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[Helgoland]

It did not directly cause the crisis, but it basically made the whole system more unstable, making the crisis possible in the first place.

[kaijyuu]

Repealing a regulation cannot directly cause anything, but it can allow things to happen that would've been impossible otherwise (at least legally).

Potentially important distinction.

[Mephansteras]

Yeah. Basically, it shifted the balance of everything in a way that made some bad business decisions go from having a small effect to having a very large effect.

Kind of like removing a levee can cause a business to fail. It's not directly responsible, but it allows various events to unfold that wouldn't had the levee been left in place.

To elaborate on this hypothetical example: With the levee gone you get Flooding of the business. This caused repair costs and lost revenue while the building was being restored. Despite the help of Insurance to cover the actual repair costs, the loss of revenue and traffic of customers causes the business to fail. The flooding was perhaps only the straw that broke the camel's back, but if the flood had never happened the business wouldn't have closed.

It's kind of like that.

[GlyphGryph]

Even at it's core, though, it's the fact that the government allows the corps to play a sort of "manipulate the system" game, where they don't have to cover their asses because they can externalize all the losses.

I think, economically, the best sort of regulation is the type that internalizes those losses, so people can't game the system by pushing the risk off onto someone else - more regulation (and better, current stuff is often all to easy to avoid) of that sort would have held those who gambled and lost responsible for the loss, and would have gone a long way towards preventing them from making ultimately unsustainable bets to begin with.

The big players here, the ones who were really responsible, almost all knew they were going to lose, and lose big, eventually - they were just absolutely sure they wouldn't have to deal with the fallout, and their immediate profits would more than offset any minor portion of the cost they might have to actually deal with. And if they didn't, hell, it's not like the government could let them fail, right? It would blow up the economy!

A classic "Heads I win, Tails you lose" sort of situation. And regulation could have prevented it. (As always, the difficult part of regulation is preventing THAT while still allowing the bits that are actually productive and good for the economy)

[GreatJustice]

Repealing a regulation cannot directly cause anything, but it can allow things to happen that would've been impossible otherwise (at least legally).

Potentially important distinction.

Things like what?

[kaijyuu]

Things like... well, if you have a regulation against dumping toxic waste into a river, it is thus prevented from happening (at least legally).

If you want me to explain how repealing Glass Steagal allowed the crisis, I'll have to pass that question on to someone else, as I don't have the expertise or knowledge to do so. You'll note I've made no specific claims about that issue, just made a clarification concerning cause and allowance.

[misko27]

Example, I legalize murder. Havign done that, I'm not directly telling anyone "hey, go murder", but The the lack of restrictions is going to massively increase the number of murders.

[GreatJustice]

No no, Glass Steagal itself.

[Lord Shonus]

That's rather uncertain. Nobody can agree on whether the restrictions would have slowed the crash, accelerated it, or had already ceased to exist at the time of repeal.

[Nadaka]

It prevented the conflict of interest between banking and brokering that caused the system to collapse.

[Lord Shonus]

In theory. Many pundits have argued for years that it no longer did so.

[Nadaka]

In theory. Many pundits have argued for years that it no longer did so.

pundits with agenda's.

Glass-Steagal was created in response to the lending and securities fraud that was largely responsible for crashing the US economy at the time. While it held, there were no such society shaking economic crisis's stemming from that cause. In the decade after it was repealed, the exact same kinds lending and securities games were played leading up to and the recession. It is extremely clear cut.

Its not impossible for something else to have happened to cause a recession, but this one was a repeat of history.

[mainiac]

No no, Glass Steagal itself.

Why on earth would someone try to explain something that complex to you?  You would just take potshots at it and then act all smug because you "disproved" it.  It would be like trying to explain the finer points of the Climate Research Unit findings at East Anglia to a climate change skeptic.  You want an explanation?  Tough crap.  Your previous behavior means that nobody is going to waste their time on you.  We are under no obligation to offer you material to flame.

[GreatJustice]

It prevented the conflict of interest between banking and brokering that caused the system to collapse.

How did it cause the system to collapse?

[Nadaka]

It prevented the conflict of interest between banking and brokering that caused the system to collapse.

How did it cause the system to collapse?

Were you not paying attention while this whole thing was in the news? Go google the damn the thing.