'Didn't know if you had seen this interview:

http://videosift.com/video/Hidden-History-of-The-Financial-Crisis-Democracy-NOW

QM, instead of reading whatever right wing blog all these slogans are coming from (Ameri-marxists? HAH GOLD!), can you take the trouble to pick up a copy of The Economist one week? This week's edition will do you quite well. They're economically right and socially left.

I think what you'll find is that most pragmatists regardless of their economic persuasion have realized 3 things about the current economic situation in the US:

1) Keynesian monetary policy works and that no sensible economist believes that the stimulus has not helped to reduce unemployment from the much higher level 12/13%+ it would have reached otherwise.

2) Spending will have to be trimmed in social security/medicare/medicaid/pensions and defense, and the retirement age will no doubt rise.

3) The Bush tax cuts were the single biggest contributors to the expansion of the federal debt from a balanced budget before the global financial crisis hit. Over time, taxes will have to rise to cope with the costs of medicare/pensions because of an ageing population.

>> ^quantumushroom:

I sincerely appreciate the correction. While the source was incorrect, the quote yet remains 100% true. You will never tax your way to prosperity and you'll achieve nothing by demonizing the wealthy.
Here's another quote you're sure to enjoy. Google it to your hearts' content.
FDR's treasury secretary, Henry Morgenthau, wrote in his diary: "We have tried spending money. We are spending more than we have ever spent before and it does not work. ... We have never made good on our promises. ... I say after eight years of this administration we have just as much unemployment as when we started ... and an enormous debt to boot!"

If only the left and Odumbo could prove me wrong with jobs and prosperity instead of empty rhetoric and blame, I'd gladly admit to being wrong. Until then, I voted the bastards out November 2nd and it felt great. Expect it again in 2012.
I really don't understand why Ameri-marxists don't vote with their feet and move to already-socialist Europe...just try to avoid Greece...they're having a bit of trouble.

Tags for this video have been changed from 'financial crisis, lehman brothers, goldman sachs, bank crisis' to 'financial crisis, lehman brothers, goldman sachs, bank crisis, inside job' - edited by Stingray

@blankfist, I'm kinda surprised at you. Perhaps you fell for the title, but here are some of the things Bill Black says:

1. Yes, [the bill's provision for running derivatives through a government-run exchange] is a good idea. You shouldn't be doing non-exchange traded derivatives, and this bill encourages exchange-traded derivatives. But it has loopholes that allow people to evade it, so it's probably not going to be terribly effective.
   
   Which is to say, the new regulations on derivatives are good, but they are too easy to circumvent.
   
   
2. What else do we know created perverse incentives? Professional compensation.
   
   
3. We know that the Goldmans of the world deliberately put the rating agencies in competition with each other in what in economics we call a "competition in laxity". In other words, whoever is willing to give the most absurdly inflated rating is who will get my business.
   
   Note: rating agencies are privately owned, for-profit companies.
   
   
4. So when we say the rating agencies screwed up, we don't mean that they took something that, you know, should've been a single-A and they call it a triple-A. No, we're talking about something that should have been 25 levels lower, and they called it AAA. If they're willing to do that, then they're going to be willing to bless the next insane thing, as long as the competition and laxity is allowed to exist.
   
   
5. Americans don't know that over 10 percent of all appraisers in America have signed a petition calling for the government to step in and regulate and enforce because of this Gresham's dynamic. A Gresham's dynamic is where cheaters and the least moral people prosper, and they drive the honest, moral people out of the marketplace. And that's what the appraisal industry was telling us. And the regulators refused to any do anything. And now, after a crisis measured in trillions of dollars of losses—and a trillion dollars is a thousand billion—we have, supposedly, the greatest reform bill since the Great Depression, and it completely ignores this causality.
   
