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Old 09-02-2011, 07:16 PM   #21
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Does anyone really think that fining a few people, or even sending them to jail, will improve business ethics and make future dealings conform to a higher standard of conduct? Come on, now. Vengeance may be sweet, but it won't make the world a better place.
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Old 09-02-2011, 07:31 PM   #22
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Does anyone really think that fining a few people, or even sending them to jail, will improve business ethics and make future dealings conform to a higher standard of conduct? Come on, now. Vengeance may be sweet, but it won't make the world a better place.
Vengeance would be sweet, if it could be achieved. More importantly, and I'm not sure how to achieve this in a free capitalist society, incentives need to modified to make it more important to the officers of the corporations and gov't agencies to work toward the common good instead of cutting corners and cheating to enrich themselves. Some smart people here. Someone should be able to come up with something.
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Old 09-02-2011, 07:43 PM   #23
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I take the other view Brat. A Tulip-mania bubble in housing prices coupled with the ongoing loss of jobs through outsourcing and technology caused the housing market to crumble. The crumbling of the housing market was but one cause of the "imploding economy."

Likewise, I believe that "fixing" the housing market is not the way to create jobs. Rather, creating jobs will fix the housing market. Home prices and interest rates are both low enough that when Americans are employed with incomes adequate to afford their own homes they will buy and eventually even bid prices up.
I agree with first part and I;d add stagnating wages, and overheated consumerism caused people to use their houses as ATM.

Not sure about the second part. The Gordian knot is that housing construction provided lots of employment for low and medium skilled workers. There is no easy way to transform a construction worker into a software engineer, health care worker, or biotech lab technician. If we could just figure out a way of reviving the housing industry a bit that would also provide jobs and help jump start the economy. How to do this of course is the 6.4 trillion dollar question.
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Old 09-02-2011, 08:34 PM   #24
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I agree with first part and I;d add stagnating wages, and overheated consumerism caused people to use their houses as ATM.

Not sure about the second part. The Gordian knot is that housing construction provided lots of employment for low and medium skilled workers. There is no easy way to transform a construction worker into a software engineer, health care worker, or biotech lab technician. If we could just figure out a way of reviving the housing industry a bit that would also provide jobs and help jump start the economy. How to do this of course is the 6.4 trillion dollar question.
When you figure out that last part let us know. I think its best to just step aside and let nature take its course...
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Old 09-03-2011, 12:15 AM   #25
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We built more than enough housing during the bubble. Granted that there are a few communities with a shortage but not nearly enough to sop up unemployed construction workers and related manufacturing. Maybe we should hire construction workers to tear down unoccupied dilapidated buildings and return the sites to 'unimproved' status.
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Old 09-05-2011, 10:01 PM   #26
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Maybe we should hire construction workers to tear down unoccupied dilapidated buildings and return the sites to 'unimproved' status.
Having driven from Maine to Key West, from New Orleans, LA to Medora, ND and many, many, places in between, I can tell you from first hand experience that there are no shortage of road improvement projects crying out for attention.

At the moment we can fund those upgrades at negative real rates . . . silly not to.
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Old 09-05-2011, 10:21 PM   #27
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Having driven from Maine to Key West, from New Orleans, LA to Medora, ND and many, many, places in between, I can tell you from first hand experience that there are no shortage of road improvement projects crying out for attention.

At the moment we can fund those upgrades at negative real rates . . . silly not to.
You mentioned New Orleans? With our wonderful roads?
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Old 09-06-2011, 06:41 AM   #28
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You mentioned New Orleans? With our wonderful roads?
ooh! an in-road swimming pool, how clever.....
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Old 09-06-2011, 09:54 AM   #29
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Vengeance would be sweet, if it could be achieved. More importantly, and I'm not sure how to achieve this in a free capitalist society, incentives need to modified to make it more important to the officers of the corporations and gov't agencies to work toward the common good instead of cutting corners and cheating to enrich themselves. Some smart people here. Someone should be able to come up with something.

Heck, there were enough laws on the books and people still cheated... now we have even more laws on the books and guess what... people will cheat again...

The jails are full of people who break a law KNOWINGLY... laws will not prevent this from happening again... they will only allow blame to be assigned to someone...

