Why Wall Street Matters, why socialists are wrong

[Ripoll]

Wall Street is defined as "the collective name for the financial and investment community, which includes stock exchanges and large banks, brokerages, securities and underwriting firms, and big businesses"

Investopedia explains what many people think about wall street by stating that

"Because of their ability to quickly raise capital through the investment community, some argue that big businesses have an unfair advantage over small businesses. Outsiders feel that Wall Street businesses are an exclusive circle made up of the powerful, greedy and corrupt. Others believe that this view is outdated. Today, there are brokerages all over the country, allowing investors free access to the same information available to Wall Street's tycoons."

I'm going to make a few points about the extremely healthy financial sector in the US where frankly Wall Street undeniably helps Main Street.

1) Affordable loans - Wall Street has allowed people to receive affordable loans to increase their purchasing power while keeping them out of the hands of predatory institutions such as pay day loans that trap them in poverty and perpetuate them with debt. Without easily accessible and affordable credit stability provided by banks pay day loans would be even more of a problem than they are now. John Oliver made a wonderful video about the dangers of pay day loans https://www.youtube.com/watch?v=PDylgzybWAw

2) Retirement - Social Security on it's own, was never intended to be a program you could completely live off of during your retirement. Through pensions, 401k accounts, and mutual funds every day people can begin to save up for their retirement efficiently and more or less risk free. These investments are incredibly easy to understand and can raise as much too $700,000 over 35 years starting from an investment of $29,000
That's an increase of about 7% every year.

3) Schooling - Capital markets allow for colleges to give scholarships much more easily. Approximately 1/3 of Harvard's budget comes endowment which allows them to give many more scholarships than they would normally be able to.

4) Life Insurance - In the event of a policy holder passing away, investments in capital markets are the only way to insure the certainty of payout Life Insurance has on hand.

Thoughts? Now moving on to 2008

freeing up holding companies to own both commercial and investment banks had NOTHING to do with the financial crisis

Glass Steagall harmed the financial industry much more than it helped it. Even President Obama acknowledges the fact that the repeal of Glass Steagall had little to not contribution to the financial crisis.

As for the FDIC-insured commercial banks that ran into trouble, the record is also clear: what got them into trouble were not activities restricted by Glass-Steagall. Their problems arose from investments in residential mortgages and residential mortgage-backed securities—investments they had always been free to engage in.

Elizabeth Warren also want's to break up big banks, which is incredibly hypocritical because she supports many big banks but that's a different thread for a different day. Breaking up large financial institutions would make loans MUCH more expensive and costly to take out and would hurt the middle class mora than help it.

Elizabeth Warren's policies would force more Americans to take out loans from pay day companies which would entrap them in vicious poverty cycles.

No I don't misunderstand the progressive Agenda, I hear them loud and clear and frankly they're wrong. Elizabeth Warren's policies would result in horrible incentives and poverty traps. Real liberals would solve this in a centrist approach, not hide behind a purely politically driven agenda and hypnotize the masses into believing wall street it the cause of all their problems.

[Ripoll]

http://s3.amazonaws.com/content.thirdwa ... 1414678314

[Valaran]

I'm not going to post in depth right now, but as someone who would be labelled progressive in the US, I believe Wall Street matters. The general progressive ideology and that specific belief aren't mutually exclusive.

[SaintB]

Oh it matters, it just needs to be watched closely to prevent abuse by and of people.

[Valaran]

Oh it matters, it just needs to be watched closely to prevent abuse by and of people.

Basically this^

Like everything, it can be harmful if just left all to its own, though generally its a great benefit.

[Fortschritte]

I feel as if this is more of a blog than a opening post. Anyways, of course Wall Street matters, and progressives can acknowledge that. Progressivism doesn't necessarily imply a distrust for Wall Street. Unfortunately, sometimes Wall St is demonized, often by self described progressives.

[Sebastianbourg]

I feel as if this is more of a blog than a opening post. Anyways, of course Wall Street matters, and progressives can acknowledge that. Progressivism doesn't necessarily imply a distrust for Wall Street. Unfortunately, sometimes Wall St is demonized, often by self described progressives.

This.

