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Official — Economic Crash Not Computers' Fault 386

Posted by timothy
from the how-about-moral-hazard-and-too-big-to-fail dept.
itwbennett writes "A 2-year government investigation has found what we pretty much all knew to be true: High speed trading systems were not the cause of the 2008 economic crash. 'The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire,' according to a leaked copy of the report's conclusions revealed in the New York Times."
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Official — Economic Crash Not Computers' Fault

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  • That's just what my computer model said too...
  • by spun (1352) <loverevolutionar ... minus physicist> on Thursday January 27, 2011 @02:20PM (#35022846) Journal

    The rich are waging class war against the rest of us, and transferring wealth from the average person to themselves through fraud and coercion.

    • by burtosis (1124179) on Thursday January 27, 2011 @02:25PM (#35022926)
      Never assign malice when simple greed and stupidity will do.
      • by Schadrach (1042952) on Thursday January 27, 2011 @02:29PM (#35022978)

        Err, isn't that what OP was doing? Assuming simple greed?

        • Arguably, if that greed is causing an economic collapse, it's stupidity, too.

        • by jgtg32a (1173373)
          There's a subtle difference and if you look at the rest of his they will help reinforce my point. A greedy person will screw someone over for a buck no doubt for the sake of having the buck, but OP is saying that the rich are screwing people over simply for the sake of not allowing the average person have anything.
          His other statement:

          http://yro.slashdot.org/comments.pl?sid=1969586&cid=35023076

          >>They do not care about net profitability. They care about power and control, which comes from wealt
      • by Hatta (162192) on Thursday January 27, 2011 @02:44PM (#35023152) Journal

        Greed is malice.

      • by cHiphead (17854)

        Problem is, this is greed, but not stupidity.

      • by Dunbal (464142) * on Thursday January 27, 2011 @03:57PM (#35024060)
        I agree. I was trading that day and notice the Japanese Yen plummeting long before the market collapsed. IMO there was an astounding move out of the US dollar towards the Japanese yen which was the setup for the crash. The yen hit bottom about 10-15 minutes before the Dow and S&P 500 slid off the scale. I just couldn't stop laughing at all the excuses that were put forward the next day to "explain" it, none of which even mentioned Forex. Funnily enough we're still at 83 yen/dollar (from 93) over a year later - not because the yen is so good, but because the dollar is losing value like crazy (and the Euro along with it). But hey, blame it on "computer error" or "jp morgan" or whomever. Either way the magic bubble keeps inflating more and more - we broke 12,000 this week thanks to the Fed's money printing policy. So we'll have real nice stock prices, but in a few years Americans won't be able to afford to import anything or travel overseas. One way or another this abscess will find a way to drain - just don't be standing next to it when it does.
    • by royallthefourth (1564389) <royallthefourth@gmail.com> on Thursday January 27, 2011 @02:33PM (#35023014)

      What's more, our institutions are arranged in such a way that this is the natural outcome. The state has colluded with business since the beginning of the United States; this is how the colony projects were formed. George Washington was the richest man on the continent at the time of the revolution. It is only natural that he (and others like him) set up a system that makes sense from their perspective.

      At one point or another, the common man needs to set up a state that works for his interests. Eventually working Americans will grow tired of working to enrich others while they suffer from illiteracy and treatable diseases. They will seize control of the state and industrial structures and finally determine their own future.
      The biggest questions are when this will occur and will they have a plan for what to do after it happens, or will it succumb to demagoguery?

      • by spun (1352)

        To set up a state that protects the interests of the common man, he would need to rebel violently, because the current owning class will not give up their privilege easily. Violent rebellions almost always lead to tyranny, as the most ruthless are best able to take advantage of the chaos of violent rebellion. For example, see every single violent revolution except ours.

        • If you are suggesting that the United States hasn't caused incredible brutality, you are quite wrong. If any African slaves were still around, they would tell you so. The Indians can certainly still testify to it, and might do so here, if they had running water and consistent electricity on the reservation. Pro-business dictators in Latin America and the Middle East (installed by the United States) have caused more suffering than the worst of Stalin's purges.

