TPS

You seem to imply it's changes to promote increased minority homeownership, but the articles indicate those programs aren't to blame. So what is your point? Besides, I believe most of the problems derive from the "house flippers" in the really hot markets. You buy an asset with someone else's money, and if it goes up in value, you sell it; if it falls, you walk away.

Of course the walls were coming down for decades going back to deregulation in the early 1980s. Securitizations also go way back (and my recollection is that they were started by banks, but polished by IBs). My point is the current financial crisis stems from the housing bubble. Maybe 1999 is not the starting point either (And i didn't say that the end of GS was responsible, I said that you can start there)? Could it be the fallout from Enron and fraud in the stock market caused investors to move to a new market in 2002? As I said, there are many factors (including both parties) that can be blamed. However, I do disagree with the belief that this housing bubble was caused by something from 20+ years ago. As for Spitzer, that's exactly what he was writing about, that state's were trying to go after predatory lending practices but they were being squelched by the Feds.

Bull2. It doesn't go back "decades." It starts in 1999 with the end of Glass-Steagall. That should make the right happy because we all know who was president--although I could play the congress card like y'all like to do.... The interest only loans, the no-doc/lo-doc loans are all recent phenomena. I posted an editorial awhile back by Spitzer (while he was still governor) who blamed the administration for preventing states from limiting predatory loan practices. There is a lot of blame to go around, and almost all of it happened after the 1999 deregulation. Btw, did you mean to say "reserve requirements"? Or did you mean down payment on the mortgages?

First, I agree with much of this. However, if one does blame the guarantee, then that gets to the argument made by austrian folks here, that without government intervention of any kind there would be no crisis; or at best, they'd be less severe. Intervention of any kind is not the cause; crises arise from the nature of financial capitalism--leveraged and profit driven (note to those who always try to put words in my mouth--this is not a value judgment either about the system). Financial innovations arise from seeking profits or to circumvent regulations which restrain profit making. We agree that financial speculation and bubbles have always happened, always will. While older factors play a role, it's a consequence of behavior that began in 1999 with the end of Glass-Steagall--In fact, one might argue that this deregulation was more imortant in causing the crisis than government's guarante of the GSEs. So the walls come down; the enron debacle has investors looking for returns elsewhere (and of course they're flush with cash from Bush's supply-side tax cuts... ); 911 has the Fed lowering interest rates; China ensures they stay low; the bubble begins; everyone believes tulips will continue to rise in value; everyone is making money hand over fist; everyone who isn't yet, wants to; build more houses, offer interest-only loans so more people can qualify, generate more fees; risk has been lowered by securitizing; another lucrative market emerges with insuring the CMOs, CDOs, etc, which are split into so many different pieces some fund managers don't even know what they're holding--but they are insured); the insurance vehicle itself becomes an asset to trade; and on and on... Why should it stop when everyone is making so much money? The very nature of a bubble causes people to under-estimate the risk. I don't think it's a devious plot by the heads of companies saying, "well the government will bail us out." I don't think there are many CEOs willing to risk losing control of their firms by doing so. I'll say it again, it's just the nature of the beast. The financial industry said they'd self-regulate. That didn't work too well. Regulation won't prevent future crises, but it can reduce their severity. "We live in interesting times..."

I guess this is what you meant by "circle jerk."

That was funny. Sometimes you are almost likeable...

Commodity prices went up because billions of dollars from investment houses poured into the futures markets driving up all prices. Some people actually believed the "professional analysts" from these same investment houses who said oil could go up to $200 a barrel. Their bubble has burst. Because they need cash to shore up all their other areas, they are liquidating their commodity investments; hence the drop in prices.

How long ago were Freddie and Fannie given implicit guarantees? Did the crisis start 50 years ago? Seems to me something much more recent triggered this crisis...

Those are in Kindleberger's famous book as well. I wanted to focus on the US prior to the fed.

How do you define "big ass bubble?" Here are a few before the fed was created: US Banking crisis of 1837, speculation in cotton and land. Depression lasted until 1843. 1873 financial crisis based on railroad speculation. 1893 sliver speculation crisis and a depression that lasted 5-6 years. 1907 financial crisis related to coffee and union pacific.

I think it's pretty clear now that speculators--investment banks, hedge funds, and others--were the ones driving oil prices, not "fundamentals." WSJ The article is from today's WSJ.

If you can find an actual quote of "what Keynes said" about "limiting profits through taxation" I'll buy you dinner (via gift certificate) at a restaurant of your choice. Specifically, show me the source where Keynes said (in his model) that you need to limit profits through taxation. And where exactly did you find this explanation of the "Keynesian model?"

