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Politics : Formerly About Advanced Micro Devices
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To: koan who wrote (546042)1/25/2010 6:38:31 PM
From: TimF2 Recommendations  Read Replies (1) of 1575758
 
Home prices are the bubble that all the leverage and derivatives fed in to. The push to extend credit further and further (at first coming mostly from the government or groups seeking to use the government, but then later taken over by the banks and other financial institutions with gusto as the bubble really got on its way and they started to believe that house prices would keep going up) was an important factor both in the rising house prices (as it increased demand), and the lower quality of the loans.

Glass Steagal had little to do with it, OTOH the 40 to 1 leverage (or in some case I think 50 to 1 or possible as much as 60 to 1) was a huge factor. That wasn't lack of regulation, it was poor regulation. In that specific case, poor in the sense of being too lose, but not to extensive. In the case of giving a high value to complex securitized bundles of loans in security requirements, it wasn't either not extensive enough regulation, or not tight enough regulation, it was just foolish regulation.

YOU have to decide if you want to live your life according to the truth or make believe.

I prefer the truth to the believe that we had a huge financial crisis because we had "no regulation", or because of Gramm–Leach–Bliley, or solely because of CDOs.
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