Repealing Glass-Steagall got government out of the market, and was a huge mistake.

That's like blaming the water for a flood when the guy up the river dynamited the dam. Who repealed Glass-Steagall? AIG? The "banks"? Nope. It was government - who had a specific objective in doing so. That is government interference in the market.

The video gets that one thing right. After the Great Depression the imposition of Glass Steagall created an environment where the banking system couldn't go nuts. That is a great example of GOOD government. Government is fine when it sets up a set of basic, fair rules and then just stays out of everyone's business and lets the market run itself.

But leftists (both in the GOP and Democrat party) have been jonesing for more and more "social engineering" power for a long time. They look out on the world and see 'unfairness' (as they define it) and want to use the power of government to change the system into something they think is better. But as with all tyrants and meddlers in misery - they forget (or choose to ignore) the sad history that is the result of such thinking. Poverty, oppression, and death.

Government constantly interfering in the private sector has created an environment of uncertainty and patronage where businesses are more beholden to whoever holds political office than to their customers. If you want to stop the 'offenses' of Wall Street - then you have to slap down government first. Reduce thier size, scope, power, influence, and ability to interfere. When government loses power, it will flow back to people who have the ability to control the market with their buying dollars.

Repealing Glass-Steagall got government out of the market, and was a huge mistake.
>> ^Winstonfield_Pennypacker:

Repealing Glass-Steagall was a horrible mistake.
...
Get the government OUT of the market.

Well - the video gets one thing right. Repealing Glass-Steagall was a horrible mistake. Where they get it wrong is that it was not 'banks' or 'Wall Street' that was pushing for it.

Glass Stegall's repeal is a long story that begins with Jimmy Carter and ended with Bill Clinton. They leaned hard on banks because they wanted more poor folks owning houses. But the dang awful truth was that the poor folks just couldn't actually AFFORD to pay for those homes, and banks weren't in the business of giving them houses for nothing.

So Congress (with both the GOP and Democrats) began pushing for a change. It is very true that there were companies (notably AIG) who also pushed for this because they saw a way they could profit from it. But "banks" did not want this at all. They were forced into it. Once the housing bubble started they had to start in with the sub-primes just to compete but a lot of them knew it was very risky. But for a while it seemed to be working and everyone was making money hand over fist. And it has to be said also that CONSUMERS weren't exactly ethical either. Many people bought homes they knew they couldn't pay for just to make a quick buck.

That's the history and fact. Glass Steagall didn't go away because of evil banks. It went away because of governmetn social engineering. So bring it back already! Oh - yeah - that would interfere with Obama's CURRENT PRACTICE of forcing banks to give away more loans in minority communities...

http://www.investors.com/NewsAndAnalysis/Article/577794/201107081851/DOJ-Begins-Bank-Witch-Hunt.aspx

The real problem is government. Get the government OUT of the market. Establish a simple set of basic, fair guidelines and then tell government to get out of everyone's way. Glass Steagall would have never been repealed without a corrupt government pushing for it.

@NetRunner

I think the difference in our concept of what's going on is that my understanding is that commercial banks can make a reserve deposit at any Fed branch and then make loans against that. From what I can tell, there isn't any math done like you're describing. Maybe if you want to make a new bank or long ago when some of these banks were created there was math like that, but there isn't anymore. There is simply a minimum number required to have on reserve deposit or in vault cash compared to how much you have loaned out. This is all not to mention that there are types of deposits which have exceptions to the reserve requirement. That alone makes sure banks are loaning more than they have (if they want to take the increased risk).

http://en.wikipedia.org/wiki/Reserve_requirement#United_States

I mean, if putting $100 in a Fed reserve bank and loaning out $900 based on someone's promise to pay isn't creating money, I don't know what is. You don't have to start out with $1000 to make the $900 loan once you're already a commercial bank. That's the point. If you make money on some investment, you can make loans and collect interest against your increased profits. You don't have to have the money and then hold 10% back. (Glass-Steagall, anyone?)

Plus, the money that comes in as interest is money that never existed in the money supply before the loan was created. Someone else has to borrow money to pay you in order for you to be able to pay your interest. This is why growth is required to pay interest and avoid foreclosure and default. If the money supply does not increase and more people aren't promising to pay interest, other people won't be able to fulfill their promises to repay. That's why the system requires growth to function well.

Legal tender law and fiat currency make sure that everyone must participate in the system at some point, or your contracts won't be protected by the courts and you won't be able to pay your taxes, since both only deal in dollars.

Wealth disparity is a red herring. It is one economic indicator out of literally thousands. Neolibs like to harp on it, but when the poorest schlub in the US has 2 cars, 2 flat screens, air conditioning, and more food than they can possibly eat then it holds very little meaning. I'm a statistician, and there is always a curve in wealth with extreme ends. Deal with it.

