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I'm not sure if it is really economists to blame here, they are merely trying to build models that approximate the world the best they can. In fact, a lot of t

by jderick 18y ago

I'm not sure if it is really economists to blame here, they are merely trying to build models that approximate the world the best they can. In fact, a lot of the work they have been doing lately has been based on behavioral economics, where actors are not necessarily concerned only with selfishness. However, I do agree with the broader point here that the financial and corporate worlds have accepted a corrosive morality where greed is good. I think part of the problem here is lack of regulation. Without any punishment for bad behavior, it just grew out of control.

anamax 18y ago
> I think part of the problem here is lack of regulation. Without any punishment for bad behavior, it just grew out of control. We had regulation that rewarded bad behavior. Subprimes were "encouraged" by regulation because it was considered a social good to for folks who couldn't afford houses to get them. AIG was told to figure out how to "insure" loan portfolios. Banks were given favorable treatment if they held fannie and freddie stock. And then there's fannie and freddie themselves, creations of regulation. The only lack of regulation was of fannie and freddie themselves - they were protected from oversight by the very pols who are currently screaming about more regulation. (One of Obama's chief financial advisors was CEO of Fannie and pulled out $90M. You don't hear anyone asking him to "give back".) FDIC insurance tells depositors that their money is safe, so they don't worry about whether they're depositing their money in a bad bank. Regulation also pushed banks into technical insolvency when they arguably weren't insolvent. (Many of the portfolios are performing as predicted, cash flow and everything, yet the market is spooked so the market price is so low that the banks are deemed insolvent. The banks want desperately to keep these portfolios or to "buy" them at the current market value.)

by jderick 18y ago

anamax 18y ago

> I think part of the problem here is lack of regulation. Without any punishment for bad behavior, it just grew out of control. We had regulation that rewarded bad behavior. Subprimes were "encouraged" by regulation because it was considered a social good to for folks who couldn't afford houses to get them. AIG was told to figure out how to "insure" loan portfolios. Banks were given favorable treatment if they held fannie and freddie stock. And then there's fannie and freddie themselves, creations of regulation. The only lack of regulation was of fannie and freddie themselves - they were protected from oversight by the very pols who are currently screaming about more regulation. (One of Obama's chief financial advisors was CEO of Fannie and pulled out $90M. You don't hear anyone asking him to "give back".) FDIC insurance tells depositors that their money is safe, so they don't worry about whether they're depositing their money in a bad bank. Regulation also pushed banks into technical insolvency when they arguably weren't insolvent. (Many of the portfolios are performing as predicted, cash flow and everything, yet the market is spooked so the market price is so low that the banks are deemed insolvent. The banks want desperately to keep these portfolios or to "buy" them at the current market value.)