[Greed and Death]

Don't worry we will get those regulations rolled back bit by bit each and every budget.

[Ashmoria]

Don't worry we will get those regulations rolled back bit by bit each and every budget.

what could possibly go wrong?

[Arkolon]

Oh it matters, it just needs to be watched closely to prevent abuse by and of people.

Having it watched isn't a problem. Having it tightened is.

[Greed and Death]

Don't worry we will get those regulations rolled back bit by bit each and every budget.

what could possibly go wrong?

I get too many passed in one year and I reach the cap on bonuses.

[The Lotophagi]

The OP is fundamentally misunderstanding the criticisms that 'progressives' (and a lot of other people) have about Wall Street. The problem isn't that it exists, the problem is that the banks making up Wall Street got greedy and decided to gamble vast quantities of other peoples' money through esoteric financial instruments that they had to finagle the government into making legal (hence the repeal of Glass-Steagall). And once they inevitably lost that money and very nearly tanked the economy in the process, they got the mother of all bailouts with practically zero accountability, all because they had extended so many putrid tentacles into the wider economic landscape that allowing them to go belly up would make things even worse.

[Arkolon]

the banks making up Wall Street got greedy and decided to gamble vast quantities of other peoples' money through esoteric financial instruments that they had to finagle the government into making legal

My god, did you even pay attention to the housing bubble of the 90s or are you just repeating whatever the indie zines you're reading are telling you? Wall Street had their profits incentives manipulated, through government-backed programs aimed at improving home ownership among the poorer American people. It was a time bomb waiting to happen, and the credit defaults happened, conveniently, all at the same time a decade later, right when the debts had to be repaid. It was catastrophic, but to blame this on "ebul bankerz" is, frankly, insanely immature. They are to blame for their role, sure, and they mustn't get off scot-free, but they aren't the only ones with blood on their hands.

[Greed and Death]

The OP is fundamentally misunderstanding the criticisms that 'progressives' (and a lot of other people) have about Wall Street. The problem isn't that it exists, the problem is that the banks making up Wall Street got greedy and decided to gamble vast quantities of other peoples' money through esoteric financial instruments that they had to finagle the government into making legal (hence the repeal of Glass-Steagall). And once they inevitably lost that money and very nearly tanked the economy in the process, they got the mother of all bailouts with practically zero accountability, all because they had extended so many putrid tentacles into the wider economic landscape that allowing them to go belly up would make things even worse.

You know the esoteric financial instruments you mention were invented by government affiliated fannie mae and freddie mac, some 20 years before Glass-Steagall was repealed. Also worth noting Glass-Steagall never blocked mortgage backed securities and most of the world never had such a restriction on banking, indeed most of the world is less regulated in that regard and allows commercial banks to be merged with insurance companies as well as investment banks.

Also noting Senator glass called for Glass-Steagall's repeal a few years after it became law calling it an emotional over reaction.

[The Lotophagi]

My god, did you even pay attention to the housing bubble of the 90s or are you just repeating whatever the indie zines you're reading are telling you?

Oh yes, just this old leftist rag I keep reading. Full of hippies and communists, but still worthwhile for the patchouli recipes.

[Arkolon]

My god, did you even pay attention to the housing bubble of the 90s or are you just repeating whatever the indie zines you're reading are telling you?

Oh yes, just this old leftist rag I keep reading. Full of hippies and communists, but still worthwhile for the patchouli recipes.

I doubt you even read it, considering it agrees with me on the following accounts:

Low interest rates created an incentive for banks, hedge funds and other investors to hunt for riskier assets that offered higher returns. They also made it profitable for such outfits to borrow and use the extra cash to amplify their investments, on the assumption that the returns would exceed the cost of borrowing. The low volatility of the Great Moderation increased the temptation to “leverage” in this way. If short-term interest rates are low but unstable, investors will hesitate before leveraging their bets. But if rates appear stable, investors will take the risk of borrowing in the money markets to buy longer-dated, higher-yielding securities. That is indeed what happened.

