this article<\/a>, a decision in 2004 by the SEC, headed by William Donaldson at the time, permitted banks to exceed the reserve ratio in their investment houses, and money seemingly flew freely between the two.\u00a0 There was meant to be oversight of the banks’ health at the time, but that oversight never happened.<\/p>\nWhy did the banks seek this change in 2004?\u00a0 They did not believe they could compete against the large investment houses with so much money tied up in case of a credit crunch.\u00a0 Put another way, we forgot some of the lessons of the 1920s.<\/p>\n
And so it’s now obvious to all.\u00a0 President Bush has not only presided over the worst financial debacle since the Great Depression, but he and his team failed to learn from the mistakes of that era, making him worse<\/strong><\/em> than President Hoover, in my book.<\/p>\nWhat do we need to do to fix the problems?\u00a0 Some of it has already happened.\u00a0 Banks have become very conservative, and perhaps are leaning too far: it’s very hard to tell when the country is teetering on a recession.\u00a0 Some of that conservative nature needs to be codified by reversing the 2004 decision or requiring investment houses to meet the reserve ratio.\u00a0 In order to figure out which we have to question whether or not we can let a large investment house fail.\u00a0 If we cannot, then more regulation is appropriate.\u00a0 One way to split the baby is to require regulation of total assets and debt above a certain number, say the $5 billion talked about in the article.<\/p>\n","protected":false},"excerpt":{"rendered":"
I am sure I’m not that different from many others when I ask the simple question, what happened?\u00a0 How did the banks get into such a mess?\u00a0 What didn’t they see, and what regulation failed?\u00a0 Was the reserve ratio that the federal reserve demands too low?\u00a0 Did debt move from regulated to unregulated, and if … Continue reading “What Caused This Crisis?”<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[50,17,4],"tags":[60,34,190,188,43,191,189],"class_list":["post-429","post","type-post","status-publish","format-standard","hentry","category-complexity","category-economics","category-politics","tag-administration","tag-banks","tag-debacle","tag-depression","tag-president-bush","tag-president-hoover","tag-recession"],"_links":{"self":[{"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=\/wp\/v2\/posts\/429","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=429"}],"version-history":[{"count":3,"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=\/wp\/v2\/posts\/429\/revisions"}],"predecessor-version":[{"id":432,"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=\/wp\/v2\/posts\/429\/revisions\/432"}],"wp:attachment":[{"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=429"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=429"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ofcourseimright.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=429"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![\"\"](\"http:\/\/www.ofcourseimright.com\/blog\/wp-content\/uploads\/2008\/09\/three-stooges.jpg\" "\\"The")
I am sure I’m not that different from many others when I ask the simple question, what happened?\u00a0 How did the banks get into such a mess?\u00a0 What didn’t they see, and what regulation failed?\u00a0 Was the reserve ratio that the federal reserve demands too low?\u00a0 Did debt move from regulated to unregulated, and if so, why would that have caused a failure of regulated banks?\u00a0 How is it that the vast amount of debt went unrecorded until recently?\u00a0 And what are we doing wrong now?<\/p>\n