But, if the next time is like this time.... and a good percent of the industry seems to cheat, nothing will happen even then with all the laws on the books..
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Old 09-06-2011, 04:00 PM   #30
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Heck, there were enough laws on the books and people still cheated... now we have even more laws on the books and guess what... people will cheat again...

The jails are full of people who break a law KNOWINGLY... laws will not prevent this from happening again... they will only allow blame to be assigned to someone...

But, if the next time is like this time.... and a good percent of the industry seems to cheat, nothing will happen even then with all the laws on the books..
Ok... then what should we do?
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Old 09-06-2011, 04:18 PM   #31
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Ok... then what should we do?

Actually prosecute and put in jail the people who broke the law... that has not happened from what I can see...

My point is that there really is nothing that can be done... people will be people and some people want to rip off others... and some of them get to be the head of a company and can do it much more easily...

These things have happened since man started commerece and will continue until we are extinct...

Don't get me wrong... I think it was bad business and people broke the law... all I am saying is expecting to 'fix' the problem is not realistic... nothing can 'fix' someone who wants to steal from you... except them getting caught and sent to jail... and then after they get out they will probably do it again...
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Old 09-06-2011, 04:46 PM   #32
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Actually prosecute and put in jail the people who broke the law... that has not happened from what I can see...
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My point is that there really is nothing that can be done... people will be people and some people want to rip off others... and some of them get to be the head of a company and can do it much more easily...

These things have happened since man started commerece and will continue until we are extinct...

Don't get me wrong... I think it was bad business and people broke the law... all I am saying is expecting to 'fix' the problem is not realistic... nothing can 'fix' someone who wants to steal from you... except them getting caught and sent to jail... and then after they get out they will probably do it again...
One thing we could do is let the financial institutions fail. Much of this is because investors and financial institutions bet that they would be backstopped no matter what, and that has proven to be largely true.
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Old 09-06-2011, 04:50 PM   #33
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One thing we could do is let the financial institutions fail. Much of this is because investors and financial institutions bet that they would be backstopped no matter what, and that has proven to be largely true.
I'm all for this, but only after the "too big to fail" problem is addressed. We saw what happened almost immediately after Lehman was allowed to implode spectacularly.

Also, I'm more and more convinced that repealing Glass-Steagall was a bad idea. Maybe it needed some modernization, but effectively letting a "rogue" investment banking arm take down "retail" banking operations and insurers? I'm not sure that's advisable. Yet that's what happened with AIG. All but one of their subsidiaries was pretty sound financially. Yet the one that was not sound nearly took down the whole shebang.
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Old 09-06-2011, 05:36 PM   #34
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One thing we could do is let the financial institutions fail. Much of this is because investors and financial institutions bet that they would be backstopped no matter what, and that has proven to be largely true.
Here's a link to the FDIC's "Failed Bank List", the first 15 pages include those institutions that have gone under since 2008 - too long for me to count, but I'm guessing maybe 400. This list doesn't include non-FDIC institutions, of course.

We do let financial institutions fail, generally. 2008 was a special circumstance where all of our largest financial institutions were on the verge of bankruptcy. Even solvent firms were at risk. I wouldn't take the conditions of 2008-2009 that led to some bailouts and assume that we'll always bail out financial institutions, even big ones. I don't think we will. I don't think we should.

It's my view that a Lehman sized firm could fail today and it wouldn't cause a systemic risk. Not necessarily because of increased capital in the financial system, although that's helpful, but because we're not in the midst of a global bank run. Context matters in these situations. I certainly wouldn't invest in Goldman under the assumption that they'd get bailed out if they blew themselves up. I think that's an unwise bet. If they happen to be fortunate enough to blow themselves up at the very same moment that everyone else is blowing up too, that's a different story. Hard to count on though.

Besides, if folks bought equity in Citigroup - for example - hoping that the government would "backstop" the firm no matter what, it didn't end well for them. Before the crisis Citigroup traded at a split-adjusted share price of $500. Today they closed at $27 and change, up from a low of $10. Not the kind of backstop I'd want in place to protect me.

