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Old 12-31-2011, 11:47 AM   #991
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Originally Posted by Achtung11 View Post
Take a look at the run on the banks that led to the Great Depression. It was the Government's non-involvement that exacerbated the lack of confidence in the banking system, and led to the greatest economic downturn in history. There is no question that without TARP, things would have been much, much worse today.
It was also the government's involvement that prolonged the depression until, basically, WWII came along.

One can certainly make these arguments in favor of TARP:
1) It did begin under Bush
2) We were facing a possible financial meltdown.
3) (Attention OWS) The banks have paid back the TARP money. The Congress then wasted it rather than returning it to the treasury.

Against TARP:
1) It has set a terrible precedent as we go forward facing bankruptcies in industry (Airlines, newspapers), foreign banks failing in a globalized economy and even state and municipality defaults. There will be enormous political pressure for federal bailouts.
2) Post-TARP the "too big to fail" banks have only grown larger.

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To give you a look at where things were heading, after the Lehman Brothers bankruptcy, credit markets froze. There was an evaporation of trust. Banks stopped lending. Forget Wall Street, even the behemoth GE was having trouble meeting it's short term financing, and would have certainly gone under had it not been for TARP. There was a chance that McDonald's was not going to be able to pay it's workers in the next week because it couldn't access short term financing.
Well now you introduce the 3rd problem with TARP:

3) Smaller banks that do the majority of local lending to businesses can't compete against the large banks and their preferential rates. My bank, founded in 1880, was forced to merge just this year.
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All in all, we needed a restoration of trust in the banking system, and the only party that was large enough to take action was the U.S. Government. It's silly to think that the affect of free markets can't be proven, because the Great Depression is a perfect example that disproves anyone who thinks government should have stayed out of it. All this anti-TARP talk coming from most of the Republican candidates is designed to appeal to the stupidity of the American public.
I agree in that I tend to favor the argument that TARP was needed but also that it was badly managed (too much power given to Bernanke, not enough concessions from banks in regards to bonuses, reforms and breaking them up).

Good debate. You've studied the issue.
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Old 12-31-2011, 08:29 PM   #992
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Originally Posted by INDY500 View Post
It was also the government's involvement that prolonged the depression until, basically, WWII came along.

One can certainly make these arguments in favor of TARP:
1) It did begin under Bush
2) We were facing a possible financial meltdown.
3) (Attention OWS) The banks have paid back the TARP money. The Congress then wasted it rather than returning it to the treasury.

Against TARP:
1) It has set a terrible precedent as we go forward facing bankruptcies in industry (Airlines, newspapers), foreign banks failing in a globalized economy and even state and municipality defaults. There will be enormous political pressure for federal bailouts.
2) Post-TARP the "too big to fail" banks have only grown larger.



Well now you introduce the 3rd problem with TARP:

3) Smaller banks that do the majority of local lending to businesses can't compete against the large banks and their preferential rates. My bank, founded in 1880, was forced to merge just this year.


I agree in that I tend to favor the argument that TARP was needed but also that it was badly managed (too much power given to Bernanke, not enough concessions from banks in regards to bonuses, reforms and breaking them up).

Good debate. You've studied the issue.
I feel like you might be over-generalizing a bit, though. The issue isn't really with commercial banking, it's with investment banking. Some kind of regulation (OH GOD NO I'M AN ECON STUDENT) to separate risky investment banking from the people that issue mortgages should be the first priority in financial industry reform.

I am an Obama supporter, but have no false illusions that it's the financial industry money that got him into office with his record fundraising in 2008.
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Old 01-01-2012, 03:43 PM   #993
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It was also the government's involvement that prolonged the depression until, basically, WWII came along.
How so?

And you missed the main point that, a total lack of confidence led to the run on banks. The government had the power to restore the confidence, but it didn't, making economic downturn much worse and longer than it could have gone. That's the main idea. In addition, it was the lack of government oversight that allowed people to carelessly borrow on 10% margin and speculate in the stock market. It was after the 1929 crash that margin requirements were set at 50%. The FDIC was also created as a result of the banking run, which was a very smart move by the government. So government oversight is absolutely necessary. I'm a big believer in capitalism, but I think that this blind notion that "free markets" rule best is ridiculous.

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Originally Posted by INDY500 View Post
One can certainly make these arguments in favor of TARP:
1) It did begin under Bush
2) We were facing a possible financial meltdown.
3) (Attention OWS) The banks have paid back the TARP money. The Congress then wasted it rather than returning it to the treasury.

Against TARP:
1) It has set a terrible precedent as we go forward facing bankruptcies in industry (Airlines, newspapers), foreign banks failing in a globalized economy and even state and municipality defaults. There will be enormous political pressure for federal bailouts.
2) Post-TARP the "too big to fail" banks have only grown larger.