Again - they're focusing on the wrong problem. The problem is a corrupt and powerful government. Lobbyists push for bad laws, but bad laws can't get passed without corrupt legislators. In the past, the robber-barons just did what they wanted and government was too toothless and feckless to stop abuses. Today the robber-barons are back, but they are aided and abetted by a powerful, corrupt government that creates a maze of loopholes, exemptions, and laws to pick and choose which company gets to be the one to get away with murder.

The first thing that has to happen is that government needs to be reduced in size and power so that they cannot be the kingmakers. Then you pass a set of simple reforms that are clear and basic so everyone knows 'the rules'. Companies get away with crap because government passes laws that allows it (like the repeal of Glass/Steagall). Peel the lobbyists out of such a system, and all you do it create an all-powerful government that crushes (or blesses) specific industries according to its whimsy.

For example - Obama has been literally shovelling cash at the 'green' industry. Solyndra (and others) have shown that it was all a subsidy-scam. There was no possible way these solar companies could possibly turn a profit. Not to mention ethanol subsidies, et al... They all lobbied big time and got a pile of political payola. It is modern day patronage. Meanwhile Obama is doing all he can to slap down oil and coal. The government is picking some industries to grow, and others to punish. That is totally bogus. And (just so you neolibs don't get mad) it is bogus when it happens to companies like Exxon or Haliburton too.

The government should not be this power broker that picks and chooses which industries get favoritism, and which ones get the thumbscrews based on the political preference of the legislators in power. That creates an unpredictable, uncertain, arbitrary system where industry is more beholden to politicians than the public. Who cares if a company makes a lousy or unprofitable product when they can just pay a lobbyist, or donate to a candidate, and end up getting piles and piles of taxpayer cash?

THAT is the real problem here. Wall Street, Solydra, Enron - all these companies are just symptoms. The disease is the government.

I'm very confused. Let me get this straight...

You're gonna blame the repeal of Glass-Steagall (a law that REGULATED financial markets) on Barney Frank who voted AGAINST the Gramm-Leach-Bliley Act, which is the legislation that repealed Glass-Steagall?! You do realize you're basically making effectively a socialist argument, right?! You're saying the repeal of Glass-Steagall was intended to help the poor, but it didn't. Glass-Steagall is fundamentally socialist, so you're saying repealing it hurt the economy?!

Other than the fact you got the critical detail of Frank voting against Gramm-Leach-Bliley wrong, I completely agree with you.

In respect that job reports have been disappointing, you didn't address what every objective report about the stimulus bill says it created jobs, and those jobs did go to lower and middle class people. There's a disappointment it didn't do more than it ended up doing, but it DID create/save jobs in the short run, that's undeniable. Extension of unemployment benefits helped the poor and middle class. I could go on and on. You're seriously gonna fight this point?! Ridiculous.

Every company Obama visited and showed as a good example folded, huh? Let's see some proof. I want to see everyone of these companies, and what happened to them. You don't get to throw idiotic statements like this out without proof and expect not get called out on it. You're full of crap on that.

Oh, so if the jobs went to people you blanket don't like, it didn't do any good? LOL! Nevermind they're poor and middle class jobs, those very people you said weren't helped. I don't blame you. Those fat cat teachers and other civil servants, robbing the country blind with their gross underpay and what not! BTW, state employees are not all union members. There are in many states laws against state employees unionizing. Minor detail really...

So you're talking about "real Socialist" countries, not the fake ones I described. Are they more left than us? YES! You then mentioned we've gone "too far to the left" and the pendulum swing of a correction is coming to smite us! Are you suggesting the UK, France, and Britain were smited by the wrath of the free market gods for being too socialist? How have they managed to avoid the smite?!

As to the US education system today. First off, I'm glad you agree with me that universal public education system did coincide with the rise of the US as an economic superpower. You do at least seem to understand attacking that point is pretty pointless. But that also means you lost the argument. We had undeniably the world's best education system during that time, and it was a socialistic program in nature. Do we have the best education system now without question? No. What changed? Not the public mandate. Not the fact it's still mostly gov't operated. That's the same. Therefore, it's undeniable that you can have a top notch gov't run public education system.

Need more proof?

http://www.guardian.co.uk/news/datablog/2010/dec/07/world-education-rankings-maths-science-reading

What do you notice about the countries with the best education systems? Oh wonder of wonders, virtually all of them have gov't operated public education systems! How do so many evil socialist programs work so well?! Hmmm, maybe it's because sometimes, socialist ideas work the best, and maybe you should open your mind a little, look at specific things, look at data objectively, and apply socialist or capitalist solutions, whichever work the best? I know that's apparently revolutionary for you, but it's called "effective problem solving".

