Yes, bmillermn, you have to wonder what, if any, lessons have been learned.
I found the following paragraph in Andrew Gordon's article particularly pertinent ...
"Before banks leveraged up and paid less attention to asset quality, banking used to be a good business. Borrowing low and lending high was a sure-fire way to generate profits. You can’t get more simple than that. But that wasn’t good enough for bankers. They lobbied for and got the repeal of the Glass-Steagall in 1999. Glass-Steagall had separated deposit banks from investment banks. After 1999, banks could take the tens of billions of dollars from depositors and invest it in anything and everything, from low-yield but safe Treasuries to risky but high-yield derivatives.
As you know by now, not enough went into safe Treasuries and too much went into risky derivatives. A few bubbles later banks were forced to write down about $1.6 trillion on their investments."
But I'm still of the opinion that there must be an adequate Regulation/Monitoring system and body in place that is staffed by experienced and knowledgeable individuals who can determine when a financial activity is exceeding acceptable risk parameters.
That body must also have the necessary authority to intervene or curtail overly risky activities in order to safeguard the general public.
It was, no doubt, for good reason that someone of the stature and know-how of Warren Buffett called those derivatives "financial weapons of mass destruction".
You would have thought that when he said what he said, those in position of relevant authority would have at least taken the time and trouble to investigate, bearing in mind the potential problem that could, and in fact did, occur should things go "pear shaped". |
