Thats to be expected as you likely have a lot of Zombie companies now that are simply not viable.

Far too many of them were being propped up by cheap debt and public subsidies.

It’s pretty close to the only reason GHWB was voted out, IMO. If the economy was doing well I don’t think Perot would have made such inroads.

Read my lips, “no new taxes”, right?

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Bush might have still won if Perot didn’t take a big bite out of the GOP vote. Granted, perhaps Perot wouldn’t have run if the economy was humming.

The President hit the one big soundbite: read my lips

The other one was Perot and the giant sucking sound.


:laughing: this gave me a chuckle

People are saying this though!!!

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It’s like trickle-down economics that way.

I don’t think you understand economics very well.

A bit OT:

Do conservative folks (I assume with a reasonable education) actually believe this stuff in the US?

My impression of the oil/gas mining regulations are that they would cost more, but from an environmental standpoint I still favor them.

A well known issue with capitalism: externalities. Gotta regulate the markets, or else there is no magic hand.

If anything, the US has gone too far. Market concentrations in so many arenas are killing competitive forces. And how about this stock buy backs. Sinking billions into those, and often with debt. No economic value at all. Simply done to manipulate stock prices and avoid taxes.


Just to be clear, you mean the US should have more (or more effective) regulations? If so I agree. We have been moving toward what is effectively an oligarchy for many years now.

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The US earnings are dominated by financial transactions. Repackaging mortgages, car leases, and anything that has cash flow really. That’s all fine and adds a ton of liquidity. It creates more debt instruments to invest in. Kewl,kewl

But it also disconnects the ultimate risk bearing investor from the borrower and all the intermediaries don’t really care. Their income is transactions, not ultimate success of the underlying assets. This is pretty recent, and we need to use different tools and controls on this. All this debt creation seems to know no limits.(a by product of wealth inequalty.the donor class isn’t able to spend it all, so they buy stuff with expected returns.) with a seemingly endless supply and a corresponding endless demand…where does it all end?

A primary argument for private investment is that the capital gets better allocated than any other means. That is no longer so obviously true. Rules and regulations are going to have to evolve to handle this.


This is something I’ve been saying for a while. Every time I try to discuss the topic someone trots out the basic Econ 101 idea of efficient allocation of capital and I just have to shake my head. If only the actual world we’re that simple.

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We’ve already had one meltdown (2008) due to this. Possibly '29 as well.

Certainly the mortgage packaging was a significant part. But you have to realize that the start of the problem was when the Federal Government decided that it wanted to increase home ownership rates. Congress forced Fannie and Freddie to subsidize the sub-prime mortgage market. That started the ball rolling and kept pumping money into the bubble. The public jumped on board taking out loans they couldn’t afford thinking they’d just refinance or flip the property after its value went up.

Be very careful what you ask for when speaking of regulations. Because when something the size of the US Government makes a policy mistake it has HUGE effects.

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Add to this the idea that “everyone should get a college education” . . .

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So F&F were losing money on sub-prime mortgages, correct?

F&F buy loans from originators, package them, and sell the resulting bonds to investors. Private firms also learned how to buy loans from originators, package them, and sell the resulting bonds to investors.

Since private firms are profit seeking, and they are run by very smart people, I’d expect them to stay far away from sub-prime mortgages because they can’t compete against F&F who are losing money on sub-prime.

Data should show that F&F were the only firms buying sub-prime mortgages. Is that what happened?


F&F in effect created a large portion of the subprime market. Congress ordered them to lower standards to get a backed mortgage. 0 down FHA loans on questionable properties and the like. That allowed the section of the market to expand greatly. Not instantly, but very quickly a bubble started forming. Lots of profit seekers rushed in, banks came under investor pressure to cash in on the sector, Magnetar and others created traunched MBS vehicles, and the general populace took loans they couldn’t pay off because now they could get them and property values were skyrocketing.

Ain’t no angles in this story.

BTW the private firms simply generated the loans and sold the risk to F&F or the market. That’s why loan originators have to retain some risk on mortgages sold.

Congress ordered it on the lobbying of their financial masters who wanted the quick profit from issuing and the selling the loans to be sequritized and knew they could only do that with the government socializing their future losses when the music stopped and the chairs disappeared. And true to form congress came through bailing out the poor multimillionaire bankers who never could have forseen what that risk could actually represent.

It happened not because there was too much regulation. It happened because there was strong lobbing to cut regulations and gut some of the barriers in place to prevent it from happening.