>> ^Winstonfield_Pennypacker:

Amazing how all leftists are criminally corrupt, all of them, apparently. Just because you're a leftist, it automatically means you don't care about the people.
Of course not all of them are corrupt – just most of the ones in political office. However, that is more endemic of being a politician than a leftist as the GOP is corrupt to the core too. I’m sure on some level even the corrupt political leftists believe they ‘care’ and are ‘helping’. But their method of helping is a poison pill destined to kill the supposed beneficiary. For example… Barney Frank thought he was helping the poor by pushing to repeal Glass-Steagall. In Frank’s fuzz-filled brain, he helped the poor get “uffodubble howsing”. But the result of his policies speak for themselves. The poor were NOT ‘helped’, and the nation’s financial stability was ruined by leftist plans for making banks give out loans to people who could not afford them. The left’s method of ‘help’ almost universally manifests in the form of inefficient, expensive, wasteful, freedom-killing big government programs which inevitably crash, burn, and make things worse than any leftist ever DREAMED life was like without their ‘help’.
Obama's big gov't spending doesn't do anything for the poor and middle class. You mean, except saving jobs when the economy tanked, the vast majority went to the poor and middle classes. Other than that... LOL...
That’s why every month the US has “unexpectedly high” unemployment figures. It’s why every job report for the last 3 years has been ‘disappointing’. It’s why every company Obama visited on the stump as a ‘shining example’ for jobs has folded. There are multiple reports that prove Obama’s stimulus money has gone almost entirely to labor unions, or state governments (and thence, THEIR unions) who supported him. In short, like a typical Chicago thug, he used the stimulus as political payola “walkin’ round money”. Jobs for the middle class & poor? Maybe 1 for every million bucks.
Leftist governments do not help with wealth distribution?! They just make it worse? I'm sure that's happened on occasion, but that's generally patently false.
I’m talking REAL left government – socialism. History has proven that leftist political philosophy’s ultimate end is wealth concentration at the top of government with the ‘people’ in utter poverty such as Soviet Russia, North Korea, Cambodia, Cuba, et al. What you are talking about are not really socialist governments. They are capitalist with socialist programs IN it (sort of the mirror image of China’s “socialist with capitalist programs”). The US ever since FDR has not been so much a ‘capitalist’ society as much as it is just another European-style capitalist with social program left-leaning government. The New Deal, the Great Society, and so many other leftist programs have routinely and regularly siphoned wealth from the middle class and used it to conduct failed social experiments. For the last 20 years or so, the US has gone further and further left in terms of spending and economic policy.
For example….universal public education and a progressive income tax coincided with the rise of the US as a global economic superpower as those first generations of publicly educated people came of working age.
Like all socialist systems, it starts well but ends badly. Remember Orwell's "Animal Farm"? Look at the US education system today and tell me it is “working wonderfully”. It is one of the most expensive in the world, while at the same time one of the least effective. Universal education is great. PUBLIC universal education? Not so much – and mostly BECAUSE it is a ‘socialist’ program. Open up a voucher system and let people choose the school, which will increase competition and lower costs.
Now - I don’t disagree with the underlying premise of your position. A pure capitalist freedom isn’t good either. Freedom is the best choice, tempered with a distant set of standards. I don’t have a problem with government mandating universal education, or even with it establishing some basic, simple standards. However, the pendulum has swung too far in the ‘socialist’ direction, and we are due for a correction. However, the people who benefit from the social system (government & unions) are responding as predicted to pullback, and would rather blow up the system than give up their power and money. Such is the end result of socialism, alas.
The founding fathers had it right. It is best to leave such matters at the state level where the people have more control and there is more accountability. The federal government should serve as ONLY a place where people can go to redress grievances (abuses). Central systems are fine when they are distant, have little power, and serve as little more than a final authority to appeal to, or as a repository of advised (but not REQUIRED) standards. The ‘system’ should be about 5% centralized and 95% local. Right now the US is more like a ‘45% federal, 55% local’ government and it is coming apart at the seams.

Amazing how all leftists are criminally corrupt, all of them, apparently. Just because you're a leftist, it automatically means you don't care about the people.

