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You may answer them by stating the fact that bank management committed fraud by making loans based on false appraisals and false documentation provided by borro

You may answer them by stating the fact that bank management committed fraud by making loans based on false appraisals and false documentation provided by borrowers and then selling these "assets" (with the help of corrupt ratings agencies) to uninformed institutional level investors . As intermediaries banks profit from the transaction fees. This is fraud plain and simple. The public at large doesn't understand the banking system and how it is funded. Banks fund loans by creating deposits out of thin air. They don't loan money from their depositors. Because of this, they must be and are carefully regulated.

generj 10y ago
Absolutely. The banks further profited by investing their own money - something we then prohibited them from doing, as it made them far too risky. Essentially the banks had abnormally high returns, which is almost always a sign of high risk. The entire purpose of regulation is to force the banks to be boring, low-risk low-return options so they have a very low chance of failing. People seeking high-returns can then go to the stock market or hedge funds, which are much less likely to be 'too big to fail'. The public is also unaware that nearly every substantial banking regulation was created as the result of a bubble, recession, or depression. We need strong bank regulations in order to prevent financial crises which can cause global depressions. Throwing away regulations when everything is going well is much like throwing out all that error-handling code your application has built up over a decade. Sure, you get better performance initially...