Ron Paul questions Geithner 3.26

[ThoughtCriminal]

[steamtownwelder]

Fantastic, but sad. As usual Dr. Paul brought up a very important point and got brushed aside.

[dc dalton]

While I am a staunch supporter of Dr. Paul I HAVE to disagree one one point. Yes easy money helped create the problem BUT greed need to be regulated and any time you give these wall street bastards an inch they take a mile.

Derivatives should have been kept illegal (as they were for almost 100 years) and they should have stayed that way .... someone has to tell the greedy fucks they are NOT going to fleece the people that don't understand the investments they are making ...this is sheep and wolves stuff and I'm sorry but as much as I hail the 'free market' there are those people (and powers) out there that will do ANYTHING to steal from others (just look at Madoff).

So Ron I still applaud your ideals BUT someone (and honestly only the government can do it) MUST say "No freaking way you are allowed to do that!"

[ehidle]

You can have a free market with limited regulation if you simply restrict the market to tangible things like goods, bonds, Real Estate, or actual shares of stock, and so on. DC, you're right that when we get into derivatives, credit default swaps, and other "things of value" that are not "things" but rather "events," you get into creating wealth with no tangible "thing" to back up that wealth. The same goes for money. Money has no intrinsic value. Money is simply a placeholder for the value of a tangible asset.

These intangibles create wealth with nothing behind it, which I think is a huge risk.

Also, we had a discussion at work yesterday about all of this and someone brought up a very interesting point about what did AIG in. AIG has a "bank" arm and a "financial services" arm. The bank arm was going hog wild making bad loans while at the same time the "financial services" arm was selling credit default swaps against the loans the "bank" arm was making. They were doing this because the two arms were not connected in any way and each had no idea what the other was doing.

The "financial" arm sold credit default swaps against tranches of packaged mortgage loans that were securitized and sold on the market by other holding companies. The finance arm had no idea who was underwriting the loans represented by those tranches. In effect, AIG was betting against itself, selling billions in credit default swaps against its own loans. If the loans were made good, then AIG not only made the money on the loan, but got to keep the premiums collected by selling the default swaps.

BUT, if the loans went bad, not only did AIG lose the asset of the loan, but they had to pay out the credit default swap, in effect losing twice as much money as the original loan was written for.

Credit Default Swaps are mind boggling. It's basically just insurance against failure. The crazy thing was that apparently more than one person could by a CDS against the same security, so the payout against failure could be larger than the value of the original security being insured. It's NUTS!

[adymond]

While I am a staunch supporter of Dr. Paul I HAVE to disagree one one point. Yes easy money helped create the problem BUT greed need to be regulated and any time you give these wall street bastards an inch they take a mile.

Derivatives should have been kept illegal (as they were for almost 100 years) and they should have stayed that way .... someone has to tell the greedy fucks they are NOT going to fleece the people that don't understand the investments they are making ...this is sheep and wolves stuff and I'm sorry but as much as I hail the 'free market' there are those people (and powers) out there that will do ANYTHING to steal from others (just look at Madoff).

So Ron I still applaud your ideals BUT someone (and honestly only the government can do it) MUST say "No freaking way you are allowed to do that!"

I've got to disagree that the market can't regulate itself. What would have happened when the house of cards fell because the banks were rediculously overleveraged due to the derivitives? Instutions would have failed, those instutions who acted responsible would have remained and grown stronger. Many of those that remained responsible were smaller banks and credit unions. The big greedy fucks would have fallen on their faces leaving a huge vaccume for the smaller more sound institutions to fill.

It would have sucked when they failed, but with governmental intrusion on the free market with the bailouts there has been no negative repurcussion for irresponsible behavior. Because of this the only two options are to back out completely and let the economic nature run it's course or to impose more false regulations that will create a new governmental bureaucracy to oversee those regulations which opens the door for further corruption and influence peddelers to find new ways to abuse the system.

[ChamberedRound]

Fantastic, but sad. As usual Dr. Paul brought up a very important point and got brushed aside.

I really like Ron Paul and his beliefs, but to be fair he did it to himself on this one. His concern was extremely valid, but he spent so much of his time getting to the point that he left himself no time to push Geithner to answer the question.

RP tends to be a bit long-winded. He needs to be a bit more terse, especially in hearings where Q&A is timed.

[FNG19]

Derivatives should have been kept illegal (as they were for almost 100 years) and they should have stayed that way .... someone has to tell the greedy fucks they are NOT going to fleece the people that don't understand the investments they are making

The problem isn't derivatives. The problem is ignorant investors. No one forced folks to buy things they didn't understand (mortgages, derivatives, CDO/MBS's, options, futures, whatever). These people signed on the dotted line. If anything, the solution is education, not restriction. A better informed populace makes better decisions.

Hell, even the Federal Government recognized that investing in certain classes of investments should be left to folks who are in a position to know what they're doing. This was enshrined in the Securities Act of 1933, Regulation D, Rule 501, found here. Keep in mind that this was written in 1932, when a million dollars was considered a small empire rather than just a DotCom Payout (oh, for the heady days of DotComs...). Still, it points out that there is a theoretical knowledge difference between Mom and Pop Six Pack and Mother and Father Kristal. As a matter of trends, the latter tend to be more savvy about investments, simply because they're probably more involved with them. And, they can stand the losses much more than Mom and Pop Six Pack can.

[scotty2hotty89]

I've got to disagree that the market can't regulate itself. What would have happened when the house of cards fell because the banks were rediculously overleveraged due to the derivitives? Instutions would have failed, those instutions who acted responsible would have remained and grown stronger. Many of those that remained responsible were smaller banks and credit unions. The big greedy fucks would have fallen on their faces leaving a huge vaccume for the smaller more sound institutions to fill.

It would have sucked when they failed, but with governmental intrusion on the free market with the bailouts there has been no negative repurcussion for irresponsible behavior. Because of this the only two options are to back out completely and let the economic nature run it's course or to impose more false regulations that will create a new governmental bureaucracy to oversee those regulations which opens the door for further corruption and influence peddelers to find new ways to abuse the system.

A sound defense of the free market. rep sent.

A depression is the most absolute and honest "bailout" that there is. It cleans out the unsound buisnesses and creates tremendous oppertunities for the sound ones to grow. Government solutions to market problems always pale in comparison to free market solutions to market problems.

[andrewjs18]

I really like Ron Paul and his beliefs, but to be fair he did it to himself on this one. His concern was extremely valid, but he spent so much of his time getting to the point that he left himself no time to push Geithner to answer the question.

RP tends to be a bit long-winded. He needs to be a bit more terse, especially in hearings where Q&A is timed.

yes sir!

rep sent.

[stephpd]

I always enjoy these type of debates. Lots of free thinking and ideas. I'm at work so I can't see the OP link. I do like Ron Paul, sometimes, and he can spent to much time getting to the meat of a question. That seems the norm for Washington. They give you a set amount of time and they spent the majority of it talking instead of asking the question.

The problem I see with all these derivatives is that they were pretty much illegal for a long time. Shortly after making them legal, relatively speaking, they have had a detrimental effect on the whole stock market. That one section of the market could effect the worth and value of everything else is just wrong.

Sure some make plenty of money but at what cost? Maybe we aren't as smart as those who saw this type of thing happening and said NO.