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The Fed may have triggered the '08 crash by accident

Most banks that failed after the crash had nothing to do with CRA, and as mentioned here earlier Mortgage banks like Countrywide also had NOTHING to do with CRA. If you want a real eye opener Google 'Countrywide financial' and read the testimony from former Countrywide employees and the tactics they were using and in many cases being FORCED to use to give out loans. They were giving people who didn't even have jobs loans. And you'll understand why banks and mortgage agencies were giving out loans like candy, they were getting rich beyond belief.

The 'it's all the CRA's fault' was BS created by the Conservative media to put the blame on the little guy, the borrowers so they can 100% excuse the banks, and Wall Street. Don't get me wrong the borrowers do deserve some of the blame. But most of the blame falls and the banks, WS, the rating agencies who were stamping the garbage loans with a AAA ratings, the Dems and GOP who for 20 years deregulated the banks and then sat back and let the banks run wild and act like they were in Vegas.

There was plenty of blame to go around.
 
WCH said:
The gut-wrenching slide of the 2008 stock market crash is unforgettable for those caught in it. In the six weeks from the Lehman Brothers bankruptcy on Sep. 17, the stock market lost over 40 percent of its value.

A quarter of trading days had plunges of 4 percent or more. Investors saw life’s savings dissipate. Traders saw a year’s work and bonus compensation vaporize.

The Federal Reserve and U.S. Treasury, which had been scrambling to cope with the developing financial crisis, accelerated their efforts to a frenetic pace, developing program after program to stem the panic. A chart of the Fed’s balance sheet during this time looks like an EKG gone haywire:...

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The Fed may have triggered the '08 crash by accident | TheHill

Personally, I don't believe it at all. I like to think of it as the "Great Theft of 2008"

Opinions?
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I think the key word is "trigger." When conditions are extremely ripe for collapse, the trigger becomes a hair-trigger. I.e., the slightest of things can be said to trigger it. That doesn't mean the trigger caused it. The causes were wide and systemic.
 
I don't understand monetarist economics all that well. This article was not enhancing my education in any regard.

Regardless, I don't think the Fed's decision in those days can be chronicled, let alone be explained in a few paragraphs. Was it the author's intentions to convince us that a whole bunch of mistakes were made in the FED at those times? By just floating big numbers with dollar signs around?

The article could not explain anything to me. I don't it could explain anything to a person with a lower understanding of economics. I doubt it even made sense to those who are smart in this field. Just a bunch of big numbers with dollar signs, with a spin that these decision markers were shagging pennies at the wall.

The article was poorly written and a poor excuse for journalism.
 
TDGonDP said:
I don't understand monetarist economics all that well. This article was not enhancing my education in any regard.

Regardless, I don't think the Fed's decision in those days can be chronicled, let alone be explained in a few paragraphs. Was it the author's intentions to convince us that a whole bunch of mistakes were made in the FED at those times? By just floating big numbers with dollar signs around?

The article could not explain anything to me. I don't it could explain anything to a person with a lower understanding of economics. I doubt it even made sense to those who are smart in this field. Just a bunch of big numbers with dollar signs, with a spin that these decision markers were shagging pennies at the wall.

The article was poorly written and a poor excuse for journalism.
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You're right. The author doesn't understand how the Fed works at all.
 
Allowing Lehman to go bankrupt triggered the '08 crash.

End of story....
 
Crovax said:
Unregulated derivatives and the incestuous nature of the investment banking industry were the main causes of the crash
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libsocialism was the cause of the crash. If we had had more freedom and capitalism all would have been well. EG Govt guaranteed or bought loans through Fanny /Freddy so there was no capitalist risk. At end Fan/Fred owned or guaranteed 73% of Atl A and sub prime loans.
 
James972 said:
libsocialism was the cause of the crash. If we had had more freedom and capitalism all would have been well. EG Govt guaranteed or bought loans through Fanny /Freddy so there was no capitalist risk. At end Fan/Fred owned or guaranteed 73% of Atl A and sub prime loans.
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Owned yes but they didn’t write any of the subprime loans, they couldn’t by law. The private banks wrote those bad loans all on their own
 
Crovax said:
Owned yes but they didn’t write any of the subprime loans, they couldn’t by law. The private banks wrote those bad loans all on their own
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You missed the point the banks wrote the loans because they knew they could sell the mortgages to Fannie Freddie. Now do you understand
 
James972 said:
You missed the point the banks wrote the loans because they knew they could sell the mortgages to Fannie Freddie.
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The GSE's needed to be bailed out, not because of the quality of their MBS portfolios, but because they lacked the capital to cover the massive decline in real estate prices, specifically in Florida, California, and Nevada.

Now do you understand
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I can guarantee you do not.
 
Kushinator said:
The GSE's needed to be bailed out, not because of the quality of their MBS portfolios, but because they lacked the capital to cover the massive decline in real estate prices, specifically in Florida, California, and Nevada.
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yes they were libcommie institutions that tried to get people into homes the free markets said they could not afford so they failed just like the soviets failed. Now do you understand?
 
