financial meltdown. Caused by deregulation?

[lord patton]

Disclaimer: I'm not a Republican. With one exception in a U.S. congressional race, I've never voted Republican.

I've heard Biden and Obama blame the current financial meltdown, at least in part, on deregulation. Obama: (http://www.cnn.com/2008/POLITICS/09/26/debate.mississippi.transcript/)

The question, I think, that we have to ask ourselves is, how did we get into this situation in the first place?

Two years ago, I warned that, because of the subprime lending mess, because of the lax regulation, that we were potentially going to have a problem and tried to stop some of the abuses in mortgages that were taking place at the time.

Biden: (http://www.cnn.com/2008/POLITICS/10/02/debate.transcript/)

If you need any more proof positive of how bad the economic theories have been, this excessive deregulation, the failure to oversee what was going on, letting Wall Street run wild, I don't think you needed any more evidence than what you see now.

But I haven't heard a lot of specifics about what deregulation they're talking about. I assume any deregulation with teeth enough to get us in this mess must've been a law or at least executive order. Which ones?

I've heard a few folks pinning the blame on the Glass-Steagal Act (http://en.wikipedia.org/wiki/Glass-Steagall_Act). Are there others?

[nanofrog]

Here's a few links to get you started. ;)
(Stuck to wikipedia, as I can't remember all of the bill names). :o

Specific to Banking Deregulation
Early 1980's Recession (http://en.wikipedia.org/wiki/Early_1980s_recession) (Pay close attention to the "Banks" and "The S&L Crisis" headings)
Depository Institutions Deregulation and Monetary Control Act (http://en.wikipedia.org/wiki/Depository_Institutions_Deregulation_and_Monetary_Control_Act)
Garn-St. Germain Depository Institutions Act
(http://en.wikipedia.org/wiki/Garn_-_St_Germain_Depository_Institutions_Act)

Other forms of deregulation that may be of interest, and there is more IIRC. :eek:
Airline Deregulation Act (http://en.wikipedia.org/wiki/Airline_Deregulation_Act)
Windfall Profits Tax (http://en.wikipedia.org/wiki/Windfall_profits_tax) (Oil Industry in particular)

Hope this helps. :)
Or at least enough to get you started. ;)

[TheAnswer]

Don't forget the Gramm-Leach-Bliley Act (http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act)

[nanofrog]

Don't forget the Gramm-Leach-Bliley Act (http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act)
Thanks. :)
This one is of particular relevance I think. Allowed the merger/acquisition/...of financial institutions. //Grrr...:mad:

I just stuck with the Reagan era. :eek:
So there's no way I found, let alone listed all of them. ;) :p

Perhaps another forum member or two could help fill in the holes. :o

[beatzfreak]

Here's an interesting timeline (http://www.motherjones.com/news/feature/2008/07/where-credit-is-due-timeline.html) of some events that had an impact on the mortgage crisis. It's a little left-leaning though.

[Thomas Veil]

I've heard a few folks pinning the blame on the Glass-Steagal Act (http://en.wikipedia.org/wiki/Glass-Steagall_Act).Just to be clear: Glass-Steagal was designed to help prevent messes like this. It was the undercutting of this act that was a part of the deregulation fiasco.

[iSaint]

Here's a good article (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon) from the New York Times published in 1999 about pressure from the Clintons to hand out more mortgages to low and moderate income persons.

[numediaman]

The biggest myth of the financial meltdown is that it is somehow caused by bad mortgage loans given to those who should not have qualified. Give me a break.

The financial crisis is being caused by collecting those loans into funds and selling the securities as an investment tool to foreign and domestic institutions.

If it were only true that these bad mortgages exist then we would only see banks writing down their bad loans and the investment community would be immune from the contagion.

Instead, these funds have made their way throughout the financial system like a virus and are of indeterminable value.

Funny how, in America, the finger is always pointed at the lowest on the economic scale. But the really funny line here is that the Clinton administration is somehow responsible because they wanted low income people to get mortgages. Geez, can we give it a break already -- it's been eight years.

Every Democratic administration has wanted to give low income families a chance at home ownership: its simply part of the ideology. But no Democratic administration told Wall Street to create funds out of these mortgages and pass them off as good investments.

[.Andy]

Here's a good article (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon) from the New York Times published in 1999 about pressure from the Clintons to hand out more mortgages to low and moderate income persons.
That's not the crux of that article at all. I suggest you read it again iSaint. The largest part of the blame in that article is directed at pressure from shareholders and other finance institutions wanting to maximise profits through subprime lending. You're cherry picking like a madman.

[pseudobrit]

The financial crisis is being caused by collecting those loans into funds and selling the securities as an investment tool to foreign and domestic institutions.

Yes. The OTC derivatives market is over ten times larger than the entire World GDP, possibly up to a quadrillion dollars large.

A trillion is 1,000 billion. This is closer to 1,000,000 billion dollars. Unfathomable.

A decade ago, this market was about $500B. This is a relatively new market, with very few ways to accurately value holdings (the mathematical models are clearly flawed) that has grown exponentially year-over-year in a completely unregulated market.

I think it Buffet who called derivatives "financial WMDs".

[mactastic]

The biggest myth of the financial meltdown is that it is somehow caused by bad mortgage loans given to those who should not have qualified. Give me a break.

The financial crisis is being caused by collecting those loans into funds and selling the securities as an investment tool to foreign and domestic institutions.
This cannot be stressed enough. If this problem was simply about bad mortgages, we would not be in the situation we find ourselves. It's these mortgage-backed securities, including CDOs, that are at the root of the problem. The market created by these derivatives is much, much larger than total USGDP.

Why something with the capacity to destroy the entire market was allowed to exist with so little oversight and regulation is the question we really need to ask ourselves.

[iSaint]

That's not the crux of that article at all. I suggest you read it again iSaint. The largest part of the blame in that article is directed at pressure from shareholders and other finance institutions wanting to maximise profits through subprime lending. You're cherry picking like a madman.

137988

Sorry, when I see the Clintons' name mentioned I naturally assume...

[solvs]

Here's a good article (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon) from the New York Times published in 1999 about pressure from the Clintons to hand out more mortgages to low and moderate income persons.

Those weren't responsible. It's a nice scapegoat for those pushing deregulation, which is actually the cause, but it's not that simple. I posted more about this in another thread here:

http://forums.macrumors.com/showthread.php?p=6353145#post6353145

[SFStateStudent]

Financial meltdown (present situation) is directly related to the "Credit Market" and it would seem that everything else is collateral damage. :eek: