Cost of Bush Tax Cuts

[Magox]

Then I'm sure you'll have no problem digging up my views that the financial services industry shouldn't be regulated. This will be a fun wait. Hope you stock up on Snickers, while we wait.

 

 

 

There's no reason to think outside the box on this, because the data is plain to see and evaluate. People who think outside the box don;t need to have their opinions validated by linking WSJ & Bloomberg articles written by reporters who frequently don't understand what they're writing about.

 

To repeat, GS had no regulatory oversight over the companies that got overextended in the financial crisis. The original JP Morgan wasn't subject to the same regs as CHemical/Chase. Bankers Trust operated under different rules. So tell me how effective GS would have been to prevent financial mania, when the Fed or FDIC had no oversight over the companies that caused the vast majority of hte damage? If anything, it probably would have made the situation worse, because traditional banks' funding exposure to the investment banks could have taken down more segments of the industry.

 

GS doesn't even come close to explaining UBS, Northern Rock & German Landesbanks. It's a convenient excuse for everyone who argued against repeal of GS at the outset, just like blaming CRA is a convenient excuse for the ideologs on the other side (yet the data doesn't back it up). Rubin's admission is doubly priceless, as we're supposed to believe he wouldn't have pushed Citi/Solly into sub-primes if the act was still alive. Here's the scenario - if regulators wouldn't have allowed City/Solly merger to occur, Solly would still be independent, would still have gone full bore into subprimes, and would have been bailed out like Bear. Take it to another logical step if GS is in effect - JPM could not take in Bear. BofA can't buy Merrill. So in addition to AIG, the government has to take ownership in Bear, Lehman, Merril & Solly.

 

It's nice to wax nostalgic about the wonders of Glass Steagall, but it's another thing to actually go through the permutations and see that the situation would likely have been much worse.

You seem to believe that in just about every case correlation implies causation. I explained to you in detail on more than a few occassions and you either conveniently forget or ignore what I have been telling you. The main impacts of the repeal of GS were 1. Pyschological impact of deregulation, which gave the green light for all banks for more risk taking. Your line of thinking will NEVER ALLOW you to see this, because you are incapable of factoring in these sort of variables into your narrow equation. 2. Banks immediately levered up after repeal of GS. Look at the ratios of leverage, Greenspan had been fighting for this along with others for years, and gradually they were levering more and more and when the repeal of GS came about, it got out of control 3. What I explained to you a few times where this was a case of what I call excess supply leading to excess demand through excess securitations of MBS offered through not just the investment banks in non regulated OTC markets that BAC and CITI both participated in. Everyone wanted to get in on the game, the government gave the green light of "TAKE RISKS, it's ok", when the conditions of low interest rates, governments push for even more homeownership, and new exotic unregulated investment products designed for more levered exposure to the mortgage markets, there was a massive amount of funds available for home loans.

 

Why not? homes were going higher and the ratings agencies said that the bonds were "just fine, no worries here", so this caused investment banks and traditional depository institutions to partake in these activities, specially considering that they were ALL competing with one another (another point you dismiss) for profits, specially considering that the gains were in the high double-digits, which led to even more risk taking, which led to even more money available for all home loans which led to even more new mortgage companies popping up at every corner, sending out massive mails offering no money down loans. It was everywhere, the money was available and the bubble was even larger as a result of the repeal of GS.

 

The point is, that the bubble became larger and as a result of a larger bubble, when the bubble popped, everyone's losses became exacerbated as a result of that larger bubble. So when I argued with you well over a year ago that the repeal of GS was not the sole reason for the collapse and that I once gave you 15 listed reasons that caused this mess, you seem to conveniently dismiss this, and that the repeal of GS only "added more fuel to the fire" that's what I meant by it. Comprende?

 

 

You are like those people that I talk about, the old-skool Wall Street thinkers, who are use to the old failed metrics. You are incapable of thinking outside of these manners, you see things through a certain prism, and only consider the variables that you have always known. Well, there are new variables to consider, and it's this line of negligence and thinking that got us in this mess.

