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XMFSinchiruna (28.54)

This is Everything I Have to Say About How This Crisis Came About!

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51

September 26, 2008 – Comments (17)

Please please please read this article, and please please please share your thoughts and reactions here! If you like the analysis, please recommend the article at that link so more people will see it.

http://www.fool.com/investing/dividends-income/2008/09/25/the-worst-kind-of-deja-vu.aspx

For those pointing to a single, recent cause of the present crisis, I insist that Fools take a longer view here. A crisis of this magnitude is not built out of a single moment or a single action; nor can it be attributed to a single political party. Rather, the present crisis is the result of the end of a regulatory regime born out of the 1930s in the aftermath of the 1st Great Depression, and facilitated by the finite memory span of successive generations.

Judging by the words of Thomas Jefferson quoted below, this is not the first time America has

doomed itself to repeating history:

"I place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared. To preserve our independence, we must not let our rulers load us with perpetual debt.

Thomas Jefferson, third US president, architect and author (1743-1826) 

 

17 Comments – Post Your Own

#1) On September 26, 2008 at 1:51 AM, DemonDoug (98.73) wrote:

yup, Glass-Steagall needs to be reinstated.

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#2) On September 26, 2008 at 2:40 AM, Nigel1234 (< 20) wrote:

right on brother!

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#3) On September 26, 2008 at 4:52 AM, TheGarcipian (86.14) wrote:

I guess once you fall out of the Top 100, your blogs get less and less attention... (grumble, grumble, grumble)... Just over a week ago, I blogged about repealing the Gramm-Leigh-Bliley Act and reinstating the portions of the Glass-Steagall Act that the GLBA gutted here at this link if you care to take a look. And yes, TMFSinch, we are definitely repeating history here...

--Gar

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#4) On September 26, 2008 at 7:47 AM, XMFSinchiruna (28.54) wrote:

Garcipian,

I wish you had checked your information before suggesting I wasn't thorough. Gramm-Leigh-Bliley and the Financial Services Modernization Act are one and the same. Please feel free to add another comment on the article. :)

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#5) On September 26, 2008 at 10:52 AM, mandrake66 (94.90) wrote:

Sinch, agree with you completely. The efforts to repeal various parts of the New Deal financial regulatory regime began in earnest in the 60s and didn't begin to bear real fruit until the Reagan-Bush Sr-Clinton years. Glass Steagal was really dead as a doornail long before it was formally repealed.

Here's a really useful timeline:

http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

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#6) On September 26, 2008 at 11:04 AM, mandrake66 (94.90) wrote:

I think the clear point of both the fool article you posted, and the frontline article, is that 50 years of attempts to undo the New Deal finally bore fruit when Alan Greenspan became Fed Chairman. He is undoubtedly the single person most responsible for undoing the protections put in place after the Great Depression. He is certainly not solely responsible, but he is the central figure.

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#7) On September 26, 2008 at 1:11 PM, bostoncelitcs (74.15) wrote:

You give the Bush administration way too much of a pass here........SEC Chair Christopher Cox is to the 2008 Wall St. meltdown  what FEMA head Michael D. Brown was to Hurricane Katrina in 2005....giving into pressure to remove the "uptick" rule.

 Instead of showing "leadership" after invading Iraq and telling Americans sacrafices were going to have to be made......he only encouraged Americans to keep shopping at the malls and driving their SUV's!

The bill's come due....time to start paying for the Iraq war.

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#8) On September 26, 2008 at 1:23 PM, GNUBEE (24.85) wrote:

Don't forget Nixson's opening china. Had that not happened the US probably would not have a buyer for most of our debts. China effectively increased our credit limits, and turned us into a consumer nation.

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#9) On September 26, 2008 at 4:35 PM, buildncastles (75.04) wrote:

GNUBEE is absolutley correct. Everyone is thinking of this as just solely a American financial crisis and that this happened because of the mistakes we have made. Yes we have made mistakes and they have impacted us greatly. Yet, the world is so globalized we need to realize what other nations are doing and how they impact our own economy and how we can protect ourselves.

