[Goanet] How regulation caused the financial crisis (updated)

[Gilbert Lawrence]

In the US, those that just repeat what?"Conservative talking heads"?write or say are called "Ditto Heads".? The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was?not the cause of bank failures.


It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

Adding to the above practices and?risks, William Black? states?in? "The Audacity of Dopes" the following. "Over the last few decades, the executive compensation and the compensation systems used for appraisers, accountants, and rating agencies were designed, and served, to create the perverse incentives and ethical rot that caused the ongoing financial crises by producing a "Gresham's dynamic" in which fraudulent and abusive lending and accounting practices drove good practices out of the marketplace."? Others have described banks as institutions that practiced "giant ponzi schemes".

Let's not tell the above to the "talking heads".? For these "talking heads" and their followers,?politicizing very issue is the name of the game.??

William Black is Associate Professor, University of Missouri, was the?senior regulator during S&L debacle..

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle. Greenspan?estimates the total amount of derivatives worldwide at eighty trillion dollars (80 Trillion US dollars) http://www.usagold.com/greenspanderivatives.html
??
Regards, GL


--------- edward desilva

Just because you got a cut and paste job, that does not mean that it is a fact. In UK at the moment the HBOS whistleblower said that the Banks were at fault NOT THE GOVT. And he is going to produce a 30 page dossier for the MPs.? Facts speak for themselves, not some back street newspaper BS..

---------- Mario Goveia:

What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down. It was precisely government intervention which turned a thriving industry into a basket case..

[Mervyn Lobo]

? It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities
(like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?
the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

?
GL,
The cause of the?current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.


As for who is to blame, I will leave that to those who did not heed the warnings and who have now?lost their
savings and their retirement plans.?People will be writing books and articles on who is to blame, for the next
100 years. Luckily, I will not be in that group.


My?view of the crises?is?the exact opposite. Lots of financial opportunities have opened. The capitalist system
requires that the less efficient get slaughtered by the?efficient.?The capitalist system also requires the movement
of capital from sectors that are not performing to sectors that are.?There is a lot of money to be made by those
who understand these basics.


Lastly, the fact that really scares a lot of people in N. America is that companies?which are traded on the stock
exchanges are priced/valued on their quarterly performance. In order to meet the profit expectations of the analysts,
companies are cutting costs by laying of their workers. The responsible employer would bear the cost of keeping
valuable employees thru a down turn. The company that has to meet?a quarterly profit,?is forced to?cut its work force
in order to?meet the profits promised. A lot of people are going to lose their jobs. In the USA alone, about 600,000
people will lose their jobs this month.?Those without savings, will lose their houses a few months after they have lost
their jobs.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money.
This is insanity.
In its purest form.


Mervyn1002Lobo


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[Mario Goveia]

Date: Sat, 21 Feb 2009 13:06:58 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

In the US, those that just repeat what "Conservative talking heads" write or say are called "Ditto Heads". The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was not the cause of bank failures.

Mario responds:

Sigh! So much ignorance, so little time:-))

First, a clarification of modern political American jargon and how it is often twisted by writers of political poppycock.

Here we see Gilbert, who supposedly has access to the internet for some minimal research, misrepresenting the term "dittohead" and the term "talking heads", which is something that politically liberal critics of the most popular "talking voice" on the radio, Rush Limbaugh, an aggressive political conservative, often resort to.

A "talking head" is a TV talk show personality. The term "dittohead" comes from listeners to Mr. Limbaugh's radio show, which dominates talk radio in the USA. Thus, Limbaugh is not a "talking head" since one cannot see his head during his show.

Secondly, the origin of the term "dittohead" is as follows:

"As Limbaugh often explains in his books and radio show, these are not necessarily those who agree with his views. Rather, he believes they are people who love the show and what he's doing, and hope he never stops doing it. The term came into use because callers would frequently begin by giving praise and thanks to Limbaugh. Knowing that the caller?s and listener?s time is valuable, one caller simply said roughly "ditto to what those guys said (how much they enjoyed the show)." Thereafter, callers were encouraged to simply say, ?Dittos,? and then get right to their point. Thus, long-time listeners would begin their calls with ?Dittos, Rush,? leading to the term ?dittoheads.? Source, Wikipedia.

Since this term originated with Mr. Limbaugh in the context of his show, his critics like Gilbert, who obviously do not listen to his show long enough to understand its nuances, do not get to revise what it means without being corrected.

Gilbert wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

Let's not tell the above to the "talking heads". For these "talking heads" and their followers, politicizing very issue is the name of the game.

William Black is Associate Professor, University of Missouri, was the senior regulator during S&L debacle.

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle.

Mario observes:

Here we see Gilbert criticizing what he falsely claims are what "dittoheads" say, while himself repeating what "is widely believed" and citing what Associate Prof. William Black has said, who is himself a "talking head" in the classroom.

This is like a pot, played by Gilbert, calling the kettle, represented by Mario, "Black", pun intended:-))

To get back to reality, a "cause", by definition, is something that starts a chain of events.

By citing the excesses of the bankers Gilbert ignores the root cause of the financial crisis, the Community Reinvestment Act and the subsequent threats of lawsuits during the Clinton administration against banks who were slow to comply with its provisions.

There would have been no "derivatives and other risky investments" in the absence of this economically flawed attempt by politicians and government regulators to "spread the wealth" by government fiat and force banks to lower lending standards to low income people.

These instruments became risky precisely because they were backed by bad loans, which the borrowers were unable to repay. Had the loans been of good quality, as home loans were previously, the bankers' investment instruments would not have failed.

The excesses of the bankers started well after being forced by the regulators to make loans to unqualified people, under threat of lawsuits and other negative bureaucratic consequences.

I doubt Associate Prof. Black or Alan Greenspan, both of whose views Gilbert has cited out of context, would deny the facts in Prof. Sowell's column:
http://www.jewishworldreview.com/cols/sowell021809b.php3

[Mario Goveia]

Date: Sat, 21 Feb 2009 17:32:26 -0800 (PST)
From: Mervyn Lobo <mervynalobo at yahoo.ca>

The cause of the current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.

Mario responds:

This is a facile but false premise pushed by some observers. If government regulation were the answer, socialism, which is such regulation taken to an extreme, would be alive and well, instead a philosophy that has been rejected in large part by all it's major proponents.

In a speech at the World Economic Forum in Davos, Switzerland recently, Vladimir Putin, who has more experience with socialism than most other leaders, had this to say:

"Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake.

True, the state's increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent.

The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.

In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing."[end of excerpt]

In fact, in the USA financial regulations under the Community Reinvestment Act were the root cause of the problem. Without this act and the intentions behind it, and the subsequent market that developed in bad loans that resulted from the regulations, we would not have had the current financial crisis.

Mervyn wrote:

the fact that really scares a lot of people in N. America is that companies which are traded on the stock exchanges are priced/valued on their quarterly performance.

Mario observes:

This is another myth fostered by the media, because quarterly performance is all the information that is easily available to them.

The most successful long term investors work very hard at research and make estimates of future free cash flow, the capital investments needed to achieve this, the risk the company faces from competitors and other economic forces, the cost of capital based on alternative investments available to them, and observing the purchases and sales of corporate insiders and analyzing what these may mean, in arriving at what they are willing to pay for a stock.

Other investors use less rigorous analyses including trying to guess stock prices from price charts, etc.

Media observes and less savy investors then take the results as reflected in stock prices and try to correlate them with quarterly earnings, which are published way after the leading investors have made judgments about the value of the company's stock. It is rare for a leading investor to be surprised by what a company discloses in their published earnings because of how closely they monitor what is going on in companies they follow, using sources of direct and indirect information that are as unbiased as possible, which certainly excludes anything a corporate executive may say.

Finally, what should scare a lot of people is that the fundamentals of free market capitalism are being eroded by the new US administration and will take years to fix.

As I have observed previously, a partisan libertarian like Marlon knows all this but falls strangely silent when faced with absolute balderdash by his supposed cronies.

[edward desilva]

Got message saying there is a fault - in case you didn't get the first, ED.
------
http://www.jewishworldreview.com/cols/sowell021809b.php3
Hi Mario,
Why don't you just get it that 'cut and paste' does not mean that it is correct.
I have said that an alcoholic was paid ?25/- during the Paki-bashing period by a high volume News of the World in UK.
I know this alcoholic personally and I have been to his flat.
Secondly a Professor/Scientist in UK was paid by Tate and Lyle (sugar company) to publish an article to say that 'sugar is good for you'.
If a UK famous paper can publish rubbish why not a back street US paper?
Every thing in the above cut and paste article is BS.
The long articles that you keep writing (half way contradicting yourself) gives me a headache.
ED.

[Mario Goveia]

Date: Sun, 22 Feb 2009 11:36:19 -0800 (PST)
From: edward desilva <guirimboy at yahoo.co.uk>

Every thing in the above cut and paste article is BS.

The long articles that you keep writing (half way contradicting yourself) gives me a headache.

Mario responds:

Edward,

http://www.jewishworldreview.com/cols/sowell021809b.php3

The word "poppycock" should have given you a clue. Nothing you have written about things that happened in the UK, has anything to do with the issues mentioned in the column, which is about the USA.

Can you also provide some specific examples of the BS you are referring to, or some specific examples of where I have contradicted myself?

[Gilbert Lawrence]

Hi Mervyn,

I agree with much of what you write. With all due respects, I do not agree?with all that you state. Or more accurately with my lack of expertise, I do not? follow your reasonings; as I contrast them to the other information I see and read.

The first line of failure in the US and internatioal financial system was the rot that crept into the system. Unfortunately the free-market system permits development of "perverse financial incentives" (that caused this).? Such?perverse financial incentives have led to the debacles of many other institutions.? Such perverse incentives?will continue to lead to the debacle of more institutions including health-care, education and other services needed for society to function..

Your claim, "My view of the crises is the exact opposite".? I am not certain what is the opposite of what (view)?

I agree that "less efficient (entities) get slaughtered by the efficient".? One commentator suggested that for such to occur, we need for zombie banks to fail, Because keeping them afloat leads them to lend to zombie companies.? What are your thoughts??

Yet for the above?to occur, IMO, one will need to see a 'contraction of the economy' as was seen in many Asian economies; when they went through a financial crises about a decade ago. Europe?(Eastern and Western) and US does not plan to follow this model and have chosen to spend and inflate the economy.? Do you have a better path (than these two) or another thought-out / practical?solution?? More specifically what are the down-side risks / drawbacks?to your proposals?

As I have written in the past, I hate to see govt borrow from future generations. This is something that neo-conservative love and practiced it extensively under Bush for 8 years. Right now, govt spending appears to me to be the only option; short of the economy contracting and more people getting unemployed. A certain degree of? 'economic contraction', IMO?would eliminate the waste and redundancies in our current economic and other systems.? But this is bad news that no one wants to deliver.

What I would like to see is the 'govt spending' make us a 'lean mean? competitive machine' as we exit this crises. I am afraid that is unlikely.? An example? of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care. This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.? For this to occur the first step is to get the right-wing know-nothing talking heads (aka paid lobbyists /?advertisements)?out of the way. There is lot of room for improvement with many studies showing? less wasteful ways of delivering good health-care.

I like your comment, "The cause ... is quite simple:? Financial regulations that were in place were either removed or not adhered to."?? This after just reading and reading?that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.
Regards, GL

--------- Mervyn Lobo wrote:

The cause of the current financial crises is quite simple:? Financial regulations that were in place were either removed or not adhered to.

My view of the crises is the exact opposite. Lots of financial opportunities have opened. The capitalist system requires that the less efficient get slaughtered by the efficient. The capitalist system also requires the movement? of capital from sectors that are not performing to sectors that are.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money. This is insanity. In its purest form.

---------- Gilbert Lawrence wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities??(like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused?the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

[goacom]

I do not believe that it was lack of regulation that caused the current problem and I believe that a system with less government intervention, within a proper framework of laws is the best in long run. I think that most of the actions by the Obama administration will not resolve the underlying problems and may actually make the problems worse. The laws of unintended consequences applies. I do not support bailing out home owners, the banks and bankrupt industries (like the auto companies).

In my opinion, there are two key factors for the current problem:
1) Most are aware that it is the collapse of the housing boom that is contributing to the current problem. I submit that if there were more controls (higher reserve requirements) like in Canada and Spain (which had an even crazier bubble), we would not have such a problem in the US. However, I believe the real problem was that there was very little enforcement/verification of the financials of the borrowers. In California where I used to live, and now one of the epicenters of the crisis, it was quite easy to get solicited with all kinds of bogus loans. Often there were little or no checks on people's credit and people were getting loans that allowed for negative amortization, easy refinancing (borrow on one's loan) etc. Furthermore, every Tom, Dick and Jose was getting into the frenzy of buying a home, which kept bidding the prices up. To me, the alarm bells were ringing way back in 2004, when it was apparent that the so called home P/E ratio was getting
way out of whack as defined by home price to rental ratios or by ratios of home prices to population income. If there is negligence, it is because borrowers, or the loan brokers, were lying about the borrowers incomes in order to qualify for loans. This is where the real crime was, deregulation or not. The existing rules were simply not being enforced.

The crisis started when the the sub prime borrowers started defaulting. The next hammer to hit will be next category up, which is the so called Alt A group. This is expected to peak in 2010. The problem now is that it now extending to the prime borrowers, who are now being affected because of the overall downturn.

Look at the stats below and weep:
http://www.bloomberg.com/apps/news?pid=20601068&sid=an7bb8PA_CqY

I think that while the actions by the current administration may provide temporary relief, I feel it will be a false dawn as it does not address the fundamentals of the problem.

The next level of failure with regulation enforcment was with the loan ratings agencies such as Moodys who gave a blanket 5* rating to all the debt, irrespective to its source. I think this is criminal and I for one, fail to understand why action is not being taken against such institutions. The consequence of this is staggering. It meant that insurance companies (such as AIG) drastically underestimated the risks of the loans and issued CDOs to the sellers of these loans. That is why when the loans started failing, it was not only the banks that started failing, but also the insurance companies that backed the banks. The single biggest recipient of govt. money is not a bank, but AIG, an insurance company.

The common thread of both of these is falsification of information or erroneous assumptions by the ratings agencies. While additional controls such as higher reserves could have reduced this problem, it may not have fully eliminated it. Furthermore, I believe there was no need for greater regulation. There was already a lot of illegal/inconsistent activities that were happening to justify government action to stop it.?The Bush administration did nothing and the actions of the Obama administration may actually go towards rewarding some of these people for their reckless actions.

