4 ms·

What specific sort of oversight/enforcement/regulation do you believe would have prevented 2008?

by yummyfajitas 11y ago

TheOtherHobbes 11y ago
Glass Steagall did an excellent job - until it started being ignored, and before it was repealed.
- yummyfajitas 11y ago
  Would preventing WaMu and Countrywide Financial from running prop desks (which they didn't do anyway) have somehow prevented the crisis? Or would preventing Bear Stearns from issuing mortgages (which they didn't do anyway) have somehow prevented them from going bust? Please be specific on what would have happened differently if Glass Steagall were still in force.
  - TheOtherHobbes 11y ago
    With something like GS regulators would have been able to say "Wait, you're doing lots of securitisation? That's not a good idea, is it?" It's not always the specific regulatory details that matter, so much as the culture they create. As long as GS was taken seriously, the culture remained "If you're a bank, don't do really stupid shit just because you think you can make a quick buck." Once it started being eroded the culture became "Wheee!" - and unsurprisingly everything exploded and the wheels came off. IMO anyone who would argue for less regulation after that isn't living at an address in the reliable side of town. The important arguments have to do with quality of oversight and the culture of people who will consistently try to be as irresponsible as they can be if they're not regulated. Regulation is a means to that end, not an end in itself.
    - yummyfajitas 11y ago
      tl;dr; GS wouldn't have done anything, but it might magically change the "culture" and cause regulators to do other unspecified things which would have done something. Um, ok. Also, the main "make a quick buck" bank was Goldman. They did just fine. It was the "make long term safe bets" banks that had problems, e.g. Countrywide, WaMu, Citi. Also, there is nothing inherently wrong with securitization. The underlying problem was the mortgages themselves; securitization merely shifts the risk around. Regulation isn't just a magic lever that you can switch to "more" or "less". Your post is as clueless as a PHB saying "we need more code, lets switch to J2EE so we'll have lots more lines of code!"
      - scurvy 11y ago
        Incorrect. GS and worthy oversight would have nipped most of this in the bud. Just look at what these banks had on their balance sheets at the time, and it would make anyone with a modicum of banking background recoil in horror. I'm not trying to sound ageist, but judging from the comments on this thread, it appears as if this generation has not learned from 2008 and is bound to repeat the same mistakes. I went through this before with the S&L crisis, one that was largely the fault of lax oversight. We didn't have another blowup until 2008; I guess that was long enough for everyone to forget the early 80's. Guess it's time to start buying Swiss Francs.
        yummyfajitas 11y ago
        GS and worthy oversight would have nipped most of this in the bud. Again, please explain how - i.e., concrete mechanisms, not vague "if we passed this law that didn't really change anything, maybe culture would have been different". Just look at what these banks had on their balance sheets at the time... Please be specific. Which banks are you referring to, and how would GS have significantly affected things? As far as I'm aware, the main banks which significantly mixed IB and S&L activity were JPM and Citi, hardly the epicenters of the crisis. Also, it's odd how the S&L crisis happened before GS was repealed - why didn't the magical culture change of GS cause regulators to magically crank regulation up to 11 and prevent it?
        dragonwriter 11y ago
        > Also, it's odd how the S&L crisis happened before GS was repealed Not really. The 2000s banking crisis happened not long after banking regulations were repealede, the S&L crisis happened after S&L regulations were repealed. (In both cases, the repeals were justified on the basis that the increased freedom would strengthen the deregulated industry and the broader economy.)
        yummyfajitas 11y ago
        Scroll up. TheOtherHobbes claimed: With something like GS regulators would have been able to...It's not always the specific regulatory details that matter, so much as the culture they create. Apparently the existence of GS did not actually allow regulators to have this magic culture and prevent the S&L crisis. But you do have even more vague generalities that don't mention any specific mechanism. Tomorrow I'm going to my boss and telling him "we need more code!" I'll refuse to say what the code should do, but I'll point out that Homejoy refactored their codebase before dying of a bad business model.

