Optimal Capitalism

Post by Peter Olcott
Capitalism when done correctly channels all of the power of greed to
produce the greatest good for everyone. When done incorrectly (looking
at profits only and ignoring dysfunctional consequences) can as much as
destroy the planet.
The power of greed is enormous, and when this power is utterly
constrained from producing any dysfunctional consequences it provides
the most effective and beneficial economic system possible.

If your assumptions are valid then somebody
would have to be "not greedy" to make that work.

If the political system is a democracy the
majority would have to be "not greedy" to
ensure that greed is "utterly constrained from
producing any dysfunctional consequences"

Peter Olcott

2014-12-15 03:50:22 UTC

If your assumptions are valid then somebody
would have to be "not greedy" to make that work.
If the political system is a democracy the
majority would have to be "not greedy" to
ensure that greed is "utterly constrained from
producing any dysfunctional consequences"

No, that is the purpose of government regulation.
I am not sure that the government regulators are aware
of this, it sure seems that they are not.

jim <""sjedgingN0Sp\"@">

2014-12-15 12:34:25 UTC

Post by jim <""sjedgingN0Sp\"@">
If your assumptions are valid then somebody
would have to be "not greedy" to make that work.
If the political system is a democracy the
majority would have to be "not greedy" to
ensure that greed is "utterly constrained from
producing any dysfunctional consequences"

No, that is the purpose of government regulation.

There would be no government regulation if
the majority of voters believe that regulations
amount to state-controlled economy.

Post by Peter Olcott
I am not sure that the government regulators are aware
of this, it sure seems that they are not.

The government regulates lending by deposit
taking facilities and loans financed by
government sponsored agencies like Freddie
and Fannie.

The government does not set
lending standards for loans made with private
money.

There were $6 trillion in mortgages funded
by private investors during the housing bubble.
Before the housing bubble and after the housing
bubble the amount of mortgages funded by private
investors was close to zero. The government
still does regulate privately funded loans.
Such lending does not occur today because no
one in their right mind would make the type
of loans that private investors were
making during the housing bubble.

Peter Olcott

2014-12-15 15:01:24 UTC

No, that is the purpose of government regulation.

There would be no government regulation if
the majority of voters believe that regulations
amount to state-controlled economy.

I am not talking about communism with a single supplier. I am talking
about prohibiting only the otherwise dysfunctional effects of pure
capitalism. For example the illegality of cheating people. If there was
zero constraints on pure capitalism then any form of cheating would be
legal. Selling someone a house and then after you receive their money
forcing them to leave under gun-point so that you could sell the house
over and over again would be legal with zero constraints on pure
capitalism.

Carrying this a little further selling someone a house that they can not
afford so that when they default the house can be sold again (as in the
Great Recession) would remain legal without constraints on pure
capitalism. Although these sort of actions may have devastating effects
on the economy (such as the Great Recession) those making the
commissions on selling these houses and those making commissions on the
loans of other peoples money have a great monetary incentive to produce
these kinds of dysfunctional results. If there are zero constraints
then they have zero reason not to produce yet another Great Recession,
or even another Great Depression.

Post by Peter Olcott
I am not sure that the government regulators are aware
of this, it sure seems that they are not.

Such that it is legal to provide collections of these funds to be sold
to investors where the risk of these investments is misrepresented. When
the risk of an investment is misrepresented fraud is occurring even if
this fraud is not illegal. The risk assessment companies hold us hostage
when we try to hold them accountable. They say if you hold us
accountable we will stop making risk assessments. In the short term the
total lack of risk assessment would be more devastating than the
possibility of some fraudulent risk assessment, so we back down on
trying to hold them accountable for their fraudulent actions.

Bottom line we need to have government regulation of risk assessment
practices with criminal penalties for intentional fraud and compensatory
monetary damages that are equivalent to the damage caused. This would
apply even if intentional fraud could not be shown as long as negligence
can be shown.

In the case of the risk assessment companies the government would be
able to take the whole company away from its owners as compensatory
damages, thus the the hostage taking would be over.

Post by jim <""sjedgingN0Sp\"@">
There were $6 trillion in mortgages funded
by private investors during the housing bubble.
Before the housing bubble and after the housing
bubble the amount of mortgages funded by private
investors was close to zero. The government
still does regulate privately funded loans.
Such lending does not occur today because no
one in their right mind would make the type
of loans that private investors were
making during the housing bubble.

