Comment Re:Government Involvement? (Score 1) 427
I am using the term regulation in the sense of enacting and enforcing legislation specific to a particular industry. Explicit collusion is already illegal in the United States and isn't going to require some new government entity. The Internet is not owned by the people and should not be treated as a public service, and if the government is dictating how a private company should run it's business with no regard to profitability then it will be a self fulfilling prophecy. You will have nobody to complain to when the government starts prioritizing traffic on behalf of special interest groups.
The entire American financial system is far from a free market. My original argument was that the financial crisis is not due to an unregulated free market. No objective postmortem will ever come to the conclusion that free market capitalism caused this crisis because it is a purely academic argument.
There is a disconnect between risk and consequences across America. You used to have to invest significant capital in property up front, and a downturn in housing prices was unlikely to wipe out the equity already built into your house. Government regulation obviously did not prevent institutions from making subprime loans, and when housing prices started to decline people had no incentive to honor their debts. The statement "most CRA loans were responsibly made" means nothing and is not backed up by any kind of number. The whole purpose of the CRA is to force a bank to give loans it otherwise would not give due to credit concerns. You think these people are still paying their mortgages when their principle is more than the value of the house?
When the government starts dictating how institutions should behave you have a bunch of crooked politicians in Washington imposing their will in domains they have absolutely no knowledge of. There was no risk management over at Fannie and Freddie, and why would there be when the government gave them an implicit guarantee against their risk? They were free to focus on cooking their books to make shareholders happy. You cannot downplay their involvement in the crisis regardless of when they got involved. When institutions don't worry about their counter party risk then they should be allowed to fold and the shareholders get stuck with the bill. When Enron went down their executives were burned at the stake. Why hasn't this happened with Freddie and Fannie? The consequences of their failure are much more severe.
The entire American financial system is far from a free market. My original argument was that the financial crisis is not due to an unregulated free market. No objective postmortem will ever come to the conclusion that free market capitalism caused this crisis because it is a purely academic argument.
There is a disconnect between risk and consequences across America. You used to have to invest significant capital in property up front, and a downturn in housing prices was unlikely to wipe out the equity already built into your house. Government regulation obviously did not prevent institutions from making subprime loans, and when housing prices started to decline people had no incentive to honor their debts. The statement "most CRA loans were responsibly made" means nothing and is not backed up by any kind of number. The whole purpose of the CRA is to force a bank to give loans it otherwise would not give due to credit concerns. You think these people are still paying their mortgages when their principle is more than the value of the house?
When the government starts dictating how institutions should behave you have a bunch of crooked politicians in Washington imposing their will in domains they have absolutely no knowledge of. There was no risk management over at Fannie and Freddie, and why would there be when the government gave them an implicit guarantee against their risk? They were free to focus on cooking their books to make shareholders happy. You cannot downplay their involvement in the crisis regardless of when they got involved. When institutions don't worry about their counter party risk then they should be allowed to fold and the shareholders get stuck with the bill. When Enron went down their executives were burned at the stake. Why hasn't this happened with Freddie and Fannie? The consequences of their failure are much more severe.
