Jim's Blog

Obama has a announced a great pile of trillion dollar giveaways to Wall Street, and called it tough regulation, though each of these regulations protects them from responsibility, while tapping the taxpayer’s veins.  To show how tough they are on Wall Street, congressmen summoned Goldman and Sach’s executives to Washington, and harshly ranted at them for selling their customers securities based on mortgages that they knew or should have known were $##%.

Meanwhile, the FDIC is busily ladeling great helpings of taxpayer money all over Goldman and Sach. (more…)

Substantial parts of this article are pillaged wholesale from Ryan Barne’s excellent account of the crisis, and Mortgage Guarantee Insurance’s colorful account of the crisis. I steal from the best. And thanks to the commenters that pointed out numerous errors.

In 2001, the Federal Reserve began cutting rates dramatically, dropping to 1% in 2003, in order to stimulate the economy.

This produced a boom, and especially a housing boom, in 2002.  A housing boom was a rational and appropriate response to the extraordinarily low  interest rate on a 30 year fixed rate mortgage, and no one was asking whether the extraordinarily low interest rates on 30 year fixed rate mortgages were rational and appropriate. (more…)

It is often claimed that the disaster was produced by deregulation.  What deregulation you may ask?

Well, mostly, the dismantling of Glass-Steagall.  I don’t think dismantling Glass-Steagall caused the crisis, but it is undeniable that if Glass-Steagall had remained in effect, the crisis would have been far less severe, for Glass-Steagall restrained financial institutions from being too big to fail.  It was the biggest institutions, the institutions too big to fail, that behaved the worst, and lost the largest proportion of the assets they managed.  Glass-Steagall also prevented financial institutions from all being “diversified” in exactly the same way, which “diversification” is not very diverse at all.

So why, and how, was Glass-Steagall dismantled?  It was dismantled by being replaced and superseded by Basel II.  Glass-Steagall consists of seventeen pages, that a competent person can, with some effort, comprehend.  Basel II consists of thousands of pages, no one knows how many, and no one person knows more than a tiny fraction of what is in these thousands of pages.

That is “deregulation”.

There have been numberless highly successful prosecutions for predatory lending, even though there is no plausible evidence that predatory lending has ever happened in recent decades, nor has such evidence ever been presented in court, nor is it plausible that predatory lending could be profitable except for lenders who break the borrowers legs and arms in the event of default. (more…)

Bryan Caplan asked why socialism turned out evil and proposed three competing explanations.  Volokh Conspiracy followed up, and a horde of socialists appeared out of the wood work, objecting to the premise of the question, claiming that socialism was just fine.

So time to re-run my golden oldie:  Why socialism needs killing fields.  (more…)