Via Zandar, the FBI is reporting large decreases in the crime rate in the first half of 2010:
The FBI’s semiannual uniform crime report shows that reports of violent crime dropped 6.2 percent from January to June and property crime reports were down 2.8 percent.
The dip in reported crimes follows a three-year trend of decreasing crime rates despite a sagging economy.
According to the FBI, murders dropped 7.1 percent in the first six months of 2010 while robberies decreased by 10.7 percent. Reports of vehicle thefts also dropped by 9.7 percent.
The murder rate is now half of what it was in 1980. There have been reasonably steady increases decreases in virtually all measures of property crimes and violent crimes since 1992. Yet Gallup polls show that in every year in that period except for 2001 and 2002, the majority (and usually the overwhelming majority) of Americans believed the crime rate had gone up over the last year. My guess is that the 2001/2002 anomaly was because people believed that the country came together after 9/11 or something like that.
The Dangerman
How about trends in white collar crimes?
Edit: How should these be measured since charges are rarely filed, meaning convictions are even more rare?
Linkmeister
It’s a cliché, but when your local TV stations consistently follow the “If it bleeds it leads” philosophy after a while you’re conditioned to believe the thugs are on your doorstep.
JD Rhoades
I and some colleagues were having this conversation at lunch the other day with the elderly parents of a young man who’d been interning with one of our usual lunch crowd. They were complaining that “nothing seemed to be working” in cutting down the crime rate and were absolutely amazed to hear that the violent crime rate was steadily going down. And since I used to work in TV news in another life (as crew, not “talent”), I filled them in on the whole “if it bleeds it leads” philosophy.
Educating one mind at a time…
Villago Delenda Est
What this means is that what few crimes remain must be even more overhyped by local TV news to keep the level of fear up amongst the serfs.
Refreshing fizzy beverage to Linkmeister
Villago Delenda Est
@The Dangerman:
If no one is even investigated, let alone subject to arrest and trial, there is no crime.
Hence the banksters are still at large, doing their thing.
Mark
@The Dangerman: Wasn’t it in one of the Michael Moore movies where he asked the producer of COPS why they didn’t do more white-collar takedowns? And the guy said “Well, if you could get a CEO to take his shirt off when he was getting arrested…”
Jeffro
Statistics, schmatistics…I go with what my gut tells me about crime in this country.
/Fox News viewer
Linkmeister
@Villago Delenda Est: Gracias, amigo. Make mine a Coke.
Mike Kay (Democrat of the Century)
interesting that property crime is down even though we’re in recession.
I blame Wii.
though, i do miss the good ole days when crime would keep rents down in major cities. it was far better than anything rent control could ever achieve.
The Dangerman
@Mark:
I’m thinking that, with recent events, a show called “Wall Streeters Up Against The Wall” would be a ratings winner. No violence, just a Bankster being forced to flip burgers or clean toilets for a while.
Back to my original question; this shit has always gone on, no doubt (see Five, Keating, S&L fiasco, Abscam, etc.), but did Bush open the floodgates, or was it Clinton’s change in the banking laws that did it?
Corey
@Jeffro: I literally got this exact response after a holiday discussion about how “those people” are ruining America. The murder rate drop since 1980 has been bandied about on the web for awhile so I mentioned that, and my uncle said, “I think the people who put out those statistics are lying. Political correctness, you know.”
Everyone nodded gravely. Pretty amazing stuff.
General Stuck
Could these increases also be related to the expanding Obama security state. He’s no George Bush, but jeevus, he doesn’t have to be worse than Bush either.
oh wait
Uncle Clarence Thomas
.
.
Also too, America remains as safe and free as it was under President Bush, according to avid President Obama supporters Michael Hayden and Mike McConnell. Actually, more freer and more saferer.
.
.
Villago Delenda Est
@The Dangerman:
Clinton signed the repeal of the utterly oppressive, Nazi and or Communist in nature Glass-Steagall act in 1999, which really allowed the banksters to go utterly nuts.
More on this atrocity on financial integrity and common sense here.
Mike Kay (Democrat of the Century)
@General Stuck: you don’t get it. the fact that fisa applications have declined only means obama’s chicago gangland thugs aren’t even bothering with the pretense of paper work. most transparent administration, my ass.
And you know who else didn’t fill out fisa applications — that’s right, the waffen ss.
Villago Delenda Est
I strongly suspect if you seriously dig into the numbers, the answer to “why is the crime rate down?” is in demographics, not in any proactive law enforcement actions.
Bill E Pilgrim
DougJ:
There have been reasonably steady increases in virtually all measures of property crimes and violent crimes since 1992. Yes Gallup polls show that in every year in that period…
increases = decreases?