          Even so, modern day communists still seek to avoi

          • by spun (1352)

            Ah, no. I am suggesting that, out of dozens of states which held a revolution to overthrow tyranny, most have ended up with more tyranny. We got lucky.

            As for the rest, you are preaching to the choir. I'm a social anarchist, though most would just call me a socialist, and I am educated in the real history of our nation.

      • by troll -1 (956834) on Thursday January 27, 2011 @04:48PM (#35024872)

        At one point or another, the common man needs to set up a state that works for his interests. Eventually working Americans will grow tired of working to enrich others while they suffer from illiteracy and treatable diseases. They will seize control of the state and industrial structures and finally determine their own future.

        What you're talking about is redistribution of the wealth by force. Historically the American economy has outperformed all others because it embraces laissez faire capitalism that allows people to accumulate wealth. Having failed in the old Soviet Union, been abandoned by the Chinese, and having caused stagnation throughout Central and South America, the idea of taking from the rich and giving to the poor still persists among those who choose to ignore history. Redistribution of the wealth has _never_ worked as an economic policy. It prohibits economic growth which means the poor just get poorer. This is the kind of thing Hugo Chavez does. You're all gonna end up like Venezuela if you're not careful.

        Google for Geni Coefficient before you assume that wealth disparity is historically more disproportionate today than it's ever been or that the gap is any wider in the US than it is anywhere else.

    • by roman_mir (125474)

      Well yes, and all of those rich people who are doing that, they are found in Washington DC.

      The class warfare is one of the last attempts of a failed government, that has spent everything it could and couldn't, to divert attention from themselves. When an empire falls apart it starts class warfare, and its started by the government, who divert the attention from themselves.

      Without government creating monopolies, there wouldn't be such huge disparities and differences between the 'rich' and the 'poor' (and b

      • by spun (1352) <loverevolutionar ... minus physicist> on Thursday January 27, 2011 @02:58PM (#35023352) Journal

        You put the cart before the horse. Government is just a tool, like a gun. It can be used for good or for evil. Tools do not have motivations of their own. They do what their owners make them do. We own our own government, but we have let it slip out of our control.

        Monopolies exist outside of government creation and control. Natural monopoly is only one case where the free market fails. When it does, we need another mechanism. The free market will not stay free on its own. The rich will use their wealth to control and dominate the market, with r without government. In fact, it is easier for them to dominate the market without government regulations.

        Our government is a democratic republic. It is hard for the wealthy to maintain control over it. They would rather it simply not exist, or failing that, that it do nothing to protect you, the cattle, from them, the owners. Government is not the problem, the rich controlling the government is the problem.

        • by roman_mir (125474) on Thursday January 27, 2011 @03:17PM (#35023554) Homepage Journal

          Monopolies exist outside of government creation and control

          - maybe you want to think about this before you type another one like that.

          Monopolies are government creations. The natural monopolies, such as if you own the original of Mona Lisa, that's not a government creation, that's real. But natural monopolies are far and between, while government has created and subsidized and protected and stimulated and bailed out and protected and created tax loopholes for and regulated for all of the really important monopolies of today, anything from AT&T, to the military industrial complex monopolies, to food production monopolies - the agricultural, the processing, the communications and the financial monopolies.

          Think about FDIC, think about what that means - removing risk from lending to certain banks.

          Think about Freddie/Fannie and what that means - removing risk from lending mortgages and then selling the 'securitized' debt around in SIVs.

          Think about 0-1% interest - taking huge loans from government at almost 0% interest and buying gov't debt and "making" the spread, thus in one shot - propping up more gov't spending and displaying 'record' profits.

          The utilities - energy department. When Carter established it, it had this agenda to get USA off foreign oil. Ok, how did that work out? But what happened to all the 'energy producing' companies that are dealing with the gov't?

          The monopolies, they are what government loves, they are what government wants, they are what pays the government officials to be reelected. It's a symbiotic relationship between politicians and monopolies, and they are parasites on the back of the society and economy that does not need them, suffers and suffocates because of them.

          You are saying: government is not the problem, the rich controlling it are the problem.

          But how did that happen? Who are these 'rich'? They are rich, because they are at the helm of the government, taking in the free money and KILLING competition with government power.

