Registered: Jun 2002
01-13-09 03:33 PM
Quote from DmanX:
Why do traders have to pay for something they didn't create?
What created the housing bubble?
1. Lax lending standards.
2. "Innovative" loans.
3. Securitization of mortgages that transfer most of the risk to the investor.
4. Zero down loans.
That in turn created price inflation across the board.
Traders make money via volatility. They speculate. They have no vested interest in continued price appreciation which is what a bubble is, albeit parabolically. Investors have a vested interest in it as they almost exclusively make money on the buy side of things by buying and holding.
If you want to stop bubbles, you engage in proactive regulation. Meaning, sit down and assess the risk of some new fangled financial activity and act expeditiously to moderate it. But instead what happened is that the so called regulators turned a blind eye and/or encouraged it.
There are several parties who deserve the BIG FINGER OF BLAME here.
1. First and foremost, the DemoCraps!! Their 1999 legislation demanding Affirmative Action Lending and that Fannie Mae guarantee the loans.
2. The Fed for providing stupidly excessive liquidity at stupidly low rates.
3. Regulators who didn't put a stop to CDS "BETS".
4. Regulators for allowing 40:1 leverage at investment banks.
5. SOME of Wall Street... for promoting a flawed, highly leveraged, [thought to be "risk free"] investment.
6. Credit rating agencies for grading "shit as sugar".
7. Greedy investors levering up to load on the perceived "risk free return".
NONE of these are the Wall Street trading community...