Failures in finance were at the heart of the crash. But bankers were not the only people to blame. Central bankers and other regulators bear responsibility too, for mishandling the crisis, for failing to keep economic imbalances in check and for failing to exercise proper oversight of financial institutions.

the regulators made mistakes long before the Lehman bankruptcy, most notably by tolerating global current-account imbalances and the housing bubbles that they helped to inflate. Central bankers had long expressed concerns about America’s big deficit and the offsetting capital inflows from Asia’s excess savings. Ben Bernanke highlighted the savings glut in early 2005, a year before he took over as chairman of the Fed from Alan Greenspan. But the focus on net capital flows from Asia left a blind spot for the much bigger gross capital flows from European banks. They bought lots of dodgy American securities, financing their purchases in large part by borrowing from American money-market funds.

[The Lotophagi]

Oh yes, just this old leftist rag I keep reading. Full of hippies and communists, but still worthwhile for the patchouli recipes.

I doubt you even read it, considering it agrees with me on the following accounts:

Low interest rates created an incentive for banks, hedge funds and other investors to hunt for riskier assets that offered higher returns. They also made it profitable for such outfits to borrow and use the extra cash to amplify their investments, on the assumption that the returns would exceed the cost of borrowing. The low volatility of the Great Moderation increased the temptation to “leverage” in this way. If short-term interest rates are low but unstable, investors will hesitate before leveraging their bets. But if rates appear stable, investors will take the risk of borrowing in the money markets to buy longer-dated, higher-yielding securities. That is indeed what happened.

Failures in finance were at the heart of the crash. But bankers were not the only people to blame. Central bankers and other regulators bear responsibility too, for mishandling the crisis, for failing to keep economic imbalances in check and for failing to exercise proper oversight of financial institutions.

the regulators made mistakes long before the Lehman bankruptcy, most notably by tolerating global current-account imbalances and the housing bubbles that they helped to inflate. Central bankers had long expressed concerns about America’s big deficit and the offsetting capital inflows from Asia’s excess savings. Ben Bernanke highlighted the savings glut in early 2005, a year before he took over as chairman of the Fed from Alan Greenspan. But the focus on net capital flows from Asia left a blind spot for the much bigger gross capital flows from European banks. They bought lots of dodgy American securities, financing their purchases in large part by borrowing from American money-market funds.

With half a decade’s hindsight, it is clear the crisis had multiple causes. The most obvious is the financiers themselves—especially the irrationally exuberant Anglo-Saxon sort, who claimed to have found a way to banish risk when in fact they had simply lost track of it. Central bankers and other regulators also bear blame, for it was they who tolerated this folly. The macroeconomic backdrop was important, too. The “Great Moderation”—years of low inflation and stable growth—fostered complacency and risk-taking. A “savings glut” in Asia pushed down global interest rates. Some research also implicates European banks, which borrowed greedily in American money markets before the crisis and used the funds to buy dodgy securities. All these factors came together to foster a surge of debt in what seemed to have become a less risky world.

Start with the folly of the financiers. The years before the crisis saw a flood of irresponsible mortgage lending in America. Loans were doled out to “subprime” borrowers with poor credit histories who struggled to repay them. These risky mortgages were passed on to financial engineers at the big banks, who turned them into supposedly low-risk securities by putting large numbers of them together in pools. Pooling works when the risks of each loan are uncorrelated. The big banks argued that the property markets in different American cities would rise and fall independently of one another. But this proved wrong. Starting in 2006, America suffered a nationwide house-price slump.

The pooled mortgages were used to back securities known as collateralised debt obligations (CDOs), which were sliced into tranches by degree of exposure to default. Investors bought the safer tranches because they trusted the triple-A credit ratings assigned by agencies such as Moody’s and Standard & Poor’s. This was another mistake. The agencies were paid by, and so beholden to, the banks that created the CDOs. They were far too generous in their assessments of them.

I direct you as well to my original post - nowhere did I say that the government was completely innocent in having set the conditions for the financial collapse. What I did say was that they were convinced to change the regulations by the financial sector, and that however that process occurred the government also failed in its duty to properly regulate the financial sector and prevent collapses like what happened in 2008.

[Arkolon]

The most obvious is the financiers themselves

Emphasis on "the most obvious", also try reading past the first paragraph.

Start with the folly of the financiers.