   
6. The consumer bill was the other thing you asked me about. That is a good thing. But you can tell somebody has a really malicious sense of humor, because they put the new consumer agency into the Federal Reserve—the leading opponent of protecting consumers. This is the agency that under the HOEPA law [Home Ownership and Equity Protection Act], which goes way back to the '90s, had unique authority to protect us from otherwise unregulated mortgage bankers and anyone else who made mortgage loans. And even board members at the Federal Reserve went to Alan Greenspan and asked him to take action against these enormous abuses in the liar's loans and subprime, and Greenspan refused to act.
   
   This probably got your juices flowing, since it places some blame on the Fed. Unfortunately, it places blame on the Fed for refusing to regulate. Oh, and it was Republicans who insisted that the consumer protection agency be housed at the Fed.
   
   
7. So [in the subprime lending market] we had the exact opposite of what economics predicts: both parties to the transaction were made worse off. Well, why? Because the agents were made better off. Who were the winners? The rating agencies, the senior officers who walked away rich, the least moral appraisers, the least moral of the outside auditors at the big accounting firms. They were all the winners. They got rich by betraying their responsibilities. And so if you had had an Elizabeth Warren and if she had banned this nonprime product to protect consumers, now, that would enormously reduce this financial crisis.
   

In all, he's making all the usual liberal criticisms of the bill, which is that the bill's new regulations aren't nearly tough enough; which itself is based on the premise that unchecked greed and dishonesty was the root cause of the crisis.

Oh, and @marinara it doesn't "ensure Wall Street Scams keep running", a fair representation of his comments would be "doesn't crack down on Wall Street Scams."

@Winstonfield_Pennypacker

Tired of hearing people talk about "entitlements" when things like medicare are enormously successful and are paid for by a fund that everyone pays into. If any of these things are "unfunded liabilities" it's because the programs are robbed of funds to pay for the Pentagon, or cut from budgets for political points to generate a "surplus" when we borrow from China against our kids' futures every day.

Any article that talks about low birthrates in a world with 6 billion people and rising is automatically intellectually bankrupt. There's nothing wrong with populations stabilizing after the post-WWII boom. There's nothing inherently wrong with an aging population in a world filled with new medical technologies. The problem is paying for it all.

It's all really a failure of that post-WWII generation to control the culture of excess they've generated. Why do you think "sustainability" is such a huge buzzword? It's because the past 60 years have had nothing to do with thinking ahead. The financial crisis and the BP oil spill punctuate that...corporations obsessed with nothing but profit causing huge unintended blowback into financial and ecological systems alike...all because of lack of meaningful and enforced regulation.

It's funny how conservatives will fight for smaller government, but then, to try and score political points, they'll complain that our government isn't acting quickly or comprehensively enough to stop a giant disaster. Reagan said gov't is part of the problem, but today's conservatives seem to go back and forth on that point, depending what serves them best. Laissez-Faire is just another subject in a long list of naive extreme ideologies.

We need thoughtful balance, not extremes.

There's two things that need to be separated here.

The fraud allegation are that Goldman Sachs's employees mislead its client into believing that the hedge fund that arranged certain CDOs for them - Paulson & Co held a long position in the CDO (they expected it to go up in value, obviously a reassurance for the investor), rather that what was really the case - that they were short (expecting it to go down in value).

If this is indeed the case then they will likely be fined and lose some of their prestige and reputation. At best it would have been an overzealous employee, at worst it would be have been a corporate strategy from upper management. Regardless they will be deemed less trustworthy and lose business from potential clients in addition to any fines imposed.

The second point is though, that the idea that this is evidence that they caused this financial crisis is simply ridiculous and anyone who believes this is channeling populist outrage.

