From a mighty ACORN an even mightier crisis did grow

[Universe Prince]

What you said was exactly this:

"Meanwhile, the least regulated firms -- hedge funds and private-equity companies -- have had the fewest problems, or have folded up their mistakes with the least amount of trauma."

I did not say that. That is a quote from someone else. And I should point out it in no way tries "to pretend that 'some' hedge funds are high-yield and risky." Can't you even keep your own argument straight?

Obviously some hedge funds are riskier than others and the general rule that you can apply to the average hedge fund would not apply to those at the extreme limits of the class.  It's possible that the infectious atmosphere of greed carried some hedge fund managers away, but their losses SHOULD be lower because they do bet both sides of the future.  Also, they can certainly "fold up their mistakes with the least amount of trauma," as you put it, because they ARE for only the wealthiest of investors, who generally can well afford the loss.

You're making assumption that the wealthy can simply absorb financial losses. If they could do this as much as you seem to think, this economic crisis would be considerably less of a crisis. (Not that is much of one anyway.)

Regulations can deny the opportunity to make certain types of risky investment, or limit it to a certain percentage of fixed assets or a percentage of total invested capital. There is literally no limit to what regulations can do.

And people say I'm idealistic.

<<And you can deny the influence of the government's actions on the economy that lead to this crisis all you like, but that is equally unrealistic. While it's easy to criticize businesses and banks for not acting according to what the economy might be, everyone acts according to what the economy is. >>

That is meaningless gobbledeygook.  Pretty much like saying everyone puts on clothes to go outside.

No. The meaning is simple. The fact is, no one acts as the market might be. They act as the market is. If the Federal Reserve keeps interest rates low, businesses and people and everyone else will act according to how the interest rates actually are, not according to how they might otherwise be. That you disapprove of this does not make it gobbledygook.

No one is proposing regulation to remove all risk.

Are you not? Very well, my mistake. Though I cannot see what risk you would allow. Perhaps you would allow them to risk buying from Subway or the local deli for lunch.

Once again, you try to win through misrepresentation.

Says one of the champions of misrepresentation.

The issue is not whether to "prevent all bad things from happening."  The idea behind regulation is to minimize and confine the risk.

Something that does not need to be done, and which prevents the proper functioning of the market. And then when a crisis or minor downturn happens, you insist it's a failure of capitalism. And for all your arguments that we are suffering from too little regulation, you still keep denying that the actions of the government have any detrimental consequences. You're entire argument is predicated on the notion that people who make the regulations know best what other people should be allowed to do. A notion that you have not proven.

The end of Glass-Steagall is probably something that has kept this crisis from being bigger than it is. As for other government actions, the government helped JP Morgan forcibly take over Bear Sterns rather than simply allow Bear Sterns to fail, which would have been more beneficial to the economy in the long run and probably would have headed off a lot of the problems we supposedly need rescuing from now. The government then decided to essentially bail out AIG. Again, letting it fail would have been better in the long run. But you see we have these bailouts because government thinks it's trying to minimize risk.

I say all that to say that the causes of the crisis are not merely regulations. There are other government actions that are influenced on this crisis. Of course, as crises go, this one is simply not the huge monster crisis that so many are making it out to be. While many politicians are trying to say that if they don't do something the entire economy will collapse, this is not even remotely true. The economic situation at the start of the Great Depression was a crisis. This situation is not even close to that. That was a mountain, and this is a molehill, and some people are trying to make a mountain out of a molehill. That sort of overreaction is not what we need.

I don't blame you, Michael, for this conversation being almost solely about regulations. I should have done a better job of pointing out the other problems involved. And while I certainly have no interest in protecting those CEOs and whatnot folks for making bad choices that led them to have their operations fall into financial ruin, to place all the blame on them as if the government to bears no responsibility is fully foolish.

[Michael Tee]

<<I did not say that. That is a quote from someone else. >>

Prince, you DID say that "Meanwhile, the least regulated firms -- hedge funds and private-equity companies -- have had the fewest problems, or have folded up their mistakes with the least amount of trauma."    Those aren't your own words, but you quoted them in support of your argument, (See Reply no. 24 in this thread.) and as far as I'm concerned, that means you adopted them as your own, unless you included some kind of caveat to distinguish where and/or to what extent you differed from them.  Which you did not.

<<You're making assumption [when arguing that hedge funds are only for the very wealthy] that the wealthy can simply absorb financial losses.>>

Absolutely not.  I am responding to your (adopted) allegation that hedge funds folded up their mistakes "with the least amount of trauma."  The super-rich aren't "traumatized" by the loss of a few million.  At least not to the same extent as a working-class man would be by the loss of his life savings.

<<You're entire argument is predicated on the notion that people who make the regulations know best what other people should be allowed to do. A notion that you have not proven.>>

Sure.  Just like I make the assumption that the by-laws of the Toronto Stock Exchange are written by a bunch of people who know a hell of a lot more about the market than I'll ever know.  We live, at least in theory, in a democracy.  If our government fucks up big-time and makes a ton of regulations that DON'T protect the people, well, throw the bums out and elect a bunch that you think CAN draft some effective regulations.

<<The government then decided to essentially bail out AIG. Again, letting it fail would have been better in the long run. >>

I've got a pretty open mind on what might be better in the long run, so I won't argue with you there.  Bottom line is, I just don't know.  But the problem is that real people don't LIVE in the long run, they live in the here and now.

And I would never claim that deregulation is the ONLY cause of the mess you're in today.  I saw two guests on CNN last night, one of them the conservative commentator and former Nixon speechwriter Ben Stein, agreeing that criminal misconduct was partly to blame here.  However, I would never minimize deregulation and in particular the repeal of the Glass-Steagall Act regulations, that bear a good share of the responsibility for this situation, as well (possibly) as lax enforcement of what regulations remained by the Bush Administration.

[Xavier_Onassis]

Hedge funds ARE for the super-rich. If you cannot prove you have ten million or so, they will not allow you to buy into them. They also have very high minimums to open an account: $500K is the lowest amount, typically.

It is also true that someone with $10 million who loses $1 million or even $5 million, assuming that all his houses are paid off and such, can continue to live in the same style as before. Not so someone with $300K who loses $200K and has only that amount to last him from 65 to the end.


There is no proof whatever that hedge funds are a better investment in any way than the sort of mutual funds anyone with a $2500 minimum can buy from Fidelity or Vanguard. This is because there is insufficient data available about the hedge funds, and that is intentional: hedge fund companies are very secretive about their results, so all one hears about them is generally positive stuff. One hears a golfing buddy say "My broker got me into this hedge fund and it's up 20% for the quarter". One does not hear that it's down 20%, because people do not often admit to bad fortune, and the broker generally does not call up his clients with bad news like that, so the poor bastard just dropped $200K in a $1m account and he is totally unaware of it.

Brokers like to call with GOOD news, so you will buy more. They hate to give you bad news. At most, they will say "This is in a temporary slump at the moment, but the signs are that it will pick up in the third quarter."