Financial Reform Bill Passed in SenateFollow

Smash has become our Andy Rooney. He shows up about once a week and is usually cranky.

Well there you go girls. If you're pretty and a liberal, you're going to be rich and famous!

Regardless of the dollar size of the sub-prime mortgage losses (closer to 350B btw), that was the asset loss event which triggered the whole meltdown. It's funny because you rail on an on about leveraging and derivatives, but seem to fail to understand that this is exactly how a sudden loss of a few hundred billion dollars in "real" assets can result in multi-trillion dollar losses in the derivative market.




None. That's the point. What regulations on the currency market led to this crisis? None there either! How about regulations on bicycle repairs? Nope. Not those either. We could sit here all day talking about what economic transactions were not regulated and therefore didn't have anything to do with the crisis, but I'm not sure why.

The fact is that there was regulation on the mortgage market. And those regulations created a condition in which mortgage securities were seriously overvalued over time. And when those values finally collapsed, it caused the meltdown. This is largely undisputed Smash, but for some reason you want to blame the economic tools applied to those assets rather than address the causes of the overvaluation in the first place. And frankly, that's a moronic approach. We use asset valuation for a whole lot more than just derivatives Smash. When you take out a loan and put down collateral, that collateral is valued as an asset and is used as a base point for determining the loan conditions. I suppose we could put such stringent requirements on loans so that even if an asset is mis-valued by an order of magnitude or three it'll still be "safe", but that would cripple the entire economic system. Seems much smarter to simply *not* create regulations which cause incorrect valuations in the first place, doesn't it?



False. And you know this is false. Of course it's germane. You get that this is precisely why the market collapse occurred, right? The market made a massive correction (overcorrection is more accurate) on the value of mortgage securities resulting in a sudden drop in leveraged lines of credit for financial institutions holding large amounts of those assets. In some cases, those new values were less than the debt owed by those institutions, resulting in the economic equivalent of financial vaporlock leading to bankruptcy, not because those institutions did anything wrong with their borrowing and lending practices, but because they trusted the government when they told them to hold mortgage securities as the underlying asset for their transactions.


To suggest that one isn't directly related to the other is absurd. And to even talk about financial regulation with an aim at preventing future such problems without actually addressing the core issue of how mortgage securities are created, bundled, and sold within our economic system is stupid beyond words. Yet, that's precisely what this new "reform" bill does (or fails to do really).



False again. It was real estate. And it was real estate because that's the market in which the government meddled in a way which created a false valuation of the assets themselves. How on earth can you argue otherwise?



Do you honestly think that the government will do a better job at determining the value and risks of assets and transactions than those who are buying and selling those things do? Let me remind you (again!), that the reason this particular asset failed was because the government played with the value. The government did so for reasons which didn't have anything to do with financial stability, but rather with social policy. That's exactly why you *don't* want the government setting those values. It'll make problems like this happen more frequently, not less. I'm not sure why you'd think otherwise...



Except that in that case, the single payer will not value things based on their cost to produce, but via some other socially derived process. Give politicians the ability to appear to provide someone something for nothing, and they'll do it every single time with no end. It's only when you have to find a buyer willing to pay their own money for something that you arrive at a fair price Smash. Government controlled markets work best at giving those in government the power to manipulate the value of goods and services to benefit them politically. It does a pretty darn crappy job of maintaining a healthy stable economy.


Free markets are not perfect Smash. But in every way that they are imperfect, government controlled markets are worse. Not just a little bit worse, but massively so.

toot,



I also seem to remember you saying something about being more conservative than you feel comfortable showing here. Are you sure you want alla members to know you're on my facebook? It might get you in trouble with the thought police.

There are alot of things I don't feel comfortable showing here.. These people are scary! That Jophiel guy will beat you up and take your lunch money.

I'll admit that I don't agree with Government intervention, It doesn't make economic since in a free market economy. I don't agree with abortion but its not my place to judge you, I'll leave that up to god and Yes I go to church on Sundays. There, all my dirty secrets are out.

Sorry. Just cracked myself up. Mind went on a tangent that ended something like: "Hey baby! You're hot! You'd be even hotter with a little conservative in you though..."

