• IP addresses are NOT logged in this forum so there's no point asking. Please note that this forum is full of homophobes, racists, lunatics, schizophrenics & absolute nut jobs with a smattering of geniuses, Chinese chauvinists, Moderate Muslims and last but not least a couple of "know-it-alls" constantly sprouting their dubious wisdom. If you believe that content generated by unsavory characters might cause you offense PLEASE LEAVE NOW! Sammyboy Admin and Staff are not responsible for your hurt feelings should you choose to read any of the content here.

    The OTHER forum is HERE so please stop asking.

USA Greedy Investment Bankers to Blame for Crisis: Excellent Read

travelbug

Alfrescian
Loyal
Found this article today on CNN by an Economics Nobel Prize Winner & very readable for the layman.

Commentary: How to prevent the next Wall Street crisis

* Story Highlights
* Joseph Stiglitz: Fed pumped too much money, aiding housing bubble
* New-fangled instruments hid overuse of borrowing, Stiglitz says
* Executives followed short-term interests and magnified risks, he says
* Stiglitz: Widespread changes needed to prevent future crises

By Joseph Stiglitz
Special to CNN

Editor's note: Joseph E. Stiglitz, professor at Columbia University, was awarded the Nobel Prize in Economics in 2001 for his work on the economics of information and was on the climate change panel that shared the Nobel Peace Prize in 2008. Stiglitz, a supporter of Barack Obama, was a member and later chairman of the Council of Economic Advisers during the Clinton administration before joining the World Bank as chief economist and senior vice president. He is the co-author with Linda Bilmes of the "Three Trillion Dollar War: The True Costs of the Iraq Conflict."

NEW YORK (CNN) -- Many seem taken aback by the depth and severity of the current financial turmoil. I was among several economists who saw it coming and warned about the risks.

There is ample blame to be shared; but the purpose of parsing out blame is to figure out how to make a recurrence less likely.

President Bush famously said, a little while ago, that the problem is simple: Too many houses were built. Yes, but the answer is too simplistic: Why did that happen?

One can say the Fed failed twice, both as a regulator and in the conduct of monetary policy. Its flood of liquidity (money made available to borrow at low interest rates) and lax regulations led to a housing bubble. When the bubble broke, the excessively leveraged loans made on the basis of overvalued assets went sour.

For all the new-fangled financial instruments, this was just another one of those financial crises based on excess leverage, or borrowing, and a pyramid scheme.

The new "innovations" simply hid the extent of systemic leverage and made the risks less transparent; it is these innovations that have made this collapse so much more dramatic than earlier financial crises. But one needs to push further: Why did the Fed fail?

First, key regulators like Alan Greenspan didn't really believe in regulation; when the excesses of the financial system were noted, they called for self-regulation -- an oxymoron.

Second, the macro-economy was in bad shape with the collapse of the tech bubble. The tax cut of 2001 was not designed to stimulate the economy but to give a largesse to the wealthy -- the group that had been doing so well over the last quarter-century.

The coup d'grace was the Iraq War, which contributed to soaring oil prices. Money that used to be spent on American goods now got diverted abroad. The Fed took seriously its responsibility to keep the economy going.

It did this by replacing the tech bubble with a new bubble, a housing bubble. Household savings plummeted to zero, to the lowest level since the Great Depression. It managed to sustain the economy, but the way it did it was shortsighted: America was living on borrowed money and borrowed time.

Finally, at the center of blame must be the financial institutions themselves. They -- and even more their executives -- had incentives that were not well aligned with the needs of our economy and our society.

They were amply rewarded, presumably for managing risk and allocating capital, which was supposed to improve the efficiency of the economy so much that it justified their generous compensation. But they misallocated capital; they mismanaged risk -- they created risk.

They did what their incentive structures were designed to do: focusing on short-term profits and encouraging excessive risk-taking.

This is not the first crisis in our financial system, not the first time that those who believe in free and unregulated markets have come running to the government for bail-outs. There is a pattern here, one that suggests deep systemic problems -- and a variety of solutions:

1. We need first to correct incentives for executives, reducing the scope for conflicts of interest and improving shareholder information about dilution in share value as a result of stock options. We should mitigate the incentives for excessive risk-taking and the short-term focus that has so long prevailed, for instance, by requiring bonuses to be paid on the basis of, say, five-year returns, rather than annual returns.

2. Secondly, we need to create a financial product safety commission, to make sure that products bought and sold by banks, pension funds, etc. are safe for "human consumption." Consenting adults should be given great freedom to do whatever they want, but that does not mean they should gamble with other people's money. Some may worry that this may stifle innovation. But that may be a good thing considering the kind of innovation we had -- attempting to subvert accounting and regulations. What we need is more innovation addressing the needs of ordinary Americans, so they can stay in their homes when economic conditions change.

