Boring stuff. But good.
I hope Brad Miller and the good guys win on this kind of thing. Banking doesn't create wealth, it sets up favorable conditions for the creation of wealth. Banking is not working when banking institutions get rich so much as it is working when bank customers get rich.
If the wealth of financial institutions grows at six times the rate of all other growth, it is suggestive of a process in which wealth is being transferred out of more productive efforts and into speculative ones. One need not know more than this to correctly judge that the financial institutions have ceased creating wealth and begun destroying it.
Why didn't we learn this once and for all in the '30's?
Posted by steve at June 2, 2009 07:16 PMWell, the finanxial "innovation" was also designed to allow dubious mortgages to be granted to people who couldn't actually afford to buy the bubble-house being sold. This was because WallStreet was desperate for things called "mortgages" to bundle into risky "securities" to sell around the world, securities whose actual risk was (intentionally) concealed by "AAA" ratings given by hopelessly conflicted private ratings agencies.
Wall Street bankers wanted mortgages at any cost, however dubious, and thus needed to change "standards" and create new "products" to get them, otherwise the income-inadequate borrowers wouldn't qualify and the number of mortgages written (as house prices exploded) would drop.
Pretty simple stuff, and nothing has changed at all, except that house prices are falling. Banks can all write and sell the exact same mortgages right now that they did then. There's no new regulations, none proposed, and as numerous Congressmen have said---"the banks run the place", i.e. Congress.
Any reform will be meaningless, tepid and mere window dressing, we can see that already.
The greatest financial crisis since 1929 has shown that we have absolutely no ability to reform ourselves---the gub'mint has fallen and it can't get back up. Banks that demanded a $750 billion bailout for their corruption now have decreed that there won't be any meaningful changes in their regulation. And they run the place.
Sickening, but that's the reality in the Shining City on the Garbage Dump.
Posted by euzoius at June 3, 2009 06:39 AM