Too Big to Fail
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The entire mess was choreographed by the government.
"...a chicken in every pot and a car in the garage." Hoover gets credit for this during his 1928 campaign but history seems to suggest he didn't say it. At any rate, that's the general theme among presidents who run for office, knowing they will only hold office for a short period of time. Re-election depends on fast results.
What did Clinton say? Something about a road (bridge?) to the new millenium, following his first term? I guess that's what he was thinking when he tore down the Chinese Wall and allowed banks to regulate themselves.
"...a chicken in every pot and a car in the garage." Hoover gets credit for this during his 1928 campaign but history seems to suggest he didn't say it. At any rate, that's the general theme among presidents who run for office, knowing they will only hold office for a short period of time. Re-election depends on fast results.
What did Clinton say? Something about a road (bridge?) to the new millenium, following his first term? I guess that's what he was thinking when he tore down the Chinese Wall and allowed banks to regulate themselves.
I almost felt sorry for them (Lehman)....but then I quickly came to my senses
My favorite part by far was Little Timmy arranging his little flash cards and then hitting the phones.....
Also, at the very beginning when Clinton was smiling and signing to repeal the Glass Steagall Act---- was important that they had that in the movie as, this is where it all began in my opinion.
They let the fox in the henhouse.
I believe that Glass Steagel had nothing to do with the crisis.
If you look at the banks that failed, the only univeral bank that failed was Citigroup. JPM was clearly fine and BAC would have been fine if they didn't catch all those falling knives.
All the pure investment banks were toast. Many regional commercial banks were toast. And most of the national commercial banks except Wells Fargo were toast.
AIG was toast but they weren't regulated by Glass Steagal or any other banking law.
The universal bank model worked because the large balance sheets protected the banks. The diversified income streams from trading operations helped. And most importantly the deposit base of funding was crucial.
Lehman, Bear, Goldman, etc didn't have this funding and thats why they had so much trouble.
What killed Citi was that they weren't recycling the risk. They should have let some hedgefunds go under. But that wasn't a Glass Steagal issue, it was a risk management issue.
And to those who say that commerical banks would be better of separated, why did Wachovia and hundreds of other banks go under? They were pure commercial banks without investment banking arms. They went under because they too were warehousing the same risk that Citi was. They were doing it before Glass Steagal and after.
There are a lot of problems and banks share a lot of the blame for what happend. But Glass-Steagal's repeal wasn't one of the reasons.
If you look at the banks that failed, the only univeral bank that failed was Citigroup. JPM was clearly fine and BAC would have been fine if they didn't catch all those falling knives.
All the pure investment banks were toast. Many regional commercial banks were toast. And most of the national commercial banks except Wells Fargo were toast.
AIG was toast but they weren't regulated by Glass Steagal or any other banking law.
The universal bank model worked because the large balance sheets protected the banks. The diversified income streams from trading operations helped. And most importantly the deposit base of funding was crucial.
Lehman, Bear, Goldman, etc didn't have this funding and thats why they had so much trouble.
What killed Citi was that they weren't recycling the risk. They should have let some hedgefunds go under. But that wasn't a Glass Steagal issue, it was a risk management issue.
And to those who say that commerical banks would be better of separated, why did Wachovia and hundreds of other banks go under? They were pure commercial banks without investment banking arms. They went under because they too were warehousing the same risk that Citi was. They were doing it before Glass Steagal and after.
There are a lot of problems and banks share a lot of the blame for what happend. But Glass-Steagal's repeal wasn't one of the reasons.
A corporation is a collection of hundreds or not thousands of individuals with families and houses and dependents. No Corporation can be blamed, but the Culture that is supported by the market regulations.
What happened in financial world is no different in the Auto or for that matter in any industry.
What was wrong is that Lehman was forced in bankrupty and about 30K people lost jobs and sat on Unemployment benefits increasing more debt that ever. These people had families.
There is only a 1-2% individuals in these corporations that make most o fthe money, thats just the nature of the beast and its no bodys right to JUDGE. Most of these people have worked hard over 30 years to get where they are.
Anyways. will anything change..not anytime soon.
I guess I am in the camp that peoples deposits should not be a part of any speculative activities of the bank and then backed by the gov't which ulitimately leads back to the tax-payer if these bankers gambles go bad.....which is exactly what happened---------I believe it is really that simple.
Bankers aren't nearly as bright/responsible as many people think they are...
This is highly debatable---that is for sure!
I agree. I think commercial bank employees should be paid a salary and not have high commission incentives so they are forced to shove crap down peoples throats that they don't need. I bet there are plenty of people nowadays that wouldn't mind having a steady paycheck at a bank and work bank hours.
Commercial banks should be for depositing money and getting loans/credit, not for doing any investing outside of money markets and CD's. Banks got greedy and started to create artificial means to screw people.
I agree with you on the speculative activities and deposits. That is where the debate starts to get muddled. Glass Stegal didn't create the speculative activities. Pure commercial banks were speculating by not laying off their risk; investment banks were speculating as part of their business. The universal banks were doing both.
I agree the gambling, leverage and misaligned incentive structure caused a lot of these problems. That and as you said, the bankers weren't that bright and shouldn't have been taking these risks in the first place.
Risk management was great at PNC, Wells Fargo JPM, and GS and crappy at Citi, Wachovia, tons of regional banks, Merril, BSC and LEH. It doesn't cut along Glass Stegal companies.
I just believe Glass Stegal wasn't responsible for the crash.