[ExI] AIG Bail out

BillK pharos at gmail.com
Thu Sep 18 14:34:22 UTC 2008


On Thu, Sep 18, 2008 at 2:06 PM, Max More wrote:
> It had nothing to do with the fed holding interests rates down too low for
> years, right? Of course not. Nor did it have anything to do with the moral
> hazard created by government financial guarantees. Anti-marketeers always
> miss the real causes.
>

There are many contributory factors and side-issues.

But the *main* cause was lack of regulation. The sharks saw an
opportunity, thought they could get away with it, and, indeed, not
only did get away with it but were handsomely rewarded for their
greed. Until the house of cards fell down. This always happens to
unregulated markets when greed is given free reign and the gangsters
take over.

This crisis is being analyzed every which way, with blame being flung
to all quarters. There are hundreds of articles being written.

But for one opinion see:
<http://bigpicture.typepad.com/comments/2008/09/regulatory-exem.html>

Quote:
As we learn this morning via Julie Satow of the NY Sun, special
exemptions from the SEC are in large part responsible for the huge
build up in financial sector leverage over the past 4 years -- as well
as the massive current unwind

Satow interviews the above quoted former SEC director, and he spits
out the blunt truth: The current excess leverage now unwinding was the
result of a purposeful SEC exemption given to five firms.

You read that right -- the events of the past year are not a mere
accident, but are the results of a conscious and willful SEC decision
to allow these firms to legally violate existing net capital rules
that, in the past 30 years, had limited broker dealers debt-to-net
capital ratio to 12-to-1.

Instead, the 2004 exemption -- given only to 5 firms -- allowed them
to lever up 30 and even 40 to 1.

Who were the five that received this special exemption? You won't be
surprised to learn that they were Goldman, Merrill, Lehman, Bear
Stearns, and Morgan Stanley.
-----------------


BillK



More information about the extropy-chat mailing list