Goldman Sachs were not the only ones selling CDOs. The client who bought from Goldman would have likely bought from someone else otherwise if they felt this was an appropriate investment. There was no shortage of financial corporations who would have been willing, and judging by their near collapse, likely would not have had any reservations like the hedge fund that arranged this CDO for Goldman.

http://media.economist.com/images/images-magazine/2010/17/fn/201017fnc367.gif

Yes, Goldman bet against the market and profited handsomely. Had there been more firms betting against the market, it would have kept the prices of houses down, and discouraged further reckless lending and prevented the bubble in the first place. Financial firms profit from the mis-pricing of securities and in acting against them bring the market back to an accurate representation of value preventing such crises. If you want to blame someone, blame the ones who created the boom. Blame the ones who perpetuated the culture of misinformation that house prices would rise indefinitely, that savings rates of around 0% were sustainable. Blame the regulators for not having sufficient safeguards in place and limits to risk taking.

If you want to prevent the next crisis, insist on there being a tax on liabilities (debt) that financial firms take on, to counteract the perception that they are too big to fail and in effect adjust upwards their borrowing costs from unrealistically low rates. Insist on there being a legal procedure to impose orderly losses on shareholders of failing banks, allowing there to be a middlegrounds that hurts investors in these banks as opposed to the option of bailing out the bank and perpetuating too big to fail, or allowing it to collapse and triggering meltdown.

When Sen. Mitch McConnell said that the Senate financial-regulation bill meant "endless taxpayer-funded bailouts for big Wall Street banks," he was, knowingly or not, taking aim at a policy that had been jointly developed by Sens. Mark Warner (D-Va.) (pictured above) and Bob Corker (R-Tenn.). The two lawmakers began collaborating last spring, when they started holding joint briefings on the financial crisis. Eventually, Sen. Chris Dodd tasked them with handling the problem of what happens when too-big-to-fail firms, well, fail. He tasked them, in other words, with handling the problem of endless bailouts.

After months of meetings, the two finalized an agreement in February. That's the "resolution authority" part of the bill, which begins in section 201. And in an interview in his office this morning, Warner was not too happy with McConnell's characterization of their work. "It appears that the Republican leader either doesn't understand or chooses not to understand the basic underlying premise of what this bill puts in place."

"Resolution," Warner continued, "will be so painful for any company. No rational management team would ever choose resolution. It means shareholders wiped out. Management wiped out. Your firm is going away. At least in bankruptcy, there was some chance that some of your equity would've been retained and you could come out in some form on the other side of the process. The resolution that Corker and I have tried to create means the death of the company. The institution is gone."

Another element of the Republican critique concerns the $50 billion "orderly liquidation fund" that the FDIC will raise by taxing the banks. The idea of this fund is to create holdover money so the bank doesn't collapse while regulators are trying to unwind it. Sen. Richard Shelby, the ranking Republican on the Banking Committee, called it a "slush fund" and said that “the mere existence of this fund will make it all too easy to choose a bailout over bankruptcy.”

"Again," says Warner, "it's either that they don't understand or they choose not to understand. There's nobody in the financial sector who believes this. They'd laugh at the proposition that $50 billion is enough to get you through the resolution process if a couple of firms go down. What we've heard time and again is that the challenge in a crisis is to buy enough time to keep the lights on for a few days till you get the FDIC in here. You could make it smaller. Corker and I spoke about $25 billion. But this is funded by the industry."

"And here's the hypocrisy of the Republican leader's comments," continues Warner. "I can guarantee you that if there had not been some pre-funding, the critique would've been: 'Look at these guys! They've left the taxpayers exposed! What's going to keep the lights on for these few days? It's going to be Treasury funds or Federal Reserve funds. The taxpayer will be exposed!' ”

"If you haven't spent time with these issues," Warner sighed, "it's easy to pop off with sound-bite solutions that don't work."


http://cl.ly/LQd

What I've always wondered about is really how many of these so called independents are really conscientiously impartial and making impartial decisions with fair consideration for both the parties' policies, and how many are simply swing voters, ready to be swayed by the next fear campaign or dumbed down populist argument.

Clearly with health care he's effectively lost the latter and made the prior ambivalent, with this move he has the chance to snap up both. Then again, everything is about posturing. Financial firms make up a highly disproportionate part of the economy, and both their lobbyists and Fox News will make every effort to vilify the taxes to be imposed on bank liabilities, whereas I'm sure any discussion on the proprietary trading ban for deposit banks will vanish in an instant.

