Except they've basically stolen from themselves. The vast majority of libor fixing was downwards. Loans they've made that pay libor-linked rates thus pay lower - so the bank earns less interest. The lowballing of libor doesn't (or didn't) affect the actual rate at which banks could fund/borrow, so net the banks lose.

Libor was low-balled to paint a better picture of the health of the market. It was a survival tactic, not an attempt to deliberately rip people off. It's quite possible that if real rates had been posted the markets would have got spooked and banks would have gone bust. I'm not saying it's right, just let's have a little perspective here. Banks haven't "stolen" from anyone. And frankly if you were out trading eurodollar futures or something then you should have known something about the libor market.

To paraphrase Churchill: It has been said that free-market capitalism is the worst economic model except all the others that have been tried.

You use the word "deregulation", yet thousands of pages of new regulations are churned out each year by the Federal government... when 1 or 2 pages are repealed, we hear "They're deregulating!". Any look at the regulations being emitted from the Federal Government will numerically prove that deregulation isn't our problem.

It seems more apparent to me that the problem is that the Government has created really poor regulations and way too many of them at that. They created the regulatory mix that their corporate partners wanted them to in order to protect the business models of those corporate partners.

Maybe if the Government tried to do a lot less and just did what it does well, we could keep better track of it and hold it accountable? Instead, the trend seems to be to hand over more power and authority to the Government in hopes that the people in it are somehow more ethical and wiser than the citizenry. That hope would seem to have been misplaced.

What good are thousands of pages of "regulatory" law when they are filled with loop holes? In fact these monstrous laws are perfect for the big corporations, their lobbyists and lawyers. These people live for this. Heck, they even often write the laws themselves!

Have a look at the deregulation of California's energy system. These are not small laws. However, this is an example of clear deregulation, and was not a regulatory effort.

In fact Enron was able to pull off completely immoral, but often at many times legal, shenanigans. I mean they shut down half of the power plants because their energy traders could make a profit from the rising prices. Holy shit. In the mean time they cried wolf and said that regulation was killing them. BULL SHIT. It was the exact opposite.

People actually died from these power outages. Again, holy shit.

With big so-called regulatory and "deregulatory" frameworks filled with loop holes, small business owners are basically shut out of the market because they don't have the resources necessary to even begin to understand the matter.

In the mean time, big corporations can fully exploit these custom-made laws, profit from them and then later, call for "more deregulation".

I hope you do realize that this is a vicious cycle.

I guess what I don't understand is your connection between "Free Market Capitalism is a joke" and the true statements above. A bunch of companies writing laws isn't Capitalism. It's Cronyism and Corporatism.

It's a direct result of investing too much power in the government to control things since there are no real protections to keep the government from being corrupted by anyone with some money.

It's one thing to have a powerful corporation that dominates a marketplace. That can make it uncomfortable when you're looking for an alternative product or service. It's quite another thing when powerful corporations write the laws. In that case, we're screwed since the guys with the tanks no longer allow us any choices but to fall in line.

There are a few things that could have been done to puncture the bubble before it got truly out of hand, but bubbles are a function of peoples' expectations more than any government policy, so we were in for a bad recession no matter what. And there's no way politicians are going to get blamed for a bad recession if someone else can be blamed for a worse one.

At this point the best thing that could happen is regulations simplified and streamlined to the point that Congressional aides (the people who actually write the laws when they're not just passing along something from a lobbyist) can understand them. Also, the GSEs should be recognized as a bad experiment and dealt with accordingly.

It's was the cdo industry which leveraged those mortgages, and the other derivatives which made the whole crisis exponentially larger and exponentially more complex.

An issue during the crisis was not that people were broke, but that they didn't even know what their exposure was.

Now if, like under glass steagal, the investment banks were the only ones holding onto the CDOs, they would only be the ones exposed, and the ones who may need recapitalization / bankruptcy.

It would also have limited the size of the final leverage being taken on the bubble.

Also it's not political, my dyed in the wool republican finance teacher/boss spoke about how glass steagal was grudgingly useful, before the crisis hit. It isn't a theory propagated during the crisis, it's a theory substantiated by the crisis.

The hell it wasn't. All that debt would have been held by somebody. It may not have been bundled up in CDOs, but look what happened to Countrywide - they went under (or, I guess, technically force onto BofA by the government) because they held on to their own paper. Even still the bulk of the writedowns have yet to occur, and the taxpayers will end up picking up the tab for all that garbage the GSEs hoovered up.

>Also it's not political, my dyed in the wool republican finance teacher/boss spoke about how glass steagal was grudgingly useful, before the crisis hit. It isn't a theory propagated during the crisis, it's a theory substantiated by the crisis.

He has no way of knowing that. The problem with economics is it isn't in any way a science. For nearly every position you can take on an issue you'll find respected economists on both sides looking at the same data and drawing different conclusions.

I'm not saying there's no logic in that position, just that the idea the whole problem was Glass-Steagal is only getting a lot of play in the media because it dovetails nicely with "those ebil greedy banksters" talking points on the left.

What you are forgetting ignoring, is that the mortgages were only fuel for the CDO market. That market was powers bigger, completely levered and so the smallest misstep meant outsized failures.

On top of this you had yet more instruments piled on, where people made just plain betson market outcomes.

Oh yeah, the swaps were also insuring far more than what the underlings were worth too.

So the real estate bubble wasn't big enough to create a crisis - for that we needed CDOs and CDSs to lever the bubble.

And a lot of those write downs have happened, the banks has their PE ratios and the rest crushed in 08. They took most of their hits.

All they have now is shadow inventory, which they can't afford to let onto the market because it would depress housing prices further.

This when some Americans are too broke to live in tents :)

For the glass steagal bit, sorry but right now your aim to be above the debate is making you take a stand based on what you think is a talking point.

It's your perception that it's a talking point, but in that case why my example was someone who was on the other side of the evil banker discussion, who was saying that glass steagal was good.

And this was even before the predicted outcome - rapacious irresponsibility, was proven. While you may want to be above the debate, it's not a talking point. It's more like a strongly substantiated theory.

Either I've been unclear or you seem to have misinterpreted what I said. When you say "It isn't a theory propagated during the crisis, it's a theory substantiated by the crisis," I can see why you think that. It doesn't mean I don't think you're wrong. I do. And I do think it's a talking point - you write as if this was all settled, and it's not.

And my point about economics as a pseudo science was really a long winded way of saying your assertion that "my dyed in the wool republican finance teacher/boss spoke about how glass steagal was grudgingly useful, before the crisis hit" carries the same intellectual weight as "The guy who runs the local sandwich shop has a sister whose brick-layer husband think glass steagal is useful"