Aaah...
But what is the governments proper role?
Regulation that is effective at preventing cheating is good for almost everyone(not cheaters themselves).
Regulation intended to regulate the nature of credit cannot possibly be thought out well enough.
This situation we are discussing is merely a large case in point for the larger concept.
So we are discussing a detail, of a larger concept.
When the government made it possible to sell loans to the government , or to bundle loans and sell the mass of loans as a single object, it decoupled the responsibility and consequence of the original loan from the outcome of a bad loan.
Then the banks that made the best money and grew the most were the ones that made and sold the most loans , bales of money rolled into the irresponsible and they left the responsible behind in the dust.
What made the big banks irresponsible is a chicken and egg question, reverse it to ask what made the irresponsible banks grow big?
Evolution works on corporations in a similar manner to its action on creatures , the selection is in favor of the fittest.
But there are short legged cattle ,because a farmer once bred speed out of his heard, due to the farmers desire the fittest on the farm was opposite to the fittest in the wild.
Our banks cope with what the bank owners want by promising them profits, the same banks cope with our government by promising them obedience, successful banks reach the balance in this environment.
When some banks are making huge profits , on an activity that the government sanctions , how does a bank manager explain to his stockholders that he does not want to participate? If he is not fired , he is abandoned and his bank will shrink from the smaller profit and lack of investors.
If there were banks but no governments , they would never lend to anyone that they suspected could not pay back.
But with the government offering to buy loans before anyone has proven that the debtors were good for it , the proper attitude for a banker becomes "why not?".
If there were government but no banks , we would build fewer and smaller houses.
There have been times when there were not enough banks and "tight money" made selling a crop and buying farm equipment and seed very difficult. This has been a national Issue since the time of Alexander Hamilton.
There is a proper role for government and banks , but we pretty often loose track of what is proper and central and try to use the aircraft as a tractor and a tractor to fly.
If the government is used to prevent cheating in banks and banks are used to facilitate projects large and small, we can return to the basics and use simple rules.