You win, dude. She's an ugly conservative chick.

People are weenies?

I mean, what are we going to do? Type at you?

Do you actually have a standard, in your view, of what makes someone liberal versus conservative? I ask, because I hold far more right wing views than 2hot, but you somehow always declare me as a liberal. It's that I don't demonize Obama, isn't it?

I'm going to punish conservatives by remote viewing them?

Stop eating glue before you post.

Regardless of the dollar size of the sub-prime mortgage losses (closer to 350B btw), that was the asset loss event which triggered the whole meltdown. It's funny because you rail on an on about leveraging and derivatives, but seem to fail to understand that this is exactly how a sudden loss of a few hundred billion dollars in "real" assets can result in multi-trillion dollar losses in the derivative market.


Yes, I fail to understand it. I fail to understand that if the underlying asset were sugar cubes stored outside and and a market leveraged against those sugar cubes failed after a heavy rain the problem would be the rain. Because it would be, right? If only someone had prevented the rain, the market would have been fine. No one could have possibly predicted that water would fall from the sky and adjust the risk of the instruments involved appropriately.

This starting to sink in yet?



None. That's the point. What regulations on the currency market led to this crisis? None there either! How about regulations on bicycle repairs? Nope. Not those either. We could sit here all day talking about what economic transactions were not regulated and therefore didn't have anything to do with the crisis, but I'm not sure why.


I'm not sure why we'd compare things that weren't related to the crisis with the primary cause, intentional miscalculation of actual risk, either. I suppose because you either don't comprehend the simple mathematics of what actually happened, or would rather ignore them because they don't fit with your masters propaganda. It's really a tough question for me. You're undeniably inept at math beyond basic arithmetic, but you're also willfully ignorant to a degree that is almost difficult to accept.

I give up, which is it?


The fact is that there was regulation on the mortgage market. And those regulations created a condition in which mortgage securities were seriously overvalued over time.

Woah woah woah. If this is the case, free markets are a complete, abject failure. If you're seriously making the argument that regulation *which the market was completely aware of* caused the problem, then you're arguing that free markets are too inefficient to function, because they ignore known information.

So, like I tell Hannah: Stop and think. Is this really your argument? That the market knew about all of these regulations, but somehow just couldn't work as a pricing mechanism for the asset? How does that work, exactly? How would less regulation have led to more efficient pricing? What was the mystery, exactly? What was the failure?

It's great to say "regulation" was the problem, but how? Was it secret regulation so that the market was denied information with which to price assets appropriately?



And when those values finally collapsed, it caused the meltdown. This is largely undisputed Smash, but for some reason you want to blame the economic tools applied to those assets rather than address the causes of the overvaluation in the first place.

What the fuck are you even talking about? Overvalued? Relative to what? To some magical "intrinsic" value of the materials used to build a house? This is pretty much where I say to myself "why are you wasting your time. You're arguing with the economic equivalent of someone who thinks there are tiny people in the television."

One more time, with feeling now: THERE IS NO SUCH THING AS "INTRINSIC VALUE" IN A FREE MARKET, ASSETS ARE WORTH WHAT THEY TRADE FOR. THAT'S ALL A FREE MARKET IS, A PRICING MECHANISM 'FREE' OF A FLOOR OR A CEILING


[b]
And frankly, that's a moronic approach. We use asset valuation for a whole lot more than just derivatives Smash. When you take out a loan and put down collateral, that collateral is valued as an asset and is used as a base point for determining the loan conditions. I suppose we could put such stringent requirements on loans so that even if an asset is mis-valued by an order of magnitude or three it'll still be "safe", but that would cripple the entire economic system. Seems much smarter to simply *not* create regulations which cause incorrect valuations in the first place, doesn't it?


Seems irrelevant, really, since only regulation that puts breaks on trading can ever cause errors in valuation, and there was no such regulation in place. Which is the point, isn't it? If there HAD been regulation to break trading, there wouldn't have been a collapse. There would have been artificial price support at probably unrealistic levels, but there wouldn't have been a death spiral of failure because credit markets suddenly froze when it was realized that risk was being calculated incorrectly. We can debate which is better, and if you weren't a fuc[i]king fool, you'd probably find we have a fair amount of common ground on the functioning of rational markets.



