by Jerome a Paris
Fri Oct 17th, 2008 at 07:10:54 AM EST
Fed Rethinks Stance on Popping Bubbles
"[O]bviously, the last decade has shown that bursting bubbles can be an extraordinarily dangerous and costly phenomenon for the economy, and there is no doubt that as we emerge from the financial crisis, we will all be looking at that issue and what can be done about it," Fed Chairman Ben Bernanke said this week.
(NYT) Since mid-2007, when the credit crisis erupted, the country’s nine largest banks have written down the value of their troubled assets by a combined $323 billion. With a recession looming, the pain is unlikely to end there.
In the case of the nine-largest commercial banks — Citigroup, Merrill Lynch, Bank of America, Morgan Stanley, JPMorgan Chase, Goldman Sachs, Wells Fargo, Washington Mutual and Wachovia — profits from early 2004 until the middle of 2007 were a combined $305 billion.
The Greenspan Bubble was a time of great economic "growth", on the back of huge "profits" for the financial sector (which reachd 40% of total corporate profits). The profits proved to be imaginary. Can we also acknowledge that the growth was also imaginary, and thus that "reforms" (deregulation, labor market flexibility, tax cuts) DO NOT WORK, except to channel massive sums towards a happy few!?
See the updated list of diaries on the financial crisis and the Anglo Disease