Moral hazard is a real concern. But it gets too much press, I think.
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Old 09-06-2011, 09:46 PM   #35
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Heck, there were enough laws on the books and people still cheated... now we have even more laws on the books and guess what... people will cheat again...

The jails are full of people who break a law KNOWINGLY... laws will not prevent this from happening again... they will only allow blame to be assigned to someone...

But, if the next time is like this time.... and a good percent of the industry seems to cheat, nothing will happen even then with all the laws on the books..
I didn't say a word about laws. I think too many laws are a huge part of this country's problem. I said incentives. Positive action is much more effective than negative action (jail). If we can figure out a way to align the interests of the politicians and CEOs with the interests of the citizens, things would be better. As it is, they run counter to each other. But as I said, I don't know how to do it.
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Old 09-06-2011, 10:12 PM   #36
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Having driven from Maine to Key West, from New Orleans, LA to Medora, ND and many, many, places in between, I can tell you from first hand experience that there are no shortage of road improvement projects crying out for attention.

At the moment we can fund those upgrades at negative real rates . . . silly not to.
Agreed. Seems that the road construction I'm seeing in my area (southern OH) complete with the pseudo-campaign signs ("Paid for by the American Reinvestment Act") is big-ticket stuff that is going to take many months (e.g. new flyover ramps for interstates) and not the more simple and often cost-effective patches and solid repairs that can prevent a much larger subsidence/cracking/failure later. I'm a little surprised, as I would have thought the latter stuff was closer to "shovel ready." Maybe they just don't put signs up when they fix small pavement failures.
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Old 09-07-2011, 10:06 AM   #37
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One thing we could do is let the financial institutions fail. Much of this is because investors and financial institutions bet that they would be backstopped no matter what, and that has proven to be largely true.

In a way a number of them did...

Washington Mutual
Lehman Brothers
Bear Sterns
Citi was partially taken over
GM was partially taken over
Chrysler was partially taken over
AIG was partially taken over


The shareholders and in a few of the companies the bondholders took a bath in their investment... if I were an investor in any of these I would have lost big time... that is an incentive IMO...


Not sure about BofA... but they look like they might be going under soon...


Now, is there an incentive for the management to do the right thing... not that I can think of... that loan they gave to someone that probably should not have been given.... was it because they wanted to book the profits or help out someone in need A lot of people might have been thinking that they were just helping... and were proven wrong... there were also a good number who just wanted to get paid... they process the paper that comes in front of them and do not really care what is on it... as long as they can check the boxes that they are supposed to check... and of course there is the management that wanted more profits for a bigger bonus... and thought that the line was a lot farther away than it was.... not knowing they had crossed it a long time ago....

And of course there are the crooks who did not care what would happen in the end as long as they profited.... like the firm that got Goldman to put in bad loans into a CMO and bet against it... (which seems perfectly legal from what I can tell)....

Can we change human nature No... this will happen again with something... might not be housing for awhile, but it will be something....
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Old 09-07-2011, 10:09 AM   #38
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I'm all for this, but only after the "too big to fail" problem is addressed. We saw what happened almost immediately after Lehman was allowed to implode spectacularly.

Also, I'm more and more convinced that repealing Glass-Steagall was a bad idea. Maybe it needed some modernization, but effectively letting a "rogue" investment banking arm take down "retail" banking operations and insurers? I'm not sure that's advisable. Yet that's what happened with AIG. All but one of their subsidiaries was pretty sound financially. Yet the one that was not sound nearly took down the whole shebang.

AIG was not subject to Glass-Steagall so it would not have mattered if it were not changed for them...
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Old 09-07-2011, 10:16 AM   #39
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Frankly I think the managers and traders who worked for those businesses were focused on their personal bottom line, not their employer's stockholders.

IMHO it is the compensation system that contributed significantly to their behavior. Most wouldn't know a felony from a hole in the wall because they didn't think what they are doing is illegal, or like a bank robber they won't get caught.
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Old 09-07-2011, 10:24 AM   #40
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AIG was not subject to Glass-Steagall so it would not have mattered if it were not changed for them...
It still illustrates the point, though, about why the law was there in the first place -- to prevent this sort of contagion in situations where the country had jurisdiction.
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