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What wrong with the economy, in 10 points
#1
This article sums it up well...

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Brett Arends, MarketWatch BOSTON (MarketWatch) Wrote:The last financial crisis isn’t over, but we might as well start getting ready for the next one.
Sorry to be gloomy, but there it is.
Why? Here are 10 reasons.
Click to Play Wall Street's grim futureWall Street is hit by another round of layoffs. What will a post–Dodd-Frank Wall Street will look like?
  1. We are learning the wrong lessons from the last one. Was the housing bubble really caused by Fannie Mae, Freddie Mac, the Community Reinvestment Act, Barney Frank, Bill Clinton, “liberals” and so on? That’s what a growing army of people now claim. There’s just one problem. If so, then how come there was a gigantic housing bubble in Spain as well? Did Barney Frank cause that, too (and while in the minority in Congress, no less!)? If so, how? And what about the giant housing bubbles in Ireland, the U.K. and Australia? All Barney Frank? And the ones across Eastern Europe, and elsewhere? I’d laugh, but tens of millions are being suckered into this piece of spin, which is being pushed in order to provide cover so the real culprits can get away. And it’s working.
  2. No one has been punished. Executives like Dick Fuld at Lehman Brothers and Angelo Mozilo at Countrywide , along with many others, cashed out hundreds of millions of dollars before the ship crashed into the rocks. Predatory lenders and crooked mortgage lenders walked away with millions in ill-gotten gains. But they aren’t in jail. They aren’t even under criminal prosecution. They got away scot-free. As a general rule, the worse you behaved from 2000 to 2008, the better you’ve been treated. And so the next crowd will do it again. Guaranteed.
  3. The incentives remain crooked. People outside finance — from respected political pundits like George Will to normal people on Main Street — still don’t fully get this. Wall Street rules aren’t like Main Street rules. The guy running a Wall Street bank isn’t in the same “risk/reward” situation as a guy running, say, a dry-cleaning shop. Take all our mental images of traditional American free-market enterprise and put them to one side. This is totally different. For the people on Wall Street, it’s a case of heads they win, tails they get to flip again. Thanks to restricted stock, options, the bonus game, securitization, 2-and-20 fee structures, insider stock sales, “too big to fail” and limited liability, they are paid to behave recklessly, and they lose little — or nothing — if things go wrong.
  4. The referees are corrupt. We’re supposed to have a system of free enterprise under the law. The only problem: The players get to bribe the refs. Imagine if that happened in the NFL. The banks and other industries lavish huge amounts of money on Congress, presidents and the entire Washington establishment of aides, advisers and hangers-on. They do it through campaign contributions. They do it with $500,000 speaker fees and boardroom sinecures upon retirement. And they do it by spending a fortune on lobbyists — so you know that if you play nice when you’re in government, you too can get a $500,000-a-year lobbying job when you retire. How big are the bribes? The finance industry spent $474 million on lobbying last year alone, according to the Center for Responsive Politics.


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#2
Mostly I agree with him. However, I have a real problem with his number one 'what's wrong' item.

Quote:1. We are learning the wrong lessons from the last one. Was the housing bubble really caused by Fannie Mae, Freddie Mac, the Community Reinvestment Act, Barney Frank, Bill Clinton, “liberals” and so on? That’s what a growing army of people now claim. There’s just one problem. If so, then how come there was a gigantic housing bubble in Spain as well? Did Barney Frank cause that, too (and while in the minority in Congress, no less!)? If so, how? And what about the giant housing bubbles in Ireland, the U.K. and Australia? All Barney Frank? And the ones across Eastern Europe, and elsewhere? I’d laugh, but tens of millions are being suckered into this piece of spin, which is being pushed in order to provide cover so the real culprits can get away. And it’s working.

If the REAL culprits are getting away with all this, then just who are the REAL culprits? Why is he keeping this a secret? Is he afraid someone will 'retire' him?
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“Don’t confuse me with facts, my mind is made up” — Saint Al of the Gore -
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#3
The real culprits are:

1. The government who told/ordered/encouraged lenders to make high risk loans with the understanding that the government would back the loan.

2. The lenders who made those loans instead of telling the government to stick their elbow in their ear.

3. The people who took out loans far larger than they could pay back, without taking the time and effort to understand what they were agreeing to, simply because some lender said it would be okay.