Manipulated profit incentives. Read the academic open letter I gave you a few minutes ago.

The big banks argued that the property markets in different American cities would rise and fall independently of one another. But this proved wrong.

Don't you think that had to do with the risk management asset ratios the government cut back on in the nineties, in the effort to give more people more houses?

I direct you as well to my original post - nowhere did I say that the government was completely innocent in having set the conditions for the financial collapse.

You blamed the bankers and their greed. I can read back through your posts; it's an awkward time for you to be shifting goalposts.

What I did say was that they were convinced to change the regulations by the financial sector

Err, no. I don't know where you got this from. The government manipulated profit incentives through easy credit (lax monetary policy) and a political effort to deregulate Fannie and Freddie and the whole lending sector to improve home ownership.

and that however that process occurred the government also failed in its duty to properly regulate the financial sector

You have pretty much all of this backwards: the government deregulated banks, let them run free for a purpose, and now who do people shift the blame on? It surprises me you take The Economist of all magazines to support your strange cause, considering, as a five-year subscriber to the magazine, The Economist is where I got most of this information from.

and prevent collapses like what happened in 2008.

Again, time bomb waiting to happen. When credit controls were relaxed and profit motives manipulated, the best anyone could do was stay away from the Lehman Bros. and try and avoid any shrapnel in the eyes.

[Ripoll]

Edited above OP to conform to progressives that suggests I "misunderstand" the progressive Agenda

[Fortschritte]

Edited above OP to conform to progressives that suggests I "misunderstand" the progressive Agenda

Elizabeth Warren's agenda isn't representative of the American progressive agenda.

[Ripoll]

Edited above OP to conform to progressives that suggests I "misunderstand" the progressive Agenda

Elizabeth Warren's agenda isn't representative of the American progressive agenda.

Wait wait wait.......what?

That's completely false, Elizabeth Warren is one of the prime leaders of the progressive Agenda in the Senate. All of her policies are progressive, and every progressive in America is pretty much following her blindly.

[Fortschritte]

Elizabeth Warren's agenda isn't representative of the American progressive agenda.

Wait wait wait.......what?

That's completely false, Elizabeth Warren is one of the prime leaders of the progressive Agenda in the Senate. All of her policies are progressive, and every progressive in America is pretty much following her blindly.

While she claims to be a leader of the Progressive Agenda, she isn't representative of every progressive. To say so is downright silly. For instance, you call yourself a third wayist, and Tony Blair was one of the prime leaders of the Third Way agenda. But, did every third wayist follow him blindly? No. Did ever third wayist agree with his agenda? No.

[Divitaen]

Of course Wall Street matters. Most people I've met would not dispute the overwhelming majority of the points you made. I don't know of any progressives who wish to see the banks broken up forcibly and left over-regulated to the point that they can't give a single loan. Some of the IMF's Basel III financial regulations would be helpful though, like capital adequacy ratios and minimum reserve requirements, just so to bolster Wall Street with an element of financial stability, but that's financial regulation, not an attempt to destroy Wall Street or undermine it's purpose and role in the economy.

[SaintB]

I read the edit of the OP and I'm convinced this is just an attempt to start an argument with progressive boogeymen that want to break up banks with sledgehammers and give all their money to homeless and illegal immigrants. There is no way the last bit is an informed opinion.

[Ripoll]

Wait wait wait.......what?

That's completely false, Elizabeth Warren is one of the prime leaders of the progressive Agenda in the Senate. All of her policies are progressive, and every progressive in America is pretty much following her blindly.

While she claims to be a leader of the Progressive Agenda, she isn't representative of every progressive. To say so is downright silly. For instance, you call yourself a third wayist, and Tony Blair was one of the prime leaders of the Third Way agenda. But, did every third wayist follow him blindly? No. Did ever third wayist agree with his agenda? No.

Well of course we mind our extremes that being said to deny that Tony Blair was affiliated and one of the main creators of third way would be ridiculous. Which, may have been wrong of me, but that's what I thought you were claiming when you said Warren isn't representative the of the progressive agenda.

Of course she doesn't represent all progressives but she is a leader for that agenda and therefore represents it.