Kushinator said:
Allowing Lehman to go bankrupt triggered the '08 crash.

End of story....
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wrong of course, crash was triggered by soviet interference in economy, in this case the housing industry!! Capitalism is self-correcting.
 
TDGonDP said:
I don't understand monetarist economics all that well.
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Its very simple. You print just enough money to keep prices constant so people can comparison shop to reward the most efficient producers.
 
Neomalthusian said:
I think the key word is "trigger." When conditions are extremely ripe for collapse, the trigger becomes a hair-trigger. I.e., the slightest of things can be said to trigger it. That doesn't mean the trigger caused it. The causes were wide and systemic.
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Great Point. To say failure of Lehman was trigger means that we should bail out all failing companies.
 
James972 said:
Its very simple. You print just enough money to keep prices constant so people can comparison shop to reward the most efficient producers.
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I took an MBA course for economics 20 years back. I could follow macro, micro, and Keynes reasonably well. But the monetarist had me baffled. On my bucket lists is to study this topic more thoroughly.

Printing money has its ramifications: hyper inflation! Print too much and the economy destabilizes as both consumers and businesses find it difficult to make long term plans. So from my limited understanding of monetarism, printing money is limited.

Having said that, there really has not been any big investors for government debt since 2008. So money is coming from somewhere.

On another group, one fellow tried to explain it me in that western governments have created special banks and "print" money for the bank. The bank then loans the money to government to finance the deficit. The government pays the interest on this debt back to the bank (which is 100% owned by the government). In other words, the "we" are paying interest to ourselves. If we ever default, then we only default ourselves. I see two possible outcomes (in my limited understanding).

According to another fellow on the same forum (and who seems to understand these things than I), governments will be able to keep this Ponzi scheme going for several decades--as long as inflation is low.

And I allude to earlier, the eventual default will not be a big deal as less and less government debt is being held outside of government. Just declare the bank bankrupt, start another bank with the same practice.
 
TDGonDP said:
I took an MBA course for economics 20 years back. I could follow macro, micro, and Keynes reasonably well. But the monetarist had me baffled. On my bucket lists is to study this topic more thoroughly.
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no need here it is again:Its very simple. You print just enough money to keep prices constant so people can comparison shop to reward the most efficient producers.
 
TDGonDP said:
And I allude to earlier, the eventual default will not be a big deal as less and less government debt is being held outside of government. Just declare the bank bankrupt, start another bank with the same practice.
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1) who would trust the new bank? 1+1=2

2) if the bank could finance the federal govt then we would not have to pay taxes. Problem is printing money like that causes inflation so you cant do much of it.
 
James972 said:
1) who would trust the new bank? 1+1=2

2) if the bank could finance the federal govt then we would not have to pay taxes. Problem is printing money like that causes inflation so you cant do much of it.
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As I have alluded to, I find this monetarist system somewhat baffling. To my linear thinking, the entire structure of governance in nearly all western nations should have collapsed years ago because it is obvious that governments cannot overcome their deficit financing. Governments may have a few extra tools to delay the collapse, but even the biggest corporations cannot ignore the perils of too much debt. Somehow governments are getting away with this.

I read some time back that the economic planners use tax revenue as means that allows them to not print as much money PLUS sop up some of the demand so the economy does not over-produce things. A good example of this was WW2. The government encouraged investment in its bonds more for ensuring that consumers did not consume many resources needed for the war effort.
 
TDGonDP said:
Somehow governments are getting away with this.

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govt can get away with it because they can tax an entire economy to pay the interest and most citizens are too stupid to know where their tax dollars are going or why prices are always going up rather than down!
 
TDGonDP said:
I read some time back that the economic planners use tax revenue as means that allows them to not print as much money
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obviously if they have tax dollars in hand they have to print money to pay for what the tax revenue can pay for
 
TDGonDP said:
PLUS sop up some of the demand so the economy does not over-produce things. A good example of this was WW2. The government encouraged investment in its bonds more for ensuring that consumers did not consume many resources needed for the war effort.
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1) govt would have no interest in preventing production nor would it have any idea how much should or should not be produced except in once in a century events like world wars.
 
James972 said:
obviously if they have tax dollars in hand they have to print money to pay for what the tax revenue can pay for
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Not obvious to me. I have enough monetarist economics under my belt to know this "science" is very complicated. Federal banks seldom hire people off the street to run their departments.

But if your perspectives are sufficient, that is good for you.
 
The simple answer is these crashes from small to major are just the result of an imperfect system. These market resets have been happening since people started trading. The more complex it becomes only leaves more loopholes for the corrupt or greedy to take advantage. The more you simplify the system the less likely you will have major resets.


The easy answer of course is to blame Bush. Or the next president unlucky enough to get caught in office when they happen.
 
PIPEWRENCH said:
The simple answer is these crashes from small to major are just the result of an imperfect system.
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makes no sense. A capitalist system is self correcting based on millions and millions of individual transactions while a socialist system does not correct because a few individuals in central govt cant possible match the judgement of millions and millions in a free market. Do you understand?
 
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