42 thoughts on “What Caused the '08 Financial Crisis: Free Markets or Government?

  1. One of the key ways that gov intervention distorts markets is by creating a false sense of security. Mark's presentation in front of the Fed illustrates this beautifully. Even Mark, an expert in the field left that meeting thinking that if these wise men of the Fed aren't concerned then maybe he was wrong and everything was fine.

  2. Very informative. In closing statement and others throughout by Mark Zandi, it is clear that he sees only positive things coming from government regulations, with no costs at all acknowledged to the system overall or individual participants: no stifling of creativity, no stopping of new investments, no channeling of capital to political vs. economic goals, etc. etc. What world is he living in, but one of a government fantasyland?

  3. Thank you mark zandi for PROVING how incompetent and/or totally DISHONEST you are as an economist. You can not even do a simple honest economic analysis…. Your alma mater may seriously want to recall your degree

  4. To a degree the lack of strict enough regulation (brakes) in which undercapitalized banks were allowed to hold and sell these ‘highly rated’ assets in the form of MBS’s when compounded with the Federal Reserves poor monetary policy following the dot com recession in drastically cutting back interest rates (acceleration) to spur immediate economic activity lead to the economy (car), especially the housing sector, being driven further by enabling further growth in sub prime and similar loans (drunk person) at high speeds careening off the cliff. The rating agencies such as Moody’s and S & P’s (police) could have acted as a buffer earlier in identifying the malfunction but did not.

    Any questions class?

    I think both proponents are attempting to square a single ultimate cause from what was actually the result of multiple independent sources, much like you only get a tornado from a specific grouping of independent weather. Ethics were in short supply and complicit negligence and indifference were rampant as greed and shortsighted outcomes were helping to blind the rot but some could see the storm building.

  5. As a former 'insider' I can say that everyone was at fault.

    Regulators were absent
    Loan agents were not qualified and only looking to make a quick buck. Same with brokers.

    Management only saw profit

    Politicians wanted homeowners for property taxes

    Buyers wanted more house than they could afford.

    Property owners wanted to keep up with the Joneses and over leveraged themselves.

    Everyone faked everything and looked the other way.

    … and the house of cards came crashing down.

  6. Zandi likes where things are at right now? WTF! The coming collapse is going to make the 2008 crisis look like a minor hiccup!

  7. Their points are not contradictory. The government pushed hard on making banks lend to more people, and failed to at the same time regulate the lenders' prudence. The government sponsored enterprises had a non-prudent influence on the market that varied in size from 1990-2008. And the fed created the long-term problem of removing accountability from banks and others, but prevented the situation from devolving into Armageddon in the short term. They're both right

  8. It seems like Mark has a good grasp on how all the actors behaved, but seems to significantly downplay how much the government set the stage for all of it to occur.

  9. The subprime problem was itself relatively small. It was the derivative market that metastatisized it into the financial crisis. That is government problem but the explanation is too long to put down here

  10. Private sector bank originated loans but just flipped them to Fannie Mae. If you're to get a mortgage now you would originate at a private bank to get a Fannie Mae loan. They just don't do the bad subprime mortgages anymore because of Dodd-Frank. Yeah the same people saying we need to make these loans to people who can't afford them are the same people saying these banks are predators and must be regulated now.

  11. Some people seem to be fundamentally brainwashed by the idea that the central banking method of operation isn't to pimp out the entire world and orchestrate booms and busts. The younger guy seems to be such a person. It's just not how keynesian and fiot money supply economics works. It's an exact formula for booms and busts, consolidation of wealth and power, and slavery. Slavery is intrinsic in it's very nature, everything else is actually just a side effect.

    The older gentleman seems to be very much aware of this fact.

  12. The card carrying member blaming the markets, not the government is just a big fat liar imho for what it's worth.

  13. This is stupid, "It was the market system that failed, not the government". BUT the government was in charge of market system, stop sugar coating the government crimes, you dumbass.

  14. Two words: "Affordable Housing."
    The whole crises was another affirmative action (redistribution) boondoggle with the gun of the state pointing at lender's head.
    Zandi's solution to a flooding sink is to hand out more mops instead of turning off the faucet.

  15. I don't know how people could ever want to own a house knowing this information. Owning a real estate in this type of environment is like a ball and chain that is hard to let go of when you get locked in. I love all sorts of great homes, but the thought of being trapped is not appealing to me.

  16. This is BS. The Democrat controlled government threatened banks with Federal intervention unless they made new loans to unqualified minorities. The Bush administration warned of the dangers, but the sexual predator, Barney Frank, head of the banking committee lied repeatedly. When things started going south, his accounting methods added trillion to the national debt your kids and grandkids will payback through devalued currency.

  17. Deregulation. I remember watching some Indian suit from one of the British multinationals saying that sub-prime was a thing in Asian markets and if we didn't open up to subprime then we would lose out. Then the deregulation happened. Then as we became more vulnerable, the insane equal opportunity mortgage rules hit. The whole thing went sideways. A few companies began to misrepresent their products in an effort to save themselves. And boom. Everything flew apart.

  18. 20:43 And tell us, Mark, is the rating agency market free and open or is it a government-granted oligarchy that stifles rating competition?

  19. Sub prime lending was the governments brainchild ( politicians) and it got the ball rolling on this mess .

  20. Please watch the Politicon debate between Ben Shapiro and TYT' Cenk Uygur, a socialost progressive. In that debate, Uygur describes a system in which you had socialism for the rich. If you agree that this is how the system worked, then you would have to agree that free markets were not responsible for the crash. In a free market, no reasonable lender would knowingly provide a loan to someone who has no capacity to repay. The risk of default was borne not by the lender, but by the govt.

  21. It's the Federal Reserve and crooked government that's to blame. We, the tax payers, always get screwed and these bankers couldn't care less. We are slaves to them.

  22. Evil bastard working for Moody's. They were complicit in rating toxic assets AAA long enough for the big banks to offload. All the rating agencies did it. Now he's out hear making apologies for bankers and their government cronies and blaming it on "lack of regulation". If they were allowed to fail, and interest rates weren't manipulated, none of those businesses would even exist.

  23. And after the collapse, Barney Frank coward like the boofooer he was and said he was really just pushing for affordable rent for people more than home ownership. So he was a liar along with all his other sleaziness. He will go down as one of the worst all time if anyone even cares to remember him.

  24. You hear the same "moral thing to do" argument today coming from the likes of AOC and Bernie. It amazes me how so many people want more government intervention and mandates imposed by fiat upon them and not less. It boils down to them saying " We know better and if you don't do what we say, you might see some jail time."

  25. Regulators forced lenders to make unwise loans, or be put out of business by the Feds; then when this spurs ruinous lending and disastrous attempts to offload risk, this guy says, 'Where are the regulators?"

  26. Easy to say.Keep goverment out of it. If you cannot afford a student loan do not borrow with the taxpayers money. Sounds like every one except Mr.Allison is supporting government regs.If the regs don’t work, they then want to pass new regs! The banking industry is probably is the most regulated. Thank you Mr.Allison! It is a moral issue. Altruism vs Individual Rights

  27. Get rid of theFederal Reserve. It’s establishment was a great violation of man’ s individual rights.
    One of the basic principles that the founding fathers of this country was the government was suppose to protect these rights. This includes taking people’s money which they earned and giving to the”needing”. Sounds very Marxist.

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