2)?The second question is what enabled these loans? Where did all this money come from? A common conclusion made by prominent economists who predicted this crash, such as Roubini, Schiff, Duncan as well as politicians like Ron Paul is that much of it was the result of excessive debt-surplus imbalances between the US and the rest of the world as a result of its trade deficits. I am not too sure how accurate their hypothesis are (though their predictions have been dead on), but if they are correct, it could mean a move away from the US dollar as a world reserve currency as well as a sharp decline in its value. Interested readers should read the books the Dollar Crisis by Richard Duncan (2004) and Crash Proof by Paul Schiff (2007).

[Mervyn Lobo]

Post by Gilbert Lawrence
I agree with much of what you write.

GL,
1) Its no fun writing for those?who agree with me :-)
2) It now looks like I will have a?load of time to write in the next few weeks but for today, I will remain brief.

Post by Gilbert Lawrence
The first line of failure in the US and internatioal financial system was the rot that crept into the system.

Not rot, outright bribery. The biggest bribers being the hedge fund lobby that removed?laws which were in place since the great depression.
The?one that really messed up the US?stock markets was the removal of the law that required shorters to sell only on an up-tick.
The US is still paying the price for the removal of this law.

Post by Gilbert Lawrence
Do you have a better path (than these two) or another thought-out / practical?solution??
More specifically what are the down-side risks / drawbacks?to your proposals?

GL,?I don't?make proposals.
My practical solution is to make money, for myself, from the known distortions in the US system.
Before I?divulge some of my new avenues,?I need to know?if?my advice to invest in gold, given here in detail?FIVE years?ago, was sound advice.???
I ask this as it is becoming increasingly clear that?some people are?here only to run their mouths. I find that even when the facts are put as
simply as possible, you get those with large amounts of time on their hands parroting?absolute rubbish.?The kicker is that even when?the idea?works
exceeding well, there is not a word of thanks. Not?even from those making money from the idea.

Post by Gilbert Lawrence
? An example?of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care.
? This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.?

The above can only come from a health professional. Here in Canada, the govt makes sure that doctors get their patients in for their annual examinations.
The govt knows it can reduce the health bill drastically by detecting and treating aliments early.

Mervyn1650Lobo



__________________________________________________________________
Yahoo! Canada Toolbar: Search from anywhere on the web, and bookmark your favourite sites. Download it now at
http://ca.toolbar.yahoo.com.

[Mario Goveia]

Date: Mon, 23 Feb 2009 05:38:29 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

To Mervyn:
I like your comment, "The cause ... is quite simple: Financial regulations that were in place were either removed or not adhered to." This after just reading and reading that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.

Mario responds:

Here we see Gilbert, a physician, continue his barrage of jejune personal insults against Prof. Tom Sowell, an eminent economist and expert in financial markets, who is a Fellow at the prestigious Hoover Institute at Stanford University. See, http://www.hoover.org/bios/sowell.html

I have already shown in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174166.html, how Gilbert misrepresented the term "dittoheads". The assertion that Prof. Sowell, a respected academic, talks like Mr. Limbaugh, a media commentator and talk show host, is equally specious and backwards. It is Mr. Limbaugh who frequently cites the research based opinions of Prof. Sowell.

At Gilbert's request in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174177.html, and to further his education, I have shown below some additional sources of information from credible sources.

Gilbert apparently has no idea that there are other financial industry experts who agree with Prof. Sowell's analysis of how the Community Reinvestment Act [CRA], an ultra-liberal piece of legislation passed in the Carter administration, which had good intentions of encouraging home-ownership by low income people, was escalated under the Clinton administration with overt and covert threats by the Justice Department, HUD, Democrat party politicians and community action groups against banks if they were slow to comply with its provisions.

Most political liberals and Democrats, and a few Republicans, defended and protected the growing house of cards because it helped low income people, which is what socialism does until it implodes from its fundamental economic flaws.

Shown below is an editorial from the respected Investors Business Daily:

http://www.ibdeditorials.com/IBDArticles.aspx?id=312766781716725

Excerpts:

The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it ? including revising history.

The CRA coerces banks into making loans based on political correctness, and little else, to people who can't afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.
[end of excerpt]

Additional sources are shown below:

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

http://74.125.95.132/search?q=cache:90IT4MK9474J:www.cato.org/pubs/regulation/regv17n4/vmck4-94.pdf+Justice+Department+under+Clinton+enforces+Community+Reinvestment+Act&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a

http://www.heritage.org/research/economy/hl516.cfm

http://iusbvision.wordpress.com/2008/09/30/obama-sued-citibank-under-cra-to-force-it-to-make-bad-loans/

[Gilbert Lawrence]

In the US, those that just repeat what?"Conservative talking heads"?write or say are called "Ditto Heads".? The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was?not the cause of bank failures.


It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

Adding to the above practices and?risks, William Black? states?in? "The Audacity of Dopes" the following. "Over the last few decades, the executive compensation and the compensation systems used for appraisers, accountants, and rating agencies were designed, and served, to create the perverse incentives and ethical rot that caused the ongoing financial crises by producing a "Gresham's dynamic" in which fraudulent and abusive lending and accounting practices drove good practices out of the marketplace."? Others have described banks as institutions that practiced "giant ponzi schemes".

Let's not tell the above to the "talking heads".? For these "talking heads" and their followers,?politicizing very issue is the name of the game.??

William Black is Associate Professor, University of Missouri, was the?senior regulator during S&L debacle..

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle. Greenspan?estimates the total amount of derivatives worldwide at eighty trillion dollars (80 Trillion US dollars) http://www.usagold.com/greenspanderivatives.html
??
Regards, GL


--------- edward desilva

Just because you got a cut and paste job, that does not mean that it is a fact. In UK at the moment the HBOS whistleblower said that the Banks were at fault NOT THE GOVT. And he is going to produce a 30 page dossier for the MPs.? Facts speak for themselves, not some back street newspaper BS..

---------- Mario Goveia:

What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down. It was precisely government intervention which turned a thriving industry into a basket case..

[Mervyn Lobo]

? It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities
(like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?
the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

?
GL,
The cause of the?current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.


As for who is to blame, I will leave that to those who did not heed the warnings and who have now?lost their
savings and their retirement plans.?People will be writing books and articles on who is to blame, for the next
100 years. Luckily, I will not be in that group.


My?view of the crises?is?the exact opposite. Lots of financial opportunities have opened. The capitalist system
requires that the less efficient get slaughtered by the?efficient.?The capitalist system also requires the movement
of capital from sectors that are not performing to sectors that are.?There is a lot of money to be made by those
who understand these basics.


Lastly, the fact that really scares a lot of people in N. America is that companies?which are traded on the stock
exchanges are priced/valued on their quarterly performance. In order to meet the profit expectations of the analysts,
companies are cutting costs by laying of their workers. The responsible employer would bear the cost of keeping
valuable employees thru a down turn. The company that has to meet?a quarterly profit,?is forced to?cut its work force
in order to?meet the profits promised. A lot of people are going to lose their jobs. In the USA alone, about 600,000
people will lose their jobs this month.?Those without savings, will lose their houses a few months after they have lost
their jobs.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money.
This is insanity.
In its purest form.


Mervyn1002Lobo


__________________________________________________________________
Instant Messaging, free SMS, sharing photos and more... Try the new Yahoo! Canada Messenger at http://ca.beta.messenger.yahoo.com/

[Mario Goveia]

Date: Sat, 21 Feb 2009 13:06:58 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

In the US, those that just repeat what "Conservative talking heads" write or say are called "Ditto Heads". The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was not the cause of bank failures.

Mario responds:

Sigh! So much ignorance, so little time:-))

First, a clarification of modern political American jargon and how it is often twisted by writers of political poppycock.

Here we see Gilbert, who supposedly has access to the internet for some minimal research, misrepresenting the term "dittohead" and the term "talking heads", which is something that politically liberal critics of the most popular "talking voice" on the radio, Rush Limbaugh, an aggressive political conservative, often resort to.

A "talking head" is a TV talk show personality. The term "dittohead" comes from listeners to Mr. Limbaugh's radio show, which dominates talk radio in the USA. Thus, Limbaugh is not a "talking head" since one cannot see his head during his show.

Secondly, the origin of the term "dittohead" is as follows:

"As Limbaugh often explains in his books and radio show, these are not necessarily those who agree with his views. Rather, he believes they are people who love the show and what he's doing, and hope he never stops doing it. The term came into use because callers would frequently begin by giving praise and thanks to Limbaugh. Knowing that the caller?s and listener?s time is valuable, one caller simply said roughly "ditto to what those guys said (how much they enjoyed the show)." Thereafter, callers were encouraged to simply say, ?Dittos,? and then get right to their point. Thus, long-time listeners would begin their calls with ?Dittos, Rush,? leading to the term ?dittoheads.? Source, Wikipedia.

Since this term originated with Mr. Limbaugh in the context of his show, his critics like Gilbert, who obviously do not listen to his show long enough to understand its nuances, do not get to revise what it means without being corrected.

Gilbert wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

Let's not tell the above to the "talking heads". For these "talking heads" and their followers, politicizing very issue is the name of the game.

William Black is Associate Professor, University of Missouri, was the senior regulator during S&L debacle.

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle.

Mario observes:

Here we see Gilbert criticizing what he falsely claims are what "dittoheads" say, while himself repeating what "is widely believed" and citing what Associate Prof. William Black has said, who is himself a "talking head" in the classroom.

This is like a pot, played by Gilbert, calling the kettle, represented by Mario, "Black", pun intended:-))

To get back to reality, a "cause", by definition, is something that starts a chain of events.

By citing the excesses of the bankers Gilbert ignores the root cause of the financial crisis, the Community Reinvestment Act and the subsequent threats of lawsuits during the Clinton administration against banks who were slow to comply with its provisions.

There would have been no "derivatives and other risky investments" in the absence of this economically flawed attempt by politicians and government regulators to "spread the wealth" by government fiat and force banks to lower lending standards to low income people.

These instruments became risky precisely because they were backed by bad loans, which the borrowers were unable to repay. Had the loans been of good quality, as home loans were previously, the bankers' investment instruments would not have failed.

The excesses of the bankers started well after being forced by the regulators to make loans to unqualified people, under threat of lawsuits and other negative bureaucratic consequences.

I doubt Associate Prof. Black or Alan Greenspan, both of whose views Gilbert has cited out of context, would deny the facts in Prof. Sowell's column:
http://www.jewishworldreview.com/cols/sowell021809b.php3

[Mario Goveia]

Date: Sat, 21 Feb 2009 17:32:26 -0800 (PST)
From: Mervyn Lobo <mervynalobo at yahoo.ca>

The cause of the current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.

Mario responds:

This is a facile but false premise pushed by some observers. If government regulation were the answer, socialism, which is such regulation taken to an extreme, would be alive and well, instead a philosophy that has been rejected in large part by all it's major proponents.

In a speech at the World Economic Forum in Davos, Switzerland recently, Vladimir Putin, who has more experience with socialism than most other leaders, had this to say:

"Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake.

True, the state's increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent.

The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.

In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing."[end of excerpt]

In fact, in the USA financial regulations under the Community Reinvestment Act were the root cause of the problem. Without this act and the intentions behind it, and the subsequent market that developed in bad loans that resulted from the regulations, we would not have had the current financial crisis.

Mervyn wrote:

the fact that really scares a lot of people in N. America is that companies which are traded on the stock exchanges are priced/valued on their quarterly performance.

Mario observes:

This is another myth fostered by the media, because quarterly performance is all the information that is easily available to them.

The most successful long term investors work very hard at research and make estimates of future free cash flow, the capital investments needed to achieve this, the risk the company faces from competitors and other economic forces, the cost of capital based on alternative investments available to them, and observing the purchases and sales of corporate insiders and analyzing what these may mean, in arriving at what they are willing to pay for a stock.

Other investors use less rigorous analyses including trying to guess stock prices from price charts, etc.

Media observes and less savy investors then take the results as reflected in stock prices and try to correlate them with quarterly earnings, which are published way after the leading investors have made judgments about the value of the company's stock. It is rare for a leading investor to be surprised by what a company discloses in their published earnings because of how closely they monitor what is going on in companies they follow, using sources of direct and indirect information that are as unbiased as possible, which certainly excludes anything a corporate executive may say.

Finally, what should scare a lot of people is that the fundamentals of free market capitalism are being eroded by the new US administration and will take years to fix.

As I have observed previously, a partisan libertarian like Marlon knows all this but falls strangely silent when faced with absolute balderdash by his supposed cronies.

[edward desilva]

Got message saying there is a fault - in case you didn't get the first, ED.
------
http://www.jewishworldreview.com/cols/sowell021809b.php3
Hi Mario,
Why don't you just get it that 'cut and paste' does not mean that it is correct.
I have said that an alcoholic was paid ?25/- during the Paki-bashing period by a high volume News of the World in UK.
I know this alcoholic personally and I have been to his flat.
Secondly a Professor/Scientist in UK was paid by Tate and Lyle (sugar company) to publish an article to say that 'sugar is good for you'.
If a UK famous paper can publish rubbish why not a back street US paper?
Every thing in the above cut and paste article is BS.
The long articles that you keep writing (half way contradicting yourself) gives me a headache.
ED.

[Mario Goveia]

Date: Sun, 22 Feb 2009 11:36:19 -0800 (PST)
From: edward desilva <guirimboy at yahoo.co.uk>

Every thing in the above cut and paste article is BS.

The long articles that you keep writing (half way contradicting yourself) gives me a headache.

Mario responds:

Edward,

http://www.jewishworldreview.com/cols/sowell021809b.php3

The word "poppycock" should have given you a clue. Nothing you have written about things that happened in the UK, has anything to do with the issues mentioned in the column, which is about the USA.

Can you also provide some specific examples of the BS you are referring to, or some specific examples of where I have contradicted myself?

[Gilbert Lawrence]

Hi Mervyn,

I agree with much of what you write. With all due respects, I do not agree?with all that you state. Or more accurately with my lack of expertise, I do not? follow your reasonings; as I contrast them to the other information I see and read.

The first line of failure in the US and internatioal financial system was the rot that crept into the system. Unfortunately the free-market system permits development of "perverse financial incentives" (that caused this).? Such?perverse financial incentives have led to the debacles of many other institutions.? Such perverse incentives?will continue to lead to the debacle of more institutions including health-care, education and other services needed for society to function..

Your claim, "My view of the crises is the exact opposite".? I am not certain what is the opposite of what (view)?