Of course not all of them are corrupt – just most of the ones in political office. However, that is more endemic of being a politician than a leftist as the GOP is corrupt to the core too. I’m sure on some level even the corrupt political leftists believe they ‘care’ and are ‘helping’. But their method of helping is a poison pill destined to kill the supposed beneficiary. For example… Barney Frank thought he was helping the poor by pushing to repeal Glass-Steagall. In Frank’s fuzz-filled brain, he helped the poor get “uffodubble howsing”. But the result of his policies speak for themselves. The poor were NOT ‘helped’, and the nation’s financial stability was ruined by leftist plans for making banks give out loans to people who could not afford them. The left’s method of ‘help’ almost universally manifests in the form of inefficient, expensive, wasteful, freedom-killing big government programs which inevitably crash, burn, and make things worse than any leftist ever DREAMED life was like without their ‘help’.

Obama's big gov't spending doesn't do anything for the poor and middle class. You mean, except saving jobs when the economy tanked, the vast majority went to the poor and middle classes. Other than that... LOL...

That’s why every month the US has “unexpectedly high” unemployment figures. It’s why every job report for the last 3 years has been ‘disappointing’. It’s why every company Obama visited on the stump as a ‘shining example’ for jobs has folded. There are multiple reports that prove Obama’s stimulus money has gone almost entirely to labor unions, or state governments (and thence, THEIR unions) who supported him. In short, like a typical Chicago thug, he used the stimulus as political payola “walkin’ round money”. Jobs for the middle class & poor? Maybe 1 for every million bucks.

Leftist governments do not help with wealth distribution?! They just make it worse? I'm sure that's happened on occasion, but that's generally patently false.

I’m talking REAL left government – socialism. History has proven that leftist political philosophy’s ultimate end is wealth concentration at the top of government with the ‘people’ in utter poverty such as Soviet Russia, North Korea, Cambodia, Cuba, et al. What you are talking about are not really socialist governments. They are capitalist with socialist programs IN it (sort of the mirror image of China’s “socialist with capitalist programs”). The US ever since FDR has not been so much a ‘capitalist’ society as much as it is just another European-style capitalist with social program left-leaning government. The New Deal, the Great Society, and so many other leftist programs have routinely and regularly siphoned wealth from the middle class and used it to conduct failed social experiments. For the last 20 years or so, the US has gone further and further left in terms of spending and economic policy.

For example….universal public education and a progressive income tax coincided with the rise of the US as a global economic superpower as those first generations of publicly educated people came of working age.

Like all socialist systems, it starts well but ends badly. Remember Orwell's "Animal Farm"? Look at the US education system today and tell me it is “working wonderfully”. It is one of the most expensive in the world, while at the same time one of the least effective. Universal education is great. PUBLIC universal education? Not so much – and mostly BECAUSE it is a ‘socialist’ program. Open up a voucher system and let people choose the school, which will increase competition and lower costs.

Now - I don’t disagree with the underlying premise of your position. A pure capitalist freedom isn’t good either. Freedom is the best choice, tempered with a distant set of standards. I don’t have a problem with government mandating universal education, or even with it establishing some basic, simple standards. However, the pendulum has swung too far in the ‘socialist’ direction, and we are due for a correction. However, the people who benefit from the social system (government & unions) are responding as predicted to pullback, and would rather blow up the system than give up their power and money. Such is the end result of socialism, alas.

The founding fathers had it right. It is best to leave such matters at the state level where the people have more control and there is more accountability. The federal government should serve as ONLY a place where people can go to redress grievances (abuses). Central systems are fine when they are distant, have little power, and serve as little more than a final authority to appeal to, or as a repository of advised (but not REQUIRED) standards. The ‘system’ should be about 5% centralized and 95% local. Right now the US is more like a ‘45% federal, 55% local’ government and it is coming apart at the seams.

This guy spends the whole video telling us what the symptoms are but ignores what got us here and how to fix it. No surprise the anti-free market (anti-freedom) people are oblivious to it.

Government and bankers have been running a ponzi scheme for most of the last century: Economic central planning and fractional reserve banking. Bankers have been stealing more and more from us every year through money manipulation and taxes.

Inflation is not some magical or natural occurrence. It is baked into the system. It is direct theft. A gallon of milk has pretty much the same value as it did 50 years ago, yet the price has changed, why? And for those that say, well prices have gone up but so have wages so it evens out. Not true. In the arbitrage between the two, you're always going to be on the losing side. And that ignores the theft of savings, and ignores how bankers exploit that arbitrage. That is why we have booms and busts. Bubbles are purposely induced through collusion and fraud to financially rape the people.

Without the fraud and collusion, there wouldn't be trillions of debt. And tax rates would probably be at the highest 10%. Income tax needs to eventually be abolished. In a free world, you trade your labor for wages. The government has no claim to your labor, so why does it have a claim to the wages you traded it for? Taxing consumption above the poverty level makes the most sense. But that can never be implemented without first eliminating the tax on income. You tax things you want less of, you bailout things you more of. The government taxes productivity (income), and rewards fraud (bank bailouts).