False. And you know this is false. Of course it's germane. You get that this is precisely why the market collapse occurred, right? The market made a massive correction (overcorrection is more accurate) on the value of mortgage securities resulting in a sudden drop in leveraged lines of credit for financial institutions holding large amounts of those assets. In some cases, those new values were less than the debt owed by those institutions, resulting in the economic equivalent of financial vaporlock leading to bankruptcy, not because those institutions did anything wrong with their borrowing and lending practices, but because they trusted the government when they told them to hold mortgage securities as the underlying asset for their transactions.


Yes, I remember explaining it to you, back when the problem was "making loans to poor people" but you apparently sill don't understand, and feel some bizarre need to inject "the government" into the clear failure of the private sector. An abject, unmitigated failure.



To suggest that one isn't directly related to the other is absurd. And to even talk about financial regulation with an aim at preventing future such problems without actually addressing the core issue of how mortgage securities are created, bundled, and sold within our economic system is stupid beyond words. Yet, that's precisely what this new "reform" bill does (or fails to do really).


Clearly it's absurd, one happened before the other, right? Just like the moon landings killed Ronald Regan. Let's not worry about an actual causal link.

To be perfectly honest, neither of us has any idea what the new reform bill does. It's not a law yet, and once it's law it'll matter far more what the guidelines coming from regulatory agencies are. You're against it because you've been told to be. I'm ambivalent because I don't understand how it'll function yet. Probably poorly. The street's always smarter than the regulators, because it's where the money is, so it probably won't do much. The good news, though, is that you'll be able to use it to wave away whatever the next inevitable failure of some market is. It won't matter what actually leads to the failure. Abject fraud, dragons, buckets of elephant *** falling from the sky, whatever it is, it'll be because of regulation.



False again. It was real estate. And it was real estate because that's the market in which the government meddled in a way which created a false valuation of the assets themselves. How on earth can you argue otherwise?


I can argue otherwise because I'm not an infant. I don't insist on being paid in food and durable goods because I'm confident the derived market in currency is robust enough for me to exchange it for those things. I don't think that the lack of a hard metal standard makes my bank account valueless. Do you? It's a vastly more regulated market than any other exchange ever will be. Why do you trust currency?



Do you honestly think that the government will do a better job at determining the value and risks of assets and transactions than those who are buying and selling those things do? Let me remind you (again!), that the reason this particular asset failed was because the government played with the value. The government did so for reasons which didn't have anything to do with financial stability, but rather with social policy. That's exactly why you *don't* want the government setting those values. It'll make problems like this happen more frequently, not less. I'm not sure why you'd think otherwise...

At determining the value, no. At mitigating the risk of systemic failure, yes. Which I care about a lot more. Markets don't care about externalities, by definition. Governments do. Markets don't care if the world ends, they just want liquidity. I do care, so I want someone examining the externalities.



Except that in that case, the single payer will not value things based on their cost to produce, but via some other socially derived process. Give politicians the ability to appear to provide someone something for nothing, and they'll do it every single time with no end. It's only when you have to find a buyer willing to pay their own money for something that you arrive at a fair price Smash. Government controlled markets work best at giving those in government the power to manipulate the value of goods and services to benefit them politically. It does a pretty darn crappy job of maintaining a healthy stable economy.


Markets are socially derived processes. How much do you pay for health care in the free market you buy it in? Oh wait, I do that, yours is handed to you and your told what it'll be each year by a committee. I forgot myself for a moment.


Free markets are not perfect Smash. But in every way that they are imperfect, government controlled markets are worse. Not just a little bit worse, but massively so.

Strange that nation states with the least regulation are those that fail over and over then, isn't it? Odder still that a *balance* of free markets and strong social safety nets lead to the most class mobility, and the highest standards of living time and time again. If it were the case that free markets worked that much better, there would be doeznes of success stories around deregulation. Where are those?

What about those of us who hide them for fear of reprisal from other conservatives who are going to claim we're "not conservative enough"?

