View Full Version : Economics Understanding more than talking points

09-26-2008, 07:11 AM
For those who have the attention span and ability to understand more than the talking points and crap we get fed by the media, here is some interesting background.

The Cascading Financial Crisis


In multiple appearances on Sunday talk shows, Treasury Secretary Henry M. Paulson underscored the seriousness of the problems ripping through the financial system and the need for swift action to deal with the crisis. The past few weeks have changed the structure of the U.S. financial system, with the federal government intervening in unprecedented ways to shore it up and proposing an eye-popping rescue package that gives the Treasury unparalleled powers. Now, the Federal Reserve has taken the extraordinary step of agreeing to convert Morgan Stanley and Goldman Sachs into traditional bank holding companies. As Wall Street and Washington continue to respond to the news, the work of AEI scholars provides ideas about what steps need to be taken next to protect the financial system.

For a comprehensive survey of AEI scholars' research on these matters over the past several months, see www.aei.org/FinancialCrisis/.
Peter J. Wallison and Charles W. Calomiris write in the Wall Street Journal that blame for the current crisis should be directed at Fannie Mae, Freddie Mac, and their enablers in government.
Wallison addresses bank regulation--including the "flawed case" for regulating securities firms like commercial banks and how some non-bank institutions are weathering the crisis better than regulated banks--in recent issues of AEI's Financial Services Outlook.
In the New York Times, Vincent R. Reinhart writes that the impending election is making the government react to the crisis faster than may be prudent.
In recent issues of AEI's Economic Outlook series, John H. Makin addresses how the financial-sector problems will spill over into the broader economy and ways to better manage systemic risk.
Alex J. Pollock writes that when government officials are faced with potential financial chaos, history shows that they always intervene and support the market with a bailout.

09-26-2008, 07:26 AM
The fallacy in this argument is the S&L example. We had defaults then. One should just repeat that in buying up assets of houses and selling them later with the government being neutral in outlays over time. That number should be very concrete. But why then is other financial tools being talked about also needing to be bought up? I admit that the downturn in the housing market leveredged this but the size of the other instruments and there very derivative nature makes this a problem front and center on the Financial Institutions and not the housing slump. It is these items that appear to have drifted to books of even Money Market Funds that now looks to erode confidence in a broader sector.

The ups and downs of markets is suppose to be what Capitalism is best at handling. To say this downturn in the HOME sells should overpower business real holding and banking in general is an attempt to avoid the circumstances that allowed this leverage to happen.

09-26-2008, 07:31 AM
what arguement do you refer to? There are many points of view represented in the information.

re mortgages and defaults....on a side note, why in the hell are we not prosecuting the individuals who lied to get a loan they couldnt pay and never intended to? The issue of personal responsibilty and the consequences of fraud have been lost in the desire to blame big anything and point fingers at anybody but me.

09-26-2008, 07:32 AM
That constitutes debtors prison.

09-26-2008, 07:33 AM
and the issue is?

09-26-2008, 07:35 AM
One of the fundamentals of capitalism is that you are not unduly punished for taking risk. That is why there is some obligation for the government to step in for its part in this. But that philosophy also exists for the individuals. That is why changes in the mortgages should be an option so that both parties share in the resolution and the pain.

09-26-2008, 07:47 AM
Taking risk is far different than committing fraud.

09-26-2008, 07:50 AM
I award you "ironic thread title of the year".

09-26-2008, 07:51 AM
I award you "ironic thread title of the year".

Seems a bit redundant doesn't it?