How do we fix this:
1. Eliminate the cancer: The Federal Reserve. Eliminate the whole concept of a central bank deciding monetary policy in general. Allow free choice and freedom of currency. Force banks to disclose their reserve ratio to issue loans. The free market will probably force banks to hold close to 100% of reserves. And banking would also become more of a co-op system like credit unions.
2. Cram down all the toxic loans on the Fed's balance sheet to the fair market value of the home and renegotiate the terms for the home owner.
3. Close down the Military Industrial Complex. End all wars. Close down all foreign military bases. Focus Department of Defense on actually defending threats instead of creating them. Abolish the CIA.
4. Break the global oil cartel.
5. Probably have to break up the big banks and pass regulations similar to Glass-Steagall to keep them from getting "too big to fail". Separate banks from investment firms, insurance firms etc. Enforce real regulations that protect consumers, not the parasitic speculators. If a hedge fund makes bad bets and loses, then they lose. No bailouts.
6. Eliminate the false free trade agreements like NAFTA and GATT. Stop incentivising global companies to outsource production oversees.
7. Eliminate tax on production. (Income tax)
8. Ban health insurance. (The middle man) We would probably have to fully nationalize health care. (It is anyway really) And then work towards a system of free choice and volunteerism.

Probably more solutions, but that's all I can think of off the top of my head. And yes, I'm a free market idealist.

A rather simplistic, populist bit of tripe.

To start with, if this guy thinks that things were so great back in the 1960s then maybe he should think again. The 'middle class' he talks about in the 60s was a far smaller entity than it is in 2011. In the 60s the country had a higher proportion of people in the 'lower' class. Since that time, the average american family has gotten proportionally wealthier - not poorer - and enjoys a higher standard of living, more property, and greater economic freedom than ever before. The entire premise of this video is nothing but an anachronistic fantasy.

The pap about families easily affording homes, cars, education, and retirement in the 60s on a single income is also a load of bull feathers. Middle class stiffs had to make tough choices back then too, and didn't have the dosh to just toss around money like that. His cutsey chalkboard claptrap cartoons of a smiling 'middle class' family easily affording any expense they wanted is stupidly wrong.

And this moron acts like people on a single income TODAY can't afford a home, car, college, and retirement. I am the lone wage-earner in my family. Not ONCE have I gotten government assistance or a handout on the dole. And I own a home, 2 cars, have $13,000 in savings for the kids, and I'm on track to be a millionaire when I retire. How did I do it? Because I'm not stupid. The middle class doesn't have to go into debt for these things - and this JERK'S premise that MC families have to rack up huge debt to live life is absolute specious.

And unions - yeesh. I noticed carefully that this obviously neolib goombah didn't bother mentioning that the over 26 TRILLION dollars in debt this nation has only exists because of private and public sector union unfunded liabilities. Corporations send world overseas because unions ARE making the cost of business in the U.S. (not to mention the fact that we're #1 in the world in corporate taxation) unfeasible for many industries. And he also doesn't mention the decrease in union size is only in the private sector, but that PUBLIC sector unions have swollen in size to gargantuan, slovenly, grotesque levels - and are (of course) literally breaking America's bank with thier costs. Of course companies outsource labor when paying a US employee costs them 100X as much money for only a fraction of the output. Only in the neolib Planet Fantasy does everyone get 100,000 a year for pushing brooms, assembling widgets, and other unskilled jobs that any reasonably trained lemming can perform.

He also doesn't mention that the top 50% of American taxpayers are paying 95% of the taxes, and that the "middle class" that he disingenously claims to speak for is actually paying almost NO INCOME TAXES at all. The bottom 50% of wage-earners (that's the middle class for you neolib idiots out there) only pay 5% of the taxes. How much more can the you burden the top 50% with before they pull up stakes and leave? That's the problem New York City, Chicago, LA, and many other neolib Meccas are facing. They have raised taxes so high on "the rich" (which Obama defines as anyone earning over 200K) that they are leaving these leftist enclaves, which in turn are literally dying on the vine under the weight of their own stupid policies and union debt.

But I do agree with some of the comments about lobbyists and the tax code. I do believe that is a problem, but it is a GOVERNMENT problem not a lobbyist problem. The government is the new "Robber Baron", when 100 years ago the government was protecting people from Robber barons. But of course this guy doesn't focus on the fact that it is GOVERNMENT making these stupid laws, and not companies. In fact, many companies hated the repeal of Glass-Steagall but government wanted it so Barney Frank could have is precious UFFODUBBLE HOWZING! Banks never wanted to be forced to give loans to people who they never would have touched in the 1960s - but Government played the Race Card with accusations of redlining and forced it through.

