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Iceland put top finance executives behind bars, but fears of cronyism remain

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Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#81

Post by ptaipale »

Mikeb85 wrote: post #74
tosseraccount wrote: post #42

Earlier quoted context omitted.

"Austerity stagnates an economy". How did overspending work out for Greece? [ edit: I'd be glad to discuss substance. The admittedly rhetorical question stands. What is the evidence on overspending and growth? ]

Greece's debt was sustainable until the financial crisis. However, when they joined the EU, many of their indigenous industries weren't competitive with other nations', so they 'specialized' in tourism. This brought in lots of income, but after the financial crisis, the tourists dried up, leaving them with a massive deficit. And of course, their debt ratio went up because of the contraction in revenues. This is why G…

Greece's debt seemed sustainable partly because official statistics were manipulated. Then, along with financial crisis, came more scrutiny.

The crisis was a trigger, but not a reason. Public spending in Greece was beyond what it could really afford; when skewed statistics were exposed, it turned out that the actual deficit was 12.7 % instead of 6 % - and this change came in about a month.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#82

Post by mrweasel »

ktRolster wrote: post #70
emodendroket wrote: post #32

Earlier quoted context omitted.

The difference is that in the US, while it would have been possible to prosecute bankers under existing law after the 2008 meltdown, we did not.

I don't even care that we didn't prosecute them. I just wish they weren't bailed out by the government (aka my tax money) when they went under. It's a free market: you make mistakes, you lose.

>It's a free market: you make mistakes, you lose.

Precisely, if you invest money, you should be prepared to lose that money. Now we're in a situation where if the amount you lose is large enough, no worries, the tax payers will refund your investment. It was a large amount you lost after all.

Here, in Denmark, we now have "systemic banks" aka "to big to fail", just like in the US. Not once have I hear someone suggest that MAYBE just fucking maybe, the issue is that the banks are to large. But no no, we'll have non of that. In fact let's make it an issue that to many people pick smaller, less well consolidated banks. How can a government not recognize that it's a problem if a country will be thrown in to chaos (apparently) should this private company fail.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#83

Post by deepnet »

cm2187 wrote: post #65
JumpCrisscross wrote: post #63

Earlier quoted context omitted.

> This can really be traced back to the repeal of Glass Steagal Can it? Because none of the banks who initially failed would have been firewalled by Glass-Steagal. Bear Stearns, Lehman Brothers, AIG...none of these were deposit-taking institutions. The problem erupted from corn-fed mortgages, something Glass-Steagall wouldn't have saved us from. This isn't just my opinion. Most economists see Gramm-Leach-Bliley (the…

And if we look at the UK, all the banks that failed (RBS, HBOS, Northern Rock) failed because of their bad loans or over-reliance on short-term funding, not because of investment banking activities.

I disagree.

The RBS failed entirely because of foolish investments. Funding covered the cracks till it dried up.

Fred the Shred (RBS CEO) invested billions in toxic assets worldwide - his last act was to buy an investment bank full of them.

He still walked away with bonuses, though now the taxpayer paid for his golden parachute.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#84

Post by delecti »

ktRolster wrote: post #70
emodendroket wrote: post #32

Earlier quoted context omitted.

The difference is that in the US, while it would have been possible to prosecute bankers under existing law after the 2008 meltdown, we did not.

I don't even care that we didn't prosecute them. I just wish they weren't bailed out by the government (aka my tax money) when they went under. It's a free market: you make mistakes, you lose.

We didn't give them money, we invested in businesses that were in desperate need of investments. Those investments later paid back very good returns.

You can argue that we shouldn't have interfered in the free market like that, and in fact I agree in principle, but the "rawr, my tax money" argument doesn't hold water.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#85

Post by badsock »

ktRolster wrote: post #64
illumin8 wrote: post #52

Earlier quoted context omitted.

This can really be traced back to the repeal of Glass Steagal. After the great depression in the 30s, congress passed the Glass Steagal act, which put a firewall between investment banks and commercial banks. In other words, Wall Street investment banks could no longer gamble with customer deposits. This seems like common sense, and all of the financial problems actually occurred after Glass Steagal was repealed in t…

>This can really be traced back to the repeal of Glass Steagal. The evidence against this hypothesis is that Canada did not have Glass Steagal (or legislation similar to it), and yet they were not harmed by the financial crisis nearly as much. The banks were smart enough to not invest so deeply in mortgage backed securities.

They weren't smart enough. They were prevented by government regulation introduced in the 1990s.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#87

Post by Ensorceled »

kybernetikos wrote: post #17
vmateixeira wrote: post #15

They're allowed to browse the Internet and go to the Gym? Sounds better than most hotels I've been.

Are you saying that life in a prison should be worse than living in a budget hotel? Why?

Americans like to punish. A lot. Instead of rehabilitation they focus on making sure convicted felons are practically unemployable once they are out of jail. This is changing, but slowly.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#90

Post by tosseraccount »

ktRolster wrote: post #64
illumin8 wrote: post #52

Earlier quoted context omitted.

This can really be traced back to the repeal of Glass Steagal. After the great depression in the 30s, congress passed the Glass Steagal act, which put a firewall between investment banks and commercial banks. In other words, Wall Street investment banks could no longer gamble with customer deposits. This seems like common sense, and all of the financial problems actually occurred after Glass Steagal was repealed in t…

>This can really be traced back to the repeal of Glass Steagal. The evidence against this hypothesis is that Canada did not have Glass Steagal (or legislation similar to it), and yet they were not harmed by the financial crisis nearly as much. The banks were smart enough to not invest so deeply in mortgage backed securities.

Canada does not have personal residence mortgage deductibility and was riding a commodities boom at the time.

Speaking of the popular "austerity ruins the economy", Canada ran a budget surplus during the crisis, enabling them to weather the financial crisis quite well.

Keeping an eye on the accounting books is always a good idea.

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