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Originally Posted by Willravel
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Here is a quote from the article you cited:
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Accounting scandals that erupted in 2003 and 2004 put Freddie and Fannie on the defensive. Now they are regaining some of their old swagger.
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I don't know how you can have regulations that can prevent people from violating regulations. I think most people agree that Fannie and Freddie were over-leveraged and assumed to much risk in a over-price US real estate market due for a correction.
Also from the article:
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Regulators in the past few years have required Fannie and Freddie to hold 30% more capital than their usual minimum while they fixed problems with their accounting and risk controls, a process now viewed as virtually complete. That capital surcharge is now falling to 20%.
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Regarding leverage at Fannie and Freddie we had regulators directing the parameters Fannie and Freddie operated under. I suppose in an odd way you can argue that lowering reserve or capital requirements is a form of de-regulation, I don't. The reserve or capital requirements are a part of the regulations in my view.
However, my original point is that "regulators" and regulations may be at the root of many corporate problems. GM for example has an average labor cost about $30 an hour higher than foreign competition operating in the US. Some existing regulations make it impossible for GM to reduce those costs to match the competition. Even with a bailout, a car czar, or whatever, GM is not going to be competitive unless they get major concessions from labor. In addition they have to be able to close inefficient and obsolete plants, regulation makes this process excessively difficult as well. GM has been dieing a slow death for about 30 years, the bailout will prolong the process not prevent it.
-----Added 11/12/2008 at 12 : 38 : 32-----
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Originally Posted by highthief
The US banking system allowed ridiculous risks to be taken with mortgages. Those risks are simply not allowed to be taken here due to various regulations (although because all large corporations invest abroad in a variety of paper backed assets, we suffered a smaller exposure to the problem in another way).
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In 2008 there have been about 20 US bank failures. Indy Mac was the largest. Here is a link:
The Wall Street Journal Online - Interactive Graphics
I don't know much about banking in Canada, but in the US there are large numbers of small locally chartered banks that always have a higher risk of failure than large national or international banks.