Wall Street's Day of Reckoning
The investment bankers took ungodly and unnecessary risks and then really did not speak openly about them or address them soon enough in order to avoid the collapse of some of the firms. This was the case of Lehman Brothers and its real estate holdings. As Woody Brock of Strategic Economic Decisions points out, mismanagement, along with "greed, perverse incentives, poor risk assessment . . . are deeply rooted in human nature and thus cannot be changed." But too much leverage, which amplifies those human failings like ignorance and bad judgment, can certainly be reformed and regulated.
What is to be done?
Both presidential candidates recognize that in the post-securitization world that has emerged in the past decade, a new system of regulation is inescapable. First, it will have to limit mortgages to viable buyers, and it will require imposing maximum loan-to-value mortgage ratios. Secondly, we will have to change our monetary policy framework to take explicit account of asset prices whose escalation was what blew up the bubble and finally burst it. Thirdly, a whole system of regulation (including limits on leverage) will have to apply to the investment banking, hedge fund, and private equity world: When firms directly or indirectly have to rely on the federal government to bail them out, they invite something similar to the Federal Reserve policy that was put into place in the 1930s toregulate banks and avoid systemic risk. In the short run some new federal agency may have to buy at a discount illiquid assets in order to enable private financing to resume.
The world of finance will never escape the existence of fear and greed. The appropriate degree of regulation will clearly be needed to prevent the kind of excesses that have now put at risk the entire economy.
Reader Comments
Wall Street's Day of Reckoning
As promised.
The Great Wall Against Wall Street -- How To Prevent The American Depression From Reaching China?
PART II. How Great Wall of China can be used to defend against failing Wall Street & its ideology?
Jordan C. Fan
(1) The Chinese government should nationalized or expel foreign companies such as Walmart. The business and employment practice of those companies must be frown upon by the Chinese government and people. The products & services of some of those companies must be boycotted by Chinese.
(2) All non-Chinese foreigners must be restricted or expelled from China because they are false indoctrinating the Chinese people. The main purpose of those foreigners were to mislead Chinese to prevent them from success and getting wealthy. Many foreigner are trying to create Chinese minorities uprising such as Tibetans to destabilized the government and take advantage of their crisis. Others are simply spies from other nations. Yet many simply trying to take away the already limited jobs from hardworking Chinese.
(3) The Chinese government must now redeem their enormous holding of U. S. Treasury Bonds and Bills because the American dollars are falling very quickly against the yuan due to inflation and economic downturn in the United States. The alternate investment for the government should be valuable and collectable items such as gold/silver coins, precious metal ingots, old currencies, antiques, historical objects & documents, books, postage stamps, designer jewelry, and furniture. Most importantly hire highly intelligent people with special talent and abilities. After cataloging and arranging those collectable items the government can then auction & sell them to the Chinese people to generate cash for more purchases.
(4) The Chinese economy should begin to slow down gradually without causing drastic downturns. Their exports should be concentrated on newly developed Asian, Australian, European and South American countries. Especially those petroleum, metal and other natural resources producing nations such as Russia. Chinese should avoid doing business or depending economically on the United States.
(5) The Chinese government should devote most of its money and resources in educating their people. The world’s most intelligent scientists & teachers in the world must be seek out, to become professors and teachers in universities & local schools.
(6) China should now demand foreign countries to return all archaeological, antiques & other valuable items which were stolen or acquired illegal/unfairly from China especially those before Liberation. Cash and gold/silver that were paid by Chinese during the nineteenth & early illegal & unequal treaties during twentieth century must be repaid back to China with interest.
(7) Environment Conservation. Since there are little wilderness or natural resources left in China and the world. China should again slow down its industries & construction of manufacturing facilities. Wildlife and plants must be strictly protected turned into Chinese national parks.
The Great Wall Against Wall Street -- How To Prevent The American Depression From Reaching China? PART II
The Great Wall Against Wall Street -- How To Prevent The American Depression From Reaching China?
By: Jordan C. Fan, Prophet Of Environment.
PART II. How the Great Wall of China can be used to defend against the failing Wall Street and American ideology?
(1) The Chinese government should nationalized or expel foreign companies such as Walmart. The business and employment practice of those companies must be frown upon by the Chinese government and people. The products and services of some of those companies must be boycotted by Chinese.
(2) All non-Chinese foreigners must be restricted or expelled from China because they are false indoctrinating the Chinese people. The main purpose of those foreigners were to mislead Chinese to prevent them from success and getting wealthy. Many foreigner are trying to create Chinese minorities uprising such as Tibetans to destabilized the government and take advantage of their crisis. Others are simply spies from other nations. Yet many simply trying to take away the already limited jobs from hardworking Chinese. Regardless of what their actual purpose, most are in China for false intentions.
(3) The Chinese government must now redeem their enormous holding of U. S. Treasury Bonds and Bills because the American dollars are falling very quickly against the yuan due to inflation and economic downturn in the United States. The alternate investment for the government should be valuable and collectable items such as gold/silver coins, precious metal ingots, old currencies, antiques, historical objects and documents, books, postage stamps, designer jewelry, and furniture. Most importantly hire highly intelligent people with special talent and abilities. To facilitate the collection and authentication of such collectable items the government should recruit large numbers of connoisseur and auction experts from shops worldwide and in on-line auction and sale groups. After cataloging and arranging those collectable items the government can then auction and sell them to the Chinese people to generate cash for more purchases.
(4) The Chinese economy should begin to slow down gradually without causing drastic downturns. Their exports should be concentrated on newly developed Asian, Australian, European and South American countries. Especially those petroleum, metal and other natural resources producing nations such as Russia. Chinese should avoid doing business or depending economically on the United States.
(5) The Chinese government should devote most of its money and resources in educating their people. The world’s most intelligent scientists and teachers in the world must be seek out, head hunter style, to become professors and teachers in universities and local schools.
(6) China should now demand foreign countries to return all archaeological, antiques and other valuable items which were stolen or acquired illegal/unfairly from China especially those before the Liberation. Cash and gold/silver that were paid by Chinese during the nineteenth and early illegal and unequal treaties during twentieth century must be repaid back to China with interest.
Any refusal should result in arm confrontation.
(7) Environmental protection and resource conservation. Since there are little or no wilderness or natural resources left in China and the world. China should again slow down its industries and construction of manufacturing facilities. Wildlife and plants must be strictly protect. Many scenic or wildlife area should be protect and turned into Chinese National Parks for our next generations and children to enjoy.
If all my recommendations and theories are put into practice, China and people will enjoy safety and prosperities in the 21 Century.
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