It's both, but demand is more important than lowering interest rates in a downturn. According to taterhill's post, the S&P is lower now than when Bush took office. Or did the tax cuts end in 2007? My point. Supply-side policies, or trickle-down, focuses most of the tax breaks on the upper income levels. What do the wealthier classes do with it? They purchase more financial assets or real estate. Increased values of financial assets doesn't mean increased real business investment. It's increases in the capital stock that are important, not inflated financial asset values or real estate. We're seeing the "real" impact from this period as financial manipulations based on the real estate bubble, not any real productive change in the American economy. A real supply-side tax cut would focus on tax cuts for businesses directly, not indirectly through "cutting taxes on the rich" and hoping more financial capital formation leads to more physical capital formation.

Of course he's a homer, he used to write for the Buffalo News.

Do they all happen to come from Chicago U or GMU or the Liberty Fund? Christ! Here's a simple one: look at the magnitude of recessions (the duration and severity) since government involvement was ratcheted up after WWII vs prior to WWII--on average, which were worse, before or after? Large government has stabilized demand so that servere downturns are prevented. That's an economic fact, it's not a value judgment. The market system is not some ideal that if left alone produces the best of all possible worlds Candide. The nature of the beast is based on the profit motive and risk taking, and with a financial structure based on leverage and faith, you get periodic crises regardless of government's role. Imagine what happens to those crises as "capital" gets more concentrated, in both the real and financial sectors. And what exactly is government now? Governments operate to protect the people that line their pockets. So, in a sense, I agree with arguments to reduce the size and scope of government, because you are really talking about reducing the ability to protect "vested interests." Aside: I have to laugh every time I think about the discussion of "capital formation" and supply side tax cuts. It appears the capital created was paper capital only...but it did create a lot of finance jobs.

An interesting hypothesis on the futures market manipulations, and not the first time I've heard this... futures manipulation

So you didn't jump out a window...?

This is a good piece on the CDS risks and AIG. Probably need the NYT subscription. AIG

The democrats are in the pockets of financial sector lobbyists as well.

Historically speculation and "mal-investment" have occured with or without government subsidies. Ending government loan guarantees will not end financial crises. Regulation is necessary to temper the inherent riskiness of finance which is built on leverage. Regulation will never end crises either, but it can help reduce their severity--as opposed to the black hole we now face...

The most important facet of the game for me was the ability of the Bills to move the ball--almost at will--against an excellent defense ON THE ROAD. There were only two series where they did not move the ball. Once deep in their own end, after a penalty and sack, they made sure not to turn it over and ran the ball on 2nd and 3rd. The second was with 3 minutes left in the half at their 20-yard line, and instead of going into a "2-minute" mode, they played conservative--which I didn't like in that situation. It almost came back to bite them, but ended with McGee's int. This gives me confidence that they can win any game now, even against a Belichek defense. So, no, I'm not going to curb my enthusiasm....

A few things to add: - This was a good road win against a good defense--they put up the necessary 20 points to get a road win. In fact, for the most part, it seemed like they moved the ball at will. There were two series where they played it conservative, the first time they were backed in their own territory, and that was the right thing to do. The second with just over two minutes to play in the first half, and I thought they should've gone to a two-minute drill, but it looked like they were playing not to lose. Jax got the ball back and got their first score. - I am really looking forward to see how this offense plays against the Pats' D. - I really liked the use of F. Jackson today, a couple of big plays. - Nice baby step for Hardy too. That indeed was a perfect throw where only Hardy had a chance for it. This is going to open things up for Evans in the red zone too. - Everyone in our group watching the game believed TE would take us down and score on that last drive. I was never that confident with JP. There's a little irony in the fact that JP getting knocked out of the Pats game last year lead to the emergence of Trent Edwards. - Love the depth we have at CB now. Youboty is pushing for time, but Greer has done nothing to lose his spot. In fact, he gets picked on the most and continues to make plays. - The defense had some lapses, but came up big when they needed to stop Jax in the 4th. Luckily, Jax was put into a situation where they needed to pass the ball which exposed their weakness in the middle of the line. - The Bills can easily be 5 and 0 going into the bye week, but 4 and 1 wouldn't be so bad.... One of my concerns: I think the weakest part of the Bills' defense is the LB unit, and certainly the thinnest. Of course, weak is a relative term. This team is fun to watch. In watching the games so far this year, I find the biggest difference is that I rarely say "how could they be so stupid?" Especially wrt to the offensive play calling.

As I read this thread, the very first thing I thought of was "preemptive strike against countries (accused of) developing wmds." Maybe you right wing neoconservatives weren't paying attention to what he was doing because you were so in love...err...it was still the honeymoon period....

As a GSE, the government has guaranteed the debt, so they have to step in and bail out. The argument made in the aritcle is that it was the foreign holders of the debt that forced the administration's hand in this bailout because they (foreigners) weren't going to continue to purchase new issues.