Well,John Fogarty was great yesterday and played like a youthful twenty-two at sixty-five. I was very glad I went to see his band play. They all were very exuberant about the show and John performed non-stop for two hours.He played all of his hits from Creedence and more. I didn't realize what a fine player he is. His young band was excellent and every song had instrumental parts where John excelled.Every form of rock was played and they continued the pace throughout the show.I'm also glad a nice crowd turned up to support Family.
The "asset price bubble"is economist speak for the housing bubble.During the years of the buildup,while interest rates were low and poured into houses; or many took money out of their homes by taking out loans against the increased value,people treated their houses like giant ATM machines. Greenspan(Central bankers) claimed that China kept interest loans low buying T-bills and that the central bankers didn't raise rates(slow the bubble) because there was no reason for prices to rise. The housing bubble also took place in the United Kingdom and most of Europe. The Chinese didn't invest in these countries like the U.S. and therefore Greenspan's account is false and misleading. Under his watch,interest rates remained so low that it encouraged the market to spin out of control. This lack of insight was one of the main causes of the bubble that lead to disaster for so many citizens.
The movement to de-regulate the financial industry went too far by exaggerating the resilience of laissez-faire capitalism. There was a decades long process of deregulation and opening up, of stripping out(by lobbyist and pro- business politicians) all measures designed to second guess the financial world's ability to regulate by "market discipline". The total free-for-all started with the 1982 Garn-St. Germain Depository Institutions Act(Reagan) that created insurance for mortgage lenders which increased their reckless practices and eventually begot the savings and loan crash and a bailout of $124.6 billion. This bill stood at the beginning of two and a half decades(Reagan, Bush, Clinton and Bush) of consistent deregulation and loosening of regulatory supervision and all subsequent legislation.
The bankers asked for and got the following: (1) insistence on free movement of capital across borders (2)the repeal of Depression era regulations separating commercial and investing banking (3) a congressional ban on the regulation of credit de-fault swaps(4)Major increases in the amount of leverage allowed to investment banks(5) a light hand at the SEC in enforcement(6) an international agreement to allow banks to measure their own risks(7)an intentional failure to update regulations so as to keep up with financial innovation.
In 2004,the SEC agreed to allow five big banks to cut the amount of capital they needed to hold in reserve against potential losses in its investments.This change allowed the banks to increase their leverage hugely.(3 of 5 eventually went under after 2008..Lynch,Lehman and Bear Stearns) Stearns increased its leverage to the point where it had $33 in debt for every $1 of equity.
The Gramn-Leach-Bliley Act of 1999 killed the Glass-Steagall Act of 1933 that separated commercial and investment banking.The bill was sponsored by three republicans and backed by Treasury Secretary Larry Summers(Dem). This bill allowed the banks to use commercial money for high risk investment that increased the probability of failure in the housing market,especially subprime mortgages.The culture which lead to this point was ingrained in the system that was a secular religion with no apologies to the millions who lost their jobs when the crises came.
More to come from "I.O.U" by John Lanchester.
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