I agree that "less efficient (entities) get slaughtered by the efficient".? One commentator suggested that for such to occur, we need for zombie banks to fail, Because keeping them afloat leads them to lend to zombie companies.? What are your thoughts??

Yet for the above?to occur, IMO, one will need to see a 'contraction of the economy' as was seen in many Asian economies; when they went through a financial crises about a decade ago. Europe?(Eastern and Western) and US does not plan to follow this model and have chosen to spend and inflate the economy.? Do you have a better path (than these two) or another thought-out / practical?solution?? More specifically what are the down-side risks / drawbacks?to your proposals?

As I have written in the past, I hate to see govt borrow from future generations. This is something that neo-conservative love and practiced it extensively under Bush for 8 years. Right now, govt spending appears to me to be the only option; short of the economy contracting and more people getting unemployed. A certain degree of? 'economic contraction', IMO?would eliminate the waste and redundancies in our current economic and other systems.? But this is bad news that no one wants to deliver.

What I would like to see is the 'govt spending' make us a 'lean mean? competitive machine' as we exit this crises. I am afraid that is unlikely.? An example? of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care. This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.? For this to occur the first step is to get the right-wing know-nothing talking heads (aka paid lobbyists /?advertisements)?out of the way. There is lot of room for improvement with many studies showing? less wasteful ways of delivering good health-care.

I like your comment, "The cause ... is quite simple:? Financial regulations that were in place were either removed or not adhered to."?? This after just reading and reading?that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.
Regards, GL

--------- Mervyn Lobo wrote:

The cause of the current financial crises is quite simple:? Financial regulations that were in place were either removed or not adhered to.

My view of the crises is the exact opposite. Lots of financial opportunities have opened. The capitalist system requires that the less efficient get slaughtered by the efficient. The capitalist system also requires the movement? of capital from sectors that are not performing to sectors that are.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money. This is insanity. In its purest form.

---------- Gilbert Lawrence wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities??(like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused?the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

[goacom]

I do not believe that it was lack of regulation that caused the current problem and I believe that a system with less government intervention, within a proper framework of laws is the best in long run. I think that most of the actions by the Obama administration will not resolve the underlying problems and may actually make the problems worse. The laws of unintended consequences applies. I do not support bailing out home owners, the banks and bankrupt industries (like the auto companies).

In my opinion, there are two key factors for the current problem:
1) Most are aware that it is the collapse of the housing boom that is contributing to the current problem. I submit that if there were more controls (higher reserve requirements) like in Canada and Spain (which had an even crazier bubble), we would not have such a problem in the US. However, I believe the real problem was that there was very little enforcement/verification of the financials of the borrowers. In California where I used to live, and now one of the epicenters of the crisis, it was quite easy to get solicited with all kinds of bogus loans. Often there were little or no checks on people's credit and people were getting loans that allowed for negative amortization, easy refinancing (borrow on one's loan) etc. Furthermore, every Tom, Dick and Jose was getting into the frenzy of buying a home, which kept bidding the prices up. To me, the alarm bells were ringing way back in 2004, when it was apparent that the so called home P/E ratio was getting
way out of whack as defined by home price to rental ratios or by ratios of home prices to population income. If there is negligence, it is because borrowers, or the loan brokers, were lying about the borrowers incomes in order to qualify for loans. This is where the real crime was, deregulation or not. The existing rules were simply not being enforced.

The crisis started when the the sub prime borrowers started defaulting. The next hammer to hit will be next category up, which is the so called Alt A group. This is expected to peak in 2010. The problem now is that it now extending to the prime borrowers, who are now being affected because of the overall downturn.

Look at the stats below and weep:
http://www.bloomberg.com/apps/news?pid=20601068&sid=an7bb8PA_CqY

I think that while the actions by the current administration may provide temporary relief, I feel it will be a false dawn as it does not address the fundamentals of the problem.

The next level of failure with regulation enforcment was with the loan ratings agencies such as Moodys who gave a blanket 5* rating to all the debt, irrespective to its source. I think this is criminal and I for one, fail to understand why action is not being taken against such institutions. The consequence of this is staggering. It meant that insurance companies (such as AIG) drastically underestimated the risks of the loans and issued CDOs to the sellers of these loans. That is why when the loans started failing, it was not only the banks that started failing, but also the insurance companies that backed the banks. The single biggest recipient of govt. money is not a bank, but AIG, an insurance company.

The common thread of both of these is falsification of information or erroneous assumptions by the ratings agencies. While additional controls such as higher reserves could have reduced this problem, it may not have fully eliminated it. Furthermore, I believe there was no need for greater regulation. There was already a lot of illegal/inconsistent activities that were happening to justify government action to stop it.?The Bush administration did nothing and the actions of the Obama administration may actually go towards rewarding some of these people for their reckless actions.

2)?The second question is what enabled these loans? Where did all this money come from? A common conclusion made by prominent economists who predicted this crash, such as Roubini, Schiff, Duncan as well as politicians like Ron Paul is that much of it was the result of excessive debt-surplus imbalances between the US and the rest of the world as a result of its trade deficits. I am not too sure how accurate their hypothesis are (though their predictions have been dead on), but if they are correct, it could mean a move away from the US dollar as a world reserve currency as well as a sharp decline in its value. Interested readers should read the books the Dollar Crisis by Richard Duncan (2004) and Crash Proof by Paul Schiff (2007).

[Mervyn Lobo]

Post by Gilbert Lawrence
I agree with much of what you write.

GL,
1) Its no fun writing for those?who agree with me :-)
2) It now looks like I will have a?load of time to write in the next few weeks but for today, I will remain brief.

Post by Gilbert Lawrence
The first line of failure in the US and internatioal financial system was the rot that crept into the system.

Not rot, outright bribery. The biggest bribers being the hedge fund lobby that removed?laws which were in place since the great depression.
The?one that really messed up the US?stock markets was the removal of the law that required shorters to sell only on an up-tick.
The US is still paying the price for the removal of this law.

Post by Gilbert Lawrence
Do you have a better path (than these two) or another thought-out / practical?solution??
More specifically what are the down-side risks / drawbacks?to your proposals?

GL,?I don't?make proposals.
My practical solution is to make money, for myself, from the known distortions in the US system.
Before I?divulge some of my new avenues,?I need to know?if?my advice to invest in gold, given here in detail?FIVE years?ago, was sound advice.???
I ask this as it is becoming increasingly clear that?some people are?here only to run their mouths. I find that even when the facts are put as
simply as possible, you get those with large amounts of time on their hands parroting?absolute rubbish.?The kicker is that even when?the idea?works
exceeding well, there is not a word of thanks. Not?even from those making money from the idea.

Post by Gilbert Lawrence
? An example?of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care.
? This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.?

The above can only come from a health professional. Here in Canada, the govt makes sure that doctors get their patients in for their annual examinations.
The govt knows it can reduce the health bill drastically by detecting and treating aliments early.

Mervyn1650Lobo



__________________________________________________________________
Yahoo! Canada Toolbar: Search from anywhere on the web, and bookmark your favourite sites. Download it now at
http://ca.toolbar.yahoo.com.

[Mario Goveia]

Date: Mon, 23 Feb 2009 05:38:29 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

To Mervyn:
I like your comment, "The cause ... is quite simple: Financial regulations that were in place were either removed or not adhered to." This after just reading and reading that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.

Mario responds:

Here we see Gilbert, a physician, continue his barrage of jejune personal insults against Prof. Tom Sowell, an eminent economist and expert in financial markets, who is a Fellow at the prestigious Hoover Institute at Stanford University. See, http://www.hoover.org/bios/sowell.html

I have already shown in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174166.html, how Gilbert misrepresented the term "dittoheads". The assertion that Prof. Sowell, a respected academic, talks like Mr. Limbaugh, a media commentator and talk show host, is equally specious and backwards. It is Mr. Limbaugh who frequently cites the research based opinions of Prof. Sowell.

At Gilbert's request in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174177.html, and to further his education, I have shown below some additional sources of information from credible sources.

Gilbert apparently has no idea that there are other financial industry experts who agree with Prof. Sowell's analysis of how the Community Reinvestment Act [CRA], an ultra-liberal piece of legislation passed in the Carter administration, which had good intentions of encouraging home-ownership by low income people, was escalated under the Clinton administration with overt and covert threats by the Justice Department, HUD, Democrat party politicians and community action groups against banks if they were slow to comply with its provisions.

Most political liberals and Democrats, and a few Republicans, defended and protected the growing house of cards because it helped low income people, which is what socialism does until it implodes from its fundamental economic flaws.

Shown below is an editorial from the respected Investors Business Daily:

http://www.ibdeditorials.com/IBDArticles.aspx?id=312766781716725

Excerpts:

The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it ? including revising history.

The CRA coerces banks into making loans based on political correctness, and little else, to people who can't afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.
[end of excerpt]

Additional sources are shown below:

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

http://74.125.95.132/search?q=cache:90IT4MK9474J:www.cato.org/pubs/regulation/regv17n4/vmck4-94.pdf+Justice+Department+under+Clinton+enforces+Community+Reinvestment+Act&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a

http://www.heritage.org/research/economy/hl516.cfm

http://iusbvision.wordpress.com/2008/09/30/obama-sued-citibank-under-cra-to-force-it-to-make-bad-loans/

[Gilbert Lawrence]

In the US, those that just repeat what?"Conservative talking heads"?write or say are called "Ditto Heads".? The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was?not the cause of bank failures.


It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

Adding to the above practices and?risks, William Black? states?in? "The Audacity of Dopes" the following. "Over the last few decades, the executive compensation and the compensation systems used for appraisers, accountants, and rating agencies were designed, and served, to create the perverse incentives and ethical rot that caused the ongoing financial crises by producing a "Gresham's dynamic" in which fraudulent and abusive lending and accounting practices drove good practices out of the marketplace."? Others have described banks as institutions that practiced "giant ponzi schemes".

Let's not tell the above to the "talking heads".? For these "talking heads" and their followers,?politicizing very issue is the name of the game.??

William Black is Associate Professor, University of Missouri, was the?senior regulator during S&L debacle..

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle. Greenspan?estimates the total amount of derivatives worldwide at eighty trillion dollars (80 Trillion US dollars) http://www.usagold.com/greenspanderivatives.html
??
Regards, GL


--------- edward desilva

Just because you got a cut and paste job, that does not mean that it is a fact. In UK at the moment the HBOS whistleblower said that the Banks were at fault NOT THE GOVT. And he is going to produce a 30 page dossier for the MPs.? Facts speak for themselves, not some back street newspaper BS..

---------- Mario Goveia:

What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down. It was precisely government intervention which turned a thriving industry into a basket case..

[Mervyn Lobo]

? It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities
(like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?
the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

?
GL,
The cause of the?current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.


As for who is to blame, I will leave that to those who did not heed the warnings and who have now?lost their
savings and their retirement plans.?People will be writing books and articles on who is to blame, for the next
100 years. Luckily, I will not be in that group.


My?view of the crises?is?the exact opposite. Lots of financial opportunities have opened. The capitalist system
requires that the less efficient get slaughtered by the?efficient.?The capitalist system also requires the movement
of capital from sectors that are not performing to sectors that are.?There is a lot of money to be made by those
who understand these basics.


Lastly, the fact that really scares a lot of people in N. America is that companies?which are traded on the stock
exchanges are priced/valued on their quarterly performance. In order to meet the profit expectations of the analysts,
companies are cutting costs by laying of their workers. The responsible employer would bear the cost of keeping
valuable employees thru a down turn. The company that has to meet?a quarterly profit,?is forced to?cut its work force
in order to?meet the profits promised. A lot of people are going to lose their jobs. In the USA alone, about 600,000
people will lose their jobs this month.?Those without savings, will lose their houses a few months after they have lost
their jobs.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money.
This is insanity.
In its purest form.


Mervyn1002Lobo


__________________________________________________________________
Instant Messaging, free SMS, sharing photos and more... Try the new Yahoo! Canada Messenger at http://ca.beta.messenger.yahoo.com/

[Mario Goveia]

Date: Sat, 21 Feb 2009 13:06:58 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

In the US, those that just repeat what "Conservative talking heads" write or say are called "Ditto Heads". The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was not the cause of bank failures.

Mario responds:

Sigh! So much ignorance, so little time:-))

First, a clarification of modern political American jargon and how it is often twisted by writers of political poppycock.

Here we see Gilbert, who supposedly has access to the internet for some minimal research, misrepresenting the term "dittohead" and the term "talking heads", which is something that politically liberal critics of the most popular "talking voice" on the radio, Rush Limbaugh, an aggressive political conservative, often resort to.

A "talking head" is a TV talk show personality. The term "dittohead" comes from listeners to Mr. Limbaugh's radio show, which dominates talk radio in the USA. Thus, Limbaugh is not a "talking head" since one cannot see his head during his show.

Secondly, the origin of the term "dittohead" is as follows:

"As Limbaugh often explains in his books and radio show, these are not necessarily those who agree with his views. Rather, he believes they are people who love the show and what he's doing, and hope he never stops doing it. The term came into use because callers would frequently begin by giving praise and thanks to Limbaugh. Knowing that the caller?s and listener?s time is valuable, one caller simply said roughly "ditto to what those guys said (how much they enjoyed the show)." Thereafter, callers were encouraged to simply say, ?Dittos,? and then get right to their point. Thus, long-time listeners would begin their calls with ?Dittos, Rush,? leading to the term ?dittoheads.? Source, Wikipedia.

Since this term originated with Mr. Limbaugh in the context of his show, his critics like Gilbert, who obviously do not listen to his show long enough to understand its nuances, do not get to revise what it means without being corrected.

Gilbert wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

Let's not tell the above to the "talking heads". For these "talking heads" and their followers, politicizing very issue is the name of the game.

William Black is Associate Professor, University of Missouri, was the senior regulator during S&L debacle.

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle.

Mario observes:

Here we see Gilbert criticizing what he falsely claims are what "dittoheads" say, while himself repeating what "is widely believed" and citing what Associate Prof. William Black has said, who is himself a "talking head" in the classroom.

This is like a pot, played by Gilbert, calling the kettle, represented by Mario, "Black", pun intended:-))

To get back to reality, a "cause", by definition, is something that starts a chain of events.

By citing the excesses of the bankers Gilbert ignores the root cause of the financial crisis, the Community Reinvestment Act and the subsequent threats of lawsuits during the Clinton administration against banks who were slow to comply with its provisions.

There would have been no "derivatives and other risky investments" in the absence of this economically flawed attempt by politicians and government regulators to "spread the wealth" by government fiat and force banks to lower lending standards to low income people.

