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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: jimmg who wrote (76418)	12/22/2006 10:12:33 AM
From: russwinter	Read Replies (2) \| Respond to of 110194

<the banks loaned money to someone who can't afford to repay, let them both suffer the consequences. > We are in total agreement here, bring it on! But is that how our system really works?

To: jimmg who wrote (76418)	12/22/2006 10:45:11 AM
From: J_Locke	Read Replies (1) \| Respond to of 110194

It's fashionable to say that credit excess is just a matter of "consenting adults" doing what comes naturally; but the Fed is intimately involved in these decisions because they set both the bank reserve requirements and the discount rate. Also regulators have a duty to keep excesses under control because the government has to pay to clean up the mess when the dam finally bursts (see the $250 billion RTC debacle.) How many billions or trillions will it cost when the gov. has to take over Fannie Mae (too big to fail times ten)? To put it in crude terms, consenting adults are entitled to make their own decisions, but if dad has to pay for the abortion he's within his rights to make sure that junior uses a condom.