in on requirements for registration, reporting, margin, capital, ownership of centralized institutions and preventing conflicts of interest. Big corporations and House Republicans want to preserve the ability to innovate, which caused OTC derivatives to explode in volume over the last two decades. Consumer advocates want the commission to open up the complex market to avoid a repeat of the 2008 financial crisis, when uncertainty about which institutions were exposed to losses caused capital markets to freeze up and threatened a chain reaction of bank failures. Big commercial interests want to avoid becoming subject to requirements aimed at derivatives dealers and startup trading platforms aim to compete with the established dealers.

---


The commission is proposing new rules almost exactly a decade after Congress blocked it from regulating OTC derivatives in the Commodity Futures Modernization Act of 2000. Futures and OTC derivatives are similar financial contracts, but derivatives have been privately negotiated between two institutions rather than trading on an exchange with terms and prices that everyone can see. The current regulatory effort could transform the derivatives markets into quasi-futures markets, which are closely regulated and whose lobbyists have argued for years that big banks unfairly escape regulation and its associated costs through OTC derivatives.

So, if we're tracing blame here, what was this Commodity Futures Modernization Act of 2000?

Commodity Futures Modernization Act of 2000 - Wikipedia, the free encyclopedia

On September 14, 2000, the SEC and CFTC announced they had agreed on a joint regulation approach for “security futures.” Senior Treasury Department officials hailed the “historic agreement” as eliminating “the major obstacles to forming a consensus bill.” [52] At the same time, Senator Phil Gramm (R-TX), the Chair of the Senate Banking Committee, was quoted as insisting that any bill brought to the Senate Floor would need to be expanded to include prohibitions on SEC regulation of the swaps market.[53]

Democratic members of Congress later described a period in late September through early October during which they were excluded from negotiations over reconciling the three committee versions of H.R. 4541, followed by involvement in reaching an acceptable compromise that left some Republicans unhappy with the final version of the bill and some Democrats upset over the “process”, particularly the involvement of Sen. Gramm and House Republican leadership in the negotiations.[54] Despite indications no agreement would be reached, on October 19, 2000, the White House announced its “strong support” for the version of H.R. 4541 scheduled to reach the House Floor that day.[55] The House approved H.R. 4541 in a 377-4 vote.[56]

As so passed by the House, H.R. 4541 contained, in Title I, the language concerning OTC derivatives that became the source for Title I of the CFMA and, in Title II, the language regulating “security futures” that became the source for Title II of the CFMA. Titles III and IV would be added when the CFMA was enacted into law two months later.[57]

From H.R. 4541 to the CFMA
After the House passed H.R. 4541, press reports indicated Sen. Gramm was blocking Senate action based on his continued insistence that the bill be expanded to prevent the SEC from regulating swaps, and the desire to broaden the protections against CFTC regulation for “bank products.”[58] Nevertheless, with Congress adjourned for the 2000 elections, but scheduled to return for a “lame duck” session, Treasury Secretary Summers “urged” Congress to move forward with legislation on OTC derivatives based on the “extraordinary bipartisan consensus this year on these very complex issues.”.[59]

When Congress returned into session for two days in mid-November, the sponsor of H.R. 4541, Representative Thomas Ewing (R-IL), described Senator Gramm as the “one man” blocking Senate passage of H.R. 4541.[60] Senator Richard G. Lugar (R-IN), the sponsor of S. 2697, was reported to be considering forcing H.R. 4541 to the Senate Floor against Senator Gramm’s objections.[61]

After Congress returned into session on December 4, 2000, there were reports Senator Gramm and the Treasury Department were exchanging proposed language to deal with the issues raised by Sen. Gramm, followed by a report those negotiations had reached an impasse.[62] On December 14, however, the Treasury Department announced agreement had been reached the night before and urged Congress to enact into law the agreed upon language.[63]

The “compromise language” was introduced in the House on December 14, 2000, as H.R. 5660.[64] The same language was introduced in the Senate on December 15, 2000 as S. 3283.[65] The Senate and House conference that was called to reconcile differences in H.R. 4577 appropriations adopted the “compromise language” by incorporating H.R. 5660 (the “CFMA”) into H.R. 4577, which was titled “Consolidated Appropriations Act for FY 2001”.[66] The House passed the Conference Report and, therefore, H.R. 4577 in a vote of 292-60.[67] The Senate passed the Conference Report, and therefore H.R. 4577, by “unanimous consent.”[68] The Chairs and Ranking members of each of the five Congressional Committees that considered H.R. 4541 or S. 2697 supported, or entered into the Congressional Record statements in support of, the CFMA. The PWG issued letters expressing the unanimous support of each of its four members for the CFMA.[69] H.R. 4577, including H.R. 5660, was signed into law by President Clinton on December 21, 2000.[70]

Passed by a Republican congress and signed by Clinton, with specific fateful input from Senator Phil Gramm (R-TX), the Chair of the Senate Banking Committee.

However, again I sound the same theme: what was portrayed as a limited but useful innovation - the ability to insure or hedge against default risk in the bond market, thus increasing liquidity and reducing overall risk - soon after morphed into a huge market used for engineering profit with little connection to the original intent.

That is, these CDSs as originally thought up were used by issuers or buyers of debt to hedge default risk and allow lower borrowing costs. But as these were profitable instruments, in the Wall Street culture they became an independent product, used by non-stakeholders to place bets on companies and debt. And AIG was making a mint along the way. It was this uncontolled growth of the market - again in the absence of both internal and external controls - that hugely magnified the '08 crisis.

The moral of the story: the government and the public must be careful when to trust private enterprise, especially the financial industry, when it insists on the need to do things away from regulation or public markets. And that whatever the immediate, legitimate, need, someone will figure out how to misuse the thing to generate profits.