The problems with income disparity people whine about are largely a phantom. More people in the US are wealthier than they've ever been in the nation's history. Carping about how much MORE the uber-rich have than the middle class is pure sophistry.

Moore - despite his rampant hypocrisy - makes a valid point in the sense that capitalism has become corrupted. Back in the late 19th and early 20th century the robber barons controlled government, and made laws so they could do whatever they wanted. Then the progressive movement worked to establish a vertical wall around powerful centralized government as a means of countering crony capitalism's unholy domination of the weak federal government. Also, they established & promoted unions as a means of increasing worker power and bettering their conditions.

But as with anything, incresed power in a sector of society results in corruption. Unions were rapidly overtaken with corrupt leaders. The more powerful federal government VERY quickly became corrupt and open to bribery, graft, waste, and 'outside-in' crony capitalism in collusion with unions. We are in a position today where the federal government has become so powerful, so corrupt, and so out of touch that it is as bad as the robber barons ever were.

Corrupt corporations & industries know where the power is, and smear money around Washington to get laws that favor their objectives. Without the corrupt federal government, the repeal of Glass-Steagall would have been impossible, and America could have entirely avoided the housing bubble and resulting collapse. Without corrupt unions and their evil alliances with government, we could have entirely avoided all these "unfunded liabilities" that are crushing our budgets.

Moore is right. We aren't broke. There is 4 trillion dollars we the people can take away from the corrupt federal government. There is also as mucha s 16 trillion dollars we can take away from lousy contracts with corrupt unions. We can balance our budgets in a year by cutting federal spending so that it is ONLY allowed for consitutionally mandated functions like defense. We can balance state budges by voiding every single union contract ever written, eliminating preposterous 'for life' benefits, and starting over with logical, limited, VOTER APPROVED contracts where unions are taken out of the equation completely.

There is a two-way contractual system The bank agrees to loan, taking on all the risks associated with such load. The borrow does the same. ... You say the borrower should check his account, but that is barely his job: whereas it is the job of the banks.

I'm having a tough time conjoining these two bits here. We both agree that the loan is a two-way contract where the bank agrees to lend, and the borrower agrees to borrow - and that both parties agree to the risks involved. And yet there is this second bit here where you say that it is 'barely the job' of the borrower to check his balance and manage his end of the contract. If someone agrees to a contract that carries the risk of bankruptcy, homelessness, or financial ruin then to say it is 'barely' thier job to check the account comes off to me as insanely negligent.

I'd be interested to hear your explanation for all the banks that are doing just fine because they didn't buy into the mortgage scheme. I've heard radio interviews where they simply say that they didn't lend to anyone who couldn't be reasonably expected to pay for it. How did they escape your Catch-22?

Depends on the bank. Peeling back the onion that is the banking industry is complex, but back in the 90s the ones that were really pushing for the repeal of Glass-Steagall were not 'banks' in the sense that most people think about them. They were large, multi-national financial institutions and insurance companies - AIG being the principle player. These kinds of big money houses saw a way to make profit on the buying & selling of mortgages as financial packages WITHIN the financial industry itself. Effectively, the customer getting the loan was utterly irrelevant to these big players. They were interested in the financial packaging - not the loans themselves.

So when the law was changed, it allowed them to throughput mortgages within their own organizations. Historically, Glass-Steagall made it illegal for a financial house like AIG to buy & sell mortgages from banks that it owned or partnered with. But after the change, they could pool all the loans together and market them as a product. They started putting pressure on the smaller players to churn out more debt. There were banks that didn't play the game, but it was tough becuase all through the late 90s and early 00s, people were making money hand over fist the sl-easy way.

I have no doubt that there were politicians who pushed for easier mortgages to please their vocal minority constituents, but the people who stood most to gain were the wall street big money handlers. In your estimation, which of these groups tends to get their way in politics most readily? And therefor, which of these groups is more to blame?

Your question is this... Who is more to blame - the person MAKING A BRIBE or the person TAKING THE BRIBE? My answer is that the person TAKING THE BRIBE bears the greater guilt. All the bribes in the world are worthless if the other guy doesn't TAKE it. Businesses have no power to pass laws. That power rests in Congress. They are the stewards. They are the gatekeepers. They are the ones that are given public trust to only pass good laws, and to guard against this kind of crap.

Sadly - this is what happens when you allow a strong, central government to exist. I remember VERY clearly in the 90s that when AIG, Barney Frank, and a bunch of other guys were strong-arming the repeal of Glass-Stegall they were VERY insistent and persuasive that they were doing a really GOOD thing. It was going to lower the cost of housing. It was going to get more poor people into homes. It was going to make a lot of money for the middle-class, and ease the burden of the poor. In fact, the "repeal Glass-Stegall" guys were vociferious in accusing those OPPOSING their plan of being evil, selfish, cruel, and racist. And until October of 2008, who could really argue with them?