 As far as repeating our mistakes, it's simply human nature. We are bound to repeat ourselves. I think it is due to the simple fact that every generation thinks it can do what past generations could not. We thought we were smarter, had a stronger grasp on our markets and understood our risk. Obviously we did not...

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#10) On September 26, 2008 at 4:35 PM, buildncastles (75.04) wrote:

GNUBEE is absolutley correct. Everyone is thinking of this as just solely a American financial crisis and that this happened because of the mistakes we have made. Yes we have made mistakes and they have impacted us greatly. Yet, the world is so globalized we need to realize what other nations are doing and how they impact our own economy and how we can protect ourselves.

 As far as repeating our mistakes, it's simply human nature. We are bound to repeat ourselves. I think it is due to the simple fact that every generation thinks it can do what past generations could not. We thought we were smarter, had a stronger grasp on our markets and understood our risk. Obviously we did not...

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#11) On September 26, 2008 at 5:58 PM, XMFSinchiruna (28.54) wrote:

As always, you guys all make some excellent points. My intention with the article was not to say that the events listed represent every ounce of responsibility for the events transpiring, but rather to ensure that people not focus in on one moment exclusively and instead zoom out to take in the longer view. There is a regulatory cycle here that is as long as our cultural memory. Had our cultural memory been longer, I believe we would never have permitted the banking/brokerage industry to get the upper hand on us for a second time.

That being said, I agree that Greenspan played a pretty giant role. I did not intent to let the Bush administration off easy... this certainly is the worst administration in American history. :) As to the comment regarding the SEC... I don't see the uptick rule asreally being central to this, though it certainly is an important issue.

Thanks to all of you for commenting, and for recommending the article right onto the 10 most recommended articles of the week list... thereby permitting more Fools to see the piece. I really wanted people to think about the longer term cycle, so I appreciate you all helping me get the word out!  :)

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#12) On September 26, 2008 at 6:03 PM, TheGarcipian (86.14) wrote:

Hey Sinch,

You're absolutely right. I blew that one. It was very late and I'd confused the Financial Services Modernization Act with the Commodity Futures Modernization Act. Sorry about that. I stand corrected.

Thanks,
--Gar

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#13) On September 26, 2008 at 6:20 PM, XMFSinchiruna (28.54) wrote:

No worries, man! I did get a chance to read your blog post, abd found it very interesting. Great job.

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#14) On September 26, 2008 at 6:21 PM, leohaas (91.57) wrote:

Excellent article, Chris! Keep them coming.

I am not sure all is lost, though. With the demise of the brokers business model, they are now all banks. And there is no reason why we cannot regulate banks. For instance, doesn't that come with a limit on their leverage?

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#15) On September 26, 2008 at 11:56 PM, leohaas (91.57) wrote:

Excellent article, Chris! Keep them coming.

I am not sure all is lost, though. With the demise of the brokers business model, they are now all banks. And there is no reason why we cannot regulate banks. For instance, doesn't that come with a limit on their leverage?

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#16) On September 30, 2008 at 2:08 AM, pjani06 (29.92) wrote:

good article, thanks for sharing, but we do have to be careful in our regulation.

 because remember, especially in the current environment, we need the basics of transparency, confidence, and opportunity to give fresh air to our economy to wake up.  although regulation will help out, too much regulation or the wrong kind of regulation can easily scare away investments outside of our great country; stopping the foreign investments that would have otherwise come in & channel capital out of the US through Fed's Open Market Operations. 

Regarding today's big bailout decison;

See the link below for the FULL list of representatives with first name, last name, and state represented, & indicates if they voted for the bailout or against the bailout with CLICKABLE LINKS for their contact information!!!

see this here :

Now its personal, full names & links to all the Representvs. who voted YES or NO to the BAILOUT

this is far from over! 

do something, pat them on the back or convert them or...vote them OUT!

enjoy.

 

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#17) On September 30, 2008 at 3:34 PM, pjani06 (29.92) wrote:

Check this out, the solution to the mess, posted today by Karl Denninger from fedupusa.org / market ticker;

Denninger's "How To Fix Our Banking System" sent to all in Congress today Report this comment

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