          They are the rich, and they are the government, because the people do not care, right? People do not care to stop the government from destroying the free market.

          Because the people, average people, they NEED the competition and free market. Because average people need prices to go DOWN, but monopolies do not allow that.

          Prices must go down. You are hearing that the gov't right now is telling you that the economy is improving. Do not believe a single word, it's a gigantic lie.

          An improving economy would mean more economic activity, and that only means more production and the result of that would be savings and reduction of trade deficit. The trade deficit is not reducing, the jobs are not appearing, the prices are not falling. Falling prices are brought to you by a working economy, by an economy that is becoming more efficient due to more efficient allocation of resources, and it's never planned, it just happens by the market forces, that choose for the falling prices.

          The government destroys the economy, takes away your purchasing power by printing money and causing prices to go up, at the same time it regulates the free market away to keep its monopolies running without any threat of competition, and this again causes prices to go up. The gov't also provides money.

          Gov't gives money, gives out loans to students, securitizes all these risky assets and loans and all this money is printed, given out with no interest, no backing, no reserves of any kind, no production to back it up.

          The US Fed is counterfeiting US Federal Reserve Notes (which are not dollars, dollars are coins, that are minted by US Treasury, that's the extent to which the gov't is allowed to 'create' money).

          The Federal Reserve is supposed to be this 'independent' entity, so that if the gov't starts spending too much, it can SHUT DOWN the printing press. Of-course the Congress will NEVER prevent the Fed from printing more money, because it will never stop from pr

          • by spun (1352) <loverevolutionar ... minus physicist> on Thursday January 27, 2011 @03:26PM (#35023652) Journal

            From http://en.wikipedia.org/wiki/Natural_monopoly [wikipedia.org] :

            A natural monopoly arises where the largest supplier in an industry, often the first supplier in a market, has an overwhelming cost advantage over other actual and potential competitors. This tends to be the case in industries where capital costs predominate, creating economies of scale that are large in relation to the size of the market, and hence high barriers to entry; examples include public utilities such as water services and electricity. It is very expensive to build transmission networks (water/gas pipelines, electricity and telephone lines); therefore, it is unlikely that a potential competitor would be willing to make the capital investment needed to even enter the monopolist's market.

            The reason we do not have more economic activity is that the rich will not invest in American business. Why would they, there is no demand for more products because people are too poor. The rich will gain a greater profit by investing in countries with poor labor, workplace safety, and environmental laws. They can exploit poor countries much more easily than rich countries.

            The Fed is controlled by rich banking families, not by the government. It is a "quasi-governmental agency," meaning it is entirely a tool of the rich. Again, government is not the problem, the rich are.

            • Re: (Score:3, Insightful)

              by roman_mir (125474)

              Don't patronize me, don't need to. Obviously there are some natural monopolies, but that's not what we are talking about, is it?

              Well, I am not talking about the natural monopolies, I am talking about all the monopolies that are not natural, and their nature is found in the halls of the government offices, where they are pumped up with money and privilege and where they are protected from the market forces, protected from any competition, where they get their preferable tax treatments, where they get the gov

    • by Hatta (162192) on Thursday January 27, 2011 @02:55PM (#35023286) Journal

      Indeed. Consider this. The economic losses to banks alone from the Financial crisis are estimated at 4 trillion [nytimes.com]. Total property crime in 2009 adds up to 15 billion [fbi.gov]

      That's less than half a percent! When you look at it this way, it's not disproportionate to suggest that the entire law enforcement budget of the United States be spent on bringing these criminals to justice. Yet, in most cases the people responsible for crashing the entire economy get million dollar bonuses for it.

      Honestly, the only way I can interpret this is that it's intentional. Our system is not intended to provide justice at all. It exists only to protect the wealthy. We have no justice system in the US, we have an exploitation system.

      • by definate (876684) on Thursday January 27, 2011 @07:01PM (#35026532)

        Please. Stop.

        You're obviously talking about something you don't understand. My guess is you model these people in your mind as evil villains, hatching plans, stroking kittens in their laps, and doing all sorts of dastardly deeds.

        They're not.

        These are very large, very complicated "systems" of people, with various incentives, and different ideas on how things should work. The result of everyones ideas, biases, actions, result in the system we have.

