Why Can’t the Banking Industry Solve Its Ethics Problems?

[Yvaelle]

You're misunderstanding what is meant by neoliberalism. Neoliberalism is the political ideology of putting neo-classical economics into practice.

The "liberalism" in neoliberalism refers to economic liberalism, i.e. deregulation, privatization, free international trade, lower taxes, small government, laissez-faire policies, etc.

As contradictory as it sounds, neoliberalism is a main component of neoconservatism, aka Reaganism and Thatcherism.

You're right, in my head I was thinking Neo-Keynesian because of the appeal to market terms and the invisible hand.


Long story short, Keynes was right - Reagan and Thatcher were wrong - bring back post-war Keynesian policies and regulate your shit, America!


Edit: As a dual citizen, if there was a candidate I thought would actually do this - I'd vote for them as my top issue. I actually thought Obama might in 2008, since he did speak about bringing serious change, and reforming the banking sector even before the crash hit. It would take a long-shot candidate like him (in 2008) to get it done, since you can be sure Hillary and any of the Republicans won't do it.

Elizabeth Warren 2016! I know she keeps emphatically saying she's not running, but I'm pretty sure if we just keep promoting her she'll win the election accidentally

[Raeph]

Why should anyone uphold a "static moral standard"?

It's doubly funny because generally people's "static moral standard" is just a product of when/where they were born. Not some great cosmic truths, or the result of deep reflection...simply the result of what the zeitgeist in their geographic locality and time period happened to be.

Then they pat themselves on the back for having such a wonderful, "strict moral code" and such which generally just means they're dogmatic, inflexible, fanatical, etc etc.

More on topic, if you really think that greed is somehow the result of people not having a "strict moral code" then you're really missing the mark. Humans aren't robots, you can't program them with "morals.exe" and then throw them into a pit of money that's there for the taking. That's why we have laws and regulations, because we're frail mortals.

Blaming some philosophy or "liberal elites" or some other nonsense is just a roundabout way of smugly patting yourself on the back for, "Not being one of THOSE guys." As if you're somehow above human frailty.

I'm not blaming anyone for anything really. I'm simply asking a question: This entire thread is about bemoaning the woes of bankers who brutalize people by what they do. They crash economies, cost money, steal the livelihoods of the good people. They are moral and ethical monsters, by the standards of the people who are castigating them in this thread.

Why should those bankers, or anyone, who lives by an ingrained and taught relativistic ethic and moral standard care or conform to a moral standard (read the laws of any country) if they exist outside of the standard they espouse.

How can you as one who holds up a relativistic ethic, as ideal, deny another person the right to hold the same standard, though their relativism manifests itself differently than yours?

Seems rather intolerant to me. Anyway...just musing and asking questions. I'll leave the thread now, so you can enjoy your moral outrage that I dared question your perspective of "social justice".

[Khoranth]

how exactly is crashing the entire economy a win for everybody?

My plan wouldn't crash the economy, it would stabilize it, without rewarding the criminals at the top, who made terrible decisions.

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The laws already exist for that too. They're not being used either.

Well i did say "if i were in charge" at the beginning. obviously, i am not.

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You're right, in my head I was thinking Neo-Keynesian because of the appeal to market terms and the invisible hand.


Long story short, Keynes was right - Reagan and Thatcher were wrong - bring back post-war Keynesian policies and regulate your shit, America!


Edit: As a dual citizen, if there was a candidate I thought would actually do this - I'd vote for them as my top issue. I actually thought Obama might in 2008, since he did speak about bringing serious change, and reforming the banking sector even before the crash hit. It would take a long-shot candidate like him (in 2008) to get it done, since you can be sure Hillary and any of the Republicans won't do it.

Elizabeth Warren 2016! I know she keeps emphatically saying she's not running, but I'm pretty sure if we just keep promoting her she'll win the election accidentally

I do not see how you can simply blame "lack of regulation" for all the problems. The gov't effectively told every "degenerate gambler" in the USA: "do whatever you want, we will bail you out"

You do not think the gov't doing this had any effect on the behavior that led to the economic crisis?

Seriously, if the gov't told every US citizen, "gamble away your mortgage and rent, if you lose we will pay it" what do you think would happen?

[satimy]

You're right, in my head I was thinking Neo-Keynesian because of the appeal to market terms and the invisible hand.


Long story short, Keynes was right - Reagan and Thatcher were wrong - bring back post-war Keynesian policies and regulate your shit, America!


Edit: As a dual citizen, if there was a candidate I thought would actually do this - I'd vote for them as my top issue. I actually thought Obama might in 2008, since he did speak about bringing serious change, and reforming the banking sector even before the crash hit. It would take a long-shot candidate like him (in 2008) to get it done, since you can be sure Hillary and any of the Republicans won't do it.

Elizabeth Warren 2016! I know she keeps emphatically saying she's not running, but I'm pretty sure if we just keep promoting her she'll win the election accidentally

Reagan is about as Keynesian as one can get, "fuck bitches print money". and neo-cons in general love keynesianism because it gives them a way to finance wars that become unpopular.

Also liquidity trap

[Sunseeker]

Short answer: because it makes them rich and they dun wanna.

[Pull My Finger]

It's like asking why crap can't smell like roses.

[Fang7986]

Because most of the world runs on what we see as corruption and ethics are just words and ideas on how you think someone else should behave and everybody has different ethics.

[Yvaelle]

I do not see how you can simply blame "lack of regulation" for all the problems. The gov't effectively told every "degenerate gambler" in the USA: "do whatever you want, we will bail you out"

You do not think the gov't doing this had any effect on the behavior that led to the economic crisis?

