Tyler Cowen explains it all for you (and me)

Economist Tyler Cowen has just posted a handy list of his views on the crisis. I found myself nodding my head in agreement on just about all of them. Go to his blog for the whole thing, but here are a few of my faves:

1. Glass-Steagall repeal was not a major cause of the financial crisis, nor was government-induced “minority lending.”

2. We should use regulation to move more of the currently unregulated derivatives markets to the clearinghouse model.

3. The crisis represents a massive conjunction of both market and governmental failure. …

5. The modified Paulson plan was better than nothing — especially after the market had been scared — but far from my first choice. In any case the plan would have been revised almost immediately. The Paulson and Dodd plans were never that far apart. …

7. In the meantime the Fed should not worry much about inflation.

8. The critical deregulatory mistake was allowing excess leverage. Many deregulations get blamed but in fact contributed little to the problem. …

10. Libertarians are overrating the moral hazard argument, as many equity holders have been wiped out. …

15. The crisis is complex and has many causes; there won’t be a simple or quick solution.

Stocks Rally Further in Run-up to EU Summit

MOSCOW — Global stocks enjoyed one of their best days in weeks on Tuesday ahead of a summit of European leaders that’s expected to be dominated by calls to boost economic growth.

Europe remains the focus of attention across all financial markets in the run-up to the June 17 Greek election that could go a long way to determining the country’s membership of the euro as well as the future of the single currency zone.

rrsafety

I’m not sure that leverage in and of itself is the problem, but the transparency of the leverage.

Capital markets need information to work appropriately, transparency provides that information.

If Lehman wants to be 44x leveraged, fine with me but the market needs to know that in detail.
Dad

I’ve seen one depression and I don’t want to go through that business again! We’re seeing much the same loss of confidence after a bubble and Bernanke has it right, we need to do something and do it fast. Those Republicans who don’t want to see the end of the Reagan era need to admit defeat. Reaganomics is a failed policy!

And those Democrats (fewer, I admit) who don’t want to see those financial business leaders get off without pain, need to reassess their values. We don’t want to follow the advice of my Great Uncle George Washington Norris, Governor of the Philadelphia Reserve Bank, who said, “The consequences of such a debauch are inevitable.” And they were when he failed to act.

Let’s give Paulson what he needs to turn this around and not put so many restrictions on him that this won’t work.
Ffred

Speaking of my man Dodd (he of the lovely socializing risk while privatizing reward quote), what is he up to in the midst of all this brouhaha?
curious steve

every real voter on mains treet i know

(and i know tens of thousands of them through work)

are HELL-BENT AGAINST this criminal attempt for high noon robbery

by wall street and washington

with corporate media cheer-leading.
rrsafety

Justin, I think curious steve wants you to put away your pom-poms and short skirt… LOL
That Anonymous Dude

curious steve – repeating my comment in earlier thread – you seem to be anti-capitalism, but what -ism are you pro?
Justin Fox

Dadaism, right?
Independent

To elaborate on No.3
“3. The crisis represents a massive conjunction of both market and governmental failure. …”

Our fiscal policy of the last quarter century of diverting resources from serious problems such as health care reform, energy independence and infrastructure rebuilding into frivolous pursuits like pumping up asset bubbles has led us to where we are now. Not only is this a massive government and market failure, but a missed opportunity that we might never regain.
rrsafety

Independent: Don’t worry, we’ll have a “green” bubble soon enough, in fact, it is already starting. Further, if you can come up with a health care reform package that effectively controls health costs, that sounds awesome. But let me guess, your health reform will actually cost “more”.
Independent

Independent: Don’t worry, we’ll have a “green” bubble soon enough, in fact, it is already starting. Further, if you can come up with a health care reform package that effectively controls health costs, that sounds awesome. But let me guess, your health reform will actually cost “more”.

Posted by rrsafety Author Profile Page | October 1, 2008 4:22 PM

I don’t make up health care reform packages. I do note, however, that we spend way more than most industrialized nations and still leave a large fraction of our population uninsured or unable to meet the cost of basic health care.
Ffred

Now that HOPE for Homeowners is officially launched, it will be interesting to see if the current situation helps or hinders the program.