        If you investigated most of the people you find fault with, you'd find they did not act deceptively, they did not break any laws, they merely acted in a way which in hindsight was bad, but given the context was entirely rational.

    • No, we are not.
       
      /me returns to admiring the polished woodgrain on his custom-made PC

      • by spun (1352)

        But you aren't rich. You are middle class. I highly doubt that any real rich person posts on Slashdot. Remember, $250,000 a year is only upper middle class, it does not put you in the owning class. If you make less than a million a year, you are what a rich person would call a peasant.

    • by Lord Ender (156273) on Thursday January 27, 2011 @02:59PM (#35023358) Homepage

      What? If anything, it was the opposite. The Rich were transferring money to the poor so that they could buy houses they could not afford. Once the bubble that caused burst, the poor lost their houses (which they couldn't afford in the first place) and the rich lost their money (foreclosing on underwater mortgages == losing money!).

      Of course, the rich had bet everything (including the deposits in your bank accounts) on those mortgages. This is when the government decided to give your childrens' money to the rich to prevent the crash from becoming a collapse. But the government's action is the result of the crash, not the cause of it.

      • Re: (Score:2, Insightful)

        by spun (1352)

        Hahaha, good one. No, the poor are being scammed out of years worth of mortgage payments by the bank owning rich. Please look at current statistics. Look at the stock market, look at Wall Street Bonuses. The rich did not have to tighten their belts at all. The top one percent control more of the country's wealth today than they did when Bush took office. The crash, and the government response to it, were all decided upon ahead of time by the few wealthy banking families that control our monetary policy. It

      • by Lithdren (605362)
        This whole thing seems like the logical outcome when you base the value of your currency on the productivity of your people, rather then say a gold standard.

        US Currency is more or less worth what it is because we can say "Look! We're a huge super power, this cash isn't gonna go all Hungarian [wikipedia.org] on you anytime soon!" The very fact that the US was/is so huge, and could produce so much, gave weight to its currency. This was even better then gold because frankly, there isn't enough gold for that. The only w
    • Sure place no blame on the average public. Even after a lot of media coverage about the housing market being in a bubble and could pop. A lot of the average person was putting their own money into this as a way to get rich quick. The banks and the other rich were trying to meet demand. As they were many other sources that would have put them out of business if they didn't try to meet the demand. The average person is just as greedy if not more then the rich. I have seen the rich warning the average per

      • by spun (1352)

        We do have a class of people telling us what is right and what is wrong. Working to make the rich richer is right, anything else is wrong. You do not get to decide on the course our country takes, on where we focus our efforts, on what projects we decide are important. You are not owning class, so you do not get to decide. You can work for the rich, or develop new markets for them by starting your own business which they will bankrupt after you develop demand for them. That is all.

  • Makes sense. (Score:4, Insightful)

    by RyuuzakiTetsuya (195424) <{taiki} {at} {cox.net}> on Thursday January 27, 2011 @02:20PM (#35022852)

    I mean, the problems largely stem from scuzzy bankers and brokers buying and selling what they knew was garbage, along with problems with the fed's lousy idea of what an interest rate is, etc.

    It's like finding out that the Minnesota bridge collapse wasn't the fault of computers either. No big deal.

    • Re:Makes sense. (Score:5, Insightful)

      by UnknowingFool (672806) on Thursday January 27, 2011 @02:37PM (#35023068)
      And people ignoring history. Everyone from investors to banks to insurance companies were betting on housing markets never falling. Anyone who has studied housing markets know they have periods of downturn and growth. All markets are cyclical. When housing fell, everyone panicked and realized that they were invested into the trillions into a market worth substantially less.
      • Re:Makes sense. (Score:5, Insightful)

        by dkleinsc (563838) on Thursday January 27, 2011 @03:04PM (#35023414) Homepage

        Actually, only complete morons were betting that the housing market never fell. The smart evil bastards that make up most of Wall Street knew the market would collapse, but were doing their best to ensure that when it did so they'd lose nothing.