3. We need to create a financial systems stability commission to take an overview of the entire financial system, recognizing the interrelations among the various parts, and to prevent the excessive systemic leveraging that we have just experienced.

4. We need to impose other regulations to improve the safety and soundness of our financial system, such as "speed bumps" to limit borrowing. Historically, rapid expansion of lending has been responsible for a large fraction of crises and this crisis is no exception.

5. We need better consumer protection laws, including laws that prevent predatory lending.

6. We need better competition laws. The financial institutions have been able to prey on consumers through credit cards partly because of the absence of competition. But even more importantly, we should not be in situations where a firm is "too big to fail." If it is that big, it should be broken up.

These reforms will not guarantee that we will not have another crisis. The ingenuity of those in the financial markets is impressive. Eventually, they will figure out how to circumvent whatever regulations are imposed. But these reforms will make another crisis of this kind less likely, and, should it occur, make it less severe than it otherwise would be.

The opinions expressed in this commentary are solely those of the writer.

All AboutFinancial Markets • Alan Greenspan • Iraq War

Find this article at:
http://us.cnn.com/2008/POLITICS/09/17/stiglitz.crisis/index.html
 

madmansg

Alfrescian
Loyal
the answer is equally simple. Give FT who buy USA homes a PR passport. U will have the taksins of the world buying up and the problems is solve in one week.
 

tonychat

Alfrescian (InfP)
Generous Asset
good article.

It boils down to a few things. Just be honest, pay back every baht you own, be selfless in doing work or business ( do it for the society and other rather than the sinkie selfish focus on oneself), be considerate in terms of monetary activities.
 

pia

Alfrescian
Loyal
good article.

It boils down to a few things. Just be honest, pay back every baht you own, be selfless in doing work or business ( do it for the society and other rather than the sinkie selfish focus on oneself), be considerate in terms of monetary activities.

Hi Tony, I would rate your posts as excellent, if you would just remove sinkie from your posts once in a while... pleeeeases!! :biggrin::wink:
 

madmansg

Alfrescian
Loyal
never trust a academic to solve the world problems. If not for wall street, we would still be using pagers to communicate.
 

The_Latest_H

Alfrescian
Loyal
Well madmansg has his own reasons to support excessive de-regulation, but as the eight years of mismanagement has shown, the government has a right to regulate through laws and regulations, and also through taxes, subsidies and quotas.

It may be inefficient, but it's for good reasons. The government shouldn't shrink or shrug off its administrative duties.

Its a fact of life, madmansg. Its not an archaic world outside. There are rules and regulations, all common sense & reasonable, that everyone has to follow. And besides, it wasn't Wall Street which invented the computers and internet; it was the US government who started using computers in the post WWII era and assigned a government agency to invent a computer network which should withstand nuke attacks in the 60s.

The US government gradually opened it up, and then the private market took over. That's how Bill Gates and Steve Jobs were able to be the first computer titans; that's how the internet became what it is today when the management was turned over to the people in the private and public sectors in the late 80s as the Cold war was in its last days.
 

zack123

Alfrescian
Loyal
Once again the weat led by the great leader USA has brought us so much turmoil. Now its their forthrightness in their monetary policy which had shown sign of failure but continued in the name of greater freedom.

Its about time they pack up their soldiers back to their shithole to solve their problem so that others wouldn't be sucked further into the shit they had created.

Stop giving crap about other nations when you can't even wipe the shit off your own ass.
 

The_Latest_H

Alfrescian
Loyal
Once again the weat led by the great leader USA has brought us so much turmoil. Now its their forthrightness in their monetary policy which had shown sign of failure but continued in the name of greater freedom.

Its about time they pack up their soldiers back to their shithole to solve their problem so that others wouldn't be sucked further into the shit they had created.

Stop giving crap about other nations when you can't even wipe the shit off your own ass.

If you have a really brilliant idea to make Tokyo or HK the financial capital of the world, instead of NYC, I would like you to announce it here.
 

The_Latest_H

Alfrescian
Loyal
Why in Tokyo/HK and not Spore which has established good corporate governance?

Singapore has to de-politicise the judiciary system first, and in the private sector, make their investment companies open, and accountable; depoliticise the private sector; liberalise the private sector by reducing their control by 95%, and then make the political system open so that all parties can fight fairly in elections.

The reason on why HK and Tokyo are considered to be better, if not the default choices is because in business, the governments don't play sides anymore, or at least not as much as the Singapore government does for its financial sector and in its judiciary system and in the political system.

Until the government or any alternative government put in power by people in a fully democratic election opens up the system and ensures improvement in all areas, we won't surpass HK and Tokyo, let alone New York.

And besides, we are way smaller in population as well. New York has tens of millions of people within its city; we have 4m at best, and we cannot go beyond 4.5m without making terrible sacrifices.
 

zack123

Alfrescian
Loyal
Singapore has to de-politicise the judiciary system first, and in the private sector, make their investment companies open, and accountable; depoliticise the private sector; liberalise the private sector by reducing their control by 95%, and then make the political system open so that all parties can fight fairly in elections.

