For example, the "obscene" bonuses that bankers were paid in previous years wasnot the exclusive result of greed per se. It has more to do with how the free market operated. When hedge fund managers operating under the 2-20 rule started making hundreds of millions of dollars through their investments, the hedge fund industry attracted would-be bankers away from the banking industry. To prevent the best and brightest from being bought away, banks had to start paying comparable bonuses.
So you want me to believe that the banks managed to get bankrupt while being run by "
the best and brightest"?
Isn't it more reasonable to say that the free market rules created an environment where opportunists and idiots got to run the show and pay themselves billions?
It wasn't "cheap money" that put those people in control of banks - or hedge funds. It was throwing away all rules, oversight and requirements for responsibility. It was
allowing those speculative schemes in the first place. Obvious Ponzi schemes, banned or limited after the last world economic depression, but human memory does not extend more than a few decades, it would seem...
Hedge funds? Stock market speculation? When will people understand that this adds nothing
real to an economy? Favors no one but the opportunists who happen to be lucky with their timing. Stock markets are just that - markets. Their
single use is to provide "easy liquidity", an easy way to trade ownership on capital investments.
They they got turned into a veritable casino: options, futures, short sales, CDS, ... Why? Because foolish economists claimed that markets could work perfectly, if only we had markets for everything, everywhere, for the present and the future. That was what turned stock markets (inherently unstable) into a casino.
Economists screwed up. And so did bankers. Because bankers, even more than economists,
were paid to care for the banking system, to
protect all their customers - the first and foremost duty of a banker is to protect the assets he is trusted with, not to announce larger profits each quarter. That was not their duty, it was their personal greed at work.
However, with a low federal interest rate and a booming equity market, savings dropped. Without savings the banks could not fulfill their duties and their earnings became capped.
Ah, they myth of perpetual growth... show better profits every quarter, and reap ever-increasing pay. But it wasn't their duty to lend what they did not had. It wasn't their duty to "repackage" mortgages. It wasn't their duty to make loans which they knew could not be repaid. Bankers pissed on their duty, pissed on the people they lend money to, and pissed on the people they sold their "packaged products to". All for the sake of profiting more personally.
Those bankers are not scapegoats, they are clearly one of the guilty parts here.
Everything leads back to globalization. No single evil mastermind orchestrated the financial mess. It all played into the free market.
[...] We have to rethink globalization as well as the world of finance. This is why I inquired conservatives to share their opinion on this matter. Given the chain of events that have unfolded, can we truly allow the free market to operate the way it has for the past few years. If we do not regulate the market, should we still bail out the banks? Bailing out the banks should not be dismissed lightly because they perform extremely crucial services in our society. They are the lubricant that keeps our economy running.
Bankers are arguably so important that they
cannot be allowed to continue in the hands of those bankers. But while banking is important, it can take many shapes. The "huge private global bank", "too big to fail" model has clearly failed...
However, any regulations we do decide to impose will almost certainly fail or create new problems because of how complex a system the regulation will affect. The financial collapse was not exclusive to the financial world. It was directly linked to global trade. It was the trade surpluses of Eastern nations that generated the kind of capital that triggered all the chain reaction. However, our tax policies, our interest rate manipulation also contributed to their trade surplus.
Almost certainly fail? No. If a system is too complex and cannot be prevented from crashing, dismantle it and build a less complex one. Both finance and trade require regulations. Regulations can only be effective (or rather, can only be carefully crafted to bring about positive outcomes) if they are created for reasonably homogeneous regions. Which is fortunate, because states, the only power capable (and with some kind of democratic legitimacy - often questionable) of imposing regulations are also regional.
So yes, "globalization" - the idea of having the same economic rules and regulations for all the world, of imposing some kind of "bevenolent
consensus" on the world - belongs in the dustbin of history.
