One act can lead to serious economic problems.  One such example is the tariff the Roosevelt administration put into effect that was supposed to help stimulate the economy after the stock market crash.  Before the tariff, the unemployment rate was 9% and after it went up to ~25% and basically led to the great depression.

Another thing I would mention is the Democrats presuring the housing markets into loaning to high risk applicants.  This led to the housing crises that happened recently.

It is true that the Federal Reserve has a lot of power over the economy.  The FR has more to do with the current state of the economy than the president does.  I do believe the president has a large role in who is head of the FR however.

The economy is complicated.  That is why seemingly small acts can have devastating unforseen (to the people who made them) consequences.  That is also why capitalism works so well.  The economy is too large and complicated for a group of people in goverment to try to completely manage.

I think the current crisis was caused by too much intervention (pressure on housing companies, poorly written accounting regulations forcing avoidance methods like the "toxic" credit instruments, invincibility of Freddie Mac/Fannie Mae leading to unlimited loans, artificially low interest rates, existence of Chapter 11).

The only way to solve it is to end all bailouts, reduce regulation*, end subsidies, end customs duties, end government sponsorship of banks, end unbalanced taxes like upper limits on income tax, and then DO NOTHING for a few years. That last part is important: constantly changing rules for good or bad causes market instability.

*That is, regulation on credit and trade, and subsidies. I'm all for consumer protection, antitrust laws, mandatory government and corporation transparency and other things that don't affect the flow of money but do increase the ability of the market to spot fraud and deception.

Once again, all of you sound like broken records. Its ludicrous.

People always talk so highly about the private sector saying how smart and efficient it is, but when it screws itself over they blame the government? Because of a few policy decisions?

That's like blaming the government for putting a no tax weekend on guns for people who are killed as a result of those guns. Sure the government may be somewhat to blame, but you are pointing the finger at the wrong person. There is a difference between allowing something to happen and doing it yourself. It was part of a lot of the independent Wall Street firms' business models to run a 30:1 margin on their assets and liabilities.

You guys are blaming the wrong person. Its like blaming a credit card company who gives low interest rates to its clients for those clients racking up huge amounts of debt.

I agree that the government should implement a lot more regulations and improve oversight, but why the hell is everyone pointing their fingers at the government rather than the banks who made all these loans? Just because it is easy to blame the government doesn't mean you are blaming the right person.

No offense.... but after your using stock charts to show that Sony isn't doing that badly...

Your not exactly the first person i'd trust when it comes to economic opinions.

The companies got greedy and made those bad descisions because they've been given an enviroment where they are reinfoced positivly for making them.

If everytime your child did something you didn't want them to you said "Don't do that..." then gave them a piece of candy and 5 dollars.

Is it really the childs fault when it acts up?

A companies job is to maximize profits while mitgating risk.  When the government takes on all the risk for you... why wouldn't you make the big play?

The banks are clearly at fault and they should go out of business because of their part in this, there should be investigations whether there was any illegal activity occurring within the banks, and if there was illegal activity the people who performed those acts as well as the executives within the bank should be held legally accountable.

Now, there are (essentially) two ways that you can treat a critical market like the banking/financial sector. There is the big bank model which is how things operate in Canada, where you have massive banks which are heavily regulated to the extent where common sense becomes law; and there is also the small bank model where you allow banks far more freedom to make mistakes but you aggressively prevent banks from becoming too large.

The problem in the United States is they follow the small bank model and have allowed banks to become so big that they are "Too large to fail" ... Long before George W Bush became president these banks should have either been forced to split into smaller institutions or the US should have started to institute regulations to prevent moronic behavior within these large banks. Why people blame the government is that when they should have been reducing risk in the system they were increasing risk through the Community Reinvestment Act  and by repealing the Glass-Steagall act.

I am saying the opposite of what you describe.  I am not blaming the government for not doing anything to prevent the problem, I am blaming the government for causing the problem.  In particular, I am blaming the Democrats, two in particular.  I will have to look up thier names sometime.

The private sector would have been fine if the Democrats would have just left it alone.

Most people here seem to assume that the market is best left to self-correct. However if you leave the market to just collapse and then re-build essentially from scratch (which it would, several more of the major financial firms would have already collapsed IMO) you will probably wipe out decades of growth.
But how much money is America willing to pour into supporting its financial systems?

hrm, I like the idea of having a salary cap of 500k to executives that are being bailed out. But on the other hand, I read that 500k is WAY below market rate for a wall street CEO, so it might be too low to entice a "good" CEO to come in and fix the bank's operations. All the "good" talent will thus go and get way higher paying jobs at companies that aren't being bailed out; which of course would make the situation worse for the banks that are being bailed out.

Exactly.  The money it costs to get a good CEO in companies is much less than the money it will cost when a bad CEO makes poor decisions.

You guys are missing out on some important details

1) It only applies to senior executives (no one is clear what that means)

2) It only applies to bank's that are receiving substantial bailout funds (AIG level)

3) and it is not retroactive

There is a pretty good balance of both Wall Street's interests and the taxpayers' interests here.

And frankly, if all the "good talent" on Wall Street has led every major financial institution to the brink of collapse, are they really that good?