Never heard of GNMA mutual funds?
https://personal.vanguard.com/us/funds/snapshot?FundId=0036&FundIntExt=INT

d***@agent.com

2014-12-16 07:15:51 UTC

Post by Peter Olcott
I am not talking about communism with a single supplier. I am talking
about prohibiting only the otherwise dysfunctional effects of pure
capitalism. For example the illegality of cheating people. If there was
zero constraints on pure capitalism then any form of cheating would be
legal. Selling someone a house and then after you receive their money
forcing them to leave under gun-point so that you could sell the house
over and over again would be legal with zero constraints on pure
capitalism.

Steve Forbes, July 8, 2010: "...The Rules of the Road means that
when changes come, when innovations are introduced, you must put
in new rules to take cognizance of it, to recognize it. I mentioned
earlier today about the automobile, when that was invented, you had to
have speed limits, you had to have rules on the state of your auto,
you had to have a Highway Patrol, new kinds of insurance, all of these
things, to bring the rules of the road up-to-date with change. When
these exotic instruments came along thanks to technology on Wall
Street, the regulators did not update the rules of the road. You take
Credit Default Swaps, for example, I know this is controversial, but
all those are are souped-up versions of things that we've had forever,
such as soybean futures, interest rate futures, & on those you have
again sensible rules of the road, you have sensible margin
requirements, you have clearinghouses so you know what the actual
volume is.
So to be blunt about it, there was a lot of abuse, I think, in credit
default swaps, when this crisis came, in terms of giving an impression
that certain entities were, their bonds, their debt, was in more
trouble than it actually was. You see it again playing out again in
sovereign debt in Europe, so again, transparency is the key. So in
terms of updating the rules of the road, where does this Reform Bill
go?...& then we'll get to Q&A. In terms of the Federal Reserve, it's
silent. Nothing on monetary policy. Fannie & Freddie, absolutely
nothing. Congress promises it'll deal with it in the future. Right.
But in terms of the two big causes the Bill is silent. Then on other
things the bill actually makes things worse, too big to fail.
Although it ostensibly is supposed to fight that, it in effect picks
out a handful of major institutions that are gonna get special treat-
ment. This is gonna be a massive increase for govt, because govt is
gonna determine whether you are a systemic risk & therefore whether
they can intervene, shut you down, provide you with more capital, or
force more capital to go into you...these are not set Rules of the
Road, they're in the hands of bureaucrats. At the same time it does
nothing to address the problems of small businesses getting credit,
in terms of the banking system, because the regulators still have the
mindset of mark-to-market accounting, which is the equivalent of
selling your house, what price would you get for your house if you
sell it in the next 6 hours, you wouldn't get much of a price in a
depressed market. So, in terms of value in regulatory capital, the
bill is largely silent & allows de facto mark-to-market
accounting...remember, half a trillion dollars of the losses that
occurred in 2008-09 in financial institutions, $500 billion, was not
actual cash losses on bad paper, sub-prime mortgages, or exotic
instruments, it was writedowns on perfectly good assets...they were
book losses, artificial losses.
In March of 2009 that was somewhat corrected, on mark-to-market
accounting, & when it was that's when the financial markets came back
to life. When Congress announced in early March that it was gonna
hold hearings on mark-to-market accounting, which got no publicity
because it's a boring subject, but nonetheless, the markets paid
attention to it, & when that announcement was made is when the stock
market came off of its lows, you remember the S&P 500 was down to 666.
So there was a lot of bad things happening on Wall Street, but, bottom
line, sensible rules of the road, on capital, no more 40-to-1
debt-to-equity ratios, should be 12-1, 11-1, 15-1, at maximum, it
should involve both on-sheet & off-balance-sheet financing,
instruments... Walter Wriston, who was the head of Citigroup for
years, retired in the mid-80s, virtually invented modern banking after
WWII, once upon a time, in the early 80s, his people came to him &
said: If we set up these exotic instruments off-balance-sheet, that'll
allow us to increase our profits, without having a charge against our
capital, because it's off the balance sheet. Wriston responded, he
said, "I don't care what the lawyers say, if our name is any way
associated with this, if there's trouble, it's gonna be as if we own
the thing outright. So get over the illusion you can have on-sheet &
off-balance-sheet assets & instruments. In terms of the market,
they're gonna regard it as one & the same," & he was right.
So, not to excuse Wall Street, but if you have sensible rules of the
road, which this Bill does not address, if you had a stable dollar, &
if Fannie & Freddie were actually truly privatized, recapitalized,
broken up & privatized, you wouldn't have a repetition of what
happened. Unfortunately this bill does not address Fannie & Freddie
or monetary policy, it sort of addresses, maybe, capital requirements,
but it leaves a lot of discretion in the hands of bureaucracies, in
terms of, for example, if we get the Volcker Rule, in terms of trading
for your own account, well who determines whether it's your own
account or for a customer? Now that's just gonna, I mean numerous
rules & interpretations, it's a disaster.
The SEC has new powers; it didn't use its old powers very well,
particularly allowing abuse of short-selling, particularly naked
short-selling, so as punishment it's given MORE powers! So the
Federal Reserve, it didn't do a very good job of regulating the banks
under its purview, so it's punished by being given more powers.
FDIC, when it went with mark-to-market, it's being punished by being
given more powers. So, this bill doesn't address the problem. As
for Wall Street itself, life is going on, some are still doing very
well on bonuses, but bottom line on bonuses, get a stable dollar,
& you'll not have out-sized profits again. Competition will come in.
If some form of this bill will pass, it'll hurt the flow of capital
to new businesses, it doesn't address Sarbanes-Oxley & the problem
of small businesses being able to do IPOs, so it's gonna be a huge
bill, it'll be an impetus, especially if we get reform after 2012,
that is, lower taxes & a stable dollar, to new institutions rising
up, new firms rising up, to be able to move more nimbly than big
institutions will be able to do, but it's just a huge, unnecessary
burden on the economy, & doesn't address the true causes of the
crisis. That's the bottom line. 2,300 pages of a bill that doesn't
address the causes of the illness. Only Washington could do something
like that."

