Economists Predict Rerun of the Foreclosure Crisis
September 30th, 2009
Eminent economists have predicted that there will be repeated reruns of the foreclosure crisis if the system is not basically overhauled. Edward Harrison of Global Macro Advisors said that the most difficult task has been regulating Wall Street because of the involvement of government and financial executives. They have come to believe in an extreme form of capitalism that promotes the idea of deregulation.
For the past 25 years the regulations put up since the Great Depression have been broken down leaving Wall Street on its own. The outcome was that the heart of the economy ran without rules and limits. This led to huge risks and repeated crises causing the government to be forced to intervene.
The monetary policy worsened matters. Liquidity was provided to stop the bust but it was not withdrawn sufficiently to stop the bubbles.
The question arises if the stability following the Great Depression is being inevitably followed by instability. Are these bouts of trouble unavoidable? None has a positive answer. But a fatalistic approach cannot absolve the power corridors to be absolved of all accountability.
Harrison suggests that erection of another super structure of regulation agencies is not required. What is necessary is the enforcement of the existing regulating rules. The Madoff scandal should have woken up the administration to the need of providing sufficient man and money power to make the regulating agencies work. The shadow banking structure should definitely be brought under some sort regulating umbrella.
Scott Reynolds of College of William and Mary comments that since the founding of the nation, the financial bodies have been given the power to implement policies and if required choke federal measures while making profits rough riding others.
The 1812 War was funded by John Jacob Astor and Stephen Girard when they took USA bonds by paying cash. The two financiers then pressurized the government to set up a second bank of USA to give support to the federal bonds. They got what they wanted. Thus the connection between the federal government and Wall Street has time and again humbled presidents as history has noted.
It is a known game that the former employees of the Federal Reserve find a place in the powerful houses of Wall Street. Banks also lure in former House and Banking Committee members.
The FDIC was set up as a separate body during the Great Depression hoping to keep it safe from the tentacles of Wall Street.
Questions have arisen about federal regulators assisting their former overlords. In 2008 Goldman Sach got help but Lehman Brothers did not. This led to internecine squabbles inside Wall Street. There are suggestions that the fall of Lehman by the government led to the present crisis.
- Florida Courts are Overwhelmed by Foreclosure Cases as Justices Mull Over Solutions
- Spurt in Sales of Foreclosed Properties
- Foreclosure Climate Changes Spirit of Competition to Cooperation Among Contractors
- Bouncing Cheques Issued by Title Companies Lead to Foreclosures
- Increase in Foreclosures Prompting Class Action Legal Suits
- Avoiding Foreclosures by Walking Away From Loans are not Without Problems
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