However, it was the mortgage-backed securities and their failure that sit at the heart of the crisis, and those came directly from government regulation and intentional distortion of the markets. They sprang from Congressional demand to spread lending to borrowers who normally wouldn’t have qualified for mortgages, with Congress explicitly mandating Fannie/Freddie purchases of these subprime loans, setting in motion an irrational bubble in the housing and construction markets.

A firestorm that was ignited by the dramatic more then doubling of energy prices. Again, as a result of Congress and government policies.

Clearly to Howard Dean the solution is the ‘isms, who’s outcome was described in cartoon form more then 50 years ago!
David
David

I normally don’t like government meddling in the economy, but after this, I believe that Adjustable-Rate Mortgages should be permanently banned. There’s too much risk of starry-eyed borrowers being tempted to buy more house than they can really afford, then losing everything a few years later.

With a fixed-rate mortgage, the first year is the worst, and it gets easier after that, due to inflation and people’s incomes normally rising with work experience.

Dean isn’t the first idiot with “Dr.” in front of his name.

GarandFan on May 8, 2009 at 1:41 PM

+1

Thanks for the word. I like Stossel.

carrying a net short position

progressoverpeace on May 8, 2009 at 2:47 PM

That should have been: “net short stock position”

What’s insane about the uptick rule… is “bear raiding” was a major culprit in the 1929 stock market crash, which led to the uptick or +1 system, whereas a stock’s price had to next trade flat or + in order to be shorted or sold.

Odie1941 on May 8, 2009 at 2:33 PM

You can only short if someone is willing to lend you stock (barring the naked shorts, as I mentioned in my post). If stockholders refused to lend out their shares, then no one could short. But if you lend me a share of stock and then I have special case where I am not allowed to sell that as normal, that’s not right.

I would also add that the uptick rule affects a lot more than just the stock being traded. Options traders need to do stock trades to hedge their option trades (they don’t “have” to, but for the sake of risk minimalization, they do), so an option trader who is carrying a net short position, because of his portfolio, is at a serious disadvantage to selling puts or buying calls.

The perversion of the market with the uptick rule cascades outwards. If people don’t want anyone shorting their stocks, then tell the brokerages that their shares are not available for borrowing.

Of course, Joe Kennedy Sr. perfected this bear raiding, making hundreds of millions and then… became the first SEC Chairman, being he “knew all the rules, even how to break them”

History does repeat itself, in so, so many ways.

Well, being a guy plagued with heart disease, that one got my attention. The heart cath is still the gold standard for determining the severity of atherosclerosis and bypass prolongs lives. WTF is the guy talking about? Is he suggesting that all of us heart patients just roll over and croak?

BobMbx on May 8, 2009 at 2:05 PM

LOL … sadly.

/paging m. steele, please don’t boot this opportunity …

Buckaroo on May 8, 2009 at 1:39 PM

The play-by-play from tomorrow:

Steele fields the long punt by Dean at his own 38 yard line, jukes left right….spins around another tackler…streaks up the right side….he’s at the 50, the 45….the 30 FUMBLE!

Deregulation also played a role. Removing the uptick rule also made the crisis exponentially worse as short-sellers raided teetering institutions.

The uptick rule is moronic, unfair, and leads to inefficiencies in the markets. Please stop championing this mechanism, as it does nothing more than force an unnatural upward bias on markets.

Now, if you wanted to talk about naked shorts, that’s a different story …

BadgerHawk, it really is a sad state of affairs when the stock marker rallies on a 8.9% unemployment rate, and 539,000 job loss.I feel like I’m in a parallel universe!

sandee on May 8, 2009 at 1:42 PM

For a lot of people, including myself, it’s a question of timing. Most of the smart, large sum investors aren’t playing buy and hold right now. They’re making as much money as they can trading and trying to figure out when to shift out. I don’t believe you’ll see a long term rally any time soon.

Every day the market goes up I scale out a little bit.

Deregulation also played a role. Removing the uptick rule also made the crisis exponentially worse as short-sellers raided teetering institutions. Coming closer to the heart of the crisis, an explosion of derivatives and insurance policies surrounding mortgage-backed securities (MBSs) also amplified the effects of their rapid devaluation. The lack of proper oversight on these markets at least allowed them to spread in ultimately irrational ways.

wow someone here admitted that. bravo.

We have never had pure capitalism in this country, at least not in the last century. We have always regulated markets to some extent. The problem in this case is neither the capitalism or the regulation, but the deliberate government distortion of both to further political goals. That’s what we need to eliminate in the future, not capitalism or regulation as a whole, nor the establishment of either to the eradication of the other.

Yep. The “regulation v. capitalism” is a false choice. One does not subtract regulation by adding capitalism. Dean uses the term regulation when he really means welfare state. its not about monitoring business practices, its about seeing that those practices produce ample wealth to disperse to the entire population.

were democrats about actual regulation, and not said dispersion, maybe i’d vote for one again. but they aren’t. so i wont.

Duh Mr. Dean. Even China realized, they needed to implement capitalism, in order to survive. L/seven Looooooser.