

Regulators systematically ignore evidence that deregulation has broken markets - ott2
http://necsi.edu/projects/yaneer/owsdesc.html

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driverdan
Here's the sentence you based the headline on:

"Our results show that government policy decisions, often in deregulation _but
also in regulation_ , have undermined the ability of our economic system to
function and made it highly susceptible to crises." (emphasis mine)

Seems you missed a key point. Also,

"...other acts of regulation and deregulation have been carried out under the
influence of corporate interests."

So it seems regulation or deregulation isn't the real issue. The real issue is
manipulation of laws based on corporate interest.

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onemoreact
I think when you compare "often in" with 'but also in" most people would
assume the first is far more prevalent than the second. Regulatory capture is
often an issue, but dispute being blamed for the instability Freddy and Fanny
lost far less money than other banks relative to their size. Which suggests
that they where not major players in the most toxic assets. So, while I have
no problem suggesting they in some small way contributed to the mess that just
happened I take issue with people suggesting they are the major causes of the
collapse.

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yummyfajitas
Huh? The government made a profit on most of the bank bailouts. The main
exceptions are AIG (lost $6B) and GM (maybe $5B, but I don't understand the GM
bailout so well).

The losses on Fannie/Freddie are estimated to be in the range of $100-200B,
depending on what house prices do.

[http://online.wsj.com/article/SB1000142405297020368750457700...](http://online.wsj.com/article/SB10001424052970203687504577001653467422674.html)

If Fannie/Freddie lost less money relative to their size (citation?), it's
only because the denominator is so large.

~~~
onemoreact
Your confusing the size of the bailouts with the size of their losses.

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yummyfajitas
This article is full of crap. It claims that Gramm-Leach-Bliley created "too
big to fail", but we had too big to fail long before Gramm-Leach-Bliley. For
that matter, I don't think Gramm-Leach-Bliley would have prevented GM from
being "too big to fail".

The uptick rule is also a red herring. We had a controlled experiment in 2004
- the SEC eliminated the uptick rule for about 1/3 of securities. No disaster
occurred for those 1/3 of securities that didn't also occur for the remaining
2/3.

There is no compelling argument whatsoever why shorting stocks should be
harder than going long. The main people who want to prevent short selling are
executives of failing companies - short selling allows speculators to inform
the market about the companies impending failure, which tends to be bad for
the CEO.

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joshuaheard
All of the examples cited are industries highly regulated by the government:
equities markets and banking. Since the government is already highly
regulating these markets, any further tinkering by the government is going to
have unintended consequences.

Actions have consequences, so when the government regulates a market, the
market players react, often in unintended ways. Likewise, when the government
then re-regulates (often called "deregulation") the market, the market players
react again in unintended ways.

The financial crash was caused by the government coming in and taking over
another industry, residential real estate mortgages, by purchasing all the
secondary mortgages and setting standards. When the government lowered lending
standards to help lower class people purchase houses (they couldn't afford),
it unintentionally caused the mortgage-based securities market to crash.
Mortgages used to be a safe investment, but after the government lowered
lending standards, this assumption that the markets had previously used was no
longer true.

Further government distortions of the market are cited in the report, namely
ethanol subsidies. So, I would conclude that government distortion is what is
breaking the markets, and that less government control is needed to return to
freer markets.

