>>>>>>So your solution is to carry on as you are ?
>>>>>>
>>>>>>Of course not....there is too much regulation that has largely created the mess we face today
>>>>>
>>>>>Too MUCH regulation created the mess we face today? That's certainly an interesting take on it.
>>>>
>>>>I think Kevin believes in the purity of an unregulated market.
>>>
>>>So do Jake and Edward. This quite amazes me after what we went through last year. If there had been more oversight of and disclosure of the credit default risk swaps at the heart of it I doubt the economic tsunami would have happened. As it is even Alan Greenspan said I barely understand these things.
>>
>>Pardon me Mike, but I do not advocate an unregulated market. My problem is with over-regulation in general and legislative market manipulation in particular. I believe I've been quite clear regarding the sequence of events, legislative, regulatory and private-sector which have led us to our current predicament.
>>
>>CDSs were not the heart of the problem but an accelerant. Housing is the heart. CDSs and low interest rates were the amphetamines which sped up the heart and caused the attack.
>
>OK, unregulated was the wrong word. I still maintain we would not be nearly as bad off now if the financial industry were more closely regulated. More like it used to be -- something I believe we agree on, don't we?

We do. I've stated before, none of this occurs without the repeal of Glass-Steagall which separated commercial from investment banking and both from insurance. Without those trillions of savings deposits being allowed into high risk derivatives and insurance through CDSs for those high risk investments, the systemic risk of overleveraging simply cannot exist.

>Agreed that the housing slump (more like its return to sanity) was the precipitating event. Still, if that had been all that happened we would just be dealing with a normal recession, not the biggest global financial crisis in 70-80 years.

Housing is where it all begins. Without the push for more homeowners, there's no push for sub-prime loans. Without the push for sub-prime loans, there's no pseudo-publicly backed entity using it's AAA credit rating to bloat their balance sheets with those risky loans. Without that bloating, there's little market for the CDSs to insure those risky loans. Without those CDSs reflecting positively on the balance sheets, there's no massive overleveraging. Without that overleveraging, there's no systemic risk. We can go round and round on this, but it always comes back to housing and Glass-Steagall.