These instruments became risky precisely because they were backed by bad loans, which the borrowers were unable to repay. Had the loans been of good quality, as home loans were previously, the bankers' investment instruments would not have failed.

The excesses of the bankers started well after being forced by the regulators to make loans to unqualified people, under threat of lawsuits and other negative bureaucratic consequences.

I doubt Associate Prof. Black or Alan Greenspan, both of whose views Gilbert has cited out of context, would deny the facts in Prof. Sowell's column:
http://www.jewishworldreview.com/cols/sowell021809b.php3

[Mario Goveia]

Date: Sat, 21 Feb 2009 17:32:26 -0800 (PST)
From: Mervyn Lobo <mervynalobo at yahoo.ca>

The cause of the current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.

Mario responds:

This is a facile but false premise pushed by some observers. If government regulation were the answer, socialism, which is such regulation taken to an extreme, would be alive and well, instead a philosophy that has been rejected in large part by all it's major proponents.

In a speech at the World Economic Forum in Davos, Switzerland recently, Vladimir Putin, who has more experience with socialism than most other leaders, had this to say:

"Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake.

True, the state's increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent.

The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.

In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing."[end of excerpt]

In fact, in the USA financial regulations under the Community Reinvestment Act were the root cause of the problem. Without this act and the intentions behind it, and the subsequent market that developed in bad loans that resulted from the regulations, we would not have had the current financial crisis.

Mervyn wrote:

the fact that really scares a lot of people in N. America is that companies which are traded on the stock exchanges are priced/valued on their quarterly performance.

Mario observes:

This is another myth fostered by the media, because quarterly performance is all the information that is easily available to them.

The most successful long term investors work very hard at research and make estimates of future free cash flow, the capital investments needed to achieve this, the risk the company faces from competitors and other economic forces, the cost of capital based on alternative investments available to them, and observing the purchases and sales of corporate insiders and analyzing what these may mean, in arriving at what they are willing to pay for a stock.

Other investors use less rigorous analyses including trying to guess stock prices from price charts, etc.

Media observes and less savy investors then take the results as reflected in stock prices and try to correlate them with quarterly earnings, which are published way after the leading investors have made judgments about the value of the company's stock. It is rare for a leading investor to be surprised by what a company discloses in their published earnings because of how closely they monitor what is going on in companies they follow, using sources of direct and indirect information that are as unbiased as possible, which certainly excludes anything a corporate executive may say.

Finally, what should scare a lot of people is that the fundamentals of free market capitalism are being eroded by the new US administration and will take years to fix.

As I have observed previously, a partisan libertarian like Marlon knows all this but falls strangely silent when faced with absolute balderdash by his supposed cronies.

[edward desilva]

Got message saying there is a fault - in case you didn't get the first, ED.
------
http://www.jewishworldreview.com/cols/sowell021809b.php3
Hi Mario,
Why don't you just get it that 'cut and paste' does not mean that it is correct.
I have said that an alcoholic was paid ?25/- during the Paki-bashing period by a high volume News of the World in UK.
I know this alcoholic personally and I have been to his flat.
Secondly a Professor/Scientist in UK was paid by Tate and Lyle (sugar company) to publish an article to say that 'sugar is good for you'.
If a UK famous paper can publish rubbish why not a back street US paper?
Every thing in the above cut and paste article is BS.
The long articles that you keep writing (half way contradicting yourself) gives me a headache.
ED.

[Mario Goveia]

Date: Sun, 22 Feb 2009 11:36:19 -0800 (PST)
From: edward desilva <guirimboy at yahoo.co.uk>

Every thing in the above cut and paste article is BS.

The long articles that you keep writing (half way contradicting yourself) gives me a headache.

Mario responds:

Edward,

http://www.jewishworldreview.com/cols/sowell021809b.php3

The word "poppycock" should have given you a clue. Nothing you have written about things that happened in the UK, has anything to do with the issues mentioned in the column, which is about the USA.

Can you also provide some specific examples of the BS you are referring to, or some specific examples of where I have contradicted myself?

[Gilbert Lawrence]

Hi Mervyn,

I agree with much of what you write. With all due respects, I do not agree?with all that you state. Or more accurately with my lack of expertise, I do not? follow your reasonings; as I contrast them to the other information I see and read.

The first line of failure in the US and internatioal financial system was the rot that crept into the system. Unfortunately the free-market system permits development of "perverse financial incentives" (that caused this).? Such?perverse financial incentives have led to the debacles of many other institutions.? Such perverse incentives?will continue to lead to the debacle of more institutions including health-care, education and other services needed for society to function..

Your claim, "My view of the crises is the exact opposite".? I am not certain what is the opposite of what (view)?

I agree that "less efficient (entities) get slaughtered by the efficient".? One commentator suggested that for such to occur, we need for zombie banks to fail, Because keeping them afloat leads them to lend to zombie companies.? What are your thoughts??

Yet for the above?to occur, IMO, one will need to see a 'contraction of the economy' as was seen in many Asian economies; when they went through a financial crises about a decade ago. Europe?(Eastern and Western) and US does not plan to follow this model and have chosen to spend and inflate the economy.? Do you have a better path (than these two) or another thought-out / practical?solution?? More specifically what are the down-side risks / drawbacks?to your proposals?

As I have written in the past, I hate to see govt borrow from future generations. This is something that neo-conservative love and practiced it extensively under Bush for 8 years. Right now, govt spending appears to me to be the only option; short of the economy contracting and more people getting unemployed. A certain degree of? 'economic contraction', IMO?would eliminate the waste and redundancies in our current economic and other systems.? But this is bad news that no one wants to deliver.

What I would like to see is the 'govt spending' make us a 'lean mean? competitive machine' as we exit this crises. I am afraid that is unlikely.? An example? of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care. This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.? For this to occur the first step is to get the right-wing know-nothing talking heads (aka paid lobbyists /?advertisements)?out of the way. There is lot of room for improvement with many studies showing? less wasteful ways of delivering good health-care.

I like your comment, "The cause ... is quite simple:? Financial regulations that were in place were either removed or not adhered to."?? This after just reading and reading?that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.
Regards, GL

--------- Mervyn Lobo wrote:

The cause of the current financial crises is quite simple:? Financial regulations that were in place were either removed or not adhered to.

My view of the crises is the exact opposite. Lots of financial opportunities have opened. The capitalist system requires that the less efficient get slaughtered by the efficient. The capitalist system also requires the movement? of capital from sectors that are not performing to sectors that are.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money. This is insanity. In its purest form.

---------- Gilbert Lawrence wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities??(like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused?the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

[goacom]

I do not believe that it was lack of regulation that caused the current problem and I believe that a system with less government intervention, within a proper framework of laws is the best in long run. I think that most of the actions by the Obama administration will not resolve the underlying problems and may actually make the problems worse. The laws of unintended consequences applies. I do not support bailing out home owners, the banks and bankrupt industries (like the auto companies).

In my opinion, there are two key factors for the current problem:
1) Most are aware that it is the collapse of the housing boom that is contributing to the current problem. I submit that if there were more controls (higher reserve requirements) like in Canada and Spain (which had an even crazier bubble), we would not have such a problem in the US. However, I believe the real problem was that there was very little enforcement/verification of the financials of the borrowers. In California where I used to live, and now one of the epicenters of the crisis, it was quite easy to get solicited with all kinds of bogus loans. Often there were little or no checks on people's credit and people were getting loans that allowed for negative amortization, easy refinancing (borrow on one's loan) etc. Furthermore, every Tom, Dick and Jose was getting into the frenzy of buying a home, which kept bidding the prices up. To me, the alarm bells were ringing way back in 2004, when it was apparent that the so called home P/E ratio was getting
way out of whack as defined by home price to rental ratios or by ratios of home prices to population income. If there is negligence, it is because borrowers, or the loan brokers, were lying about the borrowers incomes in order to qualify for loans. This is where the real crime was, deregulation or not. The existing rules were simply not being enforced.

The crisis started when the the sub prime borrowers started defaulting. The next hammer to hit will be next category up, which is the so called Alt A group. This is expected to peak in 2010. The problem now is that it now extending to the prime borrowers, who are now being affected because of the overall downturn.

Look at the stats below and weep:
http://www.bloomberg.com/apps/news?pid=20601068&sid=an7bb8PA_CqY

I think that while the actions by the current administration may provide temporary relief, I feel it will be a false dawn as it does not address the fundamentals of the problem.

The next level of failure with regulation enforcment was with the loan ratings agencies such as Moodys who gave a blanket 5* rating to all the debt, irrespective to its source. I think this is criminal and I for one, fail to understand why action is not being taken against such institutions. The consequence of this is staggering. It meant that insurance companies (such as AIG) drastically underestimated the risks of the loans and issued CDOs to the sellers of these loans. That is why when the loans started failing, it was not only the banks that started failing, but also the insurance companies that backed the banks. The single biggest recipient of govt. money is not a bank, but AIG, an insurance company.

The common thread of both of these is falsification of information or erroneous assumptions by the ratings agencies. While additional controls such as higher reserves could have reduced this problem, it may not have fully eliminated it. Furthermore, I believe there was no need for greater regulation. There was already a lot of illegal/inconsistent activities that were happening to justify government action to stop it.?The Bush administration did nothing and the actions of the Obama administration may actually go towards rewarding some of these people for their reckless actions.

2)?The second question is what enabled these loans? Where did all this money come from? A common conclusion made by prominent economists who predicted this crash, such as Roubini, Schiff, Duncan as well as politicians like Ron Paul is that much of it was the result of excessive debt-surplus imbalances between the US and the rest of the world as a result of its trade deficits. I am not too sure how accurate their hypothesis are (though their predictions have been dead on), but if they are correct, it could mean a move away from the US dollar as a world reserve currency as well as a sharp decline in its value. Interested readers should read the books the Dollar Crisis by Richard Duncan (2004) and Crash Proof by Paul Schiff (2007).

[Mervyn Lobo]

Post by Gilbert Lawrence
I agree with much of what you write.

GL,
1) Its no fun writing for those?who agree with me :-)
2) It now looks like I will have a?load of time to write in the next few weeks but for today, I will remain brief.

Post by Gilbert Lawrence
The first line of failure in the US and internatioal financial system was the rot that crept into the system.

Not rot, outright bribery. The biggest bribers being the hedge fund lobby that removed?laws which were in place since the great depression.
The?one that really messed up the US?stock markets was the removal of the law that required shorters to sell only on an up-tick.
The US is still paying the price for the removal of this law.

Post by Gilbert Lawrence
Do you have a better path (than these two) or another thought-out / practical?solution??
More specifically what are the down-side risks / drawbacks?to your proposals?

GL,?I don't?make proposals.
My practical solution is to make money, for myself, from the known distortions in the US system.
Before I?divulge some of my new avenues,?I need to know?if?my advice to invest in gold, given here in detail?FIVE years?ago, was sound advice.???
I ask this as it is becoming increasingly clear that?some people are?here only to run their mouths. I find that even when the facts are put as
simply as possible, you get those with large amounts of time on their hands parroting?absolute rubbish.?The kicker is that even when?the idea?works
exceeding well, there is not a word of thanks. Not?even from those making money from the idea.

Post by Gilbert Lawrence
? An example?of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care.
? This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.?

The above can only come from a health professional. Here in Canada, the govt makes sure that doctors get their patients in for their annual examinations.
The govt knows it can reduce the health bill drastically by detecting and treating aliments early.

Mervyn1650Lobo



__________________________________________________________________
Yahoo! Canada Toolbar: Search from anywhere on the web, and bookmark your favourite sites. Download it now at
http://ca.toolbar.yahoo.com.

[Mario Goveia]

Date: Mon, 23 Feb 2009 05:38:29 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

To Mervyn:
I like your comment, "The cause ... is quite simple: Financial regulations that were in place were either removed or not adhered to." This after just reading and reading that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.

Mario responds:

Here we see Gilbert, a physician, continue his barrage of jejune personal insults against Prof. Tom Sowell, an eminent economist and expert in financial markets, who is a Fellow at the prestigious Hoover Institute at Stanford University. See, http://www.hoover.org/bios/sowell.html

I have already shown in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174166.html, how Gilbert misrepresented the term "dittoheads". The assertion that Prof. Sowell, a respected academic, talks like Mr. Limbaugh, a media commentator and talk show host, is equally specious and backwards. It is Mr. Limbaugh who frequently cites the research based opinions of Prof. Sowell.

At Gilbert's request in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174177.html, and to further his education, I have shown below some additional sources of information from credible sources.

Gilbert apparently has no idea that there are other financial industry experts who agree with Prof. Sowell's analysis of how the Community Reinvestment Act [CRA], an ultra-liberal piece of legislation passed in the Carter administration, which had good intentions of encouraging home-ownership by low income people, was escalated under the Clinton administration with overt and covert threats by the Justice Department, HUD, Democrat party politicians and community action groups against banks if they were slow to comply with its provisions.

Most political liberals and Democrats, and a few Republicans, defended and protected the growing house of cards because it helped low income people, which is what socialism does until it implodes from its fundamental economic flaws.

Shown below is an editorial from the respected Investors Business Daily:

http://www.ibdeditorials.com/IBDArticles.aspx?id=312766781716725

Excerpts:

The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it ? including revising history.

The CRA coerces banks into making loans based on political correctness, and little else, to people who can't afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.
[end of excerpt]

Additional sources are shown below:

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

http://74.125.95.132/search?q=cache:90IT4MK9474J:www.cato.org/pubs/regulation/regv17n4/vmck4-94.pdf+Justice+Department+under+Clinton+enforces+Community+Reinvestment+Act&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a

http://www.heritage.org/research/economy/hl516.cfm

http://iusbvision.wordpress.com/2008/09/30/obama-sued-citibank-under-cra-to-force-it-to-make-bad-loans/

[Gilbert Lawrence]

In the US, those that just repeat what?"Conservative talking heads"?write or say are called "Ditto Heads".? The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was?not the cause of bank failures.


It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

Adding to the above practices and?risks, William Black? states?in? "The Audacity of Dopes" the following. "Over the last few decades, the executive compensation and the compensation systems used for appraisers, accountants, and rating agencies were designed, and served, to create the perverse incentives and ethical rot that caused the ongoing financial crises by producing a "Gresham's dynamic" in which fraudulent and abusive lending and accounting practices drove good practices out of the marketplace."? Others have described banks as institutions that practiced "giant ponzi schemes".

