Leverage Lovers

Mixing markets and dates I see.  This one is all Bush II and Clinton.  Have to give Bush I and Reagan a pass.

The problems arising atm are due to excessive debt taken out over the current decade. Rewind just 10 years and I doubt you'd see banks bloated with toxic debt that is next to worthless but able to be sold for more temporarily. Lending, or even increased lending, isn't the problem here, it's irresponsible lending, i.e. lending to someone who is unlikely to be able to repay, and/or securing that debt against an asset worth as much or only slightly more (at the time of lending) as the loan itself, or worse, lending more than that assets value. Leveraging of a firm more generally can be a good thing not a bad one though, since it allows firms to undertake investment that is beneficial now, rather than having to wait a few years to try and get together funds from retained earnings to undertake it, by which time it may be too late. As a result, I don't really understand the points+links made in your OP.

The conservative revolution in the 80s inched toward deregulation,  later administrations took the mile.

Penicillan is good.  But you can OD on it. Deregulation is not bad in itself.  It does not mean giving away the store, only making the operation of it easier.

Then why the presupposition of regulation in the first place? Teddy Roosevelt knew that the so-called Trusts were renegades.

"Leveraging of a firm more generally can be a good thing not a bad one though, since it allows firms to undertake investment that is beneficial now, rather than having to wait a few years to try and get together funds from retained earnings to undertake it, by which time it may be too late." Granted, as long as the firm and lender are not of the mindset of "check cashing" businesses.

Same reason you have laws against murder in the first place.  But then we dont have laws against saying "I hate that crumb bumb" do we?

So it's lawful for the banker knowing that in the safe is only one dollar yet draws up a car loan for $20,000[?]

YOur question is too open ended.  It can be answered both ways.  But either way it is answered is not relative to the issue at hand.  It was not a question of lending too much money, but to the wrong people.  After all, you can lend $5 billion to Warren buffet and it not being too much, but you can lend $5 to Joe Blow and never see it again.

And then the question becomes why was it leant to the wrong people.  And the answer is - too much regulations.

The question of leverage is that you don't lend money period when the lender has no reserves. The answer is regulation.

 

 

That is what got us into this mess - regulations requiring them to make bad decisions!

The last thing we need is more regulations forcing them to make bad loans and not good ones!

The homeownership society began in the late seventies[CRA-Community Reinvestment Act] which was simply to prevent lenders from arbitrarily "red-lining" [excluding] minorities from loans to erase the mindset that lending to minorities is too risky. If lenders used the standard critera for lending there wouldn't be this mess.   

The road to hell is paved with good intentions.  While it may have started out as good intentions, when politicians are involved, it is always bastardized.  It went from trying to prevent discrimination, to being affirmative action.  The latter (enforced by regulation) is where the cookie crumbled.

It really has nothing to do with regulation; lenders still have to use good business sense.Affirmative action began with the GI Bill where I got a preferable 4½% mtg while civilians were paying 6% conventional, needless to say not many minorities qualified then.

Not when the law prevents them (regulations).

That was not affirmative action.  You EARNED that.  It was not given to you.