Comment 28034

By Brandon (registered) | Posted January 05, 2009 at 10:36:04

A Smith,

Do you really believe it was regulation that caused the problems? A huge part of the problem is "Credit default swaps", which are, essentially, insurance without the pesky government rules restricting them. In order to insure something, you need to prove you have a certain amount of capital. This is to make sure that you don't insure more than you can reasonably cover. I know, I know, stupid rules.

But let's see what happened. A whole pile of risky mortgages (again, lack of rules allowed them to come into being, but that's another story) were bundled with decent mortgages and given triple AAA ratings (more rules gotten around there...) and sold as safe investments. Those were then re-bundled again and again. Now we have a combination of these sub-prime mortgages resetting to higher interest rates and the housing market leveling off instead of continuing to rise. Hello mortgage defaults.

Now about that insurance that was promised... What do you mean you can't cover it?

Suddenly it turns out that a lot of these regulations had a basis in fact, not simply some absurd desire to stop people making money.

Who won from these deregulations? Why, the people making millions upon millions at the top of Wall Street with their lobbyists and tame legislators. Who lost? Millions of people who were convinced by predatory lenders that their housing prices would continue to rise indefinitely and so re-financing would always solve their problems.

Rules are not, by definition, bad things.

I am disappointment in you're grammar.

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