Let's not tell the above to the "talking heads".? For these "talking heads" and their followers,?politicizing very issue is the name of the game.??

William Black is Associate Professor, University of Missouri, was the?senior regulator during S&L debacle..

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle. Greenspan?estimates the total amount of derivatives worldwide at eighty trillion dollars (80 Trillion US dollars) http://www.usagold.com/greenspanderivatives.html
??
Regards, GL


--------- edward desilva

Just because you got a cut and paste job, that does not mean that it is a fact. In UK at the moment the HBOS whistleblower said that the Banks were at fault NOT THE GOVT. And he is going to produce a 30 page dossier for the MPs.? Facts speak for themselves, not some back street newspaper BS..

---------- Mario Goveia:

What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down. It was precisely government intervention which turned a thriving industry into a basket case..

[Mervyn Lobo]

? It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities
(like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?
the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

?
GL,
The cause of the?current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.


As for who is to blame, I will leave that to those who did not heed the warnings and who have now?lost their
savings and their retirement plans.?People will be writing books and articles on who is to blame, for the next
100 years. Luckily, I will not be in that group.


My?view of the crises?is?the exact opposite. Lots of financial opportunities have opened. The capitalist system
requires that the less efficient get slaughtered by the?efficient.?The capitalist system also requires the movement
of capital from sectors that are not performing to sectors that are.?There is a lot of money to be made by those
who understand these basics.


Lastly, the fact that really scares a lot of people in N. America is that companies?which are traded on the stock
exchanges are priced/valued on their quarterly performance. In order to meet the profit expectations of the analysts,
companies are cutting costs by laying of their workers. The responsible employer would bear the cost of keeping
valuable employees thru a down turn. The company that has to meet?a quarterly profit,?is forced to?cut its work force
in order to?meet the profits promised. A lot of people are going to lose their jobs. In the USA alone, about 600,000
people will lose their jobs this month.?Those without savings, will lose their houses a few months after they have lost
their jobs.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money.
This is insanity.
In its purest form.


Mervyn1002Lobo


__________________________________________________________________
Instant Messaging, free SMS, sharing photos and more... Try the new Yahoo! Canada Messenger at http://ca.beta.messenger.yahoo.com/

[Mario Goveia]

Date: Sat, 21 Feb 2009 13:06:58 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

In the US, those that just repeat what "Conservative talking heads" write or say are called "Ditto Heads". The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was not the cause of bank failures.

Mario responds:

Sigh! So much ignorance, so little time:-))

First, a clarification of modern political American jargon and how it is often twisted by writers of political poppycock.

Here we see Gilbert, who supposedly has access to the internet for some minimal research, misrepresenting the term "dittohead" and the term "talking heads", which is something that politically liberal critics of the most popular "talking voice" on the radio, Rush Limbaugh, an aggressive political conservative, often resort to.

A "talking head" is a TV talk show personality. The term "dittohead" comes from listeners to Mr. Limbaugh's radio show, which dominates talk radio in the USA. Thus, Limbaugh is not a "talking head" since one cannot see his head during his show.

Secondly, the origin of the term "dittohead" is as follows:

"As Limbaugh often explains in his books and radio show, these are not necessarily those who agree with his views. Rather, he believes they are people who love the show and what he's doing, and hope he never stops doing it. The term came into use because callers would frequently begin by giving praise and thanks to Limbaugh. Knowing that the caller?s and listener?s time is valuable, one caller simply said roughly "ditto to what those guys said (how much they enjoyed the show)." Thereafter, callers were encouraged to simply say, ?Dittos,? and then get right to their point. Thus, long-time listeners would begin their calls with ?Dittos, Rush,? leading to the term ?dittoheads.? Source, Wikipedia.

Since this term originated with Mr. Limbaugh in the context of his show, his critics like Gilbert, who obviously do not listen to his show long enough to understand its nuances, do not get to revise what it means without being corrected.

Gilbert wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

Let's not tell the above to the "talking heads". For these "talking heads" and their followers, politicizing very issue is the name of the game.

William Black is Associate Professor, University of Missouri, was the senior regulator during S&L debacle.

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle.

Mario observes:

Here we see Gilbert criticizing what he falsely claims are what "dittoheads" say, while himself repeating what "is widely believed" and citing what Associate Prof. William Black has said, who is himself a "talking head" in the classroom.

This is like a pot, played by Gilbert, calling the kettle, represented by Mario, "Black", pun intended:-))

To get back to reality, a "cause", by definition, is something that starts a chain of events.

By citing the excesses of the bankers Gilbert ignores the root cause of the financial crisis, the Community Reinvestment Act and the subsequent threats of lawsuits during the Clinton administration against banks who were slow to comply with its provisions.

There would have been no "derivatives and other risky investments" in the absence of this economically flawed attempt by politicians and government regulators to "spread the wealth" by government fiat and force banks to lower lending standards to low income people.

These instruments became risky precisely because they were backed by bad loans, which the borrowers were unable to repay. Had the loans been of good quality, as home loans were previously, the bankers' investment instruments would not have failed.

The excesses of the bankers started well after being forced by the regulators to make loans to unqualified people, under threat of lawsuits and other negative bureaucratic consequences.

I doubt Associate Prof. Black or Alan Greenspan, both of whose views Gilbert has cited out of context, would deny the facts in Prof. Sowell's column:
http://www.jewishworldreview.com/cols/sowell021809b.php3

[Mario Goveia]

Date: Sat, 21 Feb 2009 17:32:26 -0800 (PST)
From: Mervyn Lobo <mervynalobo at yahoo.ca>

The cause of the current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.

Mario responds:

This is a facile but false premise pushed by some observers. If government regulation were the answer, socialism, which is such regulation taken to an extreme, would be alive and well, instead a philosophy that has been rejected in large part by all it's major proponents.

In a speech at the World Economic Forum in Davos, Switzerland recently, Vladimir Putin, who has more experience with socialism than most other leaders, had this to say:

"Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake.

True, the state's increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent.

The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.

In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing."[end of excerpt]

In fact, in the USA financial regulations under the Community Reinvestment Act were the root cause of the problem. Without this act and the intentions behind it, and the subsequent market that developed in bad loans that resulted from the regulations, we would not have had the current financial crisis.

Mervyn wrote:

the fact that really scares a lot of people in N. America is that companies which are traded on the stock exchanges are priced/valued on their quarterly performance.

Mario observes:

This is another myth fostered by the media, because quarterly performance is all the information that is easily available to them.

The most successful long term investors work very hard at research and make estimates of future free cash flow, the capital investments needed to achieve this, the risk the company faces from competitors and other economic forces, the cost of capital based on alternative investments available to them, and observing the purchases and sales of corporate insiders and analyzing what these may mean, in arriving at what they are willing to pay for a stock.

Other investors use less rigorous analyses including trying to guess stock prices from price charts, etc.

Media observes and less savy investors then take the results as reflected in stock prices and try to correlate them with quarterly earnings, which are published way after the leading investors have made judgments about the value of the company's stock. It is rare for a leading investor to be surprised by what a company discloses in their published earnings because of how closely they monitor what is going on in companies they follow, using sources of direct and indirect information that are as unbiased as possible, which certainly excludes anything a corporate executive may say.

Finally, what should scare a lot of people is that the fundamentals of free market capitalism are being eroded by the new US administration and will take years to fix.

As I have observed previously, a partisan libertarian like Marlon knows all this but falls strangely silent when faced with absolute balderdash by his supposed cronies.

[edward desilva]

Got message saying there is a fault - in case you didn't get the first, ED.
------
http://www.jewishworldreview.com/cols/sowell021809b.php3
Hi Mario,
Why don't you just get it that 'cut and paste' does not mean that it is correct.
I have said that an alcoholic was paid ?25/- during the Paki-bashing period by a high volume News of the World in UK.
I know this alcoholic personally and I have been to his flat.
Secondly a Professor/Scientist in UK was paid by Tate and Lyle (sugar company) to publish an article to say that 'sugar is good for you'.
If a UK famous paper can publish rubbish why not a back street US paper?
Every thing in the above cut and paste article is BS.
The long articles that you keep writing (half way contradicting yourself) gives me a headache.
ED.

[Mario Goveia]

Date: Sun, 22 Feb 2009 11:36:19 -0800 (PST)
From: edward desilva <guirimboy at yahoo.co.uk>

Every thing in the above cut and paste article is BS.

The long articles that you keep writing (half way contradicting yourself) gives me a headache.

Mario responds:

Edward,

http://www.jewishworldreview.com/cols/sowell021809b.php3

The word "poppycock" should have given you a clue. Nothing you have written about things that happened in the UK, has anything to do with the issues mentioned in the column, which is about the USA.

Can you also provide some specific examples of the BS you are referring to, or some specific examples of where I have contradicted myself?

[Gilbert Lawrence]

Hi Mervyn,

I agree with much of what you write. With all due respects, I do not agree?with all that you state. Or more accurately with my lack of expertise, I do not? follow your reasonings; as I contrast them to the other information I see and read.

The first line of failure in the US and internatioal financial system was the rot that crept into the system. Unfortunately the free-market system permits development of "perverse financial incentives" (that caused this).? Such?perverse financial incentives have led to the debacles of many other institutions.? Such perverse incentives?will continue to lead to the debacle of more institutions including health-care, education and other services needed for society to function..

Your claim, "My view of the crises is the exact opposite".? I am not certain what is the opposite of what (view)?

I agree that "less efficient (entities) get slaughtered by the efficient".? One commentator suggested that for such to occur, we need for zombie banks to fail, Because keeping them afloat leads them to lend to zombie companies.? What are your thoughts??

Yet for the above?to occur, IMO, one will need to see a 'contraction of the economy' as was seen in many Asian economies; when they went through a financial crises about a decade ago. Europe?(Eastern and Western) and US does not plan to follow this model and have chosen to spend and inflate the economy.? Do you have a better path (than these two) or another thought-out / practical?solution?? More specifically what are the down-side risks / drawbacks?to your proposals?

As I have written in the past, I hate to see govt borrow from future generations. This is something that neo-conservative love and practiced it extensively under Bush for 8 years. Right now, govt spending appears to me to be the only option; short of the economy contracting and more people getting unemployed. A certain degree of? 'economic contraction', IMO?would eliminate the waste and redundancies in our current economic and other systems.? But this is bad news that no one wants to deliver.

What I would like to see is the 'govt spending' make us a 'lean mean? competitive machine' as we exit this crises. I am afraid that is unlikely.? An example? of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care. This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.? For this to occur the first step is to get the right-wing know-nothing talking heads (aka paid lobbyists /?advertisements)?out of the way. There is lot of room for improvement with many studies showing? less wasteful ways of delivering good health-care.

I like your comment, "The cause ... is quite simple:? Financial regulations that were in place were either removed or not adhered to."?? This after just reading and reading?that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.
Regards, GL

--------- Mervyn Lobo wrote:

The cause of the current financial crises is quite simple:? Financial regulations that were in place were either removed or not adhered to.

My view of the crises is the exact opposite. Lots of financial opportunities have opened. The capitalist system requires that the less efficient get slaughtered by the efficient. The capitalist system also requires the movement? of capital from sectors that are not performing to sectors that are.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money. This is insanity. In its purest form.

---------- Gilbert Lawrence wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities??(like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused?the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

[goacom]

I do not believe that it was lack of regulation that caused the current problem and I believe that a system with less government intervention, within a proper framework of laws is the best in long run. I think that most of the actions by the Obama administration will not resolve the underlying problems and may actually make the problems worse. The laws of unintended consequences applies. I do not support bailing out home owners, the banks and bankrupt industries (like the auto companies).

In my opinion, there are two key factors for the current problem:
1) Most are aware that it is the collapse of the housing boom that is contributing to the current problem. I submit that if there were more controls (higher reserve requirements) like in Canada and Spain (which had an even crazier bubble), we would not have such a problem in the US. However, I believe the real problem was that there was very little enforcement/verification of the financials of the borrowers. In California where I used to live, and now one of the epicenters of the crisis, it was quite easy to get solicited with all kinds of bogus loans. Often there were little or no checks on people's credit and people were getting loans that allowed for negative amortization, easy refinancing (borrow on one's loan) etc. Furthermore, every Tom, Dick and Jose was getting into the frenzy of buying a home, which kept bidding the prices up. To me, the alarm bells were ringing way back in 2004, when it was apparent that the so called home P/E ratio was getting
way out of whack as defined by home price to rental ratios or by ratios of home prices to population income. If there is negligence, it is because borrowers, or the loan brokers, were lying about the borrowers incomes in order to qualify for loans. This is where the real crime was, deregulation or not. The existing rules were simply not being enforced.

The crisis started when the the sub prime borrowers started defaulting. The next hammer to hit will be next category up, which is the so called Alt A group. This is expected to peak in 2010. The problem now is that it now extending to the prime borrowers, who are now being affected because of the overall downturn.

Look at the stats below and weep:
http://www.bloomberg.com/apps/news?pid=20601068&sid=an7bb8PA_CqY

I think that while the actions by the current administration may provide temporary relief, I feel it will be a false dawn as it does not address the fundamentals of the problem.

The next level of failure with regulation enforcment was with the loan ratings agencies such as Moodys who gave a blanket 5* rating to all the debt, irrespective to its source. I think this is criminal and I for one, fail to understand why action is not being taken against such institutions. The consequence of this is staggering. It meant that insurance companies (such as AIG) drastically underestimated the risks of the loans and issued CDOs to the sellers of these loans. That is why when the loans started failing, it was not only the banks that started failing, but also the insurance companies that backed the banks. The single biggest recipient of govt. money is not a bank, but AIG, an insurance company.

The common thread of both of these is falsification of information or erroneous assumptions by the ratings agencies. While additional controls such as higher reserves could have reduced this problem, it may not have fully eliminated it. Furthermore, I believe there was no need for greater regulation. There was already a lot of illegal/inconsistent activities that were happening to justify government action to stop it.?The Bush administration did nothing and the actions of the Obama administration may actually go towards rewarding some of these people for their reckless actions.

2)?The second question is what enabled these loans? Where did all this money come from? A common conclusion made by prominent economists who predicted this crash, such as Roubini, Schiff, Duncan as well as politicians like Ron Paul is that much of it was the result of excessive debt-surplus imbalances between the US and the rest of the world as a result of its trade deficits. I am not too sure how accurate their hypothesis are (though their predictions have been dead on), but if they are correct, it could mean a move away from the US dollar as a world reserve currency as well as a sharp decline in its value. Interested readers should read the books the Dollar Crisis by Richard Duncan (2004) and Crash Proof by Paul Schiff (2007).