Yes = Yet?
That's Master of Accountancy to You, Pal
@The Dangerman:
The number one cause was too much money in the system. In the first half of the decade, the world was awash in liquidity. It had to be invested somewhere, and there weren’t a whole lot of obvious places other than US mortgages and their derivatives.
The whole problem was a lot longer in forming than either Bush or Clinton. Each, in their own way, provided some impetus, but there just is no one thing, or even a few things, that caused the crisis.
Mike Kay (Democrat of the Century)
we have always been at war with rising crime
jeff
There were a lot of teens in the 80s-90s, relative to the population–as the boomers had children 10 years earlier. There have been fewer, though I understand we are at another high node now.
I actually think today’s teens are less insane than my generation was in the late 80s–we all seemed hell-bent on death (but that was just my town, I guess.)
General Stuck
@Mike Kay (Democrat of the Century):
Why do they think Rahm left the WH and is running for Chicago Mayor? Obviously for evil intent, of one sort or another.
That's Master of Accountancy to You, Pal
@Villago Delenda Est:
I will once again ask a question to which no one has provided much of an answer. If the repeal of Glass-Steagal was so key, why were the companies worst hit by the crisis ones that it didn’t effect? Bear Stearns and Lehman Brothers were pure investment banks. AIG was an insurance company. None of them had a commercial bank attached to them, and so none of them would have seen any difference had Glass-Steagal never been repealed.
So, how did that happen if your thesis is correct?
The Dangerman
After some reflection, I was going to pick the date of acceleration as the Enron mess; shit, at what point did it become “acceptable” to fleece grandma out of her savings. Enron took it all to a new level; shit, look at the fallout, Arthur Anderson went down and it has cascaded from there to taking out Lehman Brothers, Merrill Lynch, etc. Picking Enron as the start and Bush serving 8 of the 10 years since that event, no wonder things are full on fucked.
I need another drink.
Mike Kay (Democrat of the Century)
@General Stuck: you know, there’s nothing on the calendar this year, I’m surprised the vaunted netroots hasn’t pledged their vast resources to primarying and paying back history’s worst monster, RAHM!
Ross Hershberger
There may be something to the demographic theory of crime reduction. Young males are disproportionately involved in property and violent crime, and that demographic has decreased in 30 years.
Also, haven’t we had a colossal explosion in the prison population in the last couple of decades? I don’t have the statistics, but substantially more people are behind bars now than in 1980.
de stijl
Kids today are too fat and lazy for a life of crime.
Southern Beale
And yet, the “moderate” guy running for governor in Tennessee (who won) of course had to do a campaign ad in which he mused about what, oh what, can we do about out of control crime in this state? And of course NO ONE (save me) fact-checked that statement, it’s just taken as a given that the crime rate is going up up up. The reason this all feels true is because the news media covers crime non-stop, and maybe they should, it’s news, I dunno. But it does needlessly instill fear in people, which serves several purposes.
For example, the new governor’s solutions were the usual “tougher sentencing laws and making sure prisons aren’t like luxury hotels.”
What an asshole. These are lovely suggestions straight from TN-based Corrections Corp. of America and it plays well with the wingnutty low-information voter around here, so I’m sure we’ll see more such brilliant ideas actually implemented. The industry-friendly ALEC already has boiler-plate legislation which you can view on their website if you want your state legislature to enact such “tougher sentencing laws.”
Hey the best way to deal with high unemployment is to start some wars and incarcerate the rest! Especially when you’ve privatized the prisons!
Huh fucking zah.
Dennis SGMM
@General Stuck: @Mike Kay (Democrat of the Century):
Why don’t you guys just get a room?
Davis X. Machina
Look at it Fox-wise, and it all makes sense.
If the country is increasingly diverse, and it is, and They are all a bunch of criminals, and they are, than it stands to reason that crime has to go up.
Michael
They stopped counting Bank-sanctioned burglary as a property crime…
General Stuck
@Dennis SGMM:
Why don’t you say something worth reading, or mind your own fucking business?
gene108
Do you mean decreases? The link you posted to with the rates of crime indicates a decrease in crime, since 1992.
That would match what I’ve been reading regarding crime, over the past 15-16 years. Crime rates started declining in the 1990’s, for the first time in a generation.
Surprised they are dropping now, with cuts in police forces and a bad economy.
I guess people don’t have anything left to rob?
gene108
http://www.disastercenter.com/crime/uscrime.htm
This link at the top of the thread has violent crime and property crime in 1992 at 1,932,270 and 12,505,900. Totals for violent crime and property crime in 2009 were 1,318,398 and 9,320,971.
