I am fully aware of the debt problems of America. I dont need you to tell me that. I do find it ironic how on the one hand you can admit to the enormity of the US debt problem, but then support a jackass like Obozo that has put that debt problem on massive steroids. You can’t be on both sides of the issue, DT. Well, maybe you can since you’re Canadian and it doesnt matter. But Americans can’t be on both sides.

Re: Ireland… they did the right things for attracting business and growing their economy, but failed to control social welfare spending. Economic growth soared and so did revenues to the government. But like all politicians everywhere, they spent way more than they took in. And when economic cycles turn down, like they always do, they were stuck holding the bag. And they, like the rest of the PIIGS in Europe, are now paying the price for profligate spending on social programs.

Why would you question bankers’ honesty? What makes politicians and bureaucrats more trustworthy than bankers? How do you know what the normal risk taking of everyday business is? And why would you care what they do with their own money? You are free to put your money in any bank you want and to examine their financials. They’re free

No one says we dont need certain minimum regulations. Of course we do. But anyone that thinks that we can regulate our way to complete safety and no more failure is living in a fantasy world. You cant do it. Not possible. In fact, the more regulation, the more likely to have failure and corruption as people naturally seek ways around strangling bureaucratic red tape. Where do you think corruption is at it’s greatest? In free market economies, or command and control economies? You know the answer that that question, DT. Why is that? Hmmmmm?????

Regarding government programs… I should be a little more specific and say government SOCIAL programs. Not a single one has EVER accomplished it’s mission. Every single one has become a behemoth and self-serving, self-perpetuating monster that consumes taxpayer dollars and redistributes only a small portion of that which it takes in. Every one has been a failure of outrageous proportion.

Also, we in America do NOT live in a democracy. Our founders knew that democracy devolves quickly into mob rule. This is why they set up a constitutional representative republic. There is a massive difference between the two. In a democracy, the majority can vote themselves access to the minority’s private property (money). In a Constitutional representative republic, this is not supposed to happen because the voice of the minority AND the rule of law as set up in the Constitution prevent mob rule. Unfortunately, in America, we are now living in a post-Constitutional period where politicians and courts have essentially ignored the rule of law laid out in the document’s plain writing. They instead are making it up as they go according to their own personal goals for society. Witness the Obozocare law. There is NO WAY IN HELL that the law is Constitutional. It’s not even debatable. John Roberts manufactured a new tax out of whole cloth. The Constitution defines taxes already, and he invented a new one that basically says that we can tax you if you DO NOT purchase a private product and service. Absolutely unbelievable. Roberts should be impeached.

Now I know you like socialized medicine and that’s what you have in Canada. But we’re NOT Canada. We have a Constitution that LIMITS Federal government powers, and maximizes individual liberty and freedom. Socialized medicine is 100% at odds with the principles of liberty and freedom. 60% of Americans want nothing to do with this law. It will bankrupt us quickly, drive costs higher, and destroy what once was the most efficient and innovative healthcare system in the world.

But healthcare is not the point of this discussion. It is an example of the fact that ALL government social programs that redistribute wealth are destructive and are failures. And by the way, when I say social programs, I also mean social programs that benefit businesses or industries. All of them suck!

Gotta run. Have a nice day!

Why do I question banker’s integrity and honesty regarding risk, when left entirely to their own devices with few rules? Oh…..I don’t know. 1929 and 2008 sort of come to mind. Funny thing that. In both cases, there were few regulations governing risk taking and libertarians were in place for “oversight”. The changes of the 1930′s brought about 70 years of stability until the changes of the 90′s finished the reversal process and set the stage for 2008. Yeah I know, like your CRA story, I’m sure that your copies of Libertarian monthly have presented some reverse engineered, cockamamy, alternate universe story of evil gov’t being responsible, but don’t believe it.

In Canada, the federal gov’t's National Energy Program was considered (by Liberals) not worth continuing. You talk as though you know every single gov’t program that ever existed and you know that none of them have ever been altered, changed, or dropped. How would you know that? Got proof? I can think of the reverse. Gov’t's realizing that a completely hands off approach had serious flaws: banks before the 1930′s, automobile and airplane safety standards, food safety and environmental regulations, labour laws, etc..

Any government programs that tend to stick are due to their popularity. In a free democratic society, why shouldn’t voters be able to tell political parties that there are certain services that they want their gov’t to do for them, and they’re more than willing to pay for them in taxation. Are freedom and democracy just for the wealthy elite who don’t want gov’t to do anything?

I don’t have uncompromising faith in gov’t institutions. The Greek gov’t has been corrupt for a long time. I have suspicions about Spain’s dynamic provisioning and even the French did a little book cooking I hear. International banking can be very intertwined and this mostly happened after the American financial deregulations occurred. Some gov’t officials were ethically challenged but they also had help from morally bankrupt financial institutions who now had the deregulated opaque products that would help them hide their true financial positions or get them through a rough period with ridiculously fraudulent promises. There were towns and municipalities across Europe, and some in America, that were devastated when things began to go horribly wrong in the market. Many times, they didn’t understand what they were getting into.

