From The Scotsman, via the International Policy Network, comes an economist’s perspective on the financial crisis:
The regulators, meanwhile, were unconscious on the floor. The US mortgage institutions, Fannie Mae and Freddie Mac, had 200 regulators on their case but still went bust for US$5 trillion. These semi-governmental companies allowed investors to believe the bad mortgages were guaranteed by government, causing credit rating agencies to give their dodgy bonds high scores.
Mortgage lenders re-packaged these bad debts round the world but nobody cried foul. Institutions were lending thirty times their asset base. Though the Bank of England knew that the huge mortgage lender Northern Rock was failing, the 2,500 staff of the Financial Services Authority seemed to do nothing until it actually collapsed six months later. Even then, they, the Treasury and the Bank had no coherent plan.
When the government is persuading the casino to hand out free chips and the regulators are standing drinks at the bar, you shouldn’t be surprised if the customers place a few risky bets. It’s the management and not the system that deserves our scorn for breaking the basic rules of economics: there ain’t no such thing as a free lunch.
Reader Comments:
Global capitalism pulling millions out of poverty ? If you believe that ,you can believe believe Barack Obama is an Arab , And more than likely you do. If global capitalism is so wonderful, why is there a “leftward drift “ in Latin America ? And what has global capitalism done for Africa lately ? Or for that matter Europe or the US ? Unrestricted unregulated cowboy capitalism starting with reagan is the problem.
article: Western capitalism has been dealt a severe blow by inept politicians and officials. But global capitalism continues to pull hundreds of millions of people out of poverty. It’s a great system. Let’s not break it.“ Good idea!
The US needs to STOP unlimited “do-gooding” before it drives us into oblivion. There was good reason for redlining, sound credit lending principles. But then that is what happens when one dumbs-down society.
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