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> The difference is that banks are free to ignore free cocaine. They're not free to ignore regulators. Misdirection. The toxic, risky, highly over-leveraged sp

by crux_ 18y ago

> The difference is that banks are free to ignore free cocaine. They're not free to ignore regulators. Misdirection. The toxic, risky, highly over-leveraged speculation they engaged in was certainly voluntary.

anamax 18y ago
Not at all - you ignored the next sentence, so I'll repeat it: "It appears that much of AIG's financial insurance was actually regulator driven, as in regulators insisted that banks buy it."
- crux_ 18y ago
  Another misdirection. I did not refer to AIG specifically as toxic, risky, or over-leveraged, but to many (the majority?) of Wall Street's recent decisions. Also, it is completely false. Banks only "needed" to buy bond insurance from AIG when they voluntarily chose to securitize + re-sell CDO tranches (for example), and I'm not an expert enough to know what the regulations say, but ratings agencies also insisted on it. Further, AIG was under no obligation whatsoever to sell CDS contracts; this was a fully voluntary activity!
  - anamax 18y ago
    > Further, AIG was under no obligation whatsoever to sell CDS contracts; this was a fully voluntary activity! That's not how regulated industries work. If a regulator says "you should produce a {type of product}", you do so or pay a significant price. For example, Wells Fargo took a huge hit for years because it wasn't as aggressive wrt subprime mortages as other banks. It wasn't allowed to open branches, make acquisitions, and so on in situations where institutions that did "play ball" were given the green light. Assets are one of the key regulatory constraint on banks. By giving banks favorable asset and tax treatment for holding Fannie and Freddie stock, not to mention "you really need to support them" advice from regulators, banks who didn't hold far more fannie and freddie stock than would otherwise be justified took a huge hit. In short, it wasn't a "voluntary" choice.
    - crux_ 18y ago
      I won't dispute that the regulatory environment encouraged or discouraged certain actions, but that is very different from forcing anything. I can encourage you to smoke (say, by subsidizing tobacco), but that's hardly the same as forcing you to do so. Secondly, CDS contracts or CDO securities certainly weren't mandated by regulators, nor is there even much evidence that they were encouraged; they were merely permitted. There is no way that you can argue that the companies who buried themselves in the things were forced to do so by regulators and maintain anything resembling credibility. My condolences on your ideology's incompatibility with reality.
      - anamax 18y ago
        > I won't dispute that the regulatory environment encouraged or discouraged certain actions, but that is very different from forcing anything. I can encourage you to smoke (say, by subsidizing tobacco), but that's hardly the same as forcing you to do so. As I said, you don't understand/are misstating how regulated industries work. A regulated company that makes its regulators mad ceases to exist. A regulated company that doesn't keep its regulators very happy has a hard time. I can walk away from the free cigarettes being given away by Joe Camel with no downside. Regulated companies take a hit when they do the same.

by crux_ 18y ago

anamax 18y ago

Not at all - you ignored the next sentence, so I'll repeat it: "It appears that much of AIG's financial insurance was actually regulator driven, as in regulators insisted that banks buy it."

crux_ 18y ago
Another misdirection. I did not refer to AIG specifically as toxic, risky, or over-leveraged, but to many (the majority?) of Wall Street's recent decisions. Also, it is completely false. Banks only "needed" to buy bond insurance from AIG when they voluntarily chose to securitize + re-sell CDO tranches (for example), and I'm not an expert enough to know what the regulations say, but ratings agencies also insisted on it. Further, AIG was under no obligation whatsoever to sell CDS contracts; this was a fully voluntary activity!
- anamax 18y ago
  > Further, AIG was under no obligation whatsoever to sell CDS contracts; this was a fully voluntary activity! That's not how regulated industries work. If a regulator says "you should produce a {type of product}", you do so or pay a significant price. For example, Wells Fargo took a huge hit for years because it wasn't as aggressive wrt subprime mortages as other banks. It wasn't allowed to open branches, make acquisitions, and so on in situations where institutions that did "play ball" were given the green light. Assets are one of the key regulatory constraint on banks. By giving banks favorable asset and tax treatment for holding Fannie and Freddie stock, not to mention "you really need to support them" advice from regulators, banks who didn't hold far more fannie and freddie stock than would otherwise be justified took a huge hit. In short, it wasn't a "voluntary" choice.
  - crux_ 18y ago
    I won't dispute that the regulatory environment encouraged or discouraged certain actions, but that is very different from forcing anything. I can encourage you to smoke (say, by subsidizing tobacco), but that's hardly the same as forcing you to do so. Secondly, CDS contracts or CDO securities certainly weren't mandated by regulators, nor is there even much evidence that they were encouraged; they were merely permitted. There is no way that you can argue that the companies who buried themselves in the things were forced to do so by regulators and maintain anything resembling credibility. My condolences on your ideology's incompatibility with reality.
    - anamax 18y ago
      > I won't dispute that the regulatory environment encouraged or discouraged certain actions, but that is very different from forcing anything. I can encourage you to smoke (say, by subsidizing tobacco), but that's hardly the same as forcing you to do so. As I said, you don't understand/are misstating how regulated industries work. A regulated company that makes its regulators mad ceases to exist. A regulated company that doesn't keep its regulators very happy has a hard time. I can walk away from the free cigarettes being given away by Joe Camel with no downside. Regulated companies take a hit when they do the same.