“Increase” in the top of the thread should read decrease, unless you are referencing another link, which was not posted.
PurpleGirl
@That’s Master of Accountancy to You, Pal: From what I know of the various companies involved: Bear Sterns and Lehman Brothers were connected to the banks because they bought and sold the derivative instruments based on the mortgages and other things. AIG insured all the stuff directly and indirectly. They were separate companies but their business lines were tied together in multiple ways.
Mike Kay (Democrat of the Century)
@Dennis SGMM: homophobe.
Mark S.
As for lower crime rates, I’m sticking with my theory that older people commit less crimes, so an older population’s crime rate goes down.
As for the public’s perception of rising crime rates, this goes with my first theory. An older population watches more Fox News, so their perception of rising crime rates likely increases.
General Stuck
@PurpleGirl:
That, and the psychological effect of killing a key long standing post depression financial regulatory law, that signaled the opening of the new Wall Street, finance world Cas ino era where about anything went, and did.
PurpleGirl
@Ross Hershberger: I saw a statistic somewhere the other day (can’t remember where) that the US has the largest prison population in the world.
As I look at TV schedules, I’m struck by how many prison type shows are on the “documentary” channels like National Geographic, History, Discovery ID, et al. Your have hows like Gangland, Super Max, cop video shows, Steven Seagal Lawman. And these are series, now with multiple seasons in their histories. No matter what the agencies tell us, people believe what they see on the TV.
PurpleGirl
@General Stuck: Yes, that too.
junebug
There was a very good, true journalism article on the Washington Monthly site not too long ago about programs to reduce recidivism. I think local communities are making a big difference. And even if the little majority of Republicans in the house try to starve the states, I feel certain they (the states) will do the right thing.
Sugar Baby
You people cannot see the forest for the politically correct tree.
gene108
@The Dangerman:
The above makes do damn sense.
After Enron, World.Com, etc. Congress stepped into whatever regulatory breach was perceived by passing Sarbanes-Oxley, to prevent the type of fraud that led to those collapses.
The accounting standards were changed to prevent some of the practices, which helped facilitate the abuses of Enron, et. al.
The fraud committed by Enron, et. al. had nothing to do with mortgage backed securities and the subsequent real estate boom and bust, which has exasperated the recession, which started in December 2007, due in large part to a sudden jump in energy prices. Jumps in energy prices aren’t unusual reasons to have recessions or economic slowdowns, especially when prices went up at least 10x in a 10 year period.
The Enron collapse did have something to do with collateralized debt obligations, since investors decided they needed some guarantee the bonds they were buying from other parties would be insured, in case there was some Enron style fraud going on with the other party. The CDO market was basically created in response the financial scandals at the start of the decade.
In and of it self, CDO’s and other derivatives to help insure the functioning of the credit market, was actually a good thing. As Greenspan pointed out, this is the market managing itself.
Somewhere around 2004 or 2005, some geniuses on Wall Street figured out how to game this market and started putting more money into CDO’s than just to cover bonds they were buying.
This sort of speculation in the credit markets is what screwed over AIG, which ended up on the wrong side of these deals.
1789? Under the current Constitution, at least. People have been getting fleeced from their savings for a very long time.
@That’s Master of Accountancy to You, Pal:
It wasn’t Glass-Steagal that was key to the collapse. The deregulation of the derivatives markets, which was on the same bill, did a lot more damage in the past decade than repealing Glass-Steagal.
If Glass-Steagal had been repealed as a stand alone bill, with the derivatives markets being untouched, much of the financial mess could’ve been avoided.
Of course, the hard part is getting people on Wall Street to agree to this. For them, they did nothing wrong. The companies that failed are the ones that screwed up and they paid the price for it already.
The changes in derivatives markets did nothing to hurt the economy because the people, who couldn’t handle it are now out of business.
Sigh…I do wonder at the lack of self-reflection some of these guys have…sort of like the inability to realize 1990’s levels of returns and growth of assets isn’t going to happen all the time and trying to force it to happen, so you can keep getting big 1990’s level bonuses or bigger, may be bad for the over all economy…
I somehow don’t think that’s the lesson people on Wall Street will take home from the near collapse of the financial markets; they always have to try and make more money than they were making and not trying to do it is somehow the bad destructive counterproductive option, when viewing your decisions over all impact on society.
shoutingattherain
Silly LIBtards:
More guns = Less crime
Sooo we need more guns!
gene108
@PurpleGirl: They could’ve been just that interconnected with Glass-Steagal in place.
DougJ
@Bill E Pilgrim:
Thanks.