The reason on why HK and Tokyo are considered to be better, if not the default choices is because in business, the governments don't play sides anymore, or at least not as much as the Singapore government does for its financial sector and in its judiciary system and in the political system.

Until the government or any alternative government put in power by people in a fully democratic election opens up the system and ensures improvement in all areas, we won't surpass HK and Tokyo, let alone New York.

And besides, we are way smaller in population as well. New York has tens of millions of people within its city; we have 4m at best, and we cannot go beyond 4.5m without making terrible sacrifices.

True it is good to have an open political system but what corporations look out more for is political stability. What is the point of having high democratic rule when it risks leading to political instability?

Japan has too many scandals involving the govt which has led to several changes. HKG is too affliated to China. There must be a separation between industrial and financial superpower to avoid having too much concentration of influence.

As for population, the value-added of the population has a better consieration rather than the number of people within the city.
 

johnny333

Alfrescian (Inf)
Asset
Japan has too many scandals involving the govt which has led to several changes. HKG is too affliated to China. There must be a separation between industrial and financial superpower to avoid having too much concentration of influence.


In Spore the ugly person in charge of Temasek is sleeping with the PM :rolleyes:
 

DerekLeung

Alfrescian
Loyal
Morning Call: September 18
Credit Crisis Enters Critical Phase; Central Banks Freak
The U.S. Federal Reserve, the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank, et all, practically air-dropped hundreds of billions of dollars, spreading them all over the face of the earth, in a desperate attempt to maintain liquidity yesterday. Where did they get these dollars from? Warren Buffett, of course. Meanwhile, president Bush took drastic measures: he canceled a trip – no, really – to focus on masterminding a fresh economic plan, which hopefully, will lead to happy endings (eh, sort of happy?) for Wachovia and/or Washington Mutual. More on the latest machinations, ahem, maneuverings being employed in this serious new phase of the credit crunch.
 

yansen84

Alfrescian
Loyal
i'm currently in Canary Wharf in London and it's kinda funny here. on Monday the Lehman people were all out on the streets here and the headhunters were whacking like mad. chaotic shit
 

tonychat

Alfrescian (InfP)
Generous Asset
Hi Tony, I would rate your posts as excellent, if you would just remove sinkie from your posts once in a while... pleeeeases!! :biggrin::wink:

He he he..... OKok... since you ask for it. i will do that if i feel like it. cheers....
 

The_Latest_H

Alfrescian
Loyal
True it is good to have an open political system but what corporations look out more for is political stability. What is the point of having high democratic rule when it risks leading to political instability?

Japan has too many scandals involving the govt which has led to several changes. HKG is too affliated to China. There must be a separation between industrial and financial superpower to avoid having too much concentration of influence.

As for population, the value-added of the population has a better consieration rather than the number of people within the city.

As if Temasek weren't closely linked with the PAP and the Lee family. At least in New York, while Rupert Murdoch has links with many of his empire of media companies, he doesn't own the whole of Wall Street.

And he probably cannot own the entire court in the New York state and pay its judiciary for decisions favouring himself and his companies. The same goes for companies in HK and Tokyo. I mean there are big MNCs who will try to pay their way- but as it is, the market is just too big for one or two companies and in addition to that, now the government has to play administrator in such tough times as this.

I'd bet that the PAP will not regulate Temasek even if most of their deals become toast, simply because the boss is the daughter-in-law of the first PM of Singapore. At least Murdoch is not related to the New York judiciary, the NY governor, President Bush and others.

True it is good to have an open political system but what corporations look out more for is political stability. What is the point of having high democratic rule when it risks leading to political instability?

It is because of democracy that such scandals are exposed before it gets worse. What I'm not afraid are financial scandals- we as people are imperfect, and as such, will have people who try to circumvent the system for personal gain- instead, what I'm afraid of is financial scandals being covered up because of the lack of democracy and subsequent transparency, and ending up in even worse tragedy. Rot often doesn't start from the tail of a fish; its starts from the head, and in order to stop the rot, we must always check the fish condition consistently and that happens when there's democracy and transparency and accountability.

That reduces political instability as corruption is exposed first in a democracy, and the corrupters subsequently put into trial.

In a dictatorship, as demonstrated by the 5000 years of instability in chinese imperial history, scandals are often unexposed, and because of that after a hundred years or two of family rule, the subsequent Emperors from father to son became even more and more corrupted, alongside their officials and eunuchs. And that led to the overall downfall of the many Dynasties that ruled China.

And that retarded China's growth economically; when Britain and the US, and other smaller countries like Sweden and Denmark took decades to a couple of hundred years to achieve 1st world status, which China is still not there yet, it says a lot.
 
Last edited:
Top