[tsotha]

What deregulation? The financial industry is the most heavily regulated industry save medicine. The problem is there are too many regulations - banking regulations are so complex only the bankers understand them, which is the basis of the revolving door between banks and government regulating agencies.

Too much regulation gives companies as much freedom as too little.

[intended]

Since you are getting downvoted, a quick point - the reduction of regulations was what helped create the crisis - removal of glass steagal in 1999 in particular.

[tsotha]

I hear people say that, but I don't believe it's true. The roots of the financial crisis were elsewhere, and it would have been just as bad either way.

[intended]

belief? I mean ... Ok, what is your belief?

[tsotha]

The collapse was the result of a real estate bubble. Changes to the law in 1999 had no effect on something that was already underway at the time. The focus on Glass-Steagal is political and a distraction from actual causes.

There are a few things that could have been done to puncture the bubble before it got truly out of hand, but bubbles are a function of peoples' expectations more than any government policy, so we were in for a bad recession no matter what. And there's no way politicians are going to get blamed for a bad recession if someone else can be blamed for a worse one.

At this point the best thing that could happen is regulations simplified and streamlined to the point that Congressional aides (the people who actually write the laws when they're not just passing along something from a lobbyist) can understand them. Also, the GSEs should be recognized as a bad experiment and dealt with accordingly.

[intended]

Alright. The re bubble was not big enough to create the crisis - firstly.

It's was the cdo industry which leveraged those mortgages, and the other derivatives which made the whole crisis exponentially larger and exponentially more complex.

An issue during the crisis was not that people were broke, but that they didn't even know what their exposure was.

Now if, like under glass steagal, the investment banks were the only ones holding onto the CDOs, they would only be the ones exposed, and the ones who may need recapitalization / bankruptcy.

It would also have limited the size of the final leverage being taken on the bubble.

Also it's not political, my dyed in the wool republican finance teacher/boss spoke about how glass steagal was grudgingly useful, before the crisis hit. It isn't a theory propagated during the crisis, it's a theory substantiated by the crisis.

[tsotha]

>Alright. The re bubble was not big enough to create the crisis - firstly.

The hell it wasn't. All that debt would have been held by somebody. It may not have been bundled up in CDOs, but look what happened to Countrywide - they went under (or, I guess, technically force onto BofA by the government) because they held on to their own paper. Even still the bulk of the writedowns have yet to occur, and the taxpayers will end up picking up the tab for all that garbage the GSEs hoovered up.

>Also it's not political, my dyed in the wool republican finance teacher/boss spoke about how glass steagal was grudgingly useful, before the crisis hit. It isn't a theory propagated during the crisis, it's a theory substantiated by the crisis.

He has no way of knowing that. The problem with economics is it isn't in any way a science. For nearly every position you can take on an issue you'll find respected economists on both sides looking at the same data and drawing different conclusions.

I'm not saying there's no logic in that position, just that the idea the whole problem was Glass-Steagal is only getting a lot of play in the media because it dovetails nicely with "those ebil greedy banksters" talking points on the left.