General Stuck
@Mark S.:
Just wait till us real hippy boomers replace the now 65 and older generation, and flower power crimes skyrocket.
joe from Lowell
@That’s Master of Accountancy to You, Pal:
The mega-conglomerates had the assets from their banking sides to become major players, and used them recklessly in a way that defined the market.
Everyone else followed the herd.
New Yorker
The funny thing is that it’s well known by pretty much everyone that the crime rate has plummeted in the two biggest cities in the country, New York and Los Angeles. Maybe it’s because those two cities had visible examples of crime out of control with the 1992 LA riots and a whole series of disturbances in New York from the 1977 blackout to the 1991 Crown Heights riots against which to compare present conditions?
So where exactly do people think crime is going up, and why? I wonder if it has something to do with non-white immigration. Some old white FOX News viewer lives in a neighborhood that has become overwhelmingly Mexican in the last 10 years, and he thinks that means crime has gotten worse, or something.
joe from Lowell
@gene108:
One theory is that we’ve hit a tipping point. As crime levels fell in the 90s and 00s, police departments hit a point where they were actually not overwhelmed with cases, and actually had sufficient resources to follow up on reports.
gene108
@gene108: I wanted to edit this post, but I had some trouble with my browser and ran out of time.
I just want to add, there’s a specific drive in most people to find simple cause-effect relationships.
Republicans took control of the House in 1994, therefore they were responsible for the economic boom and balanced budgets of the 1990’s. This of course can be correlated chronologically, when one looks at when the economy started picking up steam after the recession of 1991.
This ignores Clinton’s tax and budget legislation passed in 1993, without a single Republican vote, which was more responsible for balancing the budget.
Glass-Steagal was repealed and we had a bunch of financial scandals and later a mess in the financial markets. It may seem prior to Glass-Steagal everything was rosie and without it things went bad, but I don’t think there’s a clear cause and effect with regards to Glass-Steagal’s repeal and the financial problems we had.
I think there was other stuff in the Graham-Leach-Bliley bill that was more toxic, than repealing Glass-Steagal, but that stuff usually tends to get ignored, such as changes to the derivatives markets.
PurpleGirl
@gene108: I think it’s an attitude thing. Repealing Glass-Steagall gave them permission to try anything and everything. And they did
change
You are of course (once again) incorrect.
The REPORTED violent crimes have gone down. Actual ones? Well, that may be a different story.
Police departments are now under pressure from liberal “community policing” doctrines to “fluff” the crime numbers and underreport the crimes actually reported, less they lose funding or be labeled “racist”.
joe from Lowell
@New Yorker:
They think it’s going up in their own communities.
They think this because, 30 years ago, there were 5500 people living in their town, and there was a murder case every 10 years. Today, there are 19,000 people living in that same town, and there is a murder case every 3 years. Sure, the rate is lower, but they read about murders three times as often in their town.
joe from Lowell
@change:
You can’t hide murders, and the murder rate is half of what it was in 1980.
Seriously, get out of West Nowheresville once in a while, Gramps. Crime has dropped dramatically in American cities.
General Stuck
@change:
Dude, this is a near masterpiece in the woeful art of wingnuttery.
consider my hat tipped.
change
@joe from Lowell:
Sure you can hide murders. You can rule them “suicides” or “accidents” lest you lose funding from that “progressive” Mayor.
As for calling me “gramps”, perhaps you should get off mommy’s tit or the government dole and learn to work an actual job that doesn’t depend on government largesse stolen at the point of a gun from taxpayers?
Mark S.
@General Stuck:
I’m keeping an eye on you, Stuck.
Jack Canuck
@change:
Ah, nothing says “wingnut troll” like a complete lack of evidence.
Mark S.
@change:
God you’re a fucking retard.
General Stuck
@Mark S.:
Somebody likely should
joe from Lowell
@change:
That is beyond even your standards of dumb. Do you imagine that people don’t notice when their neighbors are getting killed? Do you imagine that elected officials don’t suffer some kind of loss of support from people when their neighbors keep getting killed?
What mayor would think it a good idea to cut funding to the police when people are getting killed?
You aren’t making any sense, Gramps. Do you often find yourself ranting about something out of the blue, and discovering that nobody knows what you’re talking about?
joe from Lowell
@Jack Canuck:
…unless it’s “making up explanations for why we should ignore the evidence.”
Nutella
@joe from Lowell:
You shouldn’t call him Gramps, Joe. Anyone who uses that many scare quotes must be a very young idiot.
Or perhaps I should say: You “shouldn’t” call him Gramps, “Joe”. Anyone who “uses” that many scare “quotes” must “be” a “very” young idiot.