Government should have known better. Glass-Steagall was made a law SPECIFICALLY to prevent housing market collapses like this. It was implemented as a direct result of similar shenanigans which caused the Great Depression and the crash of the 20s. But because government people were wanting votes and conduct 'social engineering', they changed the laws. AIG didn't change the laws. Government did. They bear the ultimate responsibility.

In no way does this absolve folks like AIG. Quite frankly, the federal bailout is a massive crime aginst the people. It dumped money into financial houses to shield them from the consequences of their stupidity. The banks should have been allowed to fail. When this kind of thing happens, you let the chips fall and then the system rebuilds itself. And it does so rather quickly when government isn't there screwing things up like they did in the 30s.

@blankfist, since you seem to want my thoughts on this (but for some reason, wanted to edit the comment to look like you were just clearing your throat), I'll give you my rebuttal.

I'll take his three points in reverse order.

#3 about regulatory uncertainty is one of these universal conservative economic fantasies. There's no evidence that this really has any kind of macroeconomic effect. Certainly the usual conservative and business advocacy groups always get a laundry list of businessmen to all line up and say how they won't be able to function if they have to pay compensation to workers injured on the job, have to check to see if the products they produce are poisonous or otherwise unsafe, can't dump toxic chemicals into lakes and rivers, can't use slave labor, etc, etc. They always fight against efforts to stop them from being able to leverage negative market externalities for extra profit.

#2 The Yahoo Finance link itself debunks this, because what Schiff says is a flat-out lie. Here's what that link says:

In contrast to Schiff's warning, the law does the following, according to Reuters:

“The bill would set up an "orderly liquidation" process that the government could use in emergencies, instead of bankruptcy or bailouts, to dismantle firms on the verge of collapse.

“The goal is to end the idea that some firms are 'too big to fail' and avoid a repeat of 2008, when the Bush administration bailed out AIG and other firms but not Lehman Brothers. Lehman's subsequent bankruptcy froze capital markets.

“Under the new rule, firms would have to have 'funeral plans' that describe how they could be shut down quickly.”

Liberal critics also question whether the bill addresses "Too Big to Fail", but they're talking about limits on the overall size of banks.

#1 I've covered this fantasy of Schiff's about the nature of the crisis before. Here are two quick points I always make, which you never respond to: low interest rates don't create moral hazard, and Fannie and Freddie weren't even remotely the biggest players in the subprime mortgage-backed security space, much less the chief source of moral hazard.

All the moral hazard was created by the financial industry thinking it had found a way to insulate itself from the risks involved in bad mortgages using CDO's and CDS's -- without relying on government backing of any kind.

I'm happy to go into much more depth on #1 if you like, but you've never really demonstrated that you have any interest in listening to what I have to say on the topic with anything like an open mind.

Oh, and liberals agree that this bill doesn't really do enough in addressing the underlying problems that led to the crisis (the real ones). Basically, they say there's not enough rating agency reform, no leverage caps on investment banks, no Glass-Steagall separation of traditional and investment banks, no commitment to break up banks that grow beyond a certain size, etc.

In fact, from what I've read, the strongest part of this bill is exactly the part Schiff lied about -- it should prevent future Congresses from being forced to do taxpayer-funded bailouts. Instead, it'll be like the standard FDIC process for failed banks, only scaled up to deal with corporations of this size and complexity. Under that process, the bank shareholders, owners, and management get wiped out and fired, but the bank's creditors and depositors are made whole. The bank fails, but it doesn't take a huge chunk of the economy with it when it goes.

>> ^NordlichReiter:

And Democrats aren't corrupt? Someone needs to come down from that tower.

I didn't say that, but there's a matter of degrees. Republican corruption usually involves outright devastation to people's lives for profit (let's "privatize" social security, let's start a war to get oil rights, let's pretend the environment is indestructible), whereas Democratic corruption usually presents itself as siding with Republicans on whatever horrific scheme they're looking to implement, plus they get involved in some of the "traditional" corruption -- funneling public money into private hands in return for campaign contributions -- though they seem to do this to much smaller degrees than Republicans do.

>> ^NordlichReiter:
Netrunner, I can think of one thing. The 1913 Federal Reserve act. Woodrow Wilson member of the Democratic Party.
I did add the qualifier "In my lifetime" for a reason. That said, the Federal Reserve Act was a good thing. Only crazy people are against the idea of having a central bank at this point. I may want more firm oversight to ensure it's not being mismanaged, but that's wholly different from declaring the very idea evil.

