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bailing out the speculators August 20, 2007

Posted by KG in comedy, econ.
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have you ever seen elaine chao on late night with conan o’brien? no – i don’t think so.

robert reich on “bailing out the speculators”:

…Wall Street has been living in an anything-goes world for too long. It has been widely – and wrongly – assumed that investors, creditors, and borrowers are smart enough to take care of themselves, especially if they’re big. That’s wrong.

The system has become so fast and so loose that many of the fancy financial instruments now in use, and the mathematical models on which they’re based, are too complicated for anyone except a computer to understand. Fortunes have been made exploiting tiny opportunities for arbitrage or devising new derivatives on the basis of data and risk assessments far less certain than they’re assumed to be.

Hedge funds have been operating huge financial casinos without having to disclose what they’re betting on, or why. Credit-rating agencies have cut corners or averted their eyes, unwilling to require the proof they need. They’ve been too eager to make money off underwriting of the new loans and other financial gimmicks on which they’re passing judgment. Banks and other mortgage lenders have been allowed to strong-arm people into taking on financial obligations they have no business taking on.

In order for the financial market to work well – to ensure fair dealing and to prevent speculative excess – government must oversee it. This mess occurred because no one was watching. The Fed and other central banks now have to clean it up. But regulators in American, Europe, and Asia have to make sure it stays clean. Hedge funds have to be more transparent. Credit-rating agencies must not have any relationship with underwriters. Banks and other mortgage lenders should be better supervised. Finance is too important to be left to the speculators.

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