        For instance, Goldman Sachs would buy credit default swaps from AIG, which meant that they could never lose money on buying up a bad loan (because AIG was going to be left paying the piper if it did). Now, in order to get a good rate from AIG, Goldman also made those investments look much better than they were, so AIG was thinking "those suckers, we're never going to have to pay a claim on this". And of course Too Big To Fail meant that if the shit really hit the fan, they could be assured that Uncle Sam would be the one holding the bag.

        And to compound the problem, the individuals at those companies knew that they were never going to be personally liable for any of it. So the manager at AIG was happy to sell credit default swaps and make big bonuses - the worst that could possibly happen is he would get fired after making big bucks.

        • Re:Makes sense. (Score:5, Insightful)

          by radtea (464814) on Thursday January 27, 2011 @04:22PM (#35024422)

          And to compound the problem, the individuals at those companies knew that they were never going to be personally liable for any of it.

          Which is what distinguishes the United States from a free market. In a free market, individuals are liable for their actions. Government interference in the free market in the form of legislation that shields individuals from the consequences of their actions in the form of the various Companies Acts that have been passed in the past 150 years, allows such people to hide behind the skirts of the Nanny State.

          Given the absence of a free market in the US, there are only two consistent alternatives: to regulate the existing market further so that we get the benefits of the corporate form of social organization without so much of the downside, or to unregulate the market by abolishing the Companies Act and its successors, and return corporate property to its individual owners (the shareholders) while giving each owner and officer personal liability. Since the latter leads to a mess--this is simply a matter of historical fact--I personally favour further regulating the non-free market in which corporations exist.

          Anyone who attempts to oppose the regulation of corporations on the basis of claims about "the free market" is guilty of a fundamental logical inconsistency, as no corporations would exist in a genuinely free market.

      • Re:Makes sense. (Score:5, Insightful)

        by C10H14N2 (640033) on Thursday January 27, 2011 @03:32PM (#35023732)

        Actually, the major problem was precisely the opposite. The banks and insurance companies -- even Fannie and Freddie -- were all betting that the housing markets WOULD fail. Freddie was churning billions in overnight short sells of their own paper daily, trying to make a profit riding down that failure. It was a race to see who could skim the most off the trades themselves until the paper was worthless. Anyone with the slightest bit of understanding of economics in general and the housing market could see that crash coming back in 2000. They had just created the financial instruments to profit, massively, off the inevitable crash. Even as the last sucker holding that worthless paper, there was still one last bet to call in and come out even money with credit default swaps. It wasn't a cycle people forgot to plan for. It was a market deliberately re-engineered to transfer a LOT of wealth VERY quickly on the highly anticipated downside of that cycle.

        It was not an accident, much less willful ignorance. It was simply bare avarice.

    • by Blakey Rat (99501)

      They made those bad investments because there were insurance companies willing to *insure* those bad investments.

      The failure was on multiple levels.

    • by pieterh (196118)

      Bankers are pretty scuzzy, yes, but they've always been so. There are good reasons why the financial markets turned to more and more risky products over the years, and computers have a lot to do with it. It comes down to the ever falling cost of IT, and the erosion of banks' monopoly over large IT systems capable of handling trillions of transactions a year. With the loss of this monopoly, they could not sustain profit margins of 6% or so on normal banking products. And without such margins they could not

    • If you could make fees on selling something that you could then have a guaranteed buyer to who to resell, at cost or better, and them carry 100% of any future risk... who wouldn't take that deal? I'm not sure why you're being modded Troll, since that's largely what happened.

    • Re:Makes sense. (Score:5, Insightful)

      by need4mospd (1146215) on Thursday January 27, 2011 @03:17PM (#35023546)
      My question, now that we have this report, where are the prosecutions? Surely it's found that certain individuals or corporations share responsibility in creating the situation that caused economic downturn, right? There are mentions of fraud dozens of times throughout the report. Fraud is a crime last I checked. People should be going to jail en masse, from the greedy loan officer that forged paperwork to the upper management that did nothing while supervising it, all the way up to the previous and current Secretary of Treasury if necessary.

      We all get worked up over pictures of oil covered birds in the marshes of Louisiana, yet we just sit here and take it when the leaders of our country rob us at gun point.

  • I mean, why not?