[Mervyn Lobo]

Post by Gilbert Lawrence
I agree with much of what you write.

GL,
1) Its no fun writing for those?who agree with me :-)
2) It now looks like I will have a?load of time to write in the next few weeks but for today, I will remain brief.

Post by Gilbert Lawrence
The first line of failure in the US and internatioal financial system was the rot that crept into the system.

Not rot, outright bribery. The biggest bribers being the hedge fund lobby that removed?laws which were in place since the great depression.
The?one that really messed up the US?stock markets was the removal of the law that required shorters to sell only on an up-tick.
The US is still paying the price for the removal of this law.

Post by Gilbert Lawrence
Do you have a better path (than these two) or another thought-out / practical?solution??
More specifically what are the down-side risks / drawbacks?to your proposals?

GL,?I don't?make proposals.
My practical solution is to make money, for myself, from the known distortions in the US system.
Before I?divulge some of my new avenues,?I need to know?if?my advice to invest in gold, given here in detail?FIVE years?ago, was sound advice.???
I ask this as it is becoming increasingly clear that?some people are?here only to run their mouths. I find that even when the facts are put as
simply as possible, you get those with large amounts of time on their hands parroting?absolute rubbish.?The kicker is that even when?the idea?works
exceeding well, there is not a word of thanks. Not?even from those making money from the idea.

Post by Gilbert Lawrence
? An example?of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care.
? This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.?

The above can only come from a health professional. Here in Canada, the govt makes sure that doctors get their patients in for their annual examinations.
The govt knows it can reduce the health bill drastically by detecting and treating aliments early.

Mervyn1650Lobo



__________________________________________________________________
Yahoo! Canada Toolbar: Search from anywhere on the web, and bookmark your favourite sites. Download it now at
http://ca.toolbar.yahoo.com.

[Mario Goveia]

Date: Mon, 23 Feb 2009 05:38:29 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

To Mervyn:
I like your comment, "The cause ... is quite simple: Financial regulations that were in place were either removed or not adhered to." This after just reading and reading that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.

Mario responds:

Here we see Gilbert, a physician, continue his barrage of jejune personal insults against Prof. Tom Sowell, an eminent economist and expert in financial markets, who is a Fellow at the prestigious Hoover Institute at Stanford University. See, http://www.hoover.org/bios/sowell.html

I have already shown in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174166.html, how Gilbert misrepresented the term "dittoheads". The assertion that Prof. Sowell, a respected academic, talks like Mr. Limbaugh, a media commentator and talk show host, is equally specious and backwards. It is Mr. Limbaugh who frequently cites the research based opinions of Prof. Sowell.

At Gilbert's request in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174177.html, and to further his education, I have shown below some additional sources of information from credible sources.

Gilbert apparently has no idea that there are other financial industry experts who agree with Prof. Sowell's analysis of how the Community Reinvestment Act [CRA], an ultra-liberal piece of legislation passed in the Carter administration, which had good intentions of encouraging home-ownership by low income people, was escalated under the Clinton administration with overt and covert threats by the Justice Department, HUD, Democrat party politicians and community action groups against banks if they were slow to comply with its provisions.

Most political liberals and Democrats, and a few Republicans, defended and protected the growing house of cards because it helped low income people, which is what socialism does until it implodes from its fundamental economic flaws.

Shown below is an editorial from the respected Investors Business Daily:

http://www.ibdeditorials.com/IBDArticles.aspx?id=312766781716725

Excerpts:

The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it ? including revising history.

The CRA coerces banks into making loans based on political correctness, and little else, to people who can't afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.
[end of excerpt]

Additional sources are shown below:

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

http://74.125.95.132/search?q=cache:90IT4MK9474J:www.cato.org/pubs/regulation/regv17n4/vmck4-94.pdf+Justice+Department+under+Clinton+enforces+Community+Reinvestment+Act&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a

http://www.heritage.org/research/economy/hl516.cfm

http://iusbvision.wordpress.com/2008/09/30/obama-sued-citibank-under-cra-to-force-it-to-make-bad-loans/

[Gilbert Lawrence]

In the US, those that just repeat what?"Conservative talking heads"?write or say are called "Ditto Heads".? The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was?not the cause of bank failures.


It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

Adding to the above practices and?risks, William Black? states?in? "The Audacity of Dopes" the following. "Over the last few decades, the executive compensation and the compensation systems used for appraisers, accountants, and rating agencies were designed, and served, to create the perverse incentives and ethical rot that caused the ongoing financial crises by producing a "Gresham's dynamic" in which fraudulent and abusive lending and accounting practices drove good practices out of the marketplace."? Others have described banks as institutions that practiced "giant ponzi schemes".

Let's not tell the above to the "talking heads".? For these "talking heads" and their followers,?politicizing very issue is the name of the game.??

William Black is Associate Professor, University of Missouri, was the?senior regulator during S&L debacle..

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle. Greenspan?estimates the total amount of derivatives worldwide at eighty trillion dollars (80 Trillion US dollars) http://www.usagold.com/greenspanderivatives.html
??
Regards, GL


--------- edward desilva

Just because you got a cut and paste job, that does not mean that it is a fact. In UK at the moment the HBOS whistleblower said that the Banks were at fault NOT THE GOVT. And he is going to produce a 30 page dossier for the MPs.? Facts speak for themselves, not some back street newspaper BS..

---------- Mario Goveia:

What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down. It was precisely government intervention which turned a thriving industry into a basket case..

[Mervyn Lobo]

? It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities
(like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?
the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

?
GL,
The cause of the?current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.


As for who is to blame, I will leave that to those who did not heed the warnings and who have now?lost their
savings and their retirement plans.?People will be writing books and articles on who is to blame, for the next
100 years. Luckily, I will not be in that group.


My?view of the crises?is?the exact opposite. Lots of financial opportunities have opened. The capitalist system
requires that the less efficient get slaughtered by the?efficient.?The capitalist system also requires the movement
of capital from sectors that are not performing to sectors that are.?There is a lot of money to be made by those
who understand these basics.


Lastly, the fact that really scares a lot of people in N. America is that companies?which are traded on the stock
exchanges are priced/valued on their quarterly performance. In order to meet the profit expectations of the analysts,
companies are cutting costs by laying of their workers. The responsible employer would bear the cost of keeping
valuable employees thru a down turn. The company that has to meet?a quarterly profit,?is forced to?cut its work force
in order to?meet the profits promised. A lot of people are going to lose their jobs. In the USA alone, about 600,000
people will lose their jobs this month.?Those without savings, will lose their houses a few months after they have lost
their jobs.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money.
This is insanity.
In its purest form.


Mervyn1002Lobo


__________________________________________________________________
Instant Messaging, free SMS, sharing photos and more... Try the new Yahoo! Canada Messenger at http://ca.beta.messenger.yahoo.com/

[Mario Goveia]

Date: Sat, 21 Feb 2009 13:06:58 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

In the US, those that just repeat what "Conservative talking heads" write or say are called "Ditto Heads". The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was not the cause of bank failures.

Mario responds:

Sigh! So much ignorance, so little time:-))

First, a clarification of modern political American jargon and how it is often twisted by writers of political poppycock.

Here we see Gilbert, who supposedly has access to the internet for some minimal research, misrepresenting the term "dittohead" and the term "talking heads", which is something that politically liberal critics of the most popular "talking voice" on the radio, Rush Limbaugh, an aggressive political conservative, often resort to.

A "talking head" is a TV talk show personality. The term "dittohead" comes from listeners to Mr. Limbaugh's radio show, which dominates talk radio in the USA. Thus, Limbaugh is not a "talking head" since one cannot see his head during his show.

Secondly, the origin of the term "dittohead" is as follows:

"As Limbaugh often explains in his books and radio show, these are not necessarily those who agree with his views. Rather, he believes they are people who love the show and what he's doing, and hope he never stops doing it. The term came into use because callers would frequently begin by giving praise and thanks to Limbaugh. Knowing that the caller?s and listener?s time is valuable, one caller simply said roughly "ditto to what those guys said (how much they enjoyed the show)." Thereafter, callers were encouraged to simply say, ?Dittos,? and then get right to their point. Thus, long-time listeners would begin their calls with ?Dittos, Rush,? leading to the term ?dittoheads.? Source, Wikipedia.

Since this term originated with Mr. Limbaugh in the context of his show, his critics like Gilbert, who obviously do not listen to his show long enough to understand its nuances, do not get to revise what it means without being corrected.

Gilbert wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

Let's not tell the above to the "talking heads". For these "talking heads" and their followers, politicizing very issue is the name of the game.

William Black is Associate Professor, University of Missouri, was the senior regulator during S&L debacle.

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle.

Mario observes:

Here we see Gilbert criticizing what he falsely claims are what "dittoheads" say, while himself repeating what "is widely believed" and citing what Associate Prof. William Black has said, who is himself a "talking head" in the classroom.

This is like a pot, played by Gilbert, calling the kettle, represented by Mario, "Black", pun intended:-))

To get back to reality, a "cause", by definition, is something that starts a chain of events.

By citing the excesses of the bankers Gilbert ignores the root cause of the financial crisis, the Community Reinvestment Act and the subsequent threats of lawsuits during the Clinton administration against banks who were slow to comply with its provisions.

There would have been no "derivatives and other risky investments" in the absence of this economically flawed attempt by politicians and government regulators to "spread the wealth" by government fiat and force banks to lower lending standards to low income people.

These instruments became risky precisely because they were backed by bad loans, which the borrowers were unable to repay. Had the loans been of good quality, as home loans were previously, the bankers' investment instruments would not have failed.

The excesses of the bankers started well after being forced by the regulators to make loans to unqualified people, under threat of lawsuits and other negative bureaucratic consequences.

I doubt Associate Prof. Black or Alan Greenspan, both of whose views Gilbert has cited out of context, would deny the facts in Prof. Sowell's column:
http://www.jewishworldreview.com/cols/sowell021809b.php3

[Mario Goveia]

Date: Sat, 21 Feb 2009 17:32:26 -0800 (PST)
From: Mervyn Lobo <mervynalobo at yahoo.ca>

The cause of the current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.

Mario responds:

This is a facile but false premise pushed by some observers. If government regulation were the answer, socialism, which is such regulation taken to an extreme, would be alive and well, instead a philosophy that has been rejected in large part by all it's major proponents.

In a speech at the World Economic Forum in Davos, Switzerland recently, Vladimir Putin, who has more experience with socialism than most other leaders, had this to say:

"Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake.

True, the state's increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent.

The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.

In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing."[end of excerpt]

In fact, in the USA financial regulations under the Community Reinvestment Act were the root cause of the problem. Without this act and the intentions behind it, and the subsequent market that developed in bad loans that resulted from the regulations, we would not have had the current financial crisis.

Mervyn wrote:

the fact that really scares a lot of people in N. America is that companies which are traded on the stock exchanges are priced/valued on their quarterly performance.

Mario observes:

This is another myth fostered by the media, because quarterly performance is all the information that is easily available to them.

The most successful long term investors work very hard at research and make estimates of future free cash flow, the capital investments needed to achieve this, the risk the company faces from competitors and other economic forces, the cost of capital based on alternative investments available to them, and observing the purchases and sales of corporate insiders and analyzing what these may mean, in arriving at what they are willing to pay for a stock.

Other investors use less rigorous analyses including trying to guess stock prices from price charts, etc.

Media observes and less savy investors then take the results as reflected in stock prices and try to correlate them with quarterly earnings, which are published way after the leading investors have made judgments about the value of the company's stock. It is rare for a leading investor to be surprised by what a company discloses in their published earnings because of how closely they monitor what is going on in companies they follow, using sources of direct and indirect information that are as unbiased as possible, which certainly excludes anything a corporate executive may say.

Finally, what should scare a lot of people is that the fundamentals of free market capitalism are being eroded by the new US administration and will take years to fix.

As I have observed previously, a partisan libertarian like Marlon knows all this but falls strangely silent when faced with absolute balderdash by his supposed cronies.

[edward desilva]

Got message saying there is a fault - in case you didn't get the first, ED.
------
http://www.jewishworldreview.com/cols/sowell021809b.php3
Hi Mario,
Why don't you just get it that 'cut and paste' does not mean that it is correct.
I have said that an alcoholic was paid ?25/- during the Paki-bashing period by a high volume News of the World in UK.
I know this alcoholic personally and I have been to his flat.
Secondly a Professor/Scientist in UK was paid by Tate and Lyle (sugar company) to publish an article to say that 'sugar is good for you'.
If a UK famous paper can publish rubbish why not a back street US paper?
Every thing in the above cut and paste article is BS.
The long articles that you keep writing (half way contradicting yourself) gives me a headache.
ED.

[Mario Goveia]

Date: Sun, 22 Feb 2009 11:36:19 -0800 (PST)
From: edward desilva <guirimboy at yahoo.co.uk>

Every thing in the above cut and paste article is BS.

The long articles that you keep writing (half way contradicting yourself) gives me a headache.

Mario responds:

Edward,

http://www.jewishworldreview.com/cols/sowell021809b.php3

The word "poppycock" should have given you a clue. Nothing you have written about things that happened in the UK, has anything to do with the issues mentioned in the column, which is about the USA.

Can you also provide some specific examples of the BS you are referring to, or some specific examples of where I have contradicted myself?

[Gilbert Lawrence]

Hi Mervyn,

I agree with much of what you write. With all due respects, I do not agree?with all that you state. Or more accurately with my lack of expertise, I do not? follow your reasonings; as I contrast them to the other information I see and read.

The first line of failure in the US and internatioal financial system was the rot that crept into the system. Unfortunately the free-market system permits development of "perverse financial incentives" (that caused this).? Such?perverse financial incentives have led to the debacles of many other institutions.? Such perverse incentives?will continue to lead to the debacle of more institutions including health-care, education and other services needed for society to function..

Your claim, "My view of the crises is the exact opposite".? I am not certain what is the opposite of what (view)?

I agree that "less efficient (entities) get slaughtered by the efficient".? One commentator suggested that for such to occur, we need for zombie banks to fail, Because keeping them afloat leads them to lend to zombie companies.? What are your thoughts??

Yet for the above?to occur, IMO, one will need to see a 'contraction of the economy' as was seen in many Asian economies; when they went through a financial crises about a decade ago. Europe?(Eastern and Western) and US does not plan to follow this model and have chosen to spend and inflate the economy.? Do you have a better path (than these two) or another thought-out / practical?solution?? More specifically what are the down-side risks / drawbacks?to your proposals?