Also the fact is, it is true that taxing financial firms will likely see the costs passed down in the form of higher and tighter lending rates. If they manage to tie that together with unemployment especially then it may be very damaging.

On the other hand, there's certainly reason to argue that this tax will fund any future financial calamities and will downsize the risk and cost of potential moral hazard in the future. While deleveraging banks and forcing them to keep larger capital requirements is also an option, only a financially crippling requirement would have prevented banks from getting in trouble in this financial crisis, so in that sense a fund creates an added level of risk prevention.

Stewart - like most of the Democrats - completely missed what Brown was all about. Brown himself was just a lucky schmoe who happened to 'be there'. You could have put a potted plant against Croakley and the result would have been similar. Croakley - like the bulk of the Democrat party today - was drunk on a sense of priveledge, power, and arrogance. For the past year they've been strutting around thinking that the wave of anger against GWB was going to let them do whatever they wanted. They also thought that the man-child Barak Obama really was all that and a bag of chips and whatever he wanted was what the people wanted and what was best for the country. This combination of arrogance and the illusion that Obama was 'more' than just a twit in a suit gave them the mental security blanket they have been DREAMING of having for years.

They're liberals. They are far-left leaning radicals. And they've had to HIDE it for soooo long. Then along comes a supermajority and a popular leftist president and they thought they could finally - FINALLY - take the mask off and let it all hang out. So they did. They started trying to pass crap that nobody liked. The people started rejecting it, and in their arrogance and hubris they ignored popular opinion (just like Bush did on Iraq). The tea parties were not the grumbling of a few puppet malcontents (like Pelosi, Obama, Stewert, et al wished they were). They were the tip of a very angry iceberg.

People elected Obama because he sold himself as a guy who was 'post-partisan' and would help correct the financial crisis caused by government over-spending and debt. Instead the people were dismayed with Obama's radical leftist agenda. They protested, but the left-wing liberals were in NO MOOD to let their leftist agenda get interrupted by such piddling trifles as the PEOPLE. So they mocked the protests. They ignored the voters. They pretty much spit in the face of the people, and now it has come back to bite them in the @$$ (just like Bush).

So Kennedy's seat is gone because they ran an arrogant, disconnected liberal lapdog who thought the seat was her's just because she showed up. Seen the news today? Health Care Reform is DEAD! This is a GREAT day for America because a radical, left-wing assault on freedom has been killed dead. Democrats rats are jumping the SS HealthCareReform in droves. Even Pelosi is giving up on it. Huzzah! Let's hope the GOP takes both houses of Congress this fall and throw government into total deadlock.

I never underestimate the GOP's ability to shoot itself in the foot. But things are looking promising. Brown won because he was unapologetically CONSERVATIVE. He said, "I'll stop health care because it is stupid policy..." He was totally right. The people responded. The GOP path is clear. If you want to skunk the "Progressive" liberals in the mid-terms then run on a CONSERVATIVE ticket where you promise to balance the budget, CUT SPENDING, pay down the debt, and reduce government to its proper scope & function. Do it GOP and you'll have the people behind you. If you just run RINOs like McCain again then you're screwed.

AH ha, this financial crisis wasn't engineered by the evil bankers, but the clingy girl friends!

I like this woman's morals

But I have a hard time understanding why people who can't afford to use credit cards get them at all, and with such high limits on the credit. (I'm not referring to the woman in this story with a $6,000 debt because I don't know the reason why she is in debt)

The only kind of card I have is a debit card because I don't live beyond my means. If I can't afford things that I want, I don't buy them. It's a simple plan to follow.
If you're using credit cards when you're in a financial crisis to pay for other bills or whatever it is that you must pay that's a really short term fix for the problem and not really a solution at all unless you know for certain that things will get much better in the very near future.

