Horrible News: Lehman Brothers Bankrupt and Merrill Lynch bought by BAC

[Xiahou]

For example, the anti-trust laws imposed at the end of the last century were needed. Monopolies are a natural, yet limiting force in the market and a systemic problem with capitalism. Therefore, a higher authority needs to be involved, as you know.

How many of those monopolies came about as a result of government favoritism in the first place? I think many government regulations are only trying to fix problems the government itself created.

In the current mortgage crisis, the government encouraged lenders to make loans to people they would otherwise be hesitant to lend to. "Affordable housing" initiatives were really the opposite- getting people into mortgages and homes that they couldn't afford by encouraging lenders to make risky loans. Now, both parties are telling us that we need even more red tape and regulation from the government to protect us from what the government has already done.

[SwordsMaster]

How many of those monopolies came about as a result of government favoritism in the first place? I think many government regulations are only trying to fix problems the government itself created.

In the current mortgage crisis, the government encouraged lenders to make loans to people they would otherwise be hesitant to lend to. "Affordable housing" initiatives were really the opposite- getting people into mortgages and homes that they couldn't afford by encouraging lenders to make risky loans. Now, both parties are telling us that we need even more red tape and regulation from the government to protect us from what the government has already done.

Well, firstly, only the government can undo government regulation, so yes, in fact we do need more regulation.

As of the flawed system PJ was referring to, I'd like to say that indeed the system is flawed, or rather not adapted to the new economic circumstances.

Considering that most core economic regulation as we know it today came in the wake of the 1930s crisis and WWII, and a lot of water has gone over that dam since. Fundamental market forces have changed in the past 30 years more than they had in the previous 200, and regulation, I'm afraid, is lagging far behind. This is why, the current situation was never in doubt, just merely a question of when.

Of course the latest governments' trend of overspending and living in debt constantly doesn't help the situation, since all this money comes from banks who need the money back, and this is mainly why the central banks can't just sit back and let them collapse. Imagine the scenario.

If the US debt is 500bn (hypothetically) and the bank they owe 100bn to pulls the money out, the US that has no money either will have to devaluate the currency to be able to pay it back. Which will make oil relatively more expensive, and so on.

What I'm trying to say is that regulation is by far the most painless and viable route IF the system is to be saved. Otherwise, we'll have to come up with a new one.

PS: Ah, and by the way...

[Tribesman]

Well, firstly, only the government can undo government regulation, so yes, in fact we do need more regulation.

How much of this was down to the changes in regulation set up after the wall street crash for financial institutions , first by Reagan and then by Clinton .
Is it all of it or just most of it?

In the current mortgage crisis, the government encouraged lenders to make loans to people they would otherwise be hesitant to lend to.

Wasn't that part of the spend like crazy on credit to promote growth plan we heard so much praise for in certain quarters of this forum ?

the industry will learn from their mistakes.

Thats what they say every time , yet every time they don't learn and its the taxpayer who gets shafted .

[Hosakawa Tito]

These companies board of directors failed to do their jobs and rein in the CEO's that were excessively reckless with company finances. Considering the scope of their stupidity there should be jail time for some and personal financial/career ruin for everyone responsible. However, what will happen is that those most responsible will not be punished

Spoiler Alert, click show to read: 

thank goodness for bribery...er I mean campaign donations

and the taxpayers bailout will ensure they receive their multi-millon dollar paychecks and golden-parachute serverance and pensions. Thanks chumps!

[Adrian II]

Thats what they say every time, yet every time they don't learn and its the taxpayer who gets shafted.

Agreed. That's why I opened the other thread about what could and should be done in the way of regulation of markets. Panzerjaeger is right that mismanagement is not a crime. And Crazed Rabbit is right that under a favouritist regime mismanagement is actually 'good' (profitable) management. Structural change is needed, but social structures are not that pliable. Outside police states, that is.