  • Ban human trading (Score:4, Interesting)

    by alvinrod (889928) on Thursday January 27, 2011 @02:22PM (#35022874)
    There are a lot of complaints about automated trading on /., but at least the machines don't know how to be dishonest or cheat the system. Perhaps we should just leave trading to the machines and ban humans from participating. Something tells me that there would be fewer problems in the long run.
    • So, how wealthy do I need to be to get in on the effectively guaranteed returns of algorithmic high frequency trading? I mean, after all, if someone else learns how to make a profit from the activities of my algorithm, I can just demand the trades be reverted and them drug into court for daring to cost their betters money, right?

      • Exactly. Try to get a good price for buying an illiquid stock by aiming between bid and ask, and watch both bid and ask go up. Bid in between the new spread, and watch them both go up again. Finally settle for the new ask price, then watch the price drop back down again. They call it "providing liquidity".

        Now try the same again, bidding higher and higher, then turn the tables around and sell at the higher price. Guess what? Your ass gets dragged into criminal court for manipulating stock prices.

    • The problem is that the computers are programmed by people who want to maximize their own profit. They are not sentient, moral creatures, they are simply doing what people tell them to do, so if those people are telling them to cheat or be dishonest, they will. The only difference is that the computers are better at it.
      • by alvinrod (889928)
        If all of the computers are similarly programmed, they'll have a fairly level playing field. What I'm saying is that if only machines were allowed to trade, it would be impossible for insider trading to occur unless you could program that machines for that as well.

        The point I was trying to make is that machines can only do what they're programmed to do. They're not smart enough yet to be dishonest of their own accord. You can program that act in such a manner, but they'll do so predictably. The idea is t
  • Years after $Trading_Houses intentionally create a bubble to trick gullible people into giving them money, people finally admit that maybe there were actual people involved in the stock market crash. As opposed to it being the fault of the inanimate objects designed and put into place at the behest of the trading houses

    Kind of like with the dutch tulip bubble, but less pretty.

  • by swschrad (312009) on Thursday January 27, 2011 @02:35PM (#35023044) Homepage Journal

    the "flash crash" of fall 2010 was caused by robotraders.

    the "credit crash" of fall 2008 was caused by greedy streetpunks passing crap paper around in the form of wispy visions of a bad translation of a murky photo of a dim shadow of the promise of someday showing a bad asset. and taking big bonuses every time the stinking pile came around for another rubber stamp.

    the only possible report on cause could be "everybody failed as soon as this unregulated activity was allowed."

    that's what published.

    duh.

    • by Idbar (1034346)
      Computers don't do what you want them to do. They do what they are programmed to do. Trying to blame stuff on the computers is always ridiculous. If someone abuses the system and programs the computers to do so, it's not the computer's fault. If someone programs the computer in a broken way, it's also not the computer's fault.

      It's like the traditional "let's blame the video games" or "let's blame the drugs", so people can excuse themselves for their stupid behavior.
  • WTF? (Score:5, Informative)

    by Sponge Bath (413667) on Thursday January 27, 2011 @02:35PM (#35023052)

    Was this EVER a proposed cause of the global economic crisis put forth by any reputable source? At first I thought the article was talking about the flash crash last May. I was unaware anyone could look past the many obvious causes of the 2008 collapse and try to blame high speed trading.

    • by Plugh (27537)

      Quoth Sponge Bath:
      > At first I thought the article was talking about the flash crash last May."
      Thank you, I had made the same assumption. Else... WTF is the point of running the gorram story? ... ...
      Slashdot editors suck.
      Thank you again.

    • by XiaoMing (1574363)

      Was this EVER a proposed cause of the global economic crisis put forth by any reputable source? At first I thought the article was talking about the flash crash last May. I was unaware anyone could look past the many obvious causes of the 2008 collapse and try to blame high speed trading.

      What was done back in 2008 wasn't explicitly illegal, just very dishonest and clever exploits of recent deregulation deregulation and loopholes. And as we see now with their taxpayer funded bonuses, the perpetrators of that bullshit are no less bold than they were back then.