Well now you introduce the 3rd problem with TARP:

3) Smaller banks that do the majority of local lending to businesses can't compete against the large banks and their preferential rates. My bank, founded in 1880, was forced to merge just this year.

I agree in that I tend to favor the argument that TARP was needed but also that it was badly managed (too much power given to Bernanke, not enough concessions from banks in regards to bonuses, reforms and breaking them up).
I agree with most of this, more or less. TARP wasn't perfect, but hindsight is always 20/20, and it got the job done. And you're right, there is the moral hazard issue. For that reason I think it might not have been a mistake to allow Lehman to go under, contrary to popular thought. It help set an example that government protection is not always guaranteed for everyone. And if there was one firm that we had to choose to let die, Lehman was the right pick. It had the most idiotic, envy-driven management out of anyone on Wall Street. People like to cast Goldman Sachs as the cause of the crisis, simply because they are extremely profitable. But they were/are the most risk averse firm, and that's why they survived. And they also didn't need TARP. But the irony is that because they do survive, they get all the blame, whereas Lehman Brothers, which deserves much more of the blame, got to escape under the blame radar because they failed.

Going forward, the best way to prevent the need for bailouts is by setting much tougher incentives for management. And owning significant stock in their firm is clearly not enough. Lehman CEO Dick Fuld had a $1 billion stake in his firm which deteriorated to about $30,000 when the firm collapsed. But the man is still a multi-millionaire. We need incentives that would force CEOs to give up nearly all of their net worth if their firm requires a bailout.

The problem with forcing the banks to make greater concessions with TARP was that not every big bank wanted or needed the money (Wells Fargo, JP Morgan, Bank of America and Goldman Sachs come to mind). They were essentially forced to accept the funds so that the public cannot discriminate between healthy and weak banks. So more tougher concessions wouldn't have worked.

There was too much power given, not to Bernanke, but to Hank Paulson. He essentially threatened to publicly outcast the banks who didn't accept the money, which alone might have taken them down. The fucked up part about TARP was that the weak banks got a great deal, but the prudent, risk averse banks were the ones who suffered.

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Good debate. You've studied the issue.
Sure, but perhaps you should study it some more so you can see some of the flaws in free markets.
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Old 01-01-2012, 03:54 PM   #994
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Originally Posted by Canadiens1131 View Post
I feel like you might be over-generalizing a bit, though. The issue isn't really with commercial banking, it's with investment banking. Some kind of regulation (OH GOD NO I'M AN ECON STUDENT) to separate risky investment banking from the people that issue mortgages should be the first priority in financial industry reform.
But commercial banks were part of the problem. It was the commercial banks and mortgage lenders that made the shitty loans which were sold to Wall Street or backed by Fannie Mae/Freddie Mac. And a lot of the lending problems were caused by monoline lenders (Countrywide, American Home Mortgage, New Century Financial, and others). They had no incentive to make good loans, because all they did was sell those loans to Wall Street, whom in turn sold them to idiot investors. But when the housing market started cooling down, most of the firms that were involved had a huge inventory of these loans or packaged products, which they couldn't take off their books.
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Old 01-01-2012, 04:00 PM   #995
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He said this after the economic meltdown in the fall of 2008?
It was part of his platform during the election cycle. I remember during one of the debates, Obama took advantage of it and called him out.
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Old 01-01-2012, 08:54 PM   #996
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How so?
Not talking banking here but joblessness and economic growth. While the New deal provided much needed stability and security the price controls, anti-competition provisions and growth in union power (much of which was later found unconstitutional) slowed the recovery and led to another downturn in the late 30's.

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I'm a big believer in capitalism, but I think that this blind notion that "free markets" rule best is ridiculous.
I'm hardly for the abolishment of the FDIC and the complete deregulation of banks. Who is? I'm not even in favor of abolishing the Federal Reserve.

But I'd argue that the market place would not have allowed the housing bubble to swell for years or interest rates to remain artificially low. The inefficient, unprofitable or corrupt financial institutions would not have survived the market's pressure to cleanse away such entities. It would have been very, very painful to allow more institutions to go bankrupt and for the housing market to bottom out--but we'd be in better shape now. As it stands 3 years out, "too big to fail" still hangs over our heads and a stagnate housing market drags down an economy struggling to recover.
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Old 01-01-2012, 09:35 PM   #997
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As it stands 3 years out, "too big to fail" still hangs over our heads and a stagnate housing market drags down an economy struggling to recover.
I'm assuming that you'd be in favour of an immediate repeal of the Gramm-Leach-Bliley Act then? Because I certainly haven't heard a clamoring for that type of legislative move from the GOP.
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Old 01-01-2012, 10:21 PM   #998
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When asked during a tele-town hall organized by the Faith and Freedom Coalition whether he would consider the former Alaska governor as his running mate in 2012, Newt Gingrich explained that he would definitely consider her for that position.