Ash Can
@change: LOL@U!
change
So joe, I’m going out on a limb here but I’m guessing you’ve never held down a job that doesn’t depend on the largesse of the public treasury?
Maude
@PurpleGirl:
In the same way the Savings and Loans did in the eighties when congress lifted restrictions on them.
Andy K
@Mark S.:
Age-specific crime rates and drug use among young males soared as baby boomers passed through the fifteen to twenty-four age group.
Just sayin’…
4tehlulz
@change: Cool story, bro.
de stijl
I’m sticking with my fat and lazy theory. Oh, and The Facebooks, too.
Youse should trust me on this because I have the sense to, wait for it, NOT FEED THE FUCKING TROLLS!
Anne Laurie
@Corey: __
This is another article of faith among the Teabagger demographic. I made the mistake of ridiculing a particularly frothing “Guns Are Like Bibles” proponent on another blog, and was informed (in a HEAVILY CAPITALIZED and also punctuation-intense! ! !) fashion that there are literally dozens of killings in Memphis alone, every single week, that were being “covered up” by the lying MSM at the behest of “Barry and his partners in crime”. Complete with links to WND and even-less-sane sites.
How is it possible that dozens of dead people, in every middle-to-major American city, are just “disappeared” every week without attracting attention from the If-It-Bleeds-It-Leads news media? Truly, that man in the White House must have magical powers!
That's Master of Accountancy to You, Pal
@PurpleGirl:
Except that prior to G-S repeal, there wasn’t any prohibition on commercial banks having dealings with investment banks. They just weren’t allowed to be a part of the same company. The investment banks could still have traded derivatives on the mortgages. They could also have traded the mortgages themselves.
This does not answer the question I asked.
That's Master of Accountancy to You, Pal
@gene108:
Gramm-Leach-Bliley had little or nothing to do with derivatives regulation. You’re probably thinking of the Commodities Futures Modernization Act, which was passed a year later. That bill did create some problems and exacerbate others, though I think that some people overstate them.
That's Master of Accountancy to You, Pal
@joe from Lowell:
This is why I asked the question. The biggest problem companies didn’t have a commercial banking side to take money from, recklessly or otherwise. All of the evidence suggests that the investment banks were able to have access to more than enough money to blow up whether they had a commercial bank attached or not. I don’t see how G-S repeal affected anything, given this demonstrated ability.
That's Master of Accountancy to You, Pal
@PurpleGirl:
You realize that this is exactly the same kind of answer as, “Maybe unreported crimes are going up,” right? It’s incapable of refutation. There were lots of changes going on around at the same time, some regulatory and some not, that could equally plausibly be what everyone took to be permission to try anything. Or, more likely, there wasn’t any one thing that caused this and they’d have ended up there without any particular thing, UNLESS you can explain a concrete effect that it had.
I’m looking for someone who can explain that concrete effect.
joe from Lowell
@change: As always, you are wrong. I’ve worked for both the public and private sector. But why do you imagine that I, or anyone reading thing, would find it embarrassing or unsavory to have worked in public service?
I consider the time I’ve put in on behalf of the public to be a point of pride.
General Stuck
You know you can’t place a concrete fact on something like this, a psychological effect of something. All you can do is look at the circumstantial evidence and form an opinion. And I remember when G-S was being repealed and what a big deal it was as a signature signpost of post depression finance regulation. And of course, all of this had been moving in a laissez-faire direction for a couple of decades, and it met a perfect storm with a highly pro business, anti regulation administration, with the Bushies. I didn’t form my opinion based on my own knowledge of finance stuff, because it is lacking, but over a period of time after having heard others who do know about this stuff opine their own opinions on the mental breakout effect of repealing G-S. And it wasn’t just that repeal, like you say, but the Gramm rule on derivatives, and the Pittman declaration of a new and friendly SEC. among other things coming together for a giant clusterfuck.
change
@joe from Lowell:
Unless you were a soldier, policeman, or fireman, any time you put in as a public “servant” was most likely either unneeded or enabled by Union thugs stealing taxpayer’s money at the point of a gun.
That’s where taxes come from, you know. From the productive work of citizens in the private sector, who create the real wealth in this country.