I guess I don't understand because I've never been in a situation where I've needed to go into debt just to survive (if that is what some of people with credit card debts do). Where I live there are safety nets so that won't ever happen unless you mess up really bad. If I get a serious illness public health insurance is there and I won't have to deal with medical bills. If i lose my job I won't risk being without food and a place to live.

But I hope not all credit card debt is because of irresponsible consumption and that most people with credit card debt can't find a new job or is in some kind of crisis and don't have anything to fall back on.
Maybe society is wrong for letting it happen but banks aren't helping by making the situation worse for those people. As many have already pointed out the banks aren't doing any good for themselves in the long run or the customer by kicking them when they're down so it's just bad for everyone involved.

I do have a student loan of almost $40.000 at an interest of 2.1% that made it possibly for me to study where I wanted. I took a loan so that I can pay for my student apartment. Not so that I could buy nice clothes, a new computer, a car or anything that I didn't need. Sure, I don't *need* the education either but to me it's an investment that I won't have any problem at all to pay of. Even if I wouldn't find a job for, let's say, 10 years I would have no problem with paying the interest.
It's a ridiculously low risk loan. A credit card is not.

>> ^RedSky:
@NordlichReiter
The dollar is only really down to levels it was pre-financial crisis. Taking your reference point at the height of the global financial crisis is unfair because everyone was buying up US treasury bonds and over inflating the currency.
The fact that countries are considering moving away from the US dollar as the reserve currency, the currency they trade in, and which they keep as foreign reserves is a good thing in the long term. This has kept the US dollar overvalued for decades, and has contributed significantly to the unsustainable consumption and housing binge, and was obvious a major catalyst for the global financial crisis. A rebalancing would put the onus further on factors of GDP such as investment as a contributor to economic growth.
To say that the economy is in recovery is not disingenuous. They're simply using leading indicators such as stock price or inventory levels, which are generally good predictors of economic recovery and in this case a pending fall in unemployment. The scale of that is anyone's guess though, as is how much of the economy was spurned by returning business confidence in the private sector rather that purely government stimulus and specific programs such as first home buyer's grants and cash for clunkers.


Cash for clunkers was the biggest waste. The other parts of your arguments I cannot find fault with.

Taking assets that can be modified, recycled reused, and even melted down for metals and destroying them and leaving them in a dump yard is a waste. Why would you destroy something that has re-usable parts and resources?

Differential gears, transmission parts, bearings, four wheel drive parts, pinions, springs, headers, skid plates, hubs, disks, and shoes. Instead they put sodium silicate into the engines. All because the government doesn't want the cars traded in being re-sold back into the market.

I would argue that having a hulking dump of cars, like I see on the side of the Highway is worse than seeing a repaired 78 Volkswagen van that runs on diesel, or electricity.

@NordlichReiter

The dollar is only really down to levels it was pre-financial crisis. Taking your reference point at the height of the global financial crisis is unfair because everyone was buying up US treasury bonds and over inflating the currency.

The fact that countries are considering moving away from the US dollar as the reserve currency, the currency they trade in, and which they keep as foreign reserves is a good thing in the long term. This has kept the US dollar overvalued for decades, and has contributed significantly to the unsustainable consumption and housing binge, and was obvious a major catalyst for the global financial crisis. A rebalancing would put the onus further on factors of GDP such as investment as a contributor to economic growth.

To say that the economy is in recovery is not disingenuous. They're simply using leading indicators such as stock price or inventory levels, which are generally good predictors of economic recovery and in this case a pending fall in unemployment. The scale of that is anyone's guess though, as is how much of the economy was spurned by returning business confidence in the private sector rather that purely government stimulus and specific programs such as first home buyer's grants and cash for clunkers.

I think part two was better than part one. Also, I agree, Michael Moore is far more palatable. He's willing to continue discussing points. Hannity diverts whenever he doesn't like where it's going.

