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I experienced the financial crisis first hand on Wall Street, a place fraught with people who pretended to know the ins and outs of risks. It was also a brutall

I experienced the financial crisis first hand on Wall Street, a place fraught with people who pretended to know the ins and outs of risks. It was also a brutally honest place when it came to winners and losers. But that changed when Hank Paulson, then the Secretary of Treasury, knelt down on camera and begged Nancy Pelosi for what was effectively a blank check. Wall Street could not face reality when it was its turn to be the loser. I believe the real cost of 2008 is moral hazard. They destroyed the fundamental values of capitalism and I can't help but feel that we are all still pretending.

rwc 8y ago
Wow I don’t remember this kneeling down on camera. Can you link?
- shshhdhs 8y ago
  I don’t recall him kneeling. I think the commentator was exaggerating
  - bitxbit 8y ago
    No, I am not exaggerating. https://www.nytimes.com/2008/09/26/business/26bailout.html https://www.nytimes.com/2008/09/26/business/26bailout.html [“I didn’t know I was going to be the referee for an internal G.O.P. ideological civil war,” Mr. Frank said, according to The A.P.Thursday, in the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.] There are some pictures of it as well but appears most of them have been taken down over the years.
    - EADGBE 8y ago
      > There are some pictures of it as well but appears most of them have been taken down over the years. Convenient
    - graedus 8y ago
      Thanks, that's an interesting bit of history, I hadn't noticed that before. Off-topic but ultimately related, here's another "fun" Hank Paulson moment as he talks about inequality with Robert Rubin and Sheryl Sandberg (and I believe Tim Geithner is just off-camera to the left): https://www.youtube.com/watch?v=ln33wtom1Ow https://www.youtube.com/watch?v=ln33wtom1Ow
pas 8y ago
Finiteness (scarcity) of resources is the essence of capitalism, and thus the effective counterparty risk is also finite. The banking sector converged on this state via the bad incentives of under-regulation. The problem is that the counterparty was (and still is) the whole host economy, the country, the world, etc. And similarly the economy would have stopped without the bailout. There is no bigger fish when it comes to global finance, geopolitical institutions are largely reactionary (eg. the Basel III accords are nice, but they are completely post-crisis, as there was simply no incentive to push for better/stronger capital requirements before the crisis). And each country's financial regulation/oversight agency is bound by the incentives of our greedy human optimization strategies. (That is politics with all of its problems: money in politics as in regulatory capture, lack of campaign finance reforms, etc.)
- bitxbit 8y ago
  Very well put.

rwc 8y ago

Wow I don’t remember this kneeling down on camera. Can you link?

shshhdhs 8y ago
I don’t recall him kneeling. I think the commentator was exaggerating
- bitxbit 8y ago
  No, I am not exaggerating. https://www.nytimes.com/2008/09/26/business/26bailout.html https://www.nytimes.com/2008/09/26/business/26bailout.html [“I didn’t know I was going to be the referee for an internal G.O.P. ideological civil war,” Mr. Frank said, according to The A.P.Thursday, in the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.] There are some pictures of it as well but appears most of them have been taken down over the years.
  - EADGBE 8y ago
    > There are some pictures of it as well but appears most of them have been taken down over the years. Convenient
  - graedus 8y ago
    Thanks, that's an interesting bit of history, I hadn't noticed that before. Off-topic but ultimately related, here's another "fun" Hank Paulson moment as he talks about inequality with Robert Rubin and Sheryl Sandberg (and I believe Tim Geithner is just off-camera to the left): https://www.youtube.com/watch?v=ln33wtom1Ow https://www.youtube.com/watch?v=ln33wtom1Ow

pas 8y ago

Finiteness (scarcity) of resources is the essence of capitalism, and thus the effective counterparty risk is also finite. The banking sector converged on this state via the bad incentives of under-regulation. The problem is that the counterparty was (and still is) the whole host economy, the country, the world, etc. And similarly the economy would have stopped without the bailout. There is no bigger fish when it comes to global finance, geopolitical institutions are largely reactionary (eg. the Basel III accords are nice, but they are completely post-crisis, as there was simply no incentive to push for better/stronger capital requirements before the crisis). And each country's financial regulation/oversight agency is bound by the incentives of our greedy human optimization strategies. (That is politics with all of its problems: money in politics as in regulatory capture, lack of campaign finance reforms, etc.)

bitxbit 8y ago
Very well put.