Skip to main content

View Diary: Iceland Solves Banking Crisis by Indicting Bankers, Forcing Mortgage Relief (191 comments)

Comment Preferences

  •  Losing your job isn't the same as going to jail (4+ / 0-)
    Recommended by:
    elwior, Spoc42, Dr Stankus, JesseCW

    And lots of the folks that caused the crisis but lost their job still ended up with lots of money from their previous bonuses based on one-way bets.

    And like Paul Krugman, I think there were definitely illegal activities that call for jail time. That is not to say they were the root of the financial crisis; deregulation was a bigger part, but illegal actions contributed. And of course the bankers had an inordinate amount of influence over the political process, such that they were able to make shady practices legal.

    Could you expand on what other different elements should be exploited? All you say there is that we had to bail out the banks, and I agree with that.

    •  Well, we don't put people in jail when they don't (0+ / 0-)

      break laws. There was not rampant law breaking. Some, sure. But if you take away all of the law breaking that happened, you still have a financial crisis that looks very similar to what played out.

      And let's be honest here, it wasn't "deregulation" that caused the crisis. It was regulation. It was government guarantee of sub-prime loans. That was the regulation that enabled the banks to act so cavalier in their lending practices. When your pay is based on volume of loans without regard to the performance of those loans, you make shitty loans. Incentives drive behavior, and regulations created incentives for banks to get very rich by being irresponsible in their lending. And it wasn't even so much irresponsibility in most cases. Lending to these people was a new idea without a recent test case.

      As far as things to exploit in our financial crisis, I think we're doing a pretty good job. Because we're the world's reserve currency, we could perform quantitative easing without a severe erosion in living standards. That has worked out well. Had Iceland tried that, they would have had a much harder time. Next, since our problems began in housing, the government's buying of toxic assets from banks to create a market turned out well. Mortgage securities should be pretty safe. Housing prices are historically very stable. As long as you can cut out the bubble-building incentives, they do have a lot of value. So I think that was executed fairly well.

      •  heh (5+ / 0-)

        we could have made whole all the underwater real estate in this country for about 2X TARP. Instead we paid out much more so that these assholes could continue to play their derivative games.

        And this:

        And let's be honest here, it wasn't "deregulation" that caused the crisis. It was regulation. It was government guarantee of sub-prime loans. That was the regulation that enabled the banks to act so cavalier in their lending practices. When your pay is based on volume of loans without regard to the performance of those loans, you make shitty loans. Incentives drive behavior, and regulations created incentives for banks to get very rich by being irresponsible in their lending. And it wasn't even so much irresponsibility in most cases. Lending to these people was a new idea without a recent test case.
        Might be the dumbest thing I have ever read.
      •  You act as if the bankers that made these (4+ / 0-)
        Recommended by:
        Dr Stankus, JesseCW, BradyB, atana

        shitty loans had nothing to do with the government deciding to guaranty them, as if there was no connection between the politicians who made these guarantees and the bankers who benefitted from them, as if we're all operating in a political vacuum.

        Your statement that,

        When your pay is based on volume of loans without regard to the performance of those loans, you make shitty loans
        also suggests that for these elite, high-minded banks to make loans without regard to the performance of the loans was not only legal but business as usual. Aren't they in any way responsible to their depositors, their shareholders, their investors?

        Or is this so-called banking system just plain and simple racketeering, with the admonition, "let the buyer beware" used as a legal cover?

      •  Talking about honesty (4+ / 0-)
        Recommended by:
        Eric Blair, BradyB, atana, Linda Wood
        It was government guarantee of sub-prime loans.
        It's a right wing talking point and a canard that has been widely disproved in financial circles.

        You know, if you want to talk about honesty, what caused the financial meltdown is a very complex subject and millions of pages have been written about it. But what unraveled the crisis is not hard to understand and it most definitely was not the government guaranteed sub-prime loans. The AIG underwriting of derivatives and how those derivatives where being accounted for by the big banks and used to misrepresent their balance sheets played an immensely, not bigger, but immensely bigger role than anything Fanny and Freddy had anything to do with it. Just J.P. Morgan alone was counter party to $45 trillion, not billion, trillion with a t, as in three times the Gross Domestic Product of the U.S., in derivatives. Guess who was insuring those? Guess who couldn't make good on all that insurance? Guess who called derivatives "financial weapons of mass destruction"? Who was leveraging their assets 30 and up to 45 times? Fanny and Freddie? I don't think so.

        Look, if you are going to ask people to be honest you should start by being honest yourself. Perhaps it is just ignorance. But ultimately where all of it really began was with Alan Greenspan, by his own admission, refusing to enforce regulations that were on the books. This refusal to regulate, following his Randian dogma, allowed all this to happen. He admitted as much in front of Congress when he said I was wrong, you can hear him in his own voice.

        So to make the claim

        It was government guarantee of sub-prime loans.
        Is dishonest to say the least. On the other hand greed played the central role in this whole debacle.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site