That’s the thing. You don’t want a situation where this can occur in the first place. That’s not the normal risk taking of everyday commerce. Of course gov’t debt can get to be a problem, but we disagree strongly on the level of blame here. The Republic of Ireland was the darling of the right for a long time. They did virtually everything that the American right says you’re supposed to do, and look what happened. Did you know that Spain’s national debt, per capita, is less than the U.S.?

Obozo, you make blanket statements all the time that no one, not absolutely steeped in your philosophy, would agree with. “All government institutions have demonstrated nothing but failure for the past 100 years.” You often make me react like an old Amy Poehler-Seth Myers weekend update skit; really…..really…..really.

Yes, you finally get it. Just like you are free to do with your money what you want, so should anyone or any business be free to do so. For banks, so long as they are NOT permitted to access customer accounts, they can do what they want with house money. Free to succeed, free to fail. NO BAILOUTS!

What makes you think that a government bureacrat knows more about banking and risk than bankers do? Why do you have such uncompromising faith in the very government institutions that have demonstrated nothing but failure for the past 100 years?

Plus, you never answered my question about “When has a leftist EVER looked at a government program and proclaimed it a failure?”…. do you have a response different than mine?

Have a nice day!

Unbelievable.

i) Who are you to say to that a bank needs/doesnt need to hedge whatever bets they want? I suppose you should be running a large investment bank, right? NOT!!!! And certainly, the multilayered collateral and hedging does present risks, but hey, there are none when the government bails you out. And the failure of a few mortgages doesnt have a great effect. What it does have effect on is when enough mortgages go under to create a significant decline in property values, the number of mortgages that are under water radically increases. As they increase, the value of the real collateral backing ALL mortgages as a whole declines, and this screws their balance sheets. In turn, hedges are placed against such an eventuality. This is not a major problem (in fantasy world) if Fannie/Freddie are backing the loans. So yes, mortgages going under DO affect a major portion of the banking system. One other point… a large number of the people defaulting on mortgages were not “poor people”, but middle and upper middle class people chosing strategic default rather than pay mortgages they could afford. So dont give me the whiner story.

ii) The reason there is only one way you can think is because you dont realize there is a difference between government bureaucrat’s regulations and financial reporting requirements, most of which are adopted by the banking industry and the AICPA’s Financial Accounting Standards Board (called the FASB) which is NOT a government agency. The SEC requires reporting. The FASB determines what goes into those reports and exactly how matters are accounted for and reflected.

iii) You have bought the lie about the bailouts. Look up history. This is not the first time that such bailouts have ocurred and they are ALWAYS accompanied with dire threats of the end of the world by the politicians seeking a way to scare the populace into supporting something they never would under normal circumstances. It was all a fake. The world would not end and the strong would survive and take over the weak who have failed. We would be WAAAYYY better off today.

iv) The problem with you leftist nutjobs is that you all think everyone else is too stupid to think for themselves and only can be saved from the big bad capitalists with the help of the leftist overlords. Well, you are wrong. We are not all that stupid. (only you guys on the left are) “Derivatives” is a fancy word for insurance. Any normal person that is NOT a useful idiot or leftist nutjob with a blind faith in government can understand this. It’s not hard. And full disclosure itself IS a deterent to foolish risk taking.

v) “Legitimate commerce”…. interesting term. What is “legitimate commerce”? Is it what you define it as? Is it what I define it as? Or, is it what has been defined by our cultural norms in a free society and codified into laws already? I think the latter wins the day. For your definition of what is legitimate is purely subjective and is based on leftist nutjob confused thinking that is emotionally based and designed to remove failure from the system.

You supposition that advocating free market economics as going to cause the rise of communism is like saying advocating safe driving causes more accidents. Huhhhh??????

And I am a pretty down to earth conservative, DT. We’ve had some good discussions on here. Hope we can have more.

You see… you got me to take time from my vacation for this. Let me go.

Have a great day, DT!

ii) The only way I can think of to separate house money from customer money is evil regulations. You eliminate Glass-Stegall and then foist the commodities futures trading modernization act upon the nation, and they’ll run wild. They have.

iii) I hated the bank bailouts too. Everybody did. The problem is, without massive intervention of some kind, the banks and entire financial system collapse and then the U.S. becomes Albania overnight. The Wall St crooks don’t care. They’ll disappear with their ill gotten fortune. You think things are bad now. This isn’t a glove factory in Mayberry going under.

iv) Not that it’s anywhere close to being a good solution, but a requirement of full disclosure of complex derivative “assets” would involve evil government regulations. Like consumers would really understand anyway, and as though it would be truly and patiently explained to them by the banks. There’s my laugh for the day.

v) You need risk to be brought about by the mechanizations of legitimate commerce, not by activity that’s so immoral that it needs to labelled as criminal if it isn’t already.

