I wrote: > > >There was an awful lot of fraud, irresponsibility and the like on > >the borrowers' side in all this. But as I said before, I frankly am > >not sure that is the real nub of the problem. It is the credit > >default swaps and the like that are ultimately causing the financial > >crisis, not the sub-prime mortgage market. > And John G. responded:
> Over the pond, the perception is that it's a political lack of > controls that is at the root of the problem. > > A lack due partly to ideology, partly to business being in bed with > government. > > This is borne out by the fact that the further a system is from the > post-Reagan model, the better it's current posture (yes, there are > exceptions like Iceland). > And I agree wholeheartedly. The lack of regulation of derivatives and similar foolishness (for example, the repeal of Glass-Steagall) are ultimately what led to the current disaster, and I hope that what I said above clearly implies that. Saying that casts a rather wide net for culprits as well; the cast of malefactors includes not only the Bush team, but also the Clinton one (the interested can consult for a major example the long article in the Washington Post a few months back about how Rubin, Greenspan and Arthur Levitt blocked Brooksley Born's efforts to regulate derivatives back in 1998). I would actually trace the roots of this back to the "Reagan Revolution" and its various myths and nascent pathologies, but that would require a long, long post and I will refrain from boring others this time around. Again, this will be something to watch closely with the new administration. Wall Street is addicted to derivatives, 70% of the US financial system is completely unregulated at present, and the big players do not want any new regulation. How will Obama handle this? Very big question, not at all clear where administration policy will come down on this. John M. --~--~---------~--~----~------------~-------~--~----~ Persons posting messages to not_honyaku assume all responsibility for their messages. The list owner does not review messages, and accepts no responsibility for the content of messages posted. -~----------~----~----~----~------~----~------~--~---
