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> Regulating a business because we think they're doing it wrong is just as bad as doing all sorts of other proactive measures to help them stay in business. I

by jeromec 17y ago

> Regulating a business because we think they're doing it wrong is just as bad as doing all sorts of other proactive measures to help them stay in business. I totally disagree. That statement is too general and each application depends on the specific case. Take for example General Motors. Should car manufacturing be regulated? Certain not, the marketplace will determine the efficiencies there, and at worst case give people inferior vehicles. However, it absolutely made sense to provide government assistance to GM, even though GM was run incorrectly, because of the broader reaching effects of letting it fall at that time. Now, we ask should the financial industry be regulated, and we see the answer is different, because the case is different; our entire dollar based economy is intertwined with the liquidity of the financial markets, so a worst case scenario there can trigger a severe economic depression, as we almost experienced. Different cases determine the need for government interaction, and the system as a whole is too complex to use one cookie cutter argument to apply to everything.

anamax 17y ago
> However, it absolutely made sense to provide government assistance to GM, even though GM was run incorrectly, because of the broader reaching effects of letting it fall at that time. That's true only if something is being done so the effects of it failing will be lower or if the failure is averted and the cost of the assistance was less than the benefit received. However it's likely that GM is going to fail anyway and at roughly the same cost. Was delaying that really worth $12B? > Now, we ask should the financial industry be regulated, and we see the answer is different, because the case is different; our entire dollar based economy is intertwined with the liquidity of the financial markets, so a worst case scenario there can trigger a severe economic depression, as we almost experienced. You're assuming that regulation works. Since regulation arguably created the problems that we just experienced (Fannie Mae and Freddie Mac are creations of regulation as was the dependence of financial institutions on them, which caused said financial institutions to fail when Fannie/Freddie went down), that's questionable at best.
- jeromec 17y ago
  > Fannie Mae and Freddie Mac are creations of regulation as was the dependence of financial institutions on them, which caused said financial institutions to fail when Fannie/Freddie went down Huh? Am I missing something? Regulation is a rule (or law). Fannie Mae and Freddie Mac are government sponsored enterprises (GSEs). That would be like saying the Small Business Administration is business regulation. Also, to my knowledge Fannie and Freddie did not fail. I think we would have noticed considering they cover trillions of dollars worth of mortgages.
  - anamax 17y ago
    > Regulation is a rule (or law). Fannie Mae and Freddie Mac are government sponsored enterprises (GSEs). Fannie and Freddie are creations of law in the form of GSEs. Their GSE status made them especially vulnerable to govt interference. They weren't independent of govt in any meaningful sense. > That would be like saying the Small Business Administration is business regulation. It would be if SBA controlled as large a segment of biz lending as Fannie and Freddie did of the mortgage market. Fannie and Freddie define "conforming mortgage". Their lending standards define what mortages are sellable. If they screw it up, as they did, the market takes a huge hit. > Also, to my knowledge Fannie and Freddie did not fail. They got billions of dollars pumped into them and their stock price collapsed. They're not essentially in receivership and are running on govt funds. That's failure. > I think we would have noticed considering they cover trillions of dollars worth of mortgages. What's to notice? The failure of an institution doesn't imply that the debts owed it go away, so folks are still paying their mortgages (or not), regardless of Fannie and Freddie's problems. The take-over is designed to keep mortgages flowing. For a while it wasn't working - if you were looking for a mortgage, you noticed.
zaidf 17y ago
it absolutely made sense to provide government assistance to GM, even though GM was run incorrectly, because of the broader reaching effects of letting it fall at that time What if the gov just let GM collapse. And instead of giving free money to GM, gave the same money to the laidoff workers to go back to school or find another(hopefully more sustainable) job.
- jeromec 17y ago
  Government aid of GM was not a one-to-one benefit, as it may have appeared on the surface. If GM failed the effects would not have been limited directly to their workers. Unfortunately, thousands of dealerships rely on the viability of General Motors. That includes salespersons up to managers and owners. It also includes the parts industry which is sizeable itself, so we're talking many thousands of jobs indirectly connected to GM additionally lost. Worse still, would have been the timing. A big reason the credit markets were freezing up and the stock market was tanking was psychological - people thought things would get worse. Think about a stock market crash, which is essentially everyone selling and nobody buying. The selloff doesn't happen right away; buyers turn into sellers because everybody is selling, which can lead to the whole thing crashing.
  - zaidf 17y ago
    That includes salespersons up to managers and owners If they can't find another job, pay them directly too. What you are saying is that it's okay to pay a buncha money to stupid executives to distribute it to everybody down the chain. I disagree. I dont think we need the execs to hand out money.
    - jeromec 17y ago
      You're saying the govt. should directly pay the thousands of affected people, at various income levels, directly? They can sit and watch tv and still make their salary? That won't fly with many fellow citizens. Remember, the "stupid executives" did not get the money, GM did (and taxpayers got shares in GM in exchange). The stupid executives are already wealthy, and would probably end up at some other company owned by a friend or whatever. You would not have punished them, but you would have punished GM's shareholders, the wider stock market, and likely the wider economy which depends on jobs and consumer spending to function.

