On regulation....

[jkjsooner]

I know many here view regulation as a bad thing but I'm going to make a bold statement and let you comment on it however you must.

If we really have financial firms that are too big to fail and require a government bailout to save our economy if things go bad, then I say we have a right and public obligation to regulate the hell out of them.

I see several options here:

1. The government doesn't allow "too big to fail" companies to be created in the first place. Don't allow mergers that would create this situation. Force company break-ups if they grow on their own to this mythical "to big to fail" level. This seems to be the most intrusive form of regulation.

2. Have extra regulation to control reckless behavior on "too big to fail" companies.

3. Have companies that admit to being too big to fail make a choice. If they ever want a government bailout (not that it is guaranteed mind you) they must voluntarily agree to a higher level of regulation than most companies. If they don't agree to this then the government is legally not allowed to bail the company out.

4. Just don't bail out anyone. I prefer this choice but I don't want to experience Great Depression #2 either.

Just random thoughts..... I'm not expert here so feel free to pick these apart....

I'm just tired of us selling out our grandchildren for our politician's short term benefit.... Sure, they will probably try to do the same to their children but by that point the game will be over...

[tommieharris91]

I know many here view regulation as a bad thing but I'm going to make a bold statement and let you comment on it however you must.

If we really have financial firms that are too big to fail and require a government bailout to save our economy if things go bad, then I say we have a right and public obligation to regulate the hell out of them.

I see several options here:

1. The government doesn't allow "too big to fail" companies to be created in the first place. Don't allow mergers that would create this situation. Force company break-ups if they grow on their own to this mythical "to big to fail" level. This seems to be the most intrusive form of regulation.

2. Have extra regulation to control reckless behavior on "too big to fail" companies.

3. Have companies that admit to being too big to fail make a choice. If they ever want a government bailout (not that it is guaranteed mind you) they must voluntarily agree to a higher level of regulation than most companies. If they don't agree to this then the government is legally not allowed to bail the company out.

4. Just don't bail out anyone. I prefer this choice but I don't want to experience Great Depression #2 either.

Just random thoughts..... I'm not expert here so feel free to pick these apart....

1. It wasn't really that mergers created the companies that are/were too big to fail. It's just that they existed and expanded for a long time, and then started making loans they shouldn't have been making in the first place.

2. I think there's enough regulation as is. The companies that have failed took on debt that was too risky to even take on. Now that bird has come home to roost.

3. That's a good, smart idea, but when does a company become "too big to fail"? There would be a point in place if that kind of legislation were to be put into place.

4. I rather see my tax money go somewhere other than to irresponsible people and companies, too.

[Vaevictis]

3. Have companies that admit to being too big to fail make a choice. If they ever want a government bailout (not that it is guaranteed mind you) they must voluntarily agree to a higher level of regulation than most companies. If they don't agree to this then the government is legally not allowed to bail the company out.

We're not bailing them out to save the companies or their employees or their management. We're really bailing out their counterparties, their counterparties' counterparties, and so on down the line.

They're too big to fail because the consequences of failure to third parties is too great to suffer. So this suggestion doesn't solve the problem.


I'm just tired of us selling out our grandchildren for our politician's short term benefit.... Sure, they will probably try to do the same to their children but by that point the game will be over...

The thing is, we're not doing this for a politician's short term benefit. The Great Depression lasted something like 15 years. It's not in anyone's best interest to risk repeating that. That's something to be avoided at almost any cost.

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The other thing to keep in mind is that sometimes these bailouts turn out to be immensely profitable. The government is getting some assets at pennies on the dollar not only because they have less value than folks thought, but because of a lack of liquidity (eg, no buyers but the seller MUST sell) that is depressing their prices even further.

It may not happen, but I wouldn't be surprised if 5 years down the road, folks are kicking themselves wishing that they had been in a position to move on these.