Fun at the ZLB, and below!?
- Thread starter Ricter
- Start date
I was responding to his article, which said the Gramm bill led precisely to the banks being too big to fail and requiring a gov't bailout. I believe the banks should have been left to fail and so did a lot of economists who penned a wsj op ed in 08 advocating letting them go down.
But surely you, fhl, are not suggesting that GLB did not allow banks to become much bigger, even too big to fail. You are just saying you think they should have been allowed to fail anyway despite the financial chaos that would precipitate, right? Otherwise I haven't a clue what your point is.
Or is it possible that you think that a bank the size of Citi or Goldman, or an Insurer the size of AIG, could just be allowed to go under with no great consequence?
Or is it possible that you think that a bank the size of Citi or Goldman, or an Insurer the size of AIG, could just be allowed to go under with no great consequence?
If they were never allowed to become too big too fail in the first place, yes. And since the crisis, what has the Fed done? Allowed them to become too bigger to fail. The Fed and all the regulators haven't done a thing to fix that.
What I am saying is clear, pie. The meme that has been thrashed around ever since 08, and you are still putting forth, is that the legislation made banks too big to fail and there would be too much systemic risk and all economists agreed on that.
That meme is false. All economists did not agree on it. Lots of high profile economists said to move the insured deposits to other banks and let the bad banks fail. They wrote an op ed and signed their names to it. They didn't think the whole system would crash and burn if the bad banks were to go away.
It's all opinion because we don't know what would have happened. It's just that I get tired of hearing the other side's opinion being promulgated as a fact that all economists agreed on. That is not true. It is bs.
WELL. I must say you give me way too much credit here for claiming that "all economists agree" that repeal of Glass Steagall by the Financial Modernization Act made banks too big to fail. I didn't even have to think very hard at all to come up with a list of economists who don't agree: e.g., Phil Gramm, his lovely wife Wendy, Larry Summers, Alan Greenspan, Robert Rubin. Will that do ?
Though it had nothing to do with any of my posts, in a prior post you mentioned:''A long list of world famous economists, including Nobel winners, tried to get the gov't to let the banks fail in 08". That made me very curious. Perhaps you wouldn't mind sharing your long list, if it isn't a secret that is. Be sure and include at least two Nobel Memorial Prize Laureates.
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P.S. -- Apparently my brain has blown a fuse because I really haven't a clue what your posts are about. To me, they seem to mix and mingle entirely different topics, sometimes in the same paragraph, and they are somehow supposed to be responses to something I have posted. But I still think it would be fun to see your "list'.
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Oddly enough, most of us would agree that this is exactly the sort of thing that you specialize in.
WELL. I must say you give me way too much credit here for claiming that "all economists agree" that repeal of Glass Steagall by the Financial Modernization Act made banks too big to fail. I didn't even have to think very hard at all to come up with a list of economists who don't agree: e.g., Phil Gramm, his lovely wife Wendy, Larry Summers, Alan Greenspan, Robert Rubin. Will that do ?
Though it had nothing to do with any of my posts, in a prior post you mentioned:''A long list of world famous economists, including Nobel winners, tried to get the gov't to let the banks fail in 08". That made me very curious. Perhaps you wouldn't mind sharing your long list, if it isn't a secret that is. Be sure and include at least two Nobel Memorial Prize Laureates.
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P.S. -- Apparently my brain has blown a fuse because I really haven't a clue what your posts are about. To me, they seem to mix and mingle entirely different topics, sometimes in the same paragraph, and they are somehow supposed to be responses to something I have posted. But I still think it would be fun to see your "list'.
Bank Bailout Bill of 08:
Economists[edit]
- In an open letter sent to Congress on September 24, over 100 university economists expressed "great concern for the plan proposed by Treasury Secretary Paulson". The letter, endorsed within a few days by 231 economists at American universities, has been described as "the emerging consensus from academic economists".[97] Its authors described three "fatal pitfalls" they perceived in the plan as it was initially proposed:
- Its fairness. The plan is a subsidy to investors at taxpayers' expense. Investors who took risks to earn profits must also bear the losses. [...] The government can ensure a well-functioning financial industry [...] without bailing out particular investors and institutions whose choices proved unwise.
- Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
- Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.[98]
The wiki article this comes from then goes on to talk about krug and stiglitz being against the bill because it didn't get gov't involved to an even greater extent.
But the main point here is number one. Banks should take the losses. No bailout. "the emerging consensus from academic economists"
And you wrote in your previous post:
" led to precisely what Michigan's John Dingle said it would, viz., "institutions to big to fail that would have to be bailed out by the Federal Government"
You stated it as if it were a fact, when the facts according to the emerging consensus of academic economists at the time was the exact opposite. Ok?
You know, you are not all that far of base. I want a coherent, logical argument. It isn't important to me that you agree. Actually, I prefer you didn't, because, really, what can I learn from communicating with a parrot? But if you start posting what is essentially: "I saw a rabbit in the woods, shoehorn." I lose interest, and I hope you would too.
But it is fact! That is why I stated it "as if it were fact", because it is!!! Institutions were "bailed out by the federal government." Exactly as Dingle predicted! (I'm still waiting for your list of economists that thought all those major financial institutions should just be allowed to fail.) You've assumed that because those academic economists had concerns about Paulson's plan, as well they should have!, that they thought it was a good idea that all these gigantic financial institutions just go belly up all at the same time! I hardly think so!
We are not getting anywhere with this exchange, so let's move on.