Comments on: The meltdown explanation that melts away http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/ Fri, 30 May 2014 19:54:25 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: missprism http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-328 Fri, 08 Jun 2012 18:16:30 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-328 Hedonisbot is 100% right.

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By: hedonistbot http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-267 Mon, 26 Mar 2012 12:25:43 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-267 Wait, what? Leverage was not the problem? Let me put it this way – leverage does not create the problem, it multiplies it. So in effect leverage was 30 times a bigger problem than underwriting standards or the housing slump. Housing was the trigger, leverage was the A-bomb that got detonated.

Rule changes in the SEC are irrelevant since no one is actually enforcing them for the last 30 years. That is why “the killer” is on the loose, because the moment he gets caught, all we can hope for is a slap on the wrist on off he/she goes.

Break up the monopolies, put those who break the law in jail along with those who fail to enforce it and you will start fixing the problem. However, that is politically and economically impossible at this point, because it would expose a huge part of the economy as a running fraud.

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By: Richard_Davet http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-265 Sat, 24 Mar 2012 12:54:23 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-265 It’d the “GSE Business Model” that is responsible. Look no further, Treas Sec Hank Paulson said it best “fatally flawed”.

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By: StephenN http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-263 Fri, 23 Mar 2012 14:38:20 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-263 When I look at the 10K filings for Lehman Brothers, I have to conclude leverage went up dramatically from 1998 to 2006. I am not sure why but its hard to argue that it was the same.

Here are the numbers from Lehman Brothers 10K

11/30/98

Total Assets 41,907
Toal Equity 5,413
Assets to Equity 7.74

11/30/2006

Total Assets 503,545
Total Equity 19,191
Assets to Equity 26.23

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By: borisjimbo http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-262 Fri, 23 Mar 2012 07:59:36 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-262 Please stop using all these financial euphemisms; it’s borrowing, not “leverage”, and gambling with borrowed money was one of the prime causes of the Great Depression and stock market crash. IMHO if we knock it off with these too-clever-by-half euphemisms, we’d go a long way toward solving the financial problems of our country.

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By: DuhyerMaker http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-260 Thu, 22 Mar 2012 16:44:20 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-260 How about instead of blaming the Glass-Steagall on Clinton, we look at the legislation that actually repealled the Glass-Steagall Act (put in place after the Great Depression to prevent savings banks from using consumer funds in investments, thusly losing savings money). It was the Gramm-Leach-Bliley Act of 1999. Do your homework.

http://en.wikipedia.org/wiki/Gramm-Leach -Bliley_Act

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By: salr_ldn http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-253 Wed, 21 Mar 2012 19:03:40 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-253 Seems to me that when discussing systemic danger it’s the gross amount of leverage that is dangerous, not the leverage ratios of a particular institution. If my capital base is $1 and am able to borrow $100, I am no danger to anyone. If my capital base is $10 billion and I lever at 30:1 and things go terribly wrong, there is a $290 billion hole out there, and that’s bad. If my capital base is $100 billion and I am levered 15:1 that’s $1,400 billion hole that I need to fill if things go wrong, and that’s even worse. In the 9 years after the repeal of Glass-Steagall, the capital base of financial companies grew massively into the 2008 crisis. Any leverage rule needs to take into account what the gross equity of the borrower and that one size does not fit all. Given the growth of financial companies from the late-90’s and their increased proportion in value of the S&P 500 into the 2008 crash, it seems that it was incredibly unwise to loosen leverage rules. If systemic regulators had been looking at gross leverage, perhaps rations would have been tighten in 2004. The primary systemic regulator of the banking industry is the Fed, and why it was left up to the SEC to set leverage rules for IBs was at best an artifact from the Glass-Steagall days.

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By: tcolgan001 http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-251 Wed, 21 Mar 2012 18:15:30 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-251 Why waste a whole Reuter’s article refuting the press’ explanation of the causes of the meltdown?

The Stigliz Report was the product of a team of economic experts who analyzed the crisis on behalf the the UN. It basically said that neoliberal economic policy – unrestrained trade and deregulation – was the cause. That would be a better starting point for debate.

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By: zotdoc http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-250 Wed, 21 Mar 2012 14:05:27 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-250 excellent article. I beleive that the collapse had to do with socialist progressive policies of the democacratic controlled congress starting in 2006. Barney Frank and Chris Dodd were instrumental in the housing bubble, forcing banks to make risky loans so that their “constituents” would vote for them. The remainder of the economic collapse that occurred during the next 6 years was the election of a democrat controlled congress and president, which promptly instituted programs consistent with socialist progressive doctrine. These moves scared the socks off anyone who is an employer, so that they quit hiring employees, resulting in a pullback. We need to get rid of the progressive/socialist/democrats in the next election cycle and then the economy will recover.

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By: ChuckeB http://blogs.reuters.com/bethany-mclean/2012/03/19/the-meltdown-explanation-that-melts-away/#comment-247 Wed, 21 Mar 2012 05:58:45 +0000 http://blogs.reuters.com/bethany-mclean/?p=73#comment-247 So basically what I am interpreting is that since leverage didn’t cause the meltdown something else did… Was that something else the fact that we had a massive bubble in Real Estate (failure of the FED and the FDIC to regulate Banks) coupled with the massive manipulation in crude oil prices which in turned siphoned off Billions and Billions of Dollars in consumer spending dollars? So what fueled the massive bubbles..? So if leverage didn’t cause the meltdown it was the incredible amount of fraud in the Mortgage Originations Markets via loan officers, appraisers and regulators, excessive speculation in 2008 levels in the oil markets with a few players manipulating the oil prices to extortion levels (failure of the CFTC) and the failure of the Federal Reserve to raise interest rates to control rampant speculation beginning in the housing market in 2004 which in turned fueled rampant speculation in the security markets…

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