Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Has the current example of the biggest world wide failure of self regulation (in the financial sector) in almost 100 years had no effect on you?
How do you judge "biggest"? On what basis do you consider it? And how does it compare to the other events?

For us, we are in the process of purchasing a condo for nearly 1/2 off its price from as short as a year ago. We were busy saving money and now we found a good 15 year fixed mortgage at a great rate. The overall market is down a some but is allowing me to regroup some investments. Also it is a good time for mergers and acquisitions. Just made some nice profits from Yahoo news of being bought out by Microsoft. Still have some shares and am making some profits on covered call for now. Stocks I follow...Yahoo

The private insurance, rating, underwriting, and banking sectors all conspired together. The inability to see what is before their noses is what makes dealing with utopian libertarians such a waste of time.
Do you have proof of all conspiring together. If you have been paying attention to your own diary you should have been able to see the moral hazards does not even imply a conspiracy only that people may be looking out for their own self interest which may not be the best outcome for the market.

I am not sure who is more utopian between the two, but I can not honestly say that it must be someone else when you talk about utopian libertarians. Heck the least favorite of my candidates was Ron Paul and their is no way I am voting for the candidate for Libertarian party if the one person mentioned so far gets their endorsement.

By the way, who is bailing out the mess - the government.
You might want to elaborate on those issues.

Getting back to the topic of your diary, maybe you can peruse the following articles:
King refuses to bail banks out of toxic mess
Toxic shock: how the banking industry created a global crisis

A better article about Mervyn King is at the Wall Street Journal, and I think you can still download the PDF from my class site: http://vle.londonexternal.ac.uk/cefims/2008/s1/2008s1C225.nsf/alldocs/20080201-DOMM-7BEKAS/$file/WSJ -BoE.pdf

Bank of England Chief
Changes Tack in Crisis
Mr. King Scolded Lenders
But Had to Rescue Them;
Now He's in Jeopardy
January 28, 2008; Page A1
Mervyn King, the silver-haired governor of the Bank of England, has guaranteed himself a chapter in future textbooks on central banking. The lesson: Standing on principle is a dangerous game. In the years of financial euphoria, Mr. King stood out as a scold. In August, he admonished British financiers that "interest rates aren't a policy instrument to protect unwise lenders from the consequences of their unwise decisions." When money markets froze and the Federal Reserve and European Central Bank pumped in billions of credit, Mr. King at first refused to follow suit. "The
provision of large liquidity," he said later, "encourages herd behavior, and increases the intensity
of future crises." But events overwhelmed Mr. King's principles. In September, Britain weathered its first bank run in more than a century, on Northern Rock.
Days later, Mr. King, believing the financial system was threatened, launched the kind of cash injections he had criticized. The British press dubbed him "Swervin' Mervyn." Willem Buiter of the London School of Economics and Political Science, a former member of the Bank of England's Monetary Policy Committee, says the BOE "deepened the crisis" because of Mr. King's "strong moralistic streak."
Over the weekend, a parliamentary committee reporting on Northern Rock declared itself "unconvinced" that Mr. King's stance was appropriate, and said the BOE should have "adopted a more proactive response" to the loss
of confidence in money markets. The report also said the U.K.'s chief regulator, the Financial Services Authority, had "systematically failed in its duty as a regulator" and the whole affair had been "damaging to the financial services industry in the United Kingdom." The report recommended creating a new high-level central-bank post to oversee expanded financial stability powers, including a fund to protect deposits.
Mr. King confronted a dilemma that central bankers always face in a crisis: Let financial fires blaze until they extinguish themselves, or try to put out the fire -- even if that encourages investors to keep playing with matches. Central bankers loathe contributing to "moral hazard," a term coined by 19th-century insurers to describe the recklessness that is encouraged by protecting individuals from the consequences of their bad decisions.
Fed Chairman Ben Bernanke -- Mr. King's office neighbor when they both taught economics at the Massachusetts Institute of Technology in the 1980s -- faced the same quandary last August, but set aside concerns about moral hazard and repeatedly injected cash and cut interest rates to cushion the economy. Last week, he responded unusually overtly to market concerns with a surprise 0.75-percentage-point rate cut.
Return of Sanity
Many central bankers initially welcomed the market's downturn last summer as a much-needed return of sanity. Mr. King had already been saying that lending standards had become too lax and investors too complacent. One symptom: the ease with which even dicey debtors could borrow.
Citing a spam email he received -- "We have the solution, Mervyn, for your bankruptcy" -- he hectored London bankers and merchants last June: "'Be cautious about how much you borrow' is not a bad maxim for each and every one of us here tonight."
He cast the emerging crisis as the consequence of imprudent behavior encouraged over the years by repeated, government-backed bailouts. "I do not believe that moral hazard is just some dry academic concept," he told Parliament last September. "It is moral hazard that has actually led us to where we are....If you always provide ex-post insurance you can be quite sure that in five or 10 years' time another crisis will come. That is exactly what we have seen in the last 20 years."

Rutherfordian ------------------------------ RDRutherford
by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Tue Apr 15th, 2008 at 03:18:50 PM EST
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