When people blame this financial crisis on the borrower it makes me sick. Is it someone's fault they got hit by a car, couldn't do their job, and hence couldn't pay back a mortgage? Does any amount of "reading the contract" help with that?

Now, is it someone's fault if you ask them to watch their wallet, and they put the whole damn thing on the blackjack table? I don't care if you can count cards. Put the wallet in your pocket and bet your own money.

Why haven't they fixed the capital requirements yet?

"The market can stay irrational longer than you can stay solvent." -JMK

>> ^bmacs27:
Well, one could argue that government of any sort is government intervention in the economy. That's why anarchists and libertarians so often get confused. Think about it. There's a market for murder. There's a market for "protection". There's a market for "waste disposal". So really, the question always boils down to 'what specific government interventions into the marketplace are you for?'

Most of those activities you mentioned require the use of force, so they can't be done by private citizens, because the use of force is exclusive to government. Any other activity that doesn't *require* the use of force shouldn't be done by government because it can be done (and will tend to be done better) by the private sector.

To me, while anarchy seems like the end result of libertarian ideals... really it's rule by corporate oligarchy, with rampant exploitation of the commons.

If anarchy was the end result of libertarian ideals, they would be called anarchists. Corporate oligarchies are much more likely when government regulates the economy, and gets in bed with corporations. You have to realize that any "archy" requires government, force. It can't sprout out of markets where force is not allowed.

How about like this: Medicare operates with 3% overhead, non-profit insurance 16% overhead, and private (for-profit) insurance 26% overhead. Source: Journal of American Medicine 2007

Does that overhead in the private sector have anything to do with excessive government regulation of the healthcare insurance market? Maybe it would be less of a burden to compete in a market that is almost 60% provided by government?

I would disagree. We are currently in a financial crisis because an unbridled, short-term incentive laden banking industry leveraged itself into oblivion. Afterwards, they put a gun to our head and handed us the tab. In other words, print the dough, or the pitchforks and torches tear the whole joint down. The only reason their hustle didn't work indefinitely is because too many of US were spending money we didn't have. Changing that is going to take a cultural shift that is already beginning.

Government and the Fed created the moral hazards that led to what you're attributing as the cause. A lot of people acted stupidly, you're saying it's cultural, that people "got greedy", ignoring the incentives and government guarantees that led people to believe there weren't any risks.

Ever hear of buy low, sell high? No, I think China is more likely to just borrow against it, and start picking up their part of the consumption. They're already pulling the world out of this recession.

Ever hear of "cutting your losses"? There's no "sell high" here, the US can't pay back its lenders, not at the rate the US government is spending and willing to spend for the next few years, and not in a recession where government is ruining productivity. China will be part of the recovery effort alright, but they'll much rather do it without the US strapped to its back.

Think about it, if China lent the US more than a trillion dollars, it's better to lose that money than lend us 2 or 3 more trillions just to watch even more money go to waste. They don't need us.

Yes. Define excessive.

The Constitution is a good reference, most things the federal government does that are not expressly authorized in the Constitution are excesses.

Spending is serious business, it's inflation you all gotta relax about. Is it worth having the "why inflation is good for the economy" argument with you? Or would you rather go back to your non-mathematical Austrian school BS, and we can just agree to disagree?

NetRunner, is that you? I guess you think hyperinflation is a synonym for "awesome".

If you actually studied Austrian economics and you think it's "non-mathematical" and "BS", yes, we'll have to agree to disagree. You're beyond help.

I agree, it's difficult to write laws without unintended consequences. That is, you can always game the rules. One should not conclude from this, however, that you shouldn't try and write rules. Instead, you should just write them faster than the douche bags can game them. You always need more rules. Every time there is an advance in technology, you need more rules. Why? Technology makes it easier to game the rules, and exploit the commons, just like it makes it easier to do everything else.

Don't worry about that. Keep rules simple, no fraud, enforce contracts, no use of force. Everything else will tend to sort itself out. Also, don't be afraid of technology.