Obozo, I’m no communist but your philosophy is going to help resurrect it. You’re no regular conservative. If so, we could dialogue. I know that every cell of your being is steeped in Ayn Rand. Like her, you’re not thinking straight but you think you are. Freedom isn’t just, let the world go crazy with no rules.

Regarding your post, I have a question: Do you think that a government commission, set up and staffed by leftist big government people, is going to find fault with government programs? Seriously? When has a leftist EVER looked at a government program and proclaimed it a failure? The answer is NEVER! The leftist nutjob answer to every failed program is that “it needs more money and time to work”.

You like to talk about derivatives, but ignore the incentive system that was set up which created the NEED to devise those hedges. Further, what do you think bankers learn when the politicians bail them out for their bad decisions? You know what they think…. that there really is no cost to bad decisions because Uncle Sam will steal from taxpayers to cover their asses.

The answer then, is absolute freedom for banks to do with their own money what they want. Disclose derivative holdings and exposure in their quarterly reports, and keep house money separate from customer money. I, as a consumer of banking services, have a right to put my money in any bank I choose and to avoid banks with excessive exposure. When a bank fails, let them fail. A smart and well run bank will take over customer deposits. The bad bankers fail and bankruptcy procedures begin. The threat of failure with NO taxpayer bailouts combined with full disclosure of derivative exposure will be plenty incentive to avoid risky behavior for most people.

As to your other cited problems with BT and LTCM, no doubt there are scumbags and liars in banking just like there are in government. No amount of regulation is going to get rid of unscroupulous or bad actors anywhere. They should be dealt with criminally IF they broke the law. If they were just being immoral, but not illegal, they should suffer the destruction of their businesses. But too much regulation stifles the very point and benefit of a free market, and therefore becomes highly destructive.

While I understand your feelings that bad actors should be weeded out and their actions should be prevented, the truth of the matter is that only a small percentage of any walk of life, banking or government included, are bad actors. It is simply NOT possible to have enough regulation to completely eliminate all risks and failure. The entire point of the free market is that we are free to succeed AND fail. Risk is a natural component of freedom. To eliminate risk is to eliminate freedom. Do you understand?

I hope you are well, my friend. I’m gonna reply to a couple more posts, but then get back to my vacation. I only have this week left.

Have a great day, DT!

2008 had many factors that contributed to it but if derivatives had been restricted, or completely regulated, the major problems would have been avoided.

Trillions of dollars in this market and the biggest banks in the country operating in secret. This high stakes derivatives market could easily take down the entire financial system again.

Long Term Capital Management was a case study in arrogance. They invented complex mathematical formulas and used otc derivatives to place their bets. Neither the gov’t nor investors knew anything about how LTCM worked. LTCM did business with 15 of Wall Street’s biggest banks and leveraged 5 billion into more than 1 trillion in derivatives. They didn’t know the extent of LTCM’s exposures in the market or that all of the other otc derivatives dealers had been lending to them as well. Many banks had invested in LTCM derivatives believing that they alone were in a deal. When LTCM became stressed (due to a financial crisis in Russia) and these guys wanted to collect their collateral, they discovered that a lot of other parties had the same claim on it. None of the regulators or banks knew that LTCM was on the verge of collapse because they had no info on the over the counter dark market.

In 1993 Bankers Trust took Proctor and Gamble to the cleaners with complex otc derivatives products. Proctor filed suit claiming that there was no way to understand these products and that they were fraudulently presented to them. BT took advantage of the fact that the otc products were too complex to understand. Somehow P&G’s counsel got hold of audiotape recordings of BT brokers saying things like “wet dream”, and “we set ‘em up”, and “these idiots really think that it’s in their best interests, but heh heh it’s not.”

In a private meeting one time, Fed chairman Alan Greenspan told CFTC head Brooksley Borne, “you probably think there should be rules against fraud don’t you?” “You don’t get it…. the market will figure it out.” Recalled later by Borne. She was charged with policing fraud and Greenspan didn’t think that should even be policed. Rubin, Sommers, and Greenspan eventually got rid of her and defanged her agency.

Obozo, this is complicated (to say the least) and it’s way, way, beyond 1977′s community reinvestment act. The issue here is that it’s an unregulated 27 trillion dollar market happening out of sight inside a black box. It’s a dark market with no transparency and no rules and conditions that are very favourable for things to go wrong. The libertarian philosophy of government being a destructive force that just gets in the way has brought us this. All of the lessons learned from the 30′s, about what’s needed to have markets function smoothly, have been ignored. Markets can’t work like that. The capitalist system can’t work like that.