I admit I stopped reading your post about 15 lines down
By then the post had misrepresented the findings presented in the majority report
And to not talk to the shadow banking is inane
There was massive casino level activity in counter party 100% opaque Swaps and other third derivative type instruments. That is why in major part the banks did not have liquidity (capital or cash).
The report does include this gambling with our money and dwells on it
The report notes it was highly leveraged - say on 90% leverage (better though of as 9:1 and some say it was leveraged as much as 24:1 at old capital requirements)
We are talking counter party (non exchange listed) SWAPS and CDOs (CDOs here used to mean a shadow virtual reality CMO which is a already a derivative of a MBS). This activity can be used as hedging but what may have started as small legitimate amounts of hedging became massive leverage levels of crazy gambling with our money
So why would banks do this? Greenspan admitted he never though they would and was WRONG
Put yourself in the shoes of the CEO of a bank. You can leverage say ten to one instruments that gain you 7-10% ROI without leverage with a 99% chance of working (SWAPS CDOS etc.) The 1% chance means once in 100 years they will blow up and cause the greater depression
If you plan to be there 10 years - odds are 90% - the blow up will not occur on their watch . Further the banks that argued free market knew that socialism - bail out - would arrive in tht one fatal year as the GOV could not allow 25% unemployment for 3-5 years.
That is why there is a need for regulation like Glass Steagall. A rational bank CEO will take risks that have a 1% chance of blowing up --- those are great odds for a 10 year bank CEO. The 1% will happen - it is in the "Cards" - and thus banks should not be allowed to play with our money this way.
Heads they win Tails we lose
Thus higher capital ratios Thus transparency Thus requiring markets so more (not all) of the exposure that banks have to SWAPS and CDOS can be seen by investors and auditors
etc.
Sorry - I will come off the soap box but people need to know that while capitalism is great - a CEO will take risk that as a nation we can not afford to take
And that of course is WHY F and F exist !! The nation can not afford the risk and needs to be part of the solution that minimizes the risk or eliminates it if possible
I admit I stopped reading your post about 15 lines down
By then the post had misrepresented the findings presented in the majority report
And to not talk to the shadow banking is inane
There was massive casino level activity in counter party 100% opaque Swaps and other third derivative type instruments. That is why in major part the banks did not have liquidity (capital or cash).
The report does include this gambling with our money and dwells on it
The report notes it was highly leveraged - say on 90% leverage (better though of as 9:1 and some say it was leveraged as much as 24:1 at old capital requirements)
We are talking counter party (non exchange listed) SWAPS and CDOs (CDOs here used to mean a shadow virtual reality CMO which is a already a derivative of a MBS). This activity can be used as hedging but what may have started as small legitimate amounts of hedging became massive leverage levels of crazy gambling with our money
So why would banks do this? Greenspan admitted he never though they would and was WRONG
Put yourself in the shoes of the CEO of a bank. You can leverage say ten to one instruments that gain you 7-10% ROI without leverage with a 99% chance of working (SWAPS CDOS etc.) The 1% chance means once in 100 years they will blow up and cause the greater depression
If you plan to be there 10 years - odds are 90% - the blow up will not occur on their watch . Further the banks that argued free market knew that socialism - bail out - would arrive in tht one fatal year as the GOV could not allow 25% unemployment for 3-5 years.
That is why there is a need for regulation like Glass Steagall. A rational bank CEO will take risks that have a 1% chance of blowing up --- those are great odds for a 10 year bank CEO. The 1% will happen - it is in the "Cards" - and thus banks should not be allowed to play with our money this way.
Heads they win Tails we lose
Thus higher capital ratios Thus transparency Thus requiring markets so more (not all) of the exposure that banks have to SWAPS and CDOS can be seen by investors and auditors
etc.
Sorry - I will come off the soap box but people need to know that while capitalism is great - a CEO will take risk that as a nation we can not afford to take
And that of course is WHY F and F exist !! The nation can not afford the risk and needs to be part of the solution that minimizes the risk or eliminates it if possible
News 
Market Data 
Discover 
