Financial Reform: Bankers 1, Consumers 0

Getting a loan you can't afford on a house only to have it foreclosed on in 6 months doesn't sound to me like winning. Its like saying that when I put out a trap for a raccoon or something, the raccoon "wins" because he gets a meal out of the bait that I put in the trap.

 

They'll go to whereever they can make the most money as safely as possible. that's why they are lending the federal government the money they just borrowed from them.

They only go to risky investments like sub-prime mortagages once all the good investments are gone.

They're only able to do this if there is enough cheap money to make the gamble worthwhile.

The problem is, and always has been, the interest rate.

The holes in the regulatory scheme wouldn't be noticeable if there wasn't money dripping through them. We need to turn off the spicket. Too bad that'll never happen.

 

...safely. right.

 

The spicket should have been turned off in 2004. But everyone wanted the economy to keep chugga lugga luggling along.

 

But the taxpayer hasn't been screwed. In fact, the taxpayer made out quite well. What you predicted simply hasn't happened.

What exactly did it reaffirm? That the banks aren't going to be scapegoated and destroyed out of a sense of vengeance and populist anger? Nothing in that article reaffirms anything - it doesn't even address any single issue with the reform bill except one that no one even knows if it's important (where the consumer protection agency will be).

 

That was the initial concern - but then as people thought more about it, they realized that housing it within the Fed or within the Treasury (two possible options) wouldn't necessarily be bad - it certainly might be, but it all depends on how it gets structured, what independent authority the CP people have, and who they report to.

 

The only tax payer money won't be recovered will be the auto bailout, and possibly AIG. The bank bailout will likely turn a nice profit for taxpayers.

Regardless, the most important thing going forward isn't getting all the tarp money back, its the issues of systemic risk within financial institutions that can crater the whole economy. The markets are becoming more efficient, more connected everyday, that spreads the risk around which in general is a good thing. Of course when once in a life catastrophe hits, everyone get dragged under. Will any regulatory agency be able to identify the next big one before it hits? who knows, chances are if its big enough to be viewed as a systemic risk, its probably already too late to do much about it.

 

Which is why we need regulation. More to the point I was making above that still has Major so confused - we needed that regulation before or with the bailout moneys. Trying to do this after they've already been saved by the taxpayers will result in half-assed legislation per the usually corrupt lobbying process.