Gingrich stated that he was a “great admirer” of Palin’s, and argued that her record of political reform in Alaska was impressive enough that he would expect her to bring the same spirit to Washington. But the candidate also brought up the possibility that Palin’s record on energy independence would make her an ideal candidate for Energy Secretary in his administration.

“I can’t imagine anybody who would do a better job of driving us to an energy solution than Governor Palin.”
...there's a headache-inducing combo right there.

Santorum...it's cute that he's still trying, it really is .
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Old 01-01-2012, 10:24 PM   #999
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I'm hardly for the abolishment of the FDIC and the complete deregulation of banks. Who is? I'm not even in favor of abolishing the Federal Reserve.

But I'd argue that the market place would not have allowed the housing bubble to swell for years or interest rates to remain artificially low. The inefficient, unprofitable or corrupt financial institutions would not have survived the market's pressure to cleanse away such entities. It would have been very, very painful to allow more institutions to go bankrupt and for the housing market to bottom out--but we'd be in better shape now. As it stands 3 years out, "too big to fail" still hangs over our heads and a stagnate housing market drags down an economy struggling to recover.
I agree that interest rates were too low for too long, and had this not been the case, the credit/housing bubble might not have been as big. Alan Greenspan's easy money policy certainly helped build the bubble, but that was only one out of many factors, involving many parties in the government and the private sector. THE underlying assumption of all these parties was that "house prices always go up" or "house prices won't come down by a lot".

There still would have been a bubble and collapse, and there still would have been systemic risks in the system needing bailouts. Incidentally, it was also Greenspan's laissez-faire attitude towards the derivatives market that played a major role in the mess. Like you mentioned, "too big to fail" still exists; and the main reason for that is the inter-connectedness that is a result of the derivatives market. "Too big to fail" would have existed regardless of interest rate policy, and it will continue to exist unless we have a major overhaul in the $500,000,000,000,000 (that's $500 Trillion) worldwide derivatives market.
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Old 01-02-2012, 06:51 PM   #1000
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The fact that santorum is second shows how ridiculous these things are...
But he's such a wonderful human being; a champion to civil rights, supporter of charities, friend to gays....
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Old 01-02-2012, 07:38 PM   #1001
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Hey guys. I don't know if you peeps caught wind of this.

But get this.

Over the weekend, Kelly Clarkson's new album got a huge sales boost after Kelly had gotten on Twitter and endorsed Ron Paul.

How can you guys explain Kelly's album getting more sales after a Ron Paul endorsement?
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Old 01-02-2012, 07:41 PM   #1002
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A) people said "Hey, I like Ron Paul, too! That Kelly Clarkson is good people" and bought her album.

B) she got quite a bit of backlash online, and some people probably bought it to support her
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Old 01-02-2012, 08:26 PM   #1003
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Or it doesn't really matter who she endorsed, what does matter is how she made the endorsement. She caused a tiny bit of controversy and made news, that in turn reminded people she's still around and has a new album.
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Old 01-02-2012, 08:43 PM   #1004
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This could change, but as of now-

1) Romney, in the mid 20s, maybe even approaching 30
2) Paul, very close behind
3) Santorum, mid-teens
4) Gingrich, low-teens
5) Perry, high single digits or low double digits
6) Bachmann, mid-single digits
7) Huntsman, barely registering

Both Bachmann and Santorum need top 3 or else they drop out.
I'm going to revise this. I think Romney/Santorum/Paul finish 1-2-3 and Bachmann/Gingrich/Perry finish 4-5-6, but those two sets of three could really finish in any order. Here's my prediction and percentages, give or take a little:

1) Romney- 26%
2) Paul- 22%
3) Santorum- 21%
4) Perry- 13%
5) Gingrich- 11%
6) Bachmann- 6%

With two debates this weekend, nobody drops out before New Hampshire. Bachmann, Santorum, Gingrich and Perry go straight to South Carolina.
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Old 01-02-2012, 09:02 PM   #1005
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I'm assuming that you'd be in favour of an immediate repeal of the Gramm-Leach-Bliley Act then? Because I certainly haven't heard a clamoring for that type of legislative move from the GOP.
Maybe, especially as a way to limit their size, but I've heard arguments that banks recovered quicker from the crisis because of the diversity this bill allowed.

Not sure.
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