As I have written in the past, I hate to see govt borrow from future generations. This is something that neo-conservative love and practiced it extensively under Bush for 8 years. Right now, govt spending appears to me to be the only option; short of the economy contracting and more people getting unemployed. A certain degree of? 'economic contraction', IMO?would eliminate the waste and redundancies in our current economic and other systems.? But this is bad news that no one wants to deliver.

What I would like to see is the 'govt spending' make us a 'lean mean? competitive machine' as we exit this crises. I am afraid that is unlikely.? An example? of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care. This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.? For this to occur the first step is to get the right-wing know-nothing talking heads (aka paid lobbyists /?advertisements)?out of the way. There is lot of room for improvement with many studies showing? less wasteful ways of delivering good health-care.

I like your comment, "The cause ... is quite simple:? Financial regulations that were in place were either removed or not adhered to."?? This after just reading and reading?that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.
Regards, GL

--------- Mervyn Lobo wrote:

The cause of the current financial crises is quite simple:? Financial regulations that were in place were either removed or not adhered to.

My view of the crises is the exact opposite. Lots of financial opportunities have opened. The capitalist system requires that the less efficient get slaughtered by the efficient. The capitalist system also requires the movement? of capital from sectors that are not performing to sectors that are.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money. This is insanity. In its purest form.

---------- Gilbert Lawrence wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities??(like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused?the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

[goacom]

I do not believe that it was lack of regulation that caused the current problem and I believe that a system with less government intervention, within a proper framework of laws is the best in long run. I think that most of the actions by the Obama administration will not resolve the underlying problems and may actually make the problems worse. The laws of unintended consequences applies. I do not support bailing out home owners, the banks and bankrupt industries (like the auto companies).

In my opinion, there are two key factors for the current problem:
1) Most are aware that it is the collapse of the housing boom that is contributing to the current problem. I submit that if there were more controls (higher reserve requirements) like in Canada and Spain (which had an even crazier bubble), we would not have such a problem in the US. However, I believe the real problem was that there was very little enforcement/verification of the financials of the borrowers. In California where I used to live, and now one of the epicenters of the crisis, it was quite easy to get solicited with all kinds of bogus loans. Often there were little or no checks on people's credit and people were getting loans that allowed for negative amortization, easy refinancing (borrow on one's loan) etc. Furthermore, every Tom, Dick and Jose was getting into the frenzy of buying a home, which kept bidding the prices up. To me, the alarm bells were ringing way back in 2004, when it was apparent that the so called home P/E ratio was getting
way out of whack as defined by home price to rental ratios or by ratios of home prices to population income. If there is negligence, it is because borrowers, or the loan brokers, were lying about the borrowers incomes in order to qualify for loans. This is where the real crime was, deregulation or not. The existing rules were simply not being enforced.

The crisis started when the the sub prime borrowers started defaulting. The next hammer to hit will be next category up, which is the so called Alt A group. This is expected to peak in 2010. The problem now is that it now extending to the prime borrowers, who are now being affected because of the overall downturn.

Look at the stats below and weep:
http://www.bloomberg.com/apps/news?pid=20601068&sid=an7bb8PA_CqY

I think that while the actions by the current administration may provide temporary relief, I feel it will be a false dawn as it does not address the fundamentals of the problem.

The next level of failure with regulation enforcment was with the loan ratings agencies such as Moodys who gave a blanket 5* rating to all the debt, irrespective to its source. I think this is criminal and I for one, fail to understand why action is not being taken against such institutions. The consequence of this is staggering. It meant that insurance companies (such as AIG) drastically underestimated the risks of the loans and issued CDOs to the sellers of these loans. That is why when the loans started failing, it was not only the banks that started failing, but also the insurance companies that backed the banks. The single biggest recipient of govt. money is not a bank, but AIG, an insurance company.

The common thread of both of these is falsification of information or erroneous assumptions by the ratings agencies. While additional controls such as higher reserves could have reduced this problem, it may not have fully eliminated it. Furthermore, I believe there was no need for greater regulation. There was already a lot of illegal/inconsistent activities that were happening to justify government action to stop it.?The Bush administration did nothing and the actions of the Obama administration may actually go towards rewarding some of these people for their reckless actions.

2)?The second question is what enabled these loans? Where did all this money come from? A common conclusion made by prominent economists who predicted this crash, such as Roubini, Schiff, Duncan as well as politicians like Ron Paul is that much of it was the result of excessive debt-surplus imbalances between the US and the rest of the world as a result of its trade deficits. I am not too sure how accurate their hypothesis are (though their predictions have been dead on), but if they are correct, it could mean a move away from the US dollar as a world reserve currency as well as a sharp decline in its value. Interested readers should read the books the Dollar Crisis by Richard Duncan (2004) and Crash Proof by Paul Schiff (2007).

[Mervyn Lobo]

Post by Gilbert Lawrence
I agree with much of what you write.

GL,
1) Its no fun writing for those?who agree with me :-)
2) It now looks like I will have a?load of time to write in the next few weeks but for today, I will remain brief.

Post by Gilbert Lawrence
The first line of failure in the US and internatioal financial system was the rot that crept into the system.

Not rot, outright bribery. The biggest bribers being the hedge fund lobby that removed?laws which were in place since the great depression.
The?one that really messed up the US?stock markets was the removal of the law that required shorters to sell only on an up-tick.
The US is still paying the price for the removal of this law.

Post by Gilbert Lawrence
Do you have a better path (than these two) or another thought-out / practical?solution??
More specifically what are the down-side risks / drawbacks?to your proposals?

GL,?I don't?make proposals.
My practical solution is to make money, for myself, from the known distortions in the US system.
Before I?divulge some of my new avenues,?I need to know?if?my advice to invest in gold, given here in detail?FIVE years?ago, was sound advice.???
I ask this as it is becoming increasingly clear that?some people are?here only to run their mouths. I find that even when the facts are put as
simply as possible, you get those with large amounts of time on their hands parroting?absolute rubbish.?The kicker is that even when?the idea?works
exceeding well, there is not a word of thanks. Not?even from those making money from the idea.

Post by Gilbert Lawrence
? An example?of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care.
? This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.?

The above can only come from a health professional. Here in Canada, the govt makes sure that doctors get their patients in for their annual examinations.
The govt knows it can reduce the health bill drastically by detecting and treating aliments early.

Mervyn1650Lobo



__________________________________________________________________
Yahoo! Canada Toolbar: Search from anywhere on the web, and bookmark your favourite sites. Download it now at
http://ca.toolbar.yahoo.com.

[Mario Goveia]

Date: Mon, 23 Feb 2009 05:38:29 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

To Mervyn:
I like your comment, "The cause ... is quite simple: Financial regulations that were in place were either removed or not adhered to." This after just reading and reading that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.

Mario responds:

Here we see Gilbert, a physician, continue his barrage of jejune personal insults against Prof. Tom Sowell, an eminent economist and expert in financial markets, who is a Fellow at the prestigious Hoover Institute at Stanford University. See, http://www.hoover.org/bios/sowell.html

I have already shown in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174166.html, how Gilbert misrepresented the term "dittoheads". The assertion that Prof. Sowell, a respected academic, talks like Mr. Limbaugh, a media commentator and talk show host, is equally specious and backwards. It is Mr. Limbaugh who frequently cites the research based opinions of Prof. Sowell.

At Gilbert's request in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174177.html, and to further his education, I have shown below some additional sources of information from credible sources.

Gilbert apparently has no idea that there are other financial industry experts who agree with Prof. Sowell's analysis of how the Community Reinvestment Act [CRA], an ultra-liberal piece of legislation passed in the Carter administration, which had good intentions of encouraging home-ownership by low income people, was escalated under the Clinton administration with overt and covert threats by the Justice Department, HUD, Democrat party politicians and community action groups against banks if they were slow to comply with its provisions.

Most political liberals and Democrats, and a few Republicans, defended and protected the growing house of cards because it helped low income people, which is what socialism does until it implodes from its fundamental economic flaws.

Shown below is an editorial from the respected Investors Business Daily:

http://www.ibdeditorials.com/IBDArticles.aspx?id=312766781716725

Excerpts:

The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it ? including revising history.

The CRA coerces banks into making loans based on political correctness, and little else, to people who can't afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.
[end of excerpt]

Additional sources are shown below:

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

http://74.125.95.132/search?q=cache:90IT4MK9474J:www.cato.org/pubs/regulation/regv17n4/vmck4-94.pdf+Justice+Department+under+Clinton+enforces+Community+Reinvestment+Act&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a

http://www.heritage.org/research/economy/hl516.cfm

http://iusbvision.wordpress.com/2008/09/30/obama-sued-citibank-under-cra-to-force-it-to-make-bad-loans/

[Gilbert Lawrence]

In the US, those that just repeat what?"Conservative talking heads"?write or say are called "Ditto Heads".? The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was?not the cause of bank failures.


It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

Adding to the above practices and?risks, William Black? states?in? "The Audacity of Dopes" the following. "Over the last few decades, the executive compensation and the compensation systems used for appraisers, accountants, and rating agencies were designed, and served, to create the perverse incentives and ethical rot that caused the ongoing financial crises by producing a "Gresham's dynamic" in which fraudulent and abusive lending and accounting practices drove good practices out of the marketplace."? Others have described banks as institutions that practiced "giant ponzi schemes".

Let's not tell the above to the "talking heads".? For these "talking heads" and their followers,?politicizing very issue is the name of the game.??

William Black is Associate Professor, University of Missouri, was the?senior regulator during S&L debacle..

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle. Greenspan?estimates the total amount of derivatives worldwide at eighty trillion dollars (80 Trillion US dollars) http://www.usagold.com/greenspanderivatives.html
??
Regards, GL


--------- edward desilva

Just because you got a cut and paste job, that does not mean that it is a fact. In UK at the moment the HBOS whistleblower said that the Banks were at fault NOT THE GOVT. And he is going to produce a 30 page dossier for the MPs.? Facts speak for themselves, not some back street newspaper BS..

---------- Mario Goveia:

What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down. It was precisely government intervention which turned a thriving industry into a basket case..

[Mervyn Lobo]

? It is widely believed that,?Derivatives and other?risky instruments that banks and other financial entities
(like brokerage and insurance companies) developed and widely used, to leverage themselves,?that caused?
the financial?failures. Those practices exposed the financial entities to far greater risk than giving sub-prime?loans.?

?
GL,
The cause of the?current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.


As for who is to blame, I will leave that to those who did not heed the warnings and who have now?lost their
savings and their retirement plans.?People will be writing books and articles on who is to blame, for the next
100 years. Luckily, I will not be in that group.


My?view of the crises?is?the exact opposite. Lots of financial opportunities have opened. The capitalist system
requires that the less efficient get slaughtered by the?efficient.?The capitalist system also requires the movement
of capital from sectors that are not performing to sectors that are.?There is a lot of money to be made by those
who understand these basics.


Lastly, the fact that really scares a lot of people in N. America is that companies?which are traded on the stock
exchanges are priced/valued on their quarterly performance. In order to meet the profit expectations of the analysts,
companies are cutting costs by laying of their workers. The responsible employer would bear the cost of keeping
valuable employees thru a down turn. The company that has to meet?a quarterly profit,?is forced to?cut its work force
in order to?meet the profits promised. A lot of people are going to lose their jobs. In the USA alone, about 600,000
people will lose their jobs this month.?Those without savings, will lose their houses a few months after they have lost
their jobs.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money.
This is insanity.
In its purest form.


Mervyn1002Lobo


__________________________________________________________________
Instant Messaging, free SMS, sharing photos and more... Try the new Yahoo! Canada Messenger at http://ca.beta.messenger.yahoo.com/

[Mario Goveia]

Date: Sat, 21 Feb 2009 13:06:58 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

In the US, those that just repeat what "Conservative talking heads" write or say are called "Ditto Heads". The law encouraging mortgages to low income earners, which is referred by some as "government intervention", is / was not the cause of bank failures.

Mario responds:

Sigh! So much ignorance, so little time:-))

First, a clarification of modern political American jargon and how it is often twisted by writers of political poppycock.

Here we see Gilbert, who supposedly has access to the internet for some minimal research, misrepresenting the term "dittohead" and the term "talking heads", which is something that politically liberal critics of the most popular "talking voice" on the radio, Rush Limbaugh, an aggressive political conservative, often resort to.

A "talking head" is a TV talk show personality. The term "dittohead" comes from listeners to Mr. Limbaugh's radio show, which dominates talk radio in the USA. Thus, Limbaugh is not a "talking head" since one cannot see his head during his show.

Secondly, the origin of the term "dittohead" is as follows:

"As Limbaugh often explains in his books and radio show, these are not necessarily those who agree with his views. Rather, he believes they are people who love the show and what he's doing, and hope he never stops doing it. The term came into use because callers would frequently begin by giving praise and thanks to Limbaugh. Knowing that the caller?s and listener?s time is valuable, one caller simply said roughly "ditto to what those guys said (how much they enjoyed the show)." Thereafter, callers were encouraged to simply say, ?Dittos,? and then get right to their point. Thus, long-time listeners would begin their calls with ?Dittos, Rush,? leading to the term ?dittoheads.? Source, Wikipedia.

Since this term originated with Mr. Limbaugh in the context of his show, his critics like Gilbert, who obviously do not listen to his show long enough to understand its nuances, do not get to revise what it means without being corrected.

Gilbert wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities (like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

Let's not tell the above to the "talking heads". For these "talking heads" and their followers, politicizing very issue is the name of the game.

William Black is Associate Professor, University of Missouri, was the senior regulator during S&L debacle.

Alan Greenspan who permitted the development of Derivatives and other such debt instruments has?take responsibility for his role in this debacle.

Mario observes:

Here we see Gilbert criticizing what he falsely claims are what "dittoheads" say, while himself repeating what "is widely believed" and citing what Associate Prof. William Black has said, who is himself a "talking head" in the classroom.

This is like a pot, played by Gilbert, calling the kettle, represented by Mario, "Black", pun intended:-))

To get back to reality, a "cause", by definition, is something that starts a chain of events.

By citing the excesses of the bankers Gilbert ignores the root cause of the financial crisis, the Community Reinvestment Act and the subsequent threats of lawsuits during the Clinton administration against banks who were slow to comply with its provisions.

There would have been no "derivatives and other risky investments" in the absence of this economically flawed attempt by politicians and government regulators to "spread the wealth" by government fiat and force banks to lower lending standards to low income people.

