What are the issues?

[MorkandMindy]

1. The Banks. These lend out huge amounts of money, often in risky investments. While the investments do well the bank executives make huge bonuses, then when the investments fall the government, meaning the average American, foots the bill. At present the Federal Reserve has bought bank assets for huge sums of money and lent out enough to keep the inefficiently run too big to fail banks solvent.

How big an issue is this? Absolutely gigantic. I don't want to frighten the horses but it's too big for me to write it down without getting nightmares. You know a trillion is a million million, so 1 trillion is 2,700 dollars for each man woman and child in the US. The amount at risk is 29 Trillion.

 

[MorkandMindy]

Where has the wealth gone?

Partly it has been destroyed by irresponsible behaviour. I can't get figures because google doesn't seem to work any more, but I recall as the car factories were moved from Detroit and other parts of Michigan to Mexico, houses where built there and houses were demolished here. The mortgage backed asset owners lost money in what became known as 'toxic assets' and were bailed out in the TARP program. The house owners lost whatever capital they had in the houses and also their jobs.

And a fair amount went into the pockets of finance executives.

For example Robert Rubin on the Citigroup Board of Directors for ten years received 124 million dollars (1/8 of a billion) in compensation for the 'work' he did.

QUOTE: Wishes he could have reined in Citi but "I don't know what I could have done" as just a board member.
M&M think he got a lot of money for someone who couldn't do much.

CLAIM TO FAME: As Clinton's treasury secretary, he pushed to overturn regulations prohibiting finance-bank hybrids such as...Citigroup.

In total a sizeable chunk of the bail out money ended up in the pockets of the top executives responsible for the problems.


Deregulation led to exactly the sort of problems you would expect if you left a load of greedy entitled execs alone with a huge amount of money
.

 

[Sultan Of Swing]

1. The Banks. These lend out huge amounts of money, often in risky investments. While the investments do well the bank executives make huge bonuses, then when the investments fall the government, meaning the average American, foots the bill. At present the Federal Reserve has bought bank assets for huge sums of money and lent out enough to keep the inefficiently run too big to fail banks solvent.

How big an issue is this? Absolutely gigantic. I don't want to frighten the horses but it's too big for me to write it down without getting nightmares. You know a trillion is a million million, so 1 trillion is 2,700 dollars for each man woman and child in the US. The amount at risk is 29 Trillion.

Deregulation led to exactly the sort of problems you would expect if you left a load of greedy entitled execs alone with a huge amount of money

I hear about deregulation being a problem a lot, but what exactly did deregulation do?

What was the regulation that would have prevented all of this from happening, if it hadn't been de-regulated?

What would be your solution to your problem?

 

[aieyiamfu]

I hear about deregulation being a problem a lot, but what exactly did deregulation do?

What was the regulation that would have prevented all of this from happening, if it hadn't been de-regulated?

What would be your solution to your problem?

Elimination of the federal government would be a great start.

 

[MorkandMindy]

Elimination of the federal government would be a great start.

There are plenty of areas in the World where there is no effective government control and many ways of 'going off the grid'. If you want to talk about it then start your own thread on American Liberatarianism (distinct from Thomas Paine's Liberatarianism)

I hear about deregulation being a problem a lot, but what exactly did deregulation do?

What was the regulation that would have prevented all of this from happening, if it hadn't been de-regulated?

What would be your solution to your problem?

There has to be a balance between investor risk and company risk. Allowing a company to declare bankruptcy and walk away from it's debts increases investor risk. If the government decides to underwrite company risk in some cases such as banks then the bank executives must not be allowed to take advantage of that by taking huge risks to increase their own bonuses.

Government regulations are no different from any investor needing to know basic things about the investment he has made and deciding certain areas are too risky and not to invest in them. Likewise the government will not FDIC guarantee stock market investments, the higher returns are the reason people will take a higher risk.

 

[MorkandMindy]

The amount at risk is 29 Trillion.

It is easy to overestimate the likely loss because if all the risky investments do well then there is no loss, but the risks may grow and there may be a chain of failure making it impossible to cover the losses, that is another possibility.

I would suspect the exposure to risk will make the government choose policies that favor the banks making money over the less wealthy members of the population, such as by keeping interest rates up and labor costs down (lower pay rates), to the benefit of the wealthy bank executives and the detriment of everyone else.
.

 

[MorkandMindy]

Detroit

• MorkandMindy
• Jun 10, 2012

As the car factories were moved out of Detroit many buildings were no longer required and have been demolished, and the same has happened to housing. Individuals and companies have lost their incomes, gone bankrupt and defaulted on loans and mortgages and the banks hid those bad loans and mortgages in assets considered to be low risk. The resulting 'sub prime crisis' was handled by the government paying off the bad loans.

A responsible government would long ago have reduced the massive medical costs in the US so the car companies would have not needed to leave the country. A quick look at Germany shows the right way to keep car companies in the country. But the churches, schools and media have brainwashed the US population into believing the government is the problem, rather than the fairly obvious problem that in a greed based system everyone in power will take as much as they can and the country will eventually go bust.