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Well, their selective take is like a description of a mass shooting that only describes where the bodies ended up, but no discussion of who caused it, or even t

by smcin 4y ago

Well, their selective take is like a description of a mass shooting that only describes where the bodies ended up, but no discussion of who caused it, or even that bullets might have been involved, let alone which people actually did it: "Households had too much leverage in 2008 : Mortgage debt % potential GDP..." "The Global Financial Crisis was driven by price declines in low-quality assets with poor disclosure leading to a solvency crisis." Drink one finger very time you find a bank mentioning the Glass-Steagall Act, and ten bottles every time you find them admitting they lobbied Congress hard to repeal it. [0] "Why didn’t any Wall Street CEOs (or executives) go to jail after the financial crisis?" (also a list of criminal and civil charges, and which banks got fined) [1] ...and here's some shameless revisionism by Cato [2] ("It wasn't the banks [being allowed to issue the CDOs], it was the securities salesmen who spontaneously invented and sold CDOs"). I must remember that compelling excuse if I ever get busted running a casino in my own living-room. > "In any case, the 2008 financial crisis had precious little to do with Glass‐Steagall, one way or the other. It was caused primarily by bad lending policies, which in turn led to the growth of the subprime market to an extent that neither the lawmakers nor regulatory authorities recognized at the time. The commercial banks and parent holding companies that failed — or had to be sold to other viable financial institutions — did so because underwriting standards were abandoned." [0]: https://blogs.law.ox.ac.uk/business-law-blog/blog/2018/11/death-glass-steagall-was-carefully-planned-and-highly-consequential https://blogs.law.ox.ac.uk/business-law-blog/blog/2018/11/de... [1]: https://features.marketplace.org/why-no-ceo-went-jail-after-financial-crisis/ https://features.marketplace.org/why-no-ceo-went-jail-after-... [2]: https://www.cato.org/policy-analysis/repeal-glass-steagall-act-myth-reality# https://www.cato.org/policy-analysis/repeal-glass-steagall-a...

JumpCrisscross 4y ago
Glass-Steagall’s repeal wasn’t proximate to any post-repeal banking crises. (Glass-Steagall wouldn’t have prevented mortgage CDOs.) It certainly wouldn’t have done anything for SVB or Signature.
- smcin 4y ago
  Re Glass-Steagall and 2008 crisis, Robert Reich and Elizabeth Warren disagree with you [https://robertreich.org/post/124114229225 https://robertreich.org/post/124114229225]. According to you, which legislation prevented the conflict-of-interest in banks writing trillions in subprime mortgages decades prior to 1999? or securities firms selling CDOs backed by subprime MBS? IIUC, the issue in 2008 was never "preventing mortgage CDOs" outright, but preventing the inflated valuations on junk tranches of subprime, i.e. mortgage lenders allowing securities sellers to intentionally create and sell junk with their assets. (and I clearly didn't say Glass-Steagall would have done anything for SVB or Signature; I was saying banks like Chase's selective edit of the chain of events around 2008 was a whitewash because it omitted mention of key events.)
  - JumpCrisscross 4y ago
    > Reich and Elizabeth Warren disagree with you They argue that "nonbanks got their funding from the big banks in the form of lines of credit, mortgages, and repurchase agreements" and if "big banks hadn’t provided them the money, the nonbanks wouldn’t have got into trouble." But nonbank funding channels were already alive, well, and causing chaos in the 1990s (LTCM) and before (S&Ls). Sure, banks juiced the problem. But it didn't start the fire, it didn't bring the fire home and it didn't meaningfully alter the fire's trajectory. And there is no evidence that their large depositors would have sat there if nonbanks offered competitive rates fueled by their nonsense. As we've seen this cycle, banks and nonbanks will chase yield when rates are low and credit is cheap. To argue that e.g. SoftBank wouldn't have SoftBanked if JPMorgan and JPMorgan Securities were separate misses the forest for the trees. > securities firms selling CDOs backed by subprime MBS Bank originates mortgage. Bank sells mortgage to securities firm. Securities firm issues as CDO. Nothing about this requires the lending arm and securities arm be under the same roof. Mortgage CDOs became a thing because of computers, not Glass-Steagall. Proponents of reinstating Glass-Steagall are broadly well intentioned. But there are real financial regulations that have real impact that this discussion crowds out.
  - makomk 4y ago
    Robert Reich and Elizabeth Warren have massive partisan and ideological axes to grind, and their careers basically rely on convincing people that it's all the fault of big businesses convincing the government to lift regulations and that they could fix all of this if voters only gave them and their side the power.
samgtx 4y ago
And zero acknowledgment that Credit Default Swaps were pioneered by Blythe Masters AT JP Morgan and used relentlessly to move risk off of balance sheets in a house of cards that led to millions losing their homes and life savings. "In bypassing barriers between different classes, maturities, rating categories, debt seniority levels and so on, credit derivatives are creating enormous opportunities to exploit and profit from associated discontinuities in the pricing of credit risk." https://www.theguardian.com/business/2008/sep/20/wallstreet.banking https://www.theguardian.com/business/2008/sep/20/wallstreet.... And of course now she's in crypto. https://www.thisismoney.co.uk/money/markets/article-9263487/Former-JP-Morgan-star-Britains-cryptocurrency-queen.html https://www.thisismoney.co.uk/money/markets/article-9263487/...