      What happened in 2010 also wasn't illegal, but obviously scared the crap out of everyone as well (granted on a much shorter-lasting timescale). Did we fix the root of that issue? No, there are some stops put in to bandage any future u

  • What a joke (Score:5, Insightful)

    by nedlohs (1335013) on Thursday January 27, 2011 @02:36PM (#35023056)

    The full 576 page investigation, out this afternoon, was the product of extensive research and interviews with over seven hundred witnesses. But only six of the 10 commission members, all of them Democrats, have backed the final report.

    Yeah, "extensive" research and interviews. Only of the very people who didn't see it coming of course, because the legion of people who predicted it in advance wouldn't have any idea as to the causes.

    You can guarantee the answer will be "there was enough regulation" by the gazillion regulations that did exist at the time and we need a gazillion more. Rather than "maybe the Fed settings rates at almost 0% for so long wasn't such a wise idea, oh and maybe when banks are making million dollar loans to people with no income and no assets the regulators and ratings agencies should take a look-see (you know doing their jobs)".

    And yes some things that weren't regulated should have been (if it looks like insurance and quacks like insurance then maybe is is insurance even if they call it a credit default swap).

    High speed trading is completely irrelevant since this wasn't triggered by a sudden drop in the prices of things involved in high speed trading in the first damn place.

    • by Klinky (636952)

      ...maybe when banks are making million dollar loans to people with no income and no assets the regulators and ratings agencies should take a look-see (you know doing their jobs).

      It's kind of hard to be objective when the banks and investment firms fund the regulators and ratings agencies... Definitely not a conflict of interest!

    • The markets had evolved much faster than new regulations could be applied, and of course the existing regulations weren't well enforced either. That's what you get tho...the party in power will put nay-sayers and do-nothings in charge of agencies and programs they don't like as a way to "show" that the agencies don't work. And of course, it's terribly difficult to get any new regulations put into law as no matter how good the economy they are always spun as job killers.

      But that's our two-party system.

  • You know, results of a government commission that was established to figure out the causes for the financial crisis of 2008 came out, and that commission was a charade, just like this one.

    That commission "found" that the crisis was caused by lack of regulations, that low interest rates and Freddie/Fannie had nothing to do with the housing bubble, they "found" that the only thing that government did "wrong" was let the Lehman brothers fail and that the future crisis can only be avoided if there is more gover

    • You should be quite happy with the findings, then. If there was systemic failure; if it was the fault of institutions, then it follows that new rules can be devised to adjust the behavior of these systems or institutions. But if it turns out that individuals made, by pure happenstance, stupid and inane decisions, than no law can possibly prevent them from doing so again. Capitalism triumphs over the laws of man!

    • by Klinky (636952)

      You should despise corruption over a specific institution. The government & many private institutions are all culpable in the financial meltdown. What safeguards did the private firms have to protect themselves and the economy from meltdown? None. They took advantage of the situation, which is what most corporations do and with the US economy setup to value short-term growth gains over stability you will have a lot of shortsighted investments with most of the prosperity coming in the form of fraudulent

      • by roman_mir (125474)

        I do despise corruption.

        But the government is the only institution, among all other institutions, that has the ultimate power over people - it can jail and kill people.

        OK? So I can hate corporations, whatever, but none of them have the legitimate power to kill you or me or to jail you or me.

        So when it's government corruption, I really really really despise it, because what is the ultimate conclusion of that? It's terrible, it's the worst.

        Government corruption must be treated with the most contempt out of al

  • by Jeremy Erwin (2054) on Thursday January 27, 2011 @02:39PM (#35023096) Journal

    Andrew Leonard says it's pretty much a waste of time [salon.com].

    I'm sure that committee members would have liked to assign blame; it's just that they didn't have the votes.

    • by Hatta (162192)

      Who needs votes? If we put every suit on Wall Street up against the wall and blew their fucking brains out, that would be a lesser injustice than letting them get away with this.

  • by Charliemopps (1157495) on Thursday January 27, 2011 @02:46PM (#35023182)
    Nationalize the Banks - before it gets any worse.
    If this were happening to any other country on earth the State Department would be leaning heavily on them to nationalize their failing banks. It's happened hundreds of times in the past and will happen again. Now that it's us, we're just too damned proud to suck it up and do what needs to be done.
  • by handy_vandal (606174) on Thursday January 27, 2011 @02:54PM (#35023264) Homepage Journal

    "'The crisis was the result of [human action] criminal behavior and [inaction] failure of law enforcement to do anything about it."