Plus, while I'm not going to try to defend Woodrow Wilson against nonspecific charges, I should point out that it's not as if his name evokes the same effect as Richard Nixon, George W. Bush, or even Herbert Hoover in people.

>> ^NordlichReiter:
How about the repealing of the Glass Steagall Act, President Bill Clinton?

...and Majority Leader Trent Lott and House Speaker Newt Gingrich. So Clinton's failing was that he didn't fight the Republicans like the left of his party wanted him to. Still fits my description.

>> ^NordlichReiter:
How about the current president and Habeus Corpus for Bagram Airforce base detainees?

You mean the rights denied them by a 5-4 decision (5 Conservative vs. 4 Liberals) of the Roberts Supreme Court?

>> ^NordlichReiter:
Preservation of extraordinary rendition? Escalation of Afghanistan? Violations of Pakistani sovereignty?

The Afghanistan war was started by Bush, as were the violations of Pakistani sovereignty (though it seems unlikely that we are really operating without Pakistan's approval). Again, the worst you can say here is that Democrat Obama has been insufficiently anti-Republican in his stance, something I would agree with as a general criticism of Obama. He isn't as left as I wish he was.

>> ^NordlichReiter:
You know what don't answer those questions. I don't want to see any more rationalizations for the two parties today. Freedom of choice be damned.


Ahh, so I am to let your eminently answerable questions stand as if I had no answer for them? Talk about limiting freedom of choice...

What's limiting your choice isn't what the two parties are doing, it's your view that there's nothing you can do to a) change how the Democratic or Republican parties do things, or b) form your own party around a platform that would appeal to an untapped coalition of voters.

And Democrats aren't corrupt? Someone needs to come down from that tower.

I'm referring to a system that lends itself to corruption. See Philip Zimbardo's Lucifer Effect.

Netrunner, I can think of one thing. The 1913 Federal Reserve act. Woodrow Wilson member of the Democratic Party. How about the repealing of the Glass Steagall Act, President Bill Clinton?

How about the current president and Habeus Corpus for Bagram Airforce base detainees? Preservation of extraordinary rendition? Escalation of Afghanistan? Violations of Pakistani sovereignty?

You know what don't answer those questions. I don't want to see any more rationalizations for the two parties today. Freedom of choice be damned.

The only fail here is a failure in BansheeX's sarcasm detector. It's really sad that you cannot tell I was being facetious. You're wasting your time.

Oh and even in jest I didn't say TPers and Libertarians were the same thing. Get your eyes checked (maybe your brain as well while you're at it).

>> ^BansheeX:

>> ^Drachen_Jager:
If they're going to deregulate then they should just scrub all the fraud laws. Hell why stop at economic relationships, why not de-regulate interpersonal relations too? Murder, rape, et al. Get big government out of my mass grave! Nosy bureaucrats, poking their noses into every little murder.
C'mon Libertarians, isn't that what you want? Don't Tea Partiers want the freedom to shoot illegal immigrants, suspected illegal immigrants (ie brown people) and (on a slow day) a few legal immigrants too?

There is so much fail in this post, I don't even know where to begin. First of all, the tea parties were started by libertarians but have since been hijacked by typical party-line neocons. Only a fraction of people there are libertarians.
Second, fraud is illegal and has been for a long time. Misrepresenting a product is fraud, which is exactly what Goldman did. You seem to think libertarians are anarchists who don't want contract laws to penalize fraud and other laws to penalize coercive behavior like murder. You are incorrect, sir.
Concerning regulations, the problem is quite simple:
If the government insures commercial bank deposits, the risk of losing one's deposit is offloaded onto holder's of dollars (mainly foreign central banks now) not involved in the transaction. With depositors having no skin in the game, banks wanting to make risky investments are more easily able to obtain deposits with which to speculate. To prevent that from happening, the banks have to be restricted on what they can do with deposits when they take FDIC.
Glass-Steagall was a 1933 Roosevelt bill that provided FDIC with restrictions. Clinton and most politicians from both parties were heavily lobbied by banks to keep the FDIC but remove the restrictions, and that's exactly what they did with the "Financial Services Modernization Act of 1999". No longer restricted from doing investment banking and unfearful of losing customers on deposit safety concerns, the inevitable happened.
Libertarians want FDIC eliminated because offloading risk onto other parties changes human behavior. Greed is normally offset by the fear of loss. When you eliminate the fear, all that's left is the greed and shit happens. We only support Glass-Steagall on the condition that we can't get rid of FDIC. Understanding now? Good, only 97% of the population left to go.