Kasz216 on 16 September 2008
| Impulsivity said: The deregulation began in the 1980s soon after reagan took office (as he had run on a platform of deregulation among other things). The first change was Depository institutions deregulation and monetary control act which allowed banks mergers, removed some oversight and increased the ammount of bank investments the Federal government would insure from 40k to 100k raising moral hazard significantly. This was in 1980 The second change was in 1982 with the Depository Institutions act further deregulated both banks AND savings and loan institutions, it relaxed one borrower loan limits, added money market accounts as authorized forms of deposit (where instead of straight interest investor money is put into a semi risky portfolio tied to the stock market). It also encouraged heavy often speculative real estate lending at a time when the real estate market was collapsing. in 1983 49 banks failed in large parts due to risky investments encouraged by deregulation. This almost included Continental Illinois bank and trust which was the 8th biggest bank at the time, but the government was forced to bail them out to avoid a larger banking collapse. How did the conservative hero help solve this problem in 1982? By cutting taxes? Quite the contrary, he RAISED taxes on corporations in 1982 to help raise the money the fed needed to deal with the recession. Yes Ronald Reagan, hero of the conservative movement, raised taxes because it was outrageously irresponsible not to given the huge ballooning deficit. George HW Bush did the same when it became necesary, only George W refused the course of action and continued outrageous deficit spending which has helped greatly in leading us to the point we are at today. Of course every time the Republicans started again they went right back to more and more deregulation. The gas crisis has a lot to do with the so called "Enron loophole" created by Phil Graham in large part, McCains economic advisor, from when he was working on behalf of Enron. This deregulated large fund investment in comodities and that effect can best be seen when huge funds sold 40 billion worth of oil dropping the price from 140 to 100 where it continues to remain more or less. There was a 40 dollar a barrel price premium purely from the speculation deregulation had allowed to thrive. Deregulation encourages risky investments and short term strategy. It creates better returns in good times, but in bad times the failures and economic meltdowns those good time returns net are just not worth it. Is a 10% increase in profit one year worth the bank failing a few years later as a result of the kinds of investments that brought that 10% increase? I certainly don't think so. Deregulation let the irresponsible consumers you point to get loans they didn't fully understand. Lack of regulation let banks give 2% intro rates to let customers quality that went up 4 points a month later and 10 points a year later. Lack of regulation of lending practices and banks in general are the number one cause of the current problems, and those problems are what McCain helped create (he voted with the so called "Reagan revolution" republicans on many of the deregulation missteps from the 1980s through today in the house then the senate). American History Pop Quiz, anyone know what caused the Great Depression? That's right! speculative mortgages and lack of stock market regulation! Almost all the regulations that the republicans have tried to deregulate were put in place after the depression to try and stop another one from happening. Smart move removing those safeguards, I was hoping we wouldn't go 100 years without another great depression, thanks Republicans. |
Your ignoring that the biggest bank deregulations happened during the Clinton Administration in the mid 90's.
Also, i'd argue that people have the right to loans they don't understand.
Though they should also be smart enough not to take them.
I don't believe in the government protecting people from themselves.
Of course there were people that outright lied or misled people into these loans. (Not a majority but still some.) Those people should be made to pay.
People should be given the best education they can, they be allowed to make all the stupid decisions they want to make. The only time the government should step in is when the buisnesses at hand are being misleading.