Let me guess, once again: your current job is being paid on the taxpayer’s dime because you couldn’t hack it in the private sector, much like your idol Obambi?
agrippa
@change:
drivel
The Sheriff's A Ni-
@change: Ah, yes. The vast International
JewishLiberal Conspiracy. By the by, how was your Christmas? Did Father Krystallnacht leave you the My Little Bunker playset with toy Luger and candy cyanide pill you’ve had your eyes on all season long? You did tell him, right, or were you still busy bawling your eyes out over DADT being repealed?agrippa
@change:
more drivel.
who is this fool?
change
The bottom line is that the real culture war going on in this country is between the natural winners and the natural losers who want to become winners. The natural losers know the only way they can become winners is by banding together all the natural losers in life and then empowering a leader of the natural losers to make things “right” for them by “spreading the wealth around” through big government (on the natural winner’s dime, of course!)
agrippa
@change:
“incorrect”?
Calling you ‘gramps’s is an act of kindness.
say thank you
The Sheriff's A Ni-
@change:
Like you, loser? As long as you’re chugging the haterade, son, you’ll never be a winner.
gene108
@That’s Master of Accountancy to You, Pal:
Getting bills mixed up.
Why do you think the Commodities Futures Modernization Act has been overstated as the cause of problems with derivatives in the past decade?
I think the impact helped push up the price of oil, as people pulled money out of equities and the bond market, looking for new places to make money in, since whatever reporting requirements that were there in the past no longer existed. The jump in oil prices helped start the recession, in 2008, which was compounded by the financial collapse.
@change:
I applaud your common sense solution. I live in New Jersey, home of the highest property taxes in the country. I think my taxes should not be taken from me at the point of a gun.
The current state of affairs in our state is terrible. My tax money is used to pay stinking, no good, dirty, greedy, lazy, unionized assholes who are plowing, sanding and salting the roads tonight, to make them passable tomorrow, so people can go to work.
I’d be much better off and I think the overall economy would benefit, from paying lower taxes, even though I might get snowed in for a few days.
I think investing more money in gold ETF’s would produce more benefit to the economy, which having more money in my pocket would let me do, than passable roads tomorrow.
That's Master of Accountancy to You, Pal
@General Stuck:
Thank you for restating my case. There is absolutely nothing about repeal of Glass-Steagal that caused or exacerbated the situation. If all you can cite is some amorphous psychological boost in a period when *everything* was moving in the same direction, you’ve got nothing. That is just as stupid as change’s drivel about unreported crimes.
If you want to argue that the overall climate of the era helped lead to the crisis, fine. The repeal of a particular regulation doesn’t add to that meaningfully. How do you know that repeal wasn’t effect rather than cause?
More, there are a lot of people arguing that we need to reinstate G-S. If no one can explain a concrete reason why that would help, shouldn’t we spend our ammo on something that does?
daveNYC
And you’re saying the red states are the natural winners?
General Stuck
@That’s Master of Accountancy to You, Pal:
To tell you the truth, I don’t give a flying fuck what you think. Tell it to Dorgan smartass.
That's Master of Accountancy to You, Pal
@gene108:
Because I think that the main causes were unrelated to it. Among things that I think were more important were:
a) the immense amount of liquidity sloshing around the world, and particularly in US$. That money had to go somewhere. It was going to inflate a bubble in something, because it didn’t have anywhere else to go.
b) the switch from partnerships to incorporation among the major investment banks
c) the declining margins in traditional banking and investment services, which drove the banks into riskier activities to maintain profits
d) a lack of action by the Fed in regulating the mortgage market.
There were definitely some exacerbating things in the CFMA, but they weren’t the root causes that some people think they were.
How? Oil prices are, over time, governed by actual supply and demand. Commodities trading can drive them up short term, but someone eventually has to take delivery. I’ve yet to see how speculation can, over longer periods, cause prices to diverge from what would have occurred with only action in the spot market.
That's Master of Accountancy to You, Pal
@General Stuck: Given the general level of competence in the Senate, why should I give much credence to that particular appeal to authority? Given your past statements on that subject, you should be embarrassed to make that kind of appeal to authority.
Nothing in that article answers the question I asked. All it provides is the same, vague, “Too big to fail,” mantra that everyone else throws out. That doesn’t answer the problem that it didn’t take being connected to a commercial bank to become too big to fail. Without an explanation for that, there’s no good reason to blame repeal of G-S. It doesn’t seem to have made any difference to which sorts of companies got dragged down.
General Stuck
@That’s Master of Accountancy to You, Pal:
And what would those be? And I will listen to a guy who has forgotten more about finance than some pissant blog commenter ever would hope to know.
The Republic of Stupidity
@Anne Laurie:
Hmmmmmmm…
And I see he’s followed you back to BJ…
Trail of bread crumbs, by any chance?