The government didn't regulate - that is what told the banks they could get away with the greatest bank robbery in history.

It didn't tell citizens "gamble away your mortgage and rent, if you lose we will pay it" - and they didn't do that either. People took out sub-prime mortgages because the banks convinced them it was safe, not because the government offered to back those mortgages - and when things went south, the government let everyone lose their homes: they put all the bailout money into saving the institutions that caused the problem (the banks).

People didn't get promised a bail out, and they didn't get bailed out: only the biggest of banks did. They are your "degenerate gamblers'.


So here are a few ways proper regulation could have addressed this:
- regulate banks such that they cannot become 'too big too fail' (break them up, anti-trust, their size poses a national - even global - security risk)
- restrict the intertwined financial sector from incestuous relationships that make them 'too complex to resolve' (ie. bring Glass-Steagall, and all the myriad other regulations it is short-hand for - back)
- eliminate sub-prime lending, both for personal and commercial loans, and for the federal funds rate
- create a government-run and mandated ratings system along the lines of Moody's / S&P, and de-emphasize all private ratings systems: they have a conflict of interest and are unable to accurately rate companies and securities by design
- create a government body (potentially the SEC) in charge of assessing and assigning grades for the risk of securities (such as CDO's in the case of mortgages), banks cannot grade their own products objectively: conflict of interest


Lastly, regulation could eliminate or greatly reduce the 'revolving door' effect between government and the financial sector: it is a conflict of interest in two ways. A previous employee of the financial sector is irrevocably biased, both toward their former employer (ie. Goldman-Sachs) and toward the self-importance of the financial industry.

Ideally - in order to oversee the financial sector - either as a central banker or as the SEC - you should have zero past work experience in the financial sector. Hire any mathematician or scientist, pretty much anyone with a post-graduate degree and a solid understanding of numbers - and they can come to understand the financial sector in entirety if they make it their profession: it's not rocket surgery.

The argument that only a career banker can possibly comprehend the god-like brilliance of the modern banking system - is absolute nonsense - yet that's the argument that keeps getting bankers into government.

Reagan is about as Keynesian as one can get, "fuck bitches print money". and neo-cons in general love keynesianism because it gives them a way to finance wars that become unpopular.

"Fuck Bitches Print Money" - is a mis-attribution to Keynes - who said something more along the lines of, 'Higher Employment results in Higher Inflation': and that turned out (after Keynes' death) to be empirically and observably true via the Philips Curve: which makes the slight adjustment that it's actually:

Increased Employment + Decreased Unemployment = Increased Inflation.

So there are certain caveats to that prediction, where Keynes wasn't precisely correct - but overwhelmingly yes - higher employment does cause higher inflation. Higher inflation, according to Keynes, isn't necessarily a bad thing (especcially when paired with full employment) - infact it's far better to have everyone have a job, but for the dollar to lose its value quicker over time - since it means working people (being everyone) retain value faster, while the wealthy (who are more likely to sit on larger %'s of their wealth) lose value that they don't invest.

Therefore higher employment results in higher inflation, and higher inflation results in greater investment, and greater investment stimulates economic growth: both bottom-up (employment) and top-down (investment).

The Nixon Shock, and Reagan-era economic policies, were the death of Keynesian policy - which rose in popularity in the 1930's, was implemented following the second world war, and ran until 1971 (Nixon Shock, and the end of Bretton-Woods).

The US/UK has operated under Neo-Classical policy ever since - with the partial exception of Clinton (a Neo-Keynesian) - but during the very end of his second term, Congress passed the Gramm-Leach-Billey Act that repealed Glass-Steagall (the aftermath of which we saw during Bush Jr's presidency, including the recession). That's why the Dodd-Frank Act was an attempt to bring back Glass-Steagall - as a first-step to implementing meaningful financial regulation (but little point now, it's so watered down as to be meaningless).

Also liquidity trap

I'm not sure what you mean by this? A liquidity trap is an idea proposed by Keynes, that central bank monetary injections into the private financial sector will not always result in reduced personal and commercial interest rates: exactly what we saw in the 2009 bailouts.

The very idea of a liquidity trap is a critique of neo-classical economics - it suggests a breakdown of traditional national monetary policy - and I'm convinced they exist (in accordance with Keynes' model).

[Khoranth]

The government didn't regulate - that is what told the banks they could get away with the greatest bank robbery in history.

It didn't tell citizens "gamble away your mortgage and rent, if you lose we will pay it" - and they didn't do that either. People took out sub-prime mortgages because the banks convinced them it was safe, not because the government offered to back those mortgages - and when things went south, the government let everyone lose their homes: they put all the bailout money into saving the institutions that caused the problem (the banks).

People didn't get promised a bail out, and they didn't get bailed out: only the biggest of banks did. They are your "degenerate gamblers'.

I think you misunderstood me, based on this response. I meant to imply that the big banks/business's who caused the economic crisis were the "degenerate gamblers". And that the root cause of the crisis was the gov't telling these "degenerate gamblers" do whatever you want and we will bail you out.

My entire point is that the bailouts for big banks/business's being available caused the bad behavior, at such a high volume, to begin with.

I then made a comparison to the gov'ts interaction with big banks/business's to being comparable to the gov't telling a degenerate gambler to gamble away the rent/mortgage and a bailout would come if they lost. I did not mean that literally, sorry for the confusion,Im not the best writer.

Anyways, my point was: the bad behavior that led to the crisis was not due to "lack of regulation", it was due to the big banks/business's knowing that they could gamble, and if they lose, the gov't would bail them out.

Edit: also,Yes i agree sub-prime mortgages are insane and should be banned, but if not banned, the gov't should 100% not be backing them and bailing out banks when sub-primes go under.