Democratic Underground Latest Greatest Lobby Journals Search Options Help Login
Google

F.D.R.’s Safety Net Gets a Big Stretch ..(Bear Stearns bailout)

Printer-friendly format Printer-friendly format
Printer-friendly format Email this thread to a friend
Printer-friendly format Bookmark this thread
This topic is archived.
Home » Discuss » Editorials & Other Articles Donate to DU
 
RedEarth Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 10:48 AM
Original message
F.D.R.’s Safety Net Gets a Big Stretch ..(Bear Stearns bailout)
March 15, 2008
News Analysis
F.D.R.’s Safety Net Gets a Big Stretch
By FLOYD NORRIS
It was an old-fashioned bank run that forced Bear Stearns to turn to the government for salvation on Friday. The difference is that Bear Stearns is not a commercial bank, and is therefore not eligible for the protections those banks received 75 years ago when Franklin D. Roosevelt halted bank runs with government guarantees.

Bear was, instead, emblematic of a financial system that grew up over the last two decades, one that largely marginalized traditional banking and that enabled lenders to evade much of the regulatory framework that had also begun during the Roosevelt administration.

The new system enabled loans to be made by almost any financial institution with the money coming from the sale of increasingly complicated securities backed by the loans.

Regulators believed that the new system spread out the risk. Alan Greenspan, a former chairman of the Federal Reserve, said the system had transferred risk from banks — which he called “highly leveraged institutions” — to “stable American and international institutions.”

It turned out he was wrong. Much of the risk had remained with commercial banks, but packaged in such a way that they were required to put aside fewer reserves to protect against losses. Much of the rest of the risk ended up with financial institutions that relied on their ability to borrow at low rates whenever they needed it.

http://www.nytimes.com/2008/03/15/business/15regulate.h...
Printer Friendly | Permalink |  | Top
aquart Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 11:09 AM
Response to Original message
1. What happens if we let Bear Stearns crash and burn?
It's what a free market would do. What are the consequences? MUST we save them to save ourselves? Because I hate their worthless criminal guts and would enjoy seeing them destroyed. (And if we could find a way for their aged CEO to die in prison, I would rejoice.)
Printer Friendly | Permalink |  | Top
 
PA Democrat Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 11:32 AM
Response to Reply #1
3. The guys at the top who made the decisions that resulted in their problems always make out like
Edited on Sat Mar-15-08 11:33 AM by PA Democrat
bandits. The former CEO conveniently "retired" in January of this year after making more than $150 million over the past 5 years. These guys always have their corrupt and incompetent asses covered. They never pay the price unless someone can prove they've done something that is criminal. Unfortunately, much of what they do is perfectly legal.

If they failed, it would probably cause a ripple effect with even more bank failures. People would lose their jobs, their retirement savings, and it would be the little guy who suffers the most.

There needs to be much tighter regulation over the financial services industry. Unfortunately, they have wielded way too much power in Washington, and I don't think most people in Congress really understand how much the industry has changed over the years, without new regulations to reflect those changes.
Printer Friendly | Permalink |  | Top
 
aquart Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 01:50 PM
Response to Reply #3
4. They will when they have to support their relatives.
Printer Friendly | Permalink |  | Top
 
PA Democrat Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 11:24 AM
Response to Original message
2. Thanks for posting this. I was puzzled by the bailout because I didn't think Bear Stearns was a
Edited on Sat Mar-15-08 11:25 AM by PA Democrat
member of the FDIC, so I was curious as to how the Fed was lending them money.
Printer Friendly | Permalink |  | Top
 
DU AdBot (1000+ posts) Click to send private message to this author Click to view 
this author's profile Click to add 
this author to your buddy list Click to add 
this author to your Ignore list Mon Oct 20th 2014, 05:10 AM
Response to Original message
Advertisements [?]
 Top

Home » Discuss » Editorials & Other Articles Donate to DU

Powered by DCForum+ Version 1.1 Copyright 1997-2002 DCScripts.com
Software has been extensively modified by the DU administrators


Important Notices: By participating on this discussion board, visitors agree to abide by the rules outlined on our Rules page. Messages posted on the Democratic Underground Discussion Forums are the opinions of the individuals who post them, and do not necessarily represent the opinions of Democratic Underground, LLC.

Home  |  Discussion Forums  |  Journals |  Store  |  Donate

About DU  |  Contact Us  |  Privacy Policy

Got a message for Democratic Underground? Click here to send us a message.

© 2001 - 2011 Democratic Underground, LLC