by jeromec 17y ago

anamax 17y ago

> However, it absolutely made sense to provide government assistance to GM, even though GM was run incorrectly, because of the broader reaching effects of letting it fall at that time. That's true only if something is being done so the effects of it failing will be lower or if the failure is averted and the cost of the assistance was less than the benefit received. However it's likely that GM is going to fail anyway and at roughly the same cost. Was delaying that really worth $12B? > Now, we ask should the financial industry be regulated, and we see the answer is different, because the case is different; our entire dollar based economy is intertwined with the liquidity of the financial markets, so a worst case scenario there can trigger a severe economic depression, as we almost experienced. You're assuming that regulation works. Since regulation arguably created the problems that we just experienced (Fannie Mae and Freddie Mac are creations of regulation as was the dependence of financial institutions on them, which caused said financial institutions to fail when Fannie/Freddie went down), that's questionable at best.

jeromec 17y ago
> Fannie Mae and Freddie Mac are creations of regulation as was the dependence of financial institutions on them, which caused said financial institutions to fail when Fannie/Freddie went down Huh? Am I missing something? Regulation is a rule (or law). Fannie Mae and Freddie Mac are government sponsored enterprises (GSEs). That would be like saying the Small Business Administration is business regulation. Also, to my knowledge Fannie and Freddie did not fail. I think we would have noticed considering they cover trillions of dollars worth of mortgages.
- anamax 17y ago
  > Regulation is a rule (or law). Fannie Mae and Freddie Mac are government sponsored enterprises (GSEs). Fannie and Freddie are creations of law in the form of GSEs. Their GSE status made them especially vulnerable to govt interference. They weren't independent of govt in any meaningful sense. > That would be like saying the Small Business Administration is business regulation. It would be if SBA controlled as large a segment of biz lending as Fannie and Freddie did of the mortgage market. Fannie and Freddie define "conforming mortgage". Their lending standards define what mortages are sellable. If they screw it up, as they did, the market takes a huge hit. > Also, to my knowledge Fannie and Freddie did not fail. They got billions of dollars pumped into them and their stock price collapsed. They're not essentially in receivership and are running on govt funds. That's failure. > I think we would have noticed considering they cover trillions of dollars worth of mortgages. What's to notice? The failure of an institution doesn't imply that the debts owed it go away, so folks are still paying their mortgages (or not), regardless of Fannie and Freddie's problems. The take-over is designed to keep mortgages flowing. For a while it wasn't working - if you were looking for a mortgage, you noticed.

zaidf 17y ago

it absolutely made sense to provide government assistance to GM, even though GM was run incorrectly, because of the broader reaching effects of letting it fall at that time What if the gov just let GM collapse. And instead of giving free money to GM, gave the same money to the laidoff workers to go back to school or find another(hopefully more sustainable) job.

jeromec 17y ago
Government aid of GM was not a one-to-one benefit, as it may have appeared on the surface. If GM failed the effects would not have been limited directly to their workers. Unfortunately, thousands of dealerships rely on the viability of General Motors. That includes salespersons up to managers and owners. It also includes the parts industry which is sizeable itself, so we're talking many thousands of jobs indirectly connected to GM additionally lost. Worse still, would have been the timing. A big reason the credit markets were freezing up and the stock market was tanking was psychological - people thought things would get worse. Think about a stock market crash, which is essentially everyone selling and nobody buying. The selloff doesn't happen right away; buyers turn into sellers because everybody is selling, which can lead to the whole thing crashing.
- zaidf 17y ago
  That includes salespersons up to managers and owners If they can't find another job, pay them directly too. What you are saying is that it's okay to pay a buncha money to stupid executives to distribute it to everybody down the chain. I disagree. I dont think we need the execs to hand out money.
  - jeromec 17y ago
    You're saying the govt. should directly pay the thousands of affected people, at various income levels, directly? They can sit and watch tv and still make their salary? That won't fly with many fellow citizens. Remember, the "stupid executives" did not get the money, GM did (and taxpayers got shares in GM in exchange). The stupid executives are already wealthy, and would probably end up at some other company owned by a friend or whatever. You would not have punished them, but you would have punished GM's shareholders, the wider stock market, and likely the wider economy which depends on jobs and consumer spending to function.