  • by jc42 (318812) on Thursday January 27, 2011 @03:11PM (#35023496) Homepage Journal
    The idea that "blame" could be assigned to a manufactured object with no mind or volition of its own is decidedly weird. Usually, when a machine is part of the cause of a disaster, the blame is assigned to the people who built and/or operated the machine. It makes no sense to blame the machine, since it had no choice in how it behaved.

    Maybe the authors think that we've actually built an Artificial Intelligence and put it in charge of our financial system. If so, maybe we should replace them with one of those computers.

  • by thepainguy (1436453) <thepainguy@gmail.com> on Thursday January 27, 2011 @03:47PM (#35023928) Homepage
    I don't think anyone thinks HS trading was the culprit behind the mortgage mess.

    Perhaps the OPer is confusing this with the flash crash.

    In terms of the mortgage meltdown, HS trading wasn't a major problem, but flawed risk models certainly were complicit because they added to the general overconfidence.
  • Of Course Not. (Score:4, Informative)

    by YetAnotherBob (988800) on Thursday January 27, 2011 @06:41PM (#35026322)

    The "Crash of 2008" was the result of several simultaneous actions.

    First, the overspending by the still relatively new Democratic Congress were not vetoed nearly enough by Mr. Bush.

    Second, the real estate boom busted. Mr. Bush had warned of the coming collapse 4 years earlier, but Congress, both Republicans and Democrats were much too interested in claiming credit for the easy home loans to worry about something that was more than 3 months off.

    Third, the relaxed accounting rules put in place during the Clinton Years had their final clash with reality. Reality won. Profits were nowhere near as high as investors were being told.

    Fourth, the savings rate by Americans continued to decline, a trend that dated back to the Carter years, and is a result of tax policy. This resulted in under funded banks that relied mainly on loans to each other for collateral, as there were not enough depositors to provide the funds. Like paying one credit card with another, a point comes where you have to pay the piper. The long toll had gone on for years. Finally reaching a breaking point. Much of the banking system worldwide went down together. Full recovery still hasn't happened. Europe has several countries that are in deep financial trouble because of it. Several US States are hurting from this as well.

    The US press of course blamed the President. That is after all a long time US tradition. Mr. Bush even got blamed for a hurricane or two. Stupid people believed it. New Orleans Mayor Levin for instance.

    A coastal city that is 30 feet below sea level, with only a dirt levee between it and the ocean should expect storm flooding of epic proportions, say 30 feet or so. That is what happened. The Army Corps of Engineers had been warning of this since 1910. It happened. There was an interesting article in Scientific America about that in the late 1970's. It was not a question of if, only of when. The problem still isn't fixed, so it will happen again.

    Now of course, Mr. Bush is no longer President, and Mr. Obama is getting blamed for the actions of others, including the weather. Well, he asked for the job. The blame comes with the territory.

    So, it's all officially Obama's fault now. Really, it is lots of people's fault. Who benefited? Mr. Soros, and a few select others. Mr Buffet didn't do too badly either. Mrs. Pelosi and Mr. Reid got a lot from it too. Mrs Pelosi has lost her throne as an aftereffect, but Mr. Reid managed to hang on, thanks to a hundred Million from Mr. Soros. The list goes on, but it is so much easier to just blame someone. It doesn't fix anything, but you might feel better for a while. That is really the take home lesson. We didn't fix anything, but we have blamed someone. They may or may not have had something to do with it.

    Don't worry about Mr. Soros, he got 7 Billion of the Stimulus funds to develop an oil field in Brazil where the oil is contracted to go to China. Mr. Buffet made out well on the recent stock climb, so he's doing well too.

    There are lots of interesting happenings on the other side of this political aisle too. Pick any famous Washington or Wall Street insider, and they are probably in it up to their necks. Some don;t even know they were partially at fault. After all, some very intelligent people are deliberately stupid. It's pride.

    No matter what side you are on, you were probably betrayed. It is after all about money.

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