What specific sort of oversight/enforcement/regulation do you believe would have prevented 2008?

TheOtherHobbes 11y ago

Glass Steagall did an excellent job - until it started being ignored, and before it was repealed.

yummyfajitas 11y ago
Would preventing WaMu and Countrywide Financial from running prop desks (which they didn't do anyway) have somehow prevented the crisis? Or would preventing Bear Stearns from issuing mortgages (which they didn't do anyway) have somehow prevented them from going bust? Please be specific on what would have happened differently if Glass Steagall were still in force.
- TheOtherHobbes 11y ago
  With something like GS regulators would have been able to say "Wait, you're doing lots of securitisation? That's not a good idea, is it?" It's not always the specific regulatory details that matter, so much as the culture they create. As long as GS was taken seriously, the culture remained "If you're a bank, don't do really stupid shit just because you think you can make a quick buck." Once it started being eroded the culture became "Wheee!" - and unsurprisingly everything exploded and the wheels came off. IMO anyone who would argue for less regulation after that isn't living at an address in the reliable side of town. The important arguments have to do with quality of oversight and the culture of people who will consistently try to be as irresponsible as they can be if they're not regulated. Regulation is a means to that end, not an end in itself.
  - yummyfajitas 11y ago
    tl;dr; GS wouldn't have done anything, but it might magically change the "culture" and cause regulators to do other unspecified things which would have done something. Um, ok. Also, the main "make a quick buck" bank was Goldman. They did just fine. It was the "make long term safe bets" banks that had problems, e.g. Countrywide, WaMu, Citi. Also, there is nothing inherently wrong with securitization. The underlying problem was the mortgages themselves; securitization merely shifts the risk around. Regulation isn't just a magic lever that you can switch to "more" or "less". Your post is as clueless as a PHB saying "we need more code, lets switch to J2EE so we'll have lots more lines of code!"
    - scurvy 11y ago
      Incorrect. GS and worthy oversight would have nipped most of this in the bud. Just look at what these banks had on their balance sheets at the time, and it would make anyone with a modicum of banking background recoil in horror. I'm not trying to sound ageist, but judging from the comments on this thread, it appears as if this generation has not learned from 2008 and is bound to repeat the same mistakes. I went through this before with the S&L crisis, one that was largely the fault of lax oversight. We didn't have another blowup until 2008; I guess that was long enough for everyone to forget the early 80's. Guess it's time to start buying Swiss Francs.
      - yummyfajitas 11y ago
        GS and worthy oversight would have nipped most of this in the bud. Again, please explain how - i.e., concrete mechanisms, not vague "if we passed this law that didn't really change anything, maybe culture would have been different". Just look at what these banks had on their balance sheets at the time... Please be specific. Which banks are you referring to, and how would GS have significantly affected things? As far as I'm aware, the main banks which significantly mixed IB and S&L activity were JPM and Citi, hardly the epicenters of the crisis. Also, it's odd how the S&L crisis happened before GS was repealed - why didn't the magical culture change of GS cause regulators to magically crank regulation up to 11 and prevent it?
        dragonwriter 11y ago
        > Also, it's odd how the S&L crisis happened before GS was repealed Not really. The 2000s banking crisis happened not long after banking regulations were repealede, the S&L crisis happened after S&L regulations were repealed. (In both cases, the repeals were justified on the basis that the increased freedom would strengthen the deregulated industry and the broader economy.)
        yummyfajitas 11y ago
        Scroll up. TheOtherHobbes claimed: With something like GS regulators would have been able to...It's not always the specific regulatory details that matter, so much as the culture they create. Apparently the existence of GS did not actually allow regulators to have this magic culture and prevent the S&L crisis. But you do have even more vague generalities that don't mention any specific mechanism. Tomorrow I'm going to my boss and telling him "we need more code!" I'll refuse to say what the code should do, but I'll point out that Homejoy refactored their codebase before dying of a bad business model.