Ahh… Excessive deregulation. I love that excuse.
Yes, there has been some deregulation of the financial markets in the last couple of decades, but much of that deregulation has actually produced incredible benefits for the American public. Aside from the customer-service gains that have come from the legalization of interstate banking and the ability of banks to offer a variety of products under one roof, the expanded range of investments that banks can take on enables them to diversify and lower their exposure to risk. .
Ignore History at your own risk.
Investments with little chance of actually losing any profit (the FDIC should ring a bell) simply encourages excessive risk.
That was the reason for the barrier between commercial and investment banks. They didn't want Banks gambling with customer's deposits.
In this case in 1999, they removed the regulations that kept the two seperated but left the system of insurance in place.
Yes, a number of banks have had problems in the last year, but the number of bank failures since the 1999 deregulation has been exceptionally low. Between 1999 and 2007 only 40 U.S. banks failed. Compare that number to the same nine-year periods starting in 1969, 1979, and 1989. Only two years since 1934 have had no bank failures: 2005 and 2006.
If the 1999 overturning of the Depression-era Glass-Steagall regulations is such a problem, why were the eight years to follow among the healthiest in U.S. banking history?
It's called a bubble and here-said bubble happend to be in debt. During a bubble, an amatuer off the street can play and win.
If you want to ignore the size of the Banks that have failed and that about 8 trillion dollars have been given away so far.
These problems are almost all linked to the troubles in the housing market. Once again, blaming deregulation is at odds with some important facts.
No it's not. Without deregulation this NEVER would have happened.
It is true that a number of the tools utilized by mortgage companies (ARM anyone?) contributed to the problem. More important, though, is the role played by institutions such as Freddie Mac and Fannie Mae. They were created by the government to intentionally distort the housing and mortgage markets. Simply browse over to their websites and take a look at the supplied mission statement: To provide “affordability to the housing market.”
They have been around and have been doing the same thing successfully and without trouble since before you were born.
Government planners were not content to allow the voluntary market forces to run unmolested. In a truly free market, supply and demand would determine the price levels. The demand for houses would be determined by people’s wealth and income. So when bureaucrats demand “affordable” mortgages to allow the poor in America to take part in the American Dream of homeownership, a distortion occurs. Demand increases artificially, supply increases artificially, and price increases artificially.
The Financial industries usurped the past role of Fannie and Fr.....actually forget this.
QUESTION: What was AIG's Role in this whole mess?
In sum, nothing in the current housing and banking troubles indicates some sort of systematic failure of capitalism that can be laid at the feet of deregulation. Yet we are still continually bombarded by any bit of bad news to declare the death of capitalism, all the while ignoring the ways in which our larger-than-ever government has intervened in the market, producing the very problems they try to blame on the free market.
There have to be rules governing banking just like there is anything else in order to prevent malfeasance.
Unless you don't think having basic laws to govern society is necessary either?
The government's role is only becomes negative when it bends to industry hacks. They go from being a regulator to being a conspirator that is more dangerous than the original criminals it tries to control. Think corrupt cop.