Edited October 21, 2010 by Magox

[Adam]

I have a question- and I will accept all the flaming about what an idiot I am to get a solid answer. Why not let them expire and move the age for retirement/Social Security up to 75. Cut defense spending by about 25%.

 

Sure, we would have some lean times, but we would make a major dent in the deficit.

[Peace]

I have a question- and I will accept all the flaming about what an idiot I am to get a solid answer. Why not let them expire and move the age for retirement/Social Security up to 75. Cut defense spending by about 25%.

 

Sure, we would have some lean times, but we would make a major dent in the deficit.

 

Fine with me.

[GG]

You seem to believe that in just about every case correlation implies causation. I explained to you in detail on more than a few occassions and you either conveniently forget or ignore what I have been telling you. The main impacts of the repeal of GS were

 

1. Pyschological impact of deregulation, which gave the green light for all banks for more risk taking. Your line of thinking will NEVER ALLOW you to see this, because you are incapable of factoring in these sort of variables into your narrow equation.

 

That risk taking meant that traditional big banks bought boutique investment banks. The only major combination of a big bank and a big investment bank was City/Solly/Travelers. The other things banks did was formally participate in debt & equity underwriting.

 

2. Banks immediately levered up after repeal of GS. Look at the ratios of leverage, Greenspan had been fighting for this along with others for years, and gradually they were levering more and more and when the repeal of GS came about, it got out of control

 

Show the data. Traditional banks could not lever up, since they were still under Fed or state regulatory watch.

 

Perhaps you're talking about the often used & misused leverage figures for Bear & Lehman?

 

3. What I explained to you a few times where this was a case of what I call excess supply leading to excess demand through excess securitations of MBS offered through not just the investment banks in non regulated OTC markets that BAC and CITI both participated in. Everyone wanted to get in on the game, the government gave the green light of "TAKE RISKS, it's ok", when the conditions of low interest rates, governments push for even more homeownership, and new exotic unregulated investment products designed for more levered exposure to the mortgage markets, there was a massive amount of funds available for home loans.

 

Why not? homes were going higher and the ratings agencies said that the bonds were "just fine, no worries here", so this caused investment banks and traditional depository institutions to partake in these activities, specially considering that they were ALL competing with one another (another point you dismiss) for profits, specially considering that the gains were in the high double-digits, which led to even more risk taking, which led to even more money available for all home loans which led to even more new mortgage companies popping up at every corner, sending out massive mails offering no money down loans. It was everywhere, the money was available and the bubble was even larger as a result of the repeal of GS.

 

The point is, that the bubble became larger and as a result of a larger bubble, when the bubble popped, everyone's losses became exacerbated as a result of that larger bubble. So when I argued with you well over a year ago that the repeal of GS was not the sole reason for the collapse and that I once gave you 15 listed reasons that caused this mess, you seem to conveniently dismiss this, and that the repeal of GS only "added more fuel to the fire" that's what I meant by it. Comprende?

 

 

You are like those people that I talk about, the old-skool Wall Street thinkers, who are use to the old failed metrics. You are incapable of thinking outside of these manners, you see things through a certain prism, and only consider the variables that you have always known. Well, there are new variables to consider, and it's this line of negligence and thinking that got us in this mess.

 

 

Nice statements. Except it has nothing to do with GS. Banks originated the mortgages and sold them off to packagers of RMBSs. The phenomenon you describe is the shadow banking system where the money was simply circulating from one institution to another on the back of riisng home equity values. GS would not have prevented the rise, because the traditional banks didn't do anything new that they could not have done before the law changed.

 

The only reason I bring up GS is to hammer the point home that GS was far down the list for the cause of the bubble & the collapse, as was the CRA. Why, because there's no data to back it up. And I'm sure you knew of Basel before WSJ suddenly discovered it and started reporting on it earlier this year.