by smcin 4y ago

JumpCrisscross 4y ago

Glass-Steagall’s repeal wasn’t proximate to any post-repeal banking crises. (Glass-Steagall wouldn’t have prevented mortgage CDOs.) It certainly wouldn’t have done anything for SVB or Signature.

smcin 4y ago
Re Glass-Steagall and 2008 crisis, Robert Reich and Elizabeth Warren disagree with you [https://robertreich.org/post/124114229225 https://robertreich.org/post/124114229225]. According to you, which legislation prevented the conflict-of-interest in banks writing trillions in subprime mortgages decades prior to 1999? or securities firms selling CDOs backed by subprime MBS? IIUC, the issue in 2008 was never "preventing mortgage CDOs" outright, but preventing the inflated valuations on junk tranches of subprime, i.e. mortgage lenders allowing securities sellers to intentionally create and sell junk with their assets. (and I clearly didn't say Glass-Steagall would have done anything for SVB or Signature; I was saying banks like Chase's selective edit of the chain of events around 2008 was a whitewash because it omitted mention of key events.)
- JumpCrisscross 4y ago
  > Reich and Elizabeth Warren disagree with you They argue that "nonbanks got their funding from the big banks in the form of lines of credit, mortgages, and repurchase agreements" and if "big banks hadn’t provided them the money, the nonbanks wouldn’t have got into trouble." But nonbank funding channels were already alive, well, and causing chaos in the 1990s (LTCM) and before (S&Ls). Sure, banks juiced the problem. But it didn't start the fire, it didn't bring the fire home and it didn't meaningfully alter the fire's trajectory. And there is no evidence that their large depositors would have sat there if nonbanks offered competitive rates fueled by their nonsense. As we've seen this cycle, banks and nonbanks will chase yield when rates are low and credit is cheap. To argue that e.g. SoftBank wouldn't have SoftBanked if JPMorgan and JPMorgan Securities were separate misses the forest for the trees. > securities firms selling CDOs backed by subprime MBS Bank originates mortgage. Bank sells mortgage to securities firm. Securities firm issues as CDO. Nothing about this requires the lending arm and securities arm be under the same roof. Mortgage CDOs became a thing because of computers, not Glass-Steagall. Proponents of reinstating Glass-Steagall are broadly well intentioned. But there are real financial regulations that have real impact that this discussion crowds out.
- makomk 4y ago
  Robert Reich and Elizabeth Warren have massive partisan and ideological axes to grind, and their careers basically rely on convincing people that it's all the fault of big businesses convincing the government to lift regulations and that they could fix all of this if voters only gave them and their side the power.

samgtx 4y ago

And zero acknowledgment that Credit Default Swaps were pioneered by Blythe Masters AT JP Morgan and used relentlessly to move risk off of balance sheets in a house of cards that led to millions losing their homes and life savings. "In bypassing barriers between different classes, maturities, rating categories, debt seniority levels and so on, credit derivatives are creating enormous opportunities to exploit and profit from associated discontinuities in the pricing of credit risk." https://www.theguardian.com/business/2008/sep/20/wallstreet.banking https://www.theguardian.com/business/2008/sep/20/wallstreet.... And of course now she's in crypto. https://www.thisismoney.co.uk/money/markets/article-9263487/Former-JP-Morgan-star-Britains-cryptocurrency-queen.html https://www.thisismoney.co.uk/money/markets/article-9263487/...