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You've chosen to defend a group you're familiar with (bankers) only to unfairly demonize other groups you haven't thought enough about. Let's see: 1) Stupid "

by tc 18y ago

You've chosen to defend a group you're familiar with (bankers) only to unfairly demonize other groups you haven't thought enough about. Let's see: 1) Stupid "homeowners" How many of these people were really stupid? Many of these new home buyers had no assets to begin with. Banks were willing to let them live in a nice house for a few years. In the worst case, they'll probably end up back where they started. This clearly isn't the best way to manage one's personal finances, but it wasn't totally irrational. 2) Shark-like loaners People were pouring in to mortgage brokers and asking for loans. If mortgage broker A decided to stop processing paperwork for people asking for a loan, home buyers would have just gone across the street to mortgage broker B (and A would go out of business). Mortgage brokers just process paperwork - the clients decide they want a loan, the banks make the lending decisions. Demonizing them makes absolutely no sense. 3) Bond structurers This was a profitable business for years. Professional investors wanted these securities. If you were in this business, who are you to argue with your customers? Besides, many of the buyers were of the highest caliber, Freddie, Fannie, and government pension funds. 5) Regulatory authorities Regulatory agencies are designed to preserve the status quo, not challenge it. The rational interests of the regulators (such as not challenging the politically powerful) are almost always in conflict with the highest social welfare. Saying regulatory agencies failed is so predictable that it's nearly a tautology. 4) Dumb lawmakers OK, we can agree on one :) The finer point, though, is to see how bad laws caused all the other market actors to make rational decisions that worked against the overall social welfare. For example, if money is free (as it was to banks, because the interest rate was held below the rate of inflation), then how much money should you borrow? Clearly the answer is as much as possible, as long as you can achieve any positive real return. Is it any surprise then that we ended up over-leveraged?

swombat 18y ago
Oh, I didn't mean to imply that those were solely responsible. I think if you look at it holistically, a majority of the population is responsible for this mess - which is why the idea of punishing a specific part of it for it is silly... we're all responsible in some way. Even the lawmakers have excuses - largely, they were probably doing something they believed was right (such as enabling poor people to own a home), rather than plotting the demise of the economy. However, most of the scorn these days seems to be directed at bankers, who imho are less responsible, in aggregate, than any of the groups I named above.

by tc 18y ago

swombat 18y ago

Oh, I didn't mean to imply that those were solely responsible. I think if you look at it holistically, a majority of the population is responsible for this mess - which is why the idea of punishing a specific part of it for it is silly... we're all responsible in some way. Even the lawmakers have excuses - largely, they were probably doing something they believed was right (such as enabling poor people to own a home), rather than plotting the demise of the economy. However, most of the scorn these days seems to be directed at bankers, who imho are less responsible, in aggregate, than any of the groups I named above.