4. The government for spending my money to bail out failing businesses/homeowners, rather than letting them fail so more sensible people would take over in their place. If a service/product is truly needed, someone will provide it.
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#4
This article does NOT sum it up well...
Fredledingue Wrote:...We are learning the wrong lessons from the last one. Was the housing bubble really caused by Fannie Mae, Freddie Mac, the Community Reinvestment Act, Barney Frank, Bill Clinton, “liberals” and so on? That’s what a growing army of people now claim. There’s just one problem. If so, then how come there was a gigantic housing bubble in Spain as well? Did Barney Frank cause that, too (and while in the minority in Congress, no less!)? If so, how? And what about the giant housing bubbles in Ireland, the U.K. and Australia? All Barney Frank? And the ones across Eastern Europe, and elsewhere? I’d laugh, but tens of millions are being suckered into this piece of spin, which is being pushed in order to provide cover so the real culprits can get away. And it’s working.
Because the spillover from property prices dropping contaminates more than the place where it started, doesn't rule out cause and effect. The fall of equity is linked to property value. The toxic loans guaranteed problems after the fact - not as the fundamental cause. As long as property values continually rose, equity also rose - despite bad regulations that threatened disaster if it fell.

Fredledingue Wrote:...No one has been punished. Executives like Dick Fuld at Lehman Brothers and Angelo Mozilo at Countrywide , along with many others, cashed out hundreds of millions of dollars before the ship crashed into the rocks. Predatory lenders and crooked mortgage lenders walked away with millions in ill-gotten gains. But they aren’t in jail. They aren’t even under criminal prosecution. They got away scot-free. As a general rule, the worse you behaved from 2000 to 2008, the better you’ve been treated. And so the next crowd will do it again. Guaranteed.
Obama filed the ACORN lawsuit to force recalcitrant bankers to toe the CRA-line, Democrat protestors invaded the homes of bank presidents intimidating their families, and Janet Reno threatened to come after businesses that didn't comply. Don't lay that on the targets of blackmail, put it where it belongs: on the shoulders of Obama, Cli9nton, Reno, Schumer, Dodd, Frank, and the rest of the blackmailers. There are many who walked away with millions who deserve prison, but theywere abusing Fanny and Freddy. .. and they were rewarded to be appointed Democrat advisors after taking their ill-gotten millions. (James Johnson, Jaimie Gorelick, et al, ad nauseum.)

Fredledingue Wrote:...The incentives remain crooked. People outside finance — from respected political pundits like George Will to normal people on Main Street — still don’t fully get this. Wall Street rules aren’t like Main Street rules. The guy running a Wall Street bank isn’t in the same “risk/reward” situation as a guy running, say, a dry-cleaning shop. Take all our mental images of traditional American free-market enterprise and put them to one side. This is totally different. For the people on Wall Street, it’s a case of heads they win, tails they get to flip again. Thanks to restricted stock, options, the bonus game, securitization, 2-and-20 fee structures, insider stock sales, “too big to fail” and limited liability, they are paid to behave recklessly, and they lose little — or nothing — if things go wrong.
Running a company by the rules shouldn't be risky - but in this case it was. I recall CEOs being kicked out of multinational firms - like GM and Chrysler to be replaced by Democrat apparatchiks. Again - it seems the bigger the past fundraising support is all that protects business leaders during a Democrat administration.

Fredledingue Wrote:...The referees are corrupt. We’re supposed to have a system of free enterprise under the law. The only problem: The players get to bribe the refs. Imagine if that happened in the NFL. The banks and other industries lavish huge amounts of money on Congress, presidents and the entire Washington establishment of aides, advisers and hangers-on. They do it through campaign contributions. They do it with $500,000 speaker fees and boardroom sinecures upon retirement. And they do it by spending a fortune on lobbyists — so you know that if you play nice when you’re in government, you too can get a $500,000-a-year lobbying job when you retire. How big are the bribes? The finance industry spent $474 million on lobbying last year alone, according to the Center for Responsive Politics.
Yeah, the referees are corrupt, alright. The NLRB is made up of Union activists. The old boy network exists, to be sure - but it is illegal and immoral at best. Lobbyists exist to perform a value-added service to the interests they represent. Many lobbyists are a sinecure, but the true lobbyists perform a needed function - and provide expertise for their interests when the government staff needs them to be used as a resource. Dandies without specialized knowledge put in a lobbyist's role as a reward for political gamesmanship do not pull their weight.
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#5
Beyond what the article is saying, my personal opinion is that the main culprits are the rating agencies.
Both for the subprime crisis and the sovereign debt crisis.
Had they lowered their rating earlier, all these crisis would have been avoided. But they lower their rating after the crisis hit us in the face.

Of course they were more than one culprit. So many in fact that no one (almost) went to jail.
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#6
I think the major omission here is the fact that Fannie and Freddie probably have criminality involved and have not only walked, but, been bailed out by us. Those government entities did encourage bad conduct, then the writer is accurate, the large bankers did begin dishonorable practices until it exploded.

The east Europe banking crisis to an extent was caused by the same mentality over there, German banks for example began to make loans in the east with these loose standards and dishonorable practices, olus, some of the largest bailout dollars wen to Europe's largest banks that bought massive quantities of US bad loans along with those credit default swaps from AIG as protection.

He's right on everything else and anyone who can't see the Wall Street deal is willfully blind, they do run the nation and they cannot lose as long as our government serves them with our assets against our will.
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