Deregulation?

United States
January 3, 2010 5:39pm CST
I have heard people on here, and the political pundits talking about regulations standing in the way of our recovery. In the last decade we have seen industries like energy, and banking loosen regulations, and caused the world economy to collapse. For those out there that want less regulation, please give me an example of what you want to see deregulated.
3 responses
@bobmnu (8160)
• United States
4 Jan 10
The banking industry was doing a fine job until the courts and government stepped in and changed the rules. There is not one single thing that one can point to and say that is what caused the Banking problem. It was a series of problems building on each other. Many will point to the Community Reinvestment Act of 1977 which outlawed the practice of Red Lining (Real Estate sales people would draw a line around a neighborhood and would not sell houses in that area)in the Bank issuing of credit. At this time banks required a 20% down payment and required you to have an income of between 25% to 30% of the value of the mortgage. When the Bank Examiners came one of the things they looked at and rated a bank on was the number and amount of loans issued to low income people. As property values increased, because of the increased demand for housing, people were having trouble coming up with the 20% down payment so government regulations allowed for the sale of Mortgage insurance which a person would pay more interest and get the down payment lowered to 5%. Some say this is what led to the Savings and Loan crisis. Along the way Fanny and Feddie were allowed to buy up mortgages and package them in bundles and sell them to Investment banks and Investment funds. These loans were considered very good because they were backed by Real Estate. As the Government followed up with a cheep money policy (keeping interest rates low) the demand for housing increased and values increased. Banks were allowed to loan interest only loans and Adjustable Rate Mortgages which when adjusted the rates put the monthly payment out of reach for the homeowner and forced into foreclosure. Government tried to do social engineering and the Banks kept offering a product because the government was backing the loans. The combination along with politicians trying to use government money and programs to get reelected lead to the current crisis.
• United States
4 Jan 10
LOL, how about Glass-Steagall? If it wasn't for the repeal of this act, banks would have seen their own risk involved in many of these insured loans, but their investment arms were making so much money that they strong armed the banks into making these very risky loans. Actually the TRUTH about what the mortgage industry, and banking industry (which in many cases were really the same thing) did was they would write a loan, then insure it through AIG which allowed them to carry 10% of the value of the mortgage on their books. So, if they wrote a loan for $1,000,000, they actually only carried $100,000 on their books. This is why when AIG when under, they took the entire banking system with them because these loans were no longer insured. You are also forgetting about the LACK OF REGULATION in the mortgage industry where you had brokers who were regulated less than you FAMILY DOG!! Many loans were made to people that knew they could NEVER be paid back, but the broker didn't care, as long as it went through he got his huge commission, and on to the next sucker. This lack of regulation played a big part in the crisis, and the sad part is that nothing has changed on this front. You also forgot to talk about the GREED factor in all of this. If you look at the CEO's and mortgage brokers who walked away with tens of millions in bonuses, and golden parachutes. Then when the whole house of cards started to collapse, they all just flew away in corporate jets to leave some other suckers and the American people to clean up their mess. All of these men should be held accountable, but in our corporations are above the laws country, the only thing they have to do is buy enough congressmen, or presidents, and they ride off into the sunset without a care in the world.
@bobmnu (8160)
• United States
5 Jan 10
I am not saying that the Banks are without blame but when you have the government (congress and regulators) doing social engineering by forcing the private sector to do it they have to take part of the blame. Look at Fanny and Freddie losing money and paying huge bonus and salaries to politically connected people. Now the Government will give them the US Treasury to loan money and do the social engineering that will keep the politicians safe in their job. They now have unlimited government guarantee of their loans. You seem to feel that the Banks are the only ones to blame. My point is the share the blame with the government and if left to the free market we would have market ups and downs with those who are taking the risk making the money or losing the money.
• United States
6 Jan 10
"I am not saying that the Banks are without blame but when you have the government (congress and regulators) doing social engineering by forcing the private sector to do it they have to take part of the blame." Please show me where any private corporation was "forced" by any government agency to give someone a home loan. "Look at Fanny and Freddie losing money and paying huge bonus and salaries to politically connected people. Now the Government will give them the US Treasury to loan money and do the social engineering that will keep the politicians safe in their job. They now have unlimited government guarantee of their loans." I agree that Fanny and Freddie shouldn't give those people those huge bonuses. I also don't agree with any of the compensation of any of the executives of companies that made their huge bonuses on the backs of the tax payers. "You seem to feel that the Banks are the only ones to blame. My point is the share the blame with the government and if left to the free market we would have market ups and downs with those who are taking the risk making the money or losing the money." I am not saying that the government had no blame at all, I feel that it has a big role in this problem. As a matter of fact the most powerful man in the world saw this this coming, and did nothing at all to stop it. The sub prime mess started this, but much of this was caused by the greed of the "free market". If we had a true "free market"/capitalist government, I wouldn't be talking to you right now, and nor would you because we should have been sent back to the stone age. What you don't understand about this is that everyone was making money off of these loans, and no one was going to stop until they were forced to, and if it wasn't for the socialist part of our government, our entire economy would have been destroyed.
@Taskr36 (13928)
• United States
4 Jan 10
It's not so much a regulation/deregulation issue, as it is an issue where the federal government screws up everything it sticks its nose into. The bank crash happened because asinine politicians and organizations like ACORN came up with this idea that poor people deserve houses. Poor people, wanting something for free, jumped all over this. The government then pushed banks to give home loans to these people who couldn't possibly make the necessary payments on the homes. Now banks would have never done this without the government getting involved. Even the dumbest banker would know that giving loans to high risk people in large numbers is a recipe for disaster, but hey, the government told them to do it, promised to have their backs, and then we had a crisis in the making. The problem is, you can't just loosen regulations and then support bad practices with taxpayer dollars. If they'd loosened regulations and let banks do business as they'd been doing for a while, this foreclosure mess wouldn't have happened because those people would have never gotten houses they couldn't afford.
• United States
4 Jan 10
Taskr, you have been listening to to much right wing hate radio that only tells you the side of the story that you want to hear. Can you please show me one congressional bill that forced private lenders to give mortgages to every American? Can you show me where ACORN ever wrote a mortgage, or forced congress to force lenders to give mortgages to everyone? The FACT is that the government made it easier for people to get loans, but it was the banks that decide to use these programs, and make these loans. " Even the dumbest banker would know that giving loans to high risk people in large numbers is a recipe for disaster, but hey, the government told them to do it, promised to have their backs, and then we had a crisis in the making. Again Taskr, please show me where congress ordered banks to write loans for every American? Taskr, you don't understand that NO ONE FORCED THEM TO GIVE OUT THESE LOANS. I don't know how to tell you this any clearer. These banks knew exactly what they were doing, and knew that there was a risk, but the reward was so much greater that they couldn't help themselves. This is a perfect example of greed gone horribly wrong. It is that simple.
@jyaegel (161)
• United States
12 May 11
I had just started a deregulation question not similar to this one but. I thought with the deregulation of electric companies one would be able to go out and purchase there electric gas what ever thru a company of there choice. now I am being told I can't due to a local municipality we have that negotiated a 30 year contract with an out of state electric company that states every resident in the city I live in are required to use them. How is this deregulation of powers? sorry if its off topic.