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Your comment is full of the absolutisms and blanket assertions that I'm talking about. Regulation IS systemic risk. -- Always? The power and impact of the bon

by jbooth 17y ago

Your comment is full of the absolutisms and blanket assertions that I'm talking about. Regulation IS systemic risk. -- Always? The power and impact of the bond rating companies is also a product of regulation. -- 100%? You see no use for these companies in a private market as a selling tool? * Oh, and the "mortgage pool insurance" - also a product of regulation. Regulators wanted banks to hold more of those securities but needed to make them appear safer* -- Doesn't really look like they needed a lot of encouragement from regulators to me. I don't think you're telling the whole story here. And finally -- For example, regulation forced US banks to own lots of fannie and freddie stock as part of their "regulated assets". When that stock tanked, they all took a huge hit. -- How huge a hit? "We require a 1 trillion dollar bailout" huge? I don't think so. Red herring.

anamax 17y ago
> Your comment is full of the absolutisms and blanket assertions that I'm talking about. The question isn't whether they're absolute, it's whether they are wrong.... > Regulation IS systemic risk. -- Always? Yes, always. Regulation enforces common behavior. If that behavior has bad consequences, its effects will be more widespread than behavior by a company or two. > Doesn't really look like they needed a lot of encouragement from regulators to me. I don't think you're telling the whole story here. I'm not telling about all the things that regulators got wrong, but I'm accurate about the things I do mention. And yes, they needed encouragement. There are lots of things that they could hold, but regulators wanted to increase the demand for mortgage-backed securities (because that lowered the price and made it possible to do more of them) so they came up with a number of financial rewards. > How huge a hit? "We require a 1 trillion dollar bailout" huge? I don't think so. Red herring. I didn't say that it was the whole problem, the mortgage backed securities that they held also lost a lot of value (see above), but it was significant. Fannie and Freddie lost $100B in market cap during the first 8 months of 08 and things haven't gotten better. I find it interesting that you think that one aspect of the problem must be unimportant because it wasn't the whole problem.... Here's a question - what incentives to regulators have to get it right? Note that failures in regulation are typically followed by "we need more regulation", as you've demonstrated....
- jbooth 17y ago
  No, the question is, in a sufficiently complex system, can or should you boil everything down to sentence-sized absolutes? I'm positing that if you do that, you're going to be wrong. Unregulated markets are the right way to go for 95% of goods and services, like toilet paper, peanut butter and roadside diners. But not for 100%. You agree with this, unless you're in favor of disbanding the military and hiring personal bodyguards, selling off the highway system to toll roads, allowing your neighbor to build a coal-fired power plant within 6 inches of your property and opposing net neutrality because the market will work things out. Don't turn your brain off just because it's comfortable -- examine situations with a fresh mind. Follow the incentives -- market failure is a real phenomenon.
  - anamax 17y ago
    > No, the question is, in a sufficiently complex system, can or should you boil everything down to sentence-sized absolutes? That's a question, but it isn't particularly relevant as no one claimed that everything can be boiled down to sentence-sized absolutes. > You agree with this, unless Not so fast. The military isn't an example of a regulated market. Net neutrality is an interesting example for you to bring up. Last-mile bandwidth providers have a govt-granted monopoly. Ford doesn't tell me what I can do with trucks that I buy from it. > Don't turn your brain off just because it's comfortable -- examine situations with a fresh mind. Follow the incentives -- market failure is a real phenomenon. Patronize much? The existence of a problem does not imply that the existence of a solution with desirable properties. To be more specific - the existence of market failure does not imply the existence of solutions to said failure that are better than said failure. If you want to argue for regulation, you need more than "market failure". You need to show that regulation costs less. Since your examples of the need for regulation have been caused by regulation.... Note that the success of regulation in one area tells us nothing about whether regulation will succeed in another. And then there's the small problem that we don't have ideal regulators, we have US regulators. Surely their record is relevant....

by jbooth 17y ago

anamax 17y ago

> Your comment is full of the absolutisms and blanket assertions that I'm talking about. The question isn't whether they're absolute, it's whether they are wrong.... > Regulation IS systemic risk. -- Always? Yes, always. Regulation enforces common behavior. If that behavior has bad consequences, its effects will be more widespread than behavior by a company or two. > Doesn't really look like they needed a lot of encouragement from regulators to me. I don't think you're telling the whole story here. I'm not telling about all the things that regulators got wrong, but I'm accurate about the things I do mention. And yes, they needed encouragement. There are lots of things that they could hold, but regulators wanted to increase the demand for mortgage-backed securities (because that lowered the price and made it possible to do more of them) so they came up with a number of financial rewards. > How huge a hit? "We require a 1 trillion dollar bailout" huge? I don't think so. Red herring. I didn't say that it was the whole problem, the mortgage backed securities that they held also lost a lot of value (see above), but it was significant. Fannie and Freddie lost $100B in market cap during the first 8 months of 08 and things haven't gotten better. I find it interesting that you think that one aspect of the problem must be unimportant because it wasn't the whole problem.... Here's a question - what incentives to regulators have to get it right? Note that failures in regulation are typically followed by "we need more regulation", as you've demonstrated....

jbooth 17y ago
No, the question is, in a sufficiently complex system, can or should you boil everything down to sentence-sized absolutes? I'm positing that if you do that, you're going to be wrong. Unregulated markets are the right way to go for 95% of goods and services, like toilet paper, peanut butter and roadside diners. But not for 100%. You agree with this, unless you're in favor of disbanding the military and hiring personal bodyguards, selling off the highway system to toll roads, allowing your neighbor to build a coal-fired power plant within 6 inches of your property and opposing net neutrality because the market will work things out. Don't turn your brain off just because it's comfortable -- examine situations with a fresh mind. Follow the incentives -- market failure is a real phenomenon.
- anamax 17y ago
  > No, the question is, in a sufficiently complex system, can or should you boil everything down to sentence-sized absolutes? That's a question, but it isn't particularly relevant as no one claimed that everything can be boiled down to sentence-sized absolutes. > You agree with this, unless Not so fast. The military isn't an example of a regulated market. Net neutrality is an interesting example for you to bring up. Last-mile bandwidth providers have a govt-granted monopoly. Ford doesn't tell me what I can do with trucks that I buy from it. > Don't turn your brain off just because it's comfortable -- examine situations with a fresh mind. Follow the incentives -- market failure is a real phenomenon. Patronize much? The existence of a problem does not imply that the existence of a solution with desirable properties. To be more specific - the existence of market failure does not imply the existence of solutions to said failure that are better than said failure. If you want to argue for regulation, you need more than "market failure". You need to show that regulation costs less. Since your examples of the need for regulation have been caused by regulation.... Note that the success of regulation in one area tells us nothing about whether regulation will succeed in another. And then there's the small problem that we don't have ideal regulators, we have US regulators. Surely their record is relevant....