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I can assure you that new regulations are strangling growth. And that they will not prevent or avert some other disaster. No amout of regulation can prevent a b

by retube 15y ago

I can assure you that new regulations are strangling growth. And that they will not prevent or avert some other disaster. No amout of regulation can prevent a bank or indeed any company making reckless or badly informed business decisions. > Countries with stronger financial regulations didn't have to bail out banks in 2008/09. That's because other countries didn't have retail banks or mortgage brokers dishing out 700k mortgages to fruit pickers on 14k. _This_ was the root cause of the banking crisis and this is the industry which needed tightened regulations (such as those seen in the UK or most European countries). Inventing punitive rules on banks' capital ratios and funding reserves etc doesn't help anyone or address the root cause of the 2008 implosion.

yardie 15y ago
That's because other countries didn't have retail banks or mortgage brokers dishing out 700k mortgages to fruit pickers on 14k. This was one of the root causes but there were many. You should take a step back and really understand what happened. In fact fruit pickers weren't the problem at all. They never applied for those loans and the ones that did were in the minority. No, what you had were a bunch of middle-class people with houses buying up investment property to secure their future. The condo I used to live in (in Miami) had a 50% occupation rate and it wasn't occupied by fruit pickers. Instead you had doctors, lawyers, and even hackers looking for a 2nd or 3rd or 4th home to rent out. And they all had good credit. Everyone likes to think it was poor people buying up McMansions (and I don't doubt there were some) but the mortgage crisis was caused by normal people who were way over leveraged and a Fed that let it continue until it collapsed. This
- retube 15y ago
  Sure, I realise the fruit-picker example is extreme. But it was the sub-prime / alt-a mortgage market that imploded with default rates in some pools hitting 90%. But yes of course everyone jumped on the bandwagon across all of society - I'm not for a minute attempting to blame "poor" people for being financially irresponsible - far from it - I realise there was a complex interplay between the lenders/brokers/borrowers, the banks that securitised the pools and the people that bought the end product. My point is that the rules and regulation around mortgage lenders and lending were lax to the point of non-existence and that penalising banks (most of whom didn't originate these mortgages in the first place) is just easy scape goating and is exacerbating the very issues it's trying to solve.
  - yardie 15y ago
    You and I know it's an extreme example but there are lots of people that honestly believe the mortgage crisis was caused by poor people getting mortgages. Then they reference some civil rights era act that they believe forces the banks to lower their lending standards. In fact the law says you can't deny loans based on where the applicant lives (aka, redlining).
nl 15y ago
_This_ was the root cause of the banking crisis and this is the industry which needed tightened regulations (such as those seen in the UK or most European countries) We agree then. Capital ratios can be helpful too in some circumstances. I'd consider tighter regulation of the loan industry as financial regulation, but I don't really care about the semantics.

by retube 15y ago

yardie 15y ago

That's because other countries didn't have retail banks or mortgage brokers dishing out 700k mortgages to fruit pickers on 14k. This was one of the root causes but there were many. You should take a step back and really understand what happened. In fact fruit pickers weren't the problem at all. They never applied for those loans and the ones that did were in the minority. No, what you had were a bunch of middle-class people with houses buying up investment property to secure their future. The condo I used to live in (in Miami) had a 50% occupation rate and it wasn't occupied by fruit pickers. Instead you had doctors, lawyers, and even hackers looking for a 2nd or 3rd or 4th home to rent out. And they all had good credit. Everyone likes to think it was poor people buying up McMansions (and I don't doubt there were some) but the mortgage crisis was caused by normal people who were way over leveraged and a Fed that let it continue until it collapsed. This

retube 15y ago
Sure, I realise the fruit-picker example is extreme. But it was the sub-prime / alt-a mortgage market that imploded with default rates in some pools hitting 90%. But yes of course everyone jumped on the bandwagon across all of society - I'm not for a minute attempting to blame "poor" people for being financially irresponsible - far from it - I realise there was a complex interplay between the lenders/brokers/borrowers, the banks that securitised the pools and the people that bought the end product. My point is that the rules and regulation around mortgage lenders and lending were lax to the point of non-existence and that penalising banks (most of whom didn't originate these mortgages in the first place) is just easy scape goating and is exacerbating the very issues it's trying to solve.
- yardie 15y ago
  You and I know it's an extreme example but there are lots of people that honestly believe the mortgage crisis was caused by poor people getting mortgages. Then they reference some civil rights era act that they believe forces the banks to lower their lending standards. In fact the law says you can't deny loans based on where the applicant lives (aka, redlining).

nl 15y ago

_This_ was the root cause of the banking crisis and this is the industry which needed tightened regulations (such as those seen in the UK or most European countries) We agree then. Capital ratios can be helpful too in some circumstances. I'd consider tighter regulation of the loan industry as financial regulation, but I don't really care about the semantics.