That's Master of Accountancy to You, Pal
@General Stuck:
Evidence that this is true?
singfoom
@That’s Master of Accountancy to You, Pal: You know all about the counterparties with AIG, right? Out of all of the big banks, the one with the most to lose was Goldman Sachs. I’ll have to look for the figures, but they were into AIG for billions.
The easy answer to your question is that GS, BOA, etc, etc… would never have leveraged themselves as much as they did after GS was repealed because of the firewall between investment and traditional banking. I believe it was something like up to 30 or 40 x the actual cash they had.
Once GS was repealed, the investment side had a lot more money to play with.
To summarize jerkily:
1)With the absence of GS, big banks got even bigger
2)Leveraging increased to dangerous levels because of their size and access to more capital
And 3, the kicker:
The government bailed out AIG and AIG turned around and gave 5.6 billion to GS among other amounts to other companies.
Not a big fan of Huffpo, but this link will do in a pinch. http://www.huffingtonpost.com/jeffrey-feldman/aig-counter-party-payment_b_176958.html
I think it is logical to think that if GS had not been repealed, the amounts lost across the board would have been much lower.
Maybe you don’t accept that as a valid answer. There’s also just the psychological thing of the big law that came out of the Great Depression being done away with and then shortly thereafter the current Depression/Recession/Whatever. I think that’s why people care about it so much.
In the end, I think it’s an important law that should be revived. Will that suddenly end all the problems in the financial markets? No. But it would be one small step towards solving those problems.
General Stuck
@That’s Master of Accountancy to You, Pal:
LOL, you serious think you know more than a long time respected US Senator, especially on matters of finance. Dorgan, who ten or so years ago when G-S was repealed predicted what would happen, that actually did happen.
Thanks for the chuckle.
Suffern ACE
@The Republic of Stupidity: Unlike the schools, who are now supposed to lose funding when test scores go down, the police tend to get more funds when crime rates go up. I’m starting to get befuddled by these arguments.
mclaren
@Villago Delenda Est:
Steven Levitt and Stephen Dubner have presented compelling statistical evidence that the real reason why crime has dropped so precipitously (and continues to drop) is that when Roe v. Wade became the law of the land in 1973, poor women who didn’t want children could afford to have them aborted, or could take RU486.
Only 6% of the criminal population is responsible for over 90% of the most violent crime. Statistics show that most of that 6% comes from the extreme underclass — the overwhelming majority of the most violent 6% of career criminals grew up as children of poor single women on welfare. Legalizing abortion let women in the underclass have a choice about whether to have kids, and the evidence suggests that given the choice, they stopped having children they couldn’t afford and didn’t want.
From a Malcolm Gladwell review of Levitt & Dubner’s Freakonomics.
mclaren
@That’s Master of Accountancy to You, Pal:
The evidence that General Crackpot Fake Name’s statement is true is that if you disagree you have a “diseased brain” and you suffer from “butt rabies.”
Nathanael
This so-called “crime rate” doesn’t count crimes committed by large corporations (or governments, or militaries) does it?
Thought not.
bago
@gene108: Grand Theft Auto 3 came out right around then.
Virtualize your crime.
Jc
Master of accountancy,
Keep asking the question, it is a good one. Don’t know why stuck is treating your reasonable questions here, as if they are the typical troll.
Not to mention that the sane thing happened in other countries, look at Europe.
I read a lot about this the last year, but didn’t bookmark or do any type of report with references (putting together a coherent “book report” would have been a good idea. Something to demonstrate a coherent regurgitation of what I was reading.)
However a few things that made sense to me, but related to your “too much money looking for better returns” theory:
1. Invention of crazy CDS derivative markets in 2004. New markets for money to chase.
2. Relaxation of the rules around leverage – used to be no more than 30 to 1 for banks, reached 100 to 1. Again money looking for profits and leveraging to get the same returns and profits, year after year.
Any system shock – banks/fund markets are immediately underwater.
In a way it’s simple. Don’t allow overleveraging, and don’t allow official oncorporated banks/investment into unregulated markets.
Period.
The problem is twofold.
A. Money is fungible – shadow banking blooms, more money ends up trading in shadow banks (that is where u get returns) than the regulated side. And an “apocalyptic” event in shadow markets seems to be able to take out “regular financial markets.
B. Banks own politicians, and will simply tell politicians, we don’t want rules that prevent us from making money like we need to, “to compete with the other big financial players”. Which has some truth to it, though self-serving.
That is why you need a global system with global regulatory controls. So money has nowhere to go, but into regulated markets.
But that’s impossible to get setup. Countries fight, listen to their own bankers, and welcome the influx of capital and money that allowing shadow market – such as crazy derivative markets – give them.
I don’t know how you put the shadow market genie back, once it is out. Money will chase after returns.
