Allan Sloan is a senior editor at Fortune that has been around the block a few times (40+ years). He started covering finance, Wall Street, Washington etc. before some METARites were born. I find most of his writings pertinent and spot on. He tends to write about significant financial events where the public has a poor understanding or comprehension of.
Today (6/13/12) he published a short article entitled: “The 5 myths of the great financial meltdown” which is very pertinent IMO. I cannot add much beyond what Allan has written. Here are his five points, and a few quotes on each point:
Myth No. 1: The government should have done nothing.
There's an idea gaining currency that everything the government did, from the Troubled Asset Relief Program (the now infamous TARP) to the Federal Reserve's innovative lending programs and rate cutting, just made the problem worse. And that we should have simply let markets do their thing.
Wrong! Wrong! Wrong!
Myth No. 2: The government bailed out shareholders.
The real beneficiaries of the government bailout of financial institutions weren't their stockholders -- it was their lenders.
Myth No. 3: The Volcker Rule will save us.
Let's get one thing straight. Washington is unwilling to change the financial system drastically, the way it was changed in the Great Depression's aftermath. Rather than shrinking giant financial companies so that they're no longer too big to fail -- a process that Dick Fisher, head of the Dallas Fed, wonderfully likens to stomach-shrinking bariatric surgery -- we're trying to legislate the problems away. Hence a whole raft of new, tough-seeming -- but almost incomprehensible -- regulations.
Myth No. 4: Taxpayers are off the hook for future failures.
Dodd-Frank reform legislation passed in 2010 is being touted in Washington as a way to deal with future meltdowns of big financial institutions without risking taxpayer dollars or giving creditors a free pass.
Myth No. 5: It's the government's fault.
Yes, there were plenty of reckless and immoral borrowers taking out mortgages they knew (or should have known) they couldn't afford. And yes, you can make a case that the federal government's zeal to increase homeownership levels was partly responsible for lowering lending standards. But the idea that the government is primarily to blame for this whole mess is delusional. It was the private market -- not government programs -- that made, packaged, and sold most of these wretched loans without regard to their quality. The packaging, combined with credit default swaps and other esoteric derivatives, spread the contagion throughout the world. That's why what initially seemed to be a large but containable U.S. mortgage problem touched off a worldwide financial crisis.
The article is brief and I recommend you read it:
http://finance.fortune.cnn.com/2012/06/13/financial-crisis-myths/?iid=HP_LN
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