Also, would you quit being a dirty fornicating terrorist already?

And part two:



That's not what a free market is Smash. It's a market that is free of government regulation and subsidy and which relies on supply and demand to manage prices and availability. The law of supply and demand would have caused the value of the mortgage securities to decrease as their supply increased. You're arguing against a strawman. I'm well aware of how values are placed in a free market. The problem with the sub-prime mortgage meltdown was that the government interference effectively created infinite demand for those securities. Thus, the normal check which would keep prices at stable levels was not present.

The market responded predictably and naturally to an unnatural manipulation of the market itself. Worse is that as this effect played itself out and concerns grew about this situation, the same "side" of our political system which is writing the new reform act, did everything they could to hide and downplay the problem. And in the reform act itself, there is no mention of any changes to the same system which broke things in the first place. As far as I know, there is still la requirement to pass a CRA exam in effect. This will still require that financial institutions who do not directly deal in home loans invest in mortgage securities to "do their part", and this will still create the same broken cost relationship we had before. It may take another 10 years before it explodes in our faces again, but it will. And while the financial reforms may limit the damage done when that happens, it will also hinder positive uses of the same financial tools.




Huh? Where the hell do you get that idea? Regulation which artificially increases the demand for a good or service will cause errors in valuation. What part of that are you confused about? And regulations which do so to a degree which outstrips the supply of the good itself will result in artificial increases in supply to match. And when that happens in something like a housing market, you get sub-prime loans. The "supply" of people buying houses is based on the number of people who can afford to buy houses, right? The same factor which artificially increases the value of the mortgage securities *also* drains the pool of people who can legitimately afford to buy a new house even faster (since this will affect housing costs as well). The result isn't just a higher valued product over time, but *also* a higher risk product.


I'm not sure why you think that only breaks in trading can affect valuation, but you are dead wrong.




Again, the problems were caused long before the market got involved Smash. But while on that subject, I assume you agree that the "mark to market" rules were a bad idea, right? We can also say that had the government not passed regulations which required that financial institutions post their assets based on a current market valuation instead of a predicted market valuation or trend, the negative effect of the lost value of said assets would have been far far less dramatic than they were.


It wasn't a lack of market breaks that mattered Smash. Not letting people trade the value down wouldn't have kept the market value up. I suppose artificially placing a floor would have, but who gets to decide what that floor should be? That's just asking for more problems down the line IMO.




No Smash. One happened because of the other. Demonstrably so.



Ok. But what the government was doing was affecting the value as well as increasing the risk, all in order to pursue a social agenda.

Using government to prevent systemic failure is really a completely separate issue. We can discuss plans to let the horse out and put out the fire in the event the barn goes up in flames, but it's also maybe a good idea to figure out what caused the fire and take some action to prevent that as well. You want to focus entirely on mitigating damage done when financial markets fail. That's a viable topic, but in the aftermath of this meltdown, it might be a good idea to first fix the problems which caused it.

Safety nets always come at the cost of efficiency. I'd rather we spend more time looking at not causing a fall in the first place, then putting a system in place to protect us when it happens. Doubly so when the same people putting in the safety system are the ones putting in the things which cause the failures. It's like the Dems are deliberately breaking our economic system, and then selling us the "fix" for what they broke. Seems like a bad way to go...



You're correct. The current system of health insurance is not a free market. I've said as much repeatedly for years. But you do get that it was a series of government laws and regulations which created that system and have maintained it, right? Absent the medicare act, and the hmo act, and a few others I can't remember off the top of my head, we wouldn't have the same monolithic insurance system for health care which you argue is so inefficient that we should replace it with a single payer system. It's just like what I said above. The Dems created the problem so that they could some in with a big government "solution" to it.

Maybe we should consider *not* breaking things in the first place. Shocking idea, I know!



Strange in that this is a fantasy you've created in your head. It's not true. Well, not unless you measure "class mobility, and standard of living" based on things like "how much socialized medicine do you have?". Kinda circular, isn't it? What's strange is that the US consistently places at the bottom of those measurements, and yet it has by far the most vibrant, productive, and healthy economy. Ever consider that you're just measuring the wrong things?