1.
gene108
@singfoom:
Leverage rules for banks was covered under Basel II accords. They have been updated with the new Basel III accords.
For better or worse, we are in an interconnected global marketplace. Rules we put on U.S. banks, which other banks do not have to follow, can put American firms at a competitive disadvantage. That’s one reason for things like the Basel Accords, so there’s a relatively leveled playing field for these institutions.
http://en.wikipedia.org/wiki/Basel_III
mclaren
@Jc:
Excellent point. Eventually we’re bound to get something like that, if capitalism survives. Given the technological changes, it’s doubtful whether capitalism and a recognizable monetary system and any kind of recognizable banking system will survive for very much longer.
But more to the point, individual nations can do some important things to rein in the shadow banking system.
Here are some concrete policies that would help:
[1] Capital controls. Limit the rate at which money can move across national borders. There were strict capital controls prior to the Bretton Woods agreement, by the way.
[2] Laws reducing the complexity of financial instruments allowed. This will automatically make the shadow banking system less dangerous. At present, even at modest levels of leverage, financial instruments like CDOs are so complex that not even the expert can understand or predict how they’ll interact.
[3] Laws eliminating the legal enfranchisement of corporations as immortal persons.
[4] Laws that demand responsible behavior from corporations, otherwise their limited liability gets suddenly and radically ended.
There’s no reason individual nations can’t pass any or all of these laws. Countries like Malaysia already have some of these kinds of laws in place (viz., capital controls). The more nations that implement these kinds of laws, the more fully the shadow banking system will be brought under control.
Nations like America and Britain and Japan account for a disproportionate amount of the global financial crimes, so if only a handful of the larger nations signed on to these kinds of laws, it would have a disproportionate effect in reining in the shadow banking system worldwide.
singfoom
@gene108: Gene,
Thanks. I wasn’t saying that GS specified leverage limits. I was trying to make the point that without GS the firms got larger and had access to more funds AND (with no relation to GS) leveraged themselves quite badly.
Thanks for the link to Basel III. It is still shocking that the leverage can go as high as it does.
kansi
We talk about this phenomenon all the time in my JH Media Studies class. People think there’s lots of crime because they see it every night on the teevee news. Studies show the more someone watches the local news, the more fearful of crime they are and the more they believe they could be a victim. Just easier and more interesting to cover police stories than local public policy issues.
binzinerator
@That’s Master of Accountancy to You, Pal:
Not making a refutation just curious and asking a question — if immense liquidity was a factor in creating the bubble, what created the immense liquidity?
I looked up the meaning of liquidity. About.com (aka answers for idiots) sez “liquidity refers to how quickly and cheaply an asset can be converted into cash. Money (in the form of cash) is the most liquid asset. Assets that generally can only be sold after a long exhaustive search for a buyer are known as illiquid.”
Wikipedia says this: “The liquidity of a product can be measured as how often it is bought and sold; this is known as volume. Often investments in liquid markets such as the stock market or futures markets are considered to be more liquid than investments such as real estate, based on their ability to be converted quickly.”
So because there was an immense liquidity especially in US dollars, would that mean no one wanted to invest in illiquid things like infrastructure, machinery, manufacturing plants?
And yet real estate is considered illiquid.
But this mortgage business means that homes were being bought and sold frequently, so much so the banks have lost track of legal ownership of some of them.
Are homes=real estate=mortgages? If so, then supposedly illiquid real estate was behaving as if it were liquid.
Or is that the big ‘genius’ breakthrough these wall street assholes figured out — how to make an illiquid asset like a home act as if it were in fact a liquid asset?
As they say, follow the money. So where did all that money come from — i.e. what freed up all this liquidity in cash so it could be used to inflate that bubble?
Sorry, just lots o’ questions here, and interested in what you’ve been commenting on.
trollhattan
@shoutingattherain:
Channeling certain of my inlaws, this was my first thought as well. As Herr Doktor Reynolds would type, “An armed society is a pole-light society.”
Remember the War on Our Ammo Supplies(tm) after Obama’s election? We’re way safer now.
Chris
@jeff: Indeed, the obvious (“economy” and/or “demographics”) explanations for crime rates don’t hold very well. My new favorite (but completely untested) hypothesis: leaded gasoline making people crazy. :-)
@joe from Lowell: Now that you mention it … try reading “change”‘s rants in a Grandpa Simpson voice. It suddenly makes so much more sense! (“So I tied an onion to my belt, which was the style at the time…”)
Barb (formerly Gex)
Hooray for everyone. Except gays. Violent crime against gays has been rising for about a decade. Merry Christmas.