These instruments became risky precisely because they were backed by bad loans, which the borrowers were unable to repay. Had the loans been of good quality, as home loans were previously, the bankers' investment instruments would not have failed.

The excesses of the bankers started well after being forced by the regulators to make loans to unqualified people, under threat of lawsuits and other negative bureaucratic consequences.

I doubt Associate Prof. Black or Alan Greenspan, both of whose views Gilbert has cited out of context, would deny the facts in Prof. Sowell's column:
http://www.jewishworldreview.com/cols/sowell021809b.php3

[Mario Goveia]

Date: Sat, 21 Feb 2009 17:32:26 -0800 (PST)
From: Mervyn Lobo <mervynalobo at yahoo.ca>

The cause of the current financial crises is quite simple:
Financial regulations that were in place were either removed or not adhered to.

Mario responds:

This is a facile but false premise pushed by some observers. If government regulation were the answer, socialism, which is such regulation taken to an extreme, would be alive and well, instead a philosophy that has been rejected in large part by all it's major proponents.

In a speech at the World Economic Forum in Davos, Switzerland recently, Vladimir Putin, who has more experience with socialism than most other leaders, had this to say:

"Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake.

True, the state's increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent.

The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.

In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing."[end of excerpt]

In fact, in the USA financial regulations under the Community Reinvestment Act were the root cause of the problem. Without this act and the intentions behind it, and the subsequent market that developed in bad loans that resulted from the regulations, we would not have had the current financial crisis.

Mervyn wrote:

the fact that really scares a lot of people in N. America is that companies which are traded on the stock exchanges are priced/valued on their quarterly performance.

Mario observes:

This is another myth fostered by the media, because quarterly performance is all the information that is easily available to them.

The most successful long term investors work very hard at research and make estimates of future free cash flow, the capital investments needed to achieve this, the risk the company faces from competitors and other economic forces, the cost of capital based on alternative investments available to them, and observing the purchases and sales of corporate insiders and analyzing what these may mean, in arriving at what they are willing to pay for a stock.

Other investors use less rigorous analyses including trying to guess stock prices from price charts, etc.

Media observes and less savy investors then take the results as reflected in stock prices and try to correlate them with quarterly earnings, which are published way after the leading investors have made judgments about the value of the company's stock. It is rare for a leading investor to be surprised by what a company discloses in their published earnings because of how closely they monitor what is going on in companies they follow, using sources of direct and indirect information that are as unbiased as possible, which certainly excludes anything a corporate executive may say.

Finally, what should scare a lot of people is that the fundamentals of free market capitalism are being eroded by the new US administration and will take years to fix.

As I have observed previously, a partisan libertarian like Marlon knows all this but falls strangely silent when faced with absolute balderdash by his supposed cronies.

[edward desilva]

Got message saying there is a fault - in case you didn't get the first, ED.
------
http://www.jewishworldreview.com/cols/sowell021809b.php3
Hi Mario,
Why don't you just get it that 'cut and paste' does not mean that it is correct.
I have said that an alcoholic was paid ?25/- during the Paki-bashing period by a high volume News of the World in UK.
I know this alcoholic personally and I have been to his flat.
Secondly a Professor/Scientist in UK was paid by Tate and Lyle (sugar company) to publish an article to say that 'sugar is good for you'.
If a UK famous paper can publish rubbish why not a back street US paper?
Every thing in the above cut and paste article is BS.
The long articles that you keep writing (half way contradicting yourself) gives me a headache.
ED.

[Mario Goveia]

Date: Sun, 22 Feb 2009 11:36:19 -0800 (PST)
From: edward desilva <guirimboy at yahoo.co.uk>

Every thing in the above cut and paste article is BS.

The long articles that you keep writing (half way contradicting yourself) gives me a headache.

Mario responds:

Edward,

http://www.jewishworldreview.com/cols/sowell021809b.php3

The word "poppycock" should have given you a clue. Nothing you have written about things that happened in the UK, has anything to do with the issues mentioned in the column, which is about the USA.

Can you also provide some specific examples of the BS you are referring to, or some specific examples of where I have contradicted myself?

[Gilbert Lawrence]

Hi Mervyn,

I agree with much of what you write. With all due respects, I do not agree?with all that you state. Or more accurately with my lack of expertise, I do not? follow your reasonings; as I contrast them to the other information I see and read.

The first line of failure in the US and internatioal financial system was the rot that crept into the system. Unfortunately the free-market system permits development of "perverse financial incentives" (that caused this).? Such?perverse financial incentives have led to the debacles of many other institutions.? Such perverse incentives?will continue to lead to the debacle of more institutions including health-care, education and other services needed for society to function..

Your claim, "My view of the crises is the exact opposite".? I am not certain what is the opposite of what (view)?

I agree that "less efficient (entities) get slaughtered by the efficient".? One commentator suggested that for such to occur, we need for zombie banks to fail, Because keeping them afloat leads them to lend to zombie companies.? What are your thoughts??

Yet for the above?to occur, IMO, one will need to see a 'contraction of the economy' as was seen in many Asian economies; when they went through a financial crises about a decade ago. Europe?(Eastern and Western) and US does not plan to follow this model and have chosen to spend and inflate the economy.? Do you have a better path (than these two) or another thought-out / practical?solution?? More specifically what are the down-side risks / drawbacks?to your proposals?

As I have written in the past, I hate to see govt borrow from future generations. This is something that neo-conservative love and practiced it extensively under Bush for 8 years. Right now, govt spending appears to me to be the only option; short of the economy contracting and more people getting unemployed. A certain degree of? 'economic contraction', IMO?would eliminate the waste and redundancies in our current economic and other systems.? But this is bad news that no one wants to deliver.

What I would like to see is the 'govt spending' make us a 'lean mean? competitive machine' as we exit this crises. I am afraid that is unlikely.? An example? of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care. This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.? For this to occur the first step is to get the right-wing know-nothing talking heads (aka paid lobbyists /?advertisements)?out of the way. There is lot of room for improvement with many studies showing? less wasteful ways of delivering good health-care.

I like your comment, "The cause ... is quite simple:? Financial regulations that were in place were either removed or not adhered to."?? This after just reading and reading?that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.
Regards, GL

--------- Mervyn Lobo wrote:

The cause of the current financial crises is quite simple:? Financial regulations that were in place were either removed or not adhered to.

My view of the crises is the exact opposite. Lots of financial opportunities have opened. The capitalist system requires that the less efficient get slaughtered by the efficient. The capitalist system also requires the movement? of capital from sectors that are not performing to sectors that are.

Incredibly, the US govt is trying to convince its citizens that the way to get out of this crises is by spending money. This is insanity. In its purest form.

---------- Gilbert Lawrence wrote:

It is widely believed that, Derivatives and other risky instruments that banks and other financial entities??(like brokerage and insurance companies) developed and widely used, to leverage themselves, that caused?the financial failures. Those practices exposed the financial entities to far greater risk than giving sub-prime loans.

[goacom]

I do not believe that it was lack of regulation that caused the current problem and I believe that a system with less government intervention, within a proper framework of laws is the best in long run. I think that most of the actions by the Obama administration will not resolve the underlying problems and may actually make the problems worse. The laws of unintended consequences applies. I do not support bailing out home owners, the banks and bankrupt industries (like the auto companies).

In my opinion, there are two key factors for the current problem:
1) Most are aware that it is the collapse of the housing boom that is contributing to the current problem. I submit that if there were more controls (higher reserve requirements) like in Canada and Spain (which had an even crazier bubble), we would not have such a problem in the US. However, I believe the real problem was that there was very little enforcement/verification of the financials of the borrowers. In California where I used to live, and now one of the epicenters of the crisis, it was quite easy to get solicited with all kinds of bogus loans. Often there were little or no checks on people's credit and people were getting loans that allowed for negative amortization, easy refinancing (borrow on one's loan) etc. Furthermore, every Tom, Dick and Jose was getting into the frenzy of buying a home, which kept bidding the prices up. To me, the alarm bells were ringing way back in 2004, when it was apparent that the so called home P/E ratio was getting
way out of whack as defined by home price to rental ratios or by ratios of home prices to population income. If there is negligence, it is because borrowers, or the loan brokers, were lying about the borrowers incomes in order to qualify for loans. This is where the real crime was, deregulation or not. The existing rules were simply not being enforced.

The crisis started when the the sub prime borrowers started defaulting. The next hammer to hit will be next category up, which is the so called Alt A group. This is expected to peak in 2010. The problem now is that it now extending to the prime borrowers, who are now being affected because of the overall downturn.

Look at the stats below and weep:
http://www.bloomberg.com/apps/news?pid=20601068&sid=an7bb8PA_CqY

I think that while the actions by the current administration may provide temporary relief, I feel it will be a false dawn as it does not address the fundamentals of the problem.

The next level of failure with regulation enforcment was with the loan ratings agencies such as Moodys who gave a blanket 5* rating to all the debt, irrespective to its source. I think this is criminal and I for one, fail to understand why action is not being taken against such institutions. The consequence of this is staggering. It meant that insurance companies (such as AIG) drastically underestimated the risks of the loans and issued CDOs to the sellers of these loans. That is why when the loans started failing, it was not only the banks that started failing, but also the insurance companies that backed the banks. The single biggest recipient of govt. money is not a bank, but AIG, an insurance company.

The common thread of both of these is falsification of information or erroneous assumptions by the ratings agencies. While additional controls such as higher reserves could have reduced this problem, it may not have fully eliminated it. Furthermore, I believe there was no need for greater regulation. There was already a lot of illegal/inconsistent activities that were happening to justify government action to stop it.?The Bush administration did nothing and the actions of the Obama administration may actually go towards rewarding some of these people for their reckless actions.

2)?The second question is what enabled these loans? Where did all this money come from? A common conclusion made by prominent economists who predicted this crash, such as Roubini, Schiff, Duncan as well as politicians like Ron Paul is that much of it was the result of excessive debt-surplus imbalances between the US and the rest of the world as a result of its trade deficits. I am not too sure how accurate their hypothesis are (though their predictions have been dead on), but if they are correct, it could mean a move away from the US dollar as a world reserve currency as well as a sharp decline in its value. Interested readers should read the books the Dollar Crisis by Richard Duncan (2004) and Crash Proof by Paul Schiff (2007).

[Mervyn Lobo]

Post by Gilbert Lawrence
I agree with much of what you write.

GL,
1) Its no fun writing for those?who agree with me :-)
2) It now looks like I will have a?load of time to write in the next few weeks but for today, I will remain brief.

Post by Gilbert Lawrence
The first line of failure in the US and internatioal financial system was the rot that crept into the system.

Not rot, outright bribery. The biggest bribers being the hedge fund lobby that removed?laws which were in place since the great depression.
The?one that really messed up the US?stock markets was the removal of the law that required shorters to sell only on an up-tick.
The US is still paying the price for the removal of this law.

Post by Gilbert Lawrence
Do you have a better path (than these two) or another thought-out / practical?solution??
More specifically what are the down-side risks / drawbacks?to your proposals?

GL,?I don't?make proposals.
My practical solution is to make money, for myself, from the known distortions in the US system.
Before I?divulge some of my new avenues,?I need to know?if?my advice to invest in gold, given here in detail?FIVE years?ago, was sound advice.???
I ask this as it is becoming increasingly clear that?some people are?here only to run their mouths. I find that even when the facts are put as
simply as possible, you get those with large amounts of time on their hands parroting?absolute rubbish.?The kicker is that even when?the idea?works
exceeding well, there is not a word of thanks. Not?even from those making money from the idea.

Post by Gilbert Lawrence
? An example?of what I mean: The use of government dollars to make us a more healthy society delivering better quality health-care.
? This in the long-run will reduce cost of health-care.? If govt follows?some recommendations, it would reduce the cost of health-care even in the short-run.?

The above can only come from a health professional. Here in Canada, the govt makes sure that doctors get their patients in for their annual examinations.
The govt knows it can reduce the health bill drastically by detecting and treating aliments early.

Mervyn1650Lobo



__________________________________________________________________
Yahoo! Canada Toolbar: Search from anywhere on the web, and bookmark your favourite sites. Download it now at
http://ca.toolbar.yahoo.com.

[Mario Goveia]

Date: Mon, 23 Feb 2009 05:38:29 -0800 (PST)
From: Gilbert Lawrence <gilbert2114 at yahoo.com>

To Mervyn:
I like your comment, "The cause ... is quite simple: Financial regulations that were in place were either removed or not adhered to." This after just reading and reading that it was too much regulations that caused the debacle, put forward by a Rush Limbaugh talk-alike called Thomas Sowell.

Mario responds:

Here we see Gilbert, a physician, continue his barrage of jejune personal insults against Prof. Tom Sowell, an eminent economist and expert in financial markets, who is a Fellow at the prestigious Hoover Institute at Stanford University. See, http://www.hoover.org/bios/sowell.html

I have already shown in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174166.html, how Gilbert misrepresented the term "dittoheads". The assertion that Prof. Sowell, a respected academic, talks like Mr. Limbaugh, a media commentator and talk show host, is equally specious and backwards. It is Mr. Limbaugh who frequently cites the research based opinions of Prof. Sowell.

At Gilbert's request in http://lists.goanet.org/pipermail/goanet-goanet.org/2009-February/174177.html, and to further his education, I have shown below some additional sources of information from credible sources.

Gilbert apparently has no idea that there are other financial industry experts who agree with Prof. Sowell's analysis of how the Community Reinvestment Act [CRA], an ultra-liberal piece of legislation passed in the Carter administration, which had good intentions of encouraging home-ownership by low income people, was escalated under the Clinton administration with overt and covert threats by the Justice Department, HUD, Democrat party politicians and community action groups against banks if they were slow to comply with its provisions.

Most political liberals and Democrats, and a few Republicans, defended and protected the growing house of cards because it helped low income people, which is what socialism does until it implodes from its fundamental economic flaws.

Shown below is an editorial from the respected Investors Business Daily:

http://www.ibdeditorials.com/IBDArticles.aspx?id=312766781716725

Excerpts:

The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it ? including revising history.

The CRA coerces banks into making loans based on political correctness, and little else, to people who can't afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.
[end of excerpt]

Additional sources are shown below:

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

http://74.125.95.132/search?q=cache:90IT4MK9474J:www.cato.org/pubs/regulation/regv17n4/vmck4-94.pdf+Justice+Department+under+Clinton+enforces+Community+Reinvestment+Act&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a

http://www.heritage.org/research/economy/hl516.cfm

http://iusbvision.wordpress.com/2008/09/30/obama-sued-citibank-under-cra-to-force-it-to-make-bad-loans/