Peter Olcott

2014-12-16 13:33:39 UTC

Post by d***@agent.com

So Like I said [optimal capitalism] absolutely requires that the
dysfunctional
effects of greed be totally prohibited. You provided many details of
exactly
how this is not happening. It would seem to me that the reason that this is
not happening is the corrupting influence of Big Money shown by the recent
Princeton study.

Unless and until we can remove this corrupting influence the United States
of America is eventually doomed. It is no longer a nation of the people, by
the people and for the people, the corrupting influence of Big Money ruins
what could otherwise be an approximation of utopia.

It is time for the people to stand up and take back government from the
corrupting influence of Big Money. I am ashamed of our supreme court
for significantly adding to this problem. They should be ashamed of
themselves.

BeamMeUpScotty

2014-12-15 15:59:59 UTC

If your assumptions are valid then somebody
would have to be "not greedy" to make that work.

NO... you only have to use greed as the tool it is.

Greed is good and you are the evil.

Like fear, the politicians can use it to get you to vote for a bail out
in which they steal the money.... or they can minimize fear so that you
don't go out and kill those with Ebola to end the plague.

"It's all the same until you use it" and how you do that depends on the
Character and moral values you yourself hold. Rather than trying to
eliminate greed from any use which is both good and bad, you need to
improve your own character so that you don't abuse your fellow man by
manipulating greed/fear to do so.

And since you can't force others to improve their character you can
never eradicate the negative of greed or fear or so many other human
traits. The best we can hope for is to convince enough people around us
that character matters and that *by abusing fear and greed* *they*
*will* *lose more than they will gain* .

Les Cargill

2014-12-14 16:06:34 UTC

Post by Peter Olcott
Capitalism when done correctly channels all of the power of greed to
produce the greatest good for everyone.

If greed is to be interesting, then it has to be abnormal. It
has to be a pathology. Somebody wanting to eat, retire, have shelter
can't be abnormal.

Post by Peter Olcott
When done incorrectly (looking
at profits only and ignoring dysfunctional consequences) can as much as
destroy the planet.

But you can't calculate all the negative externalities from an action.

It might be possible to set up markets to do that for you ( ala say,
carbon offsets ) , but maybe not.

Post by Peter Olcott
The power of greed is enormous,

I think this is overrated. I think Gordon Gecko is a fictional
character and too much has been made of it.

Markets work because of "consumer surplus". But it is too easy to take
your eye off the ball.

Post by Peter Olcott
and when this power is utterly
constrained from producing any dysfunctional consequences it provides
the most effective and beneficial economic system possible.
Alternatively there are few things that can can have more devastating
consequences that the unconstrained power of greed.

Russ Roberts is slowly massaging an analysis of Adam Smith into a
model where we're all of two minds - we think one way as consumers,
another as producers.

And there remains the possibility that our emphasis on inequality may
simply be an accounting problem:

http://marginalrevolution.com/marginalrevolution/2014/12/sentences-about-wealth-inequality.html

--
Les Cargill

Peter Olcott

2014-12-15 05:21:15 UTC

Post by Peter Olcott
Capitalism when done correctly channels all of the power of greed to
produce the greatest good for everyone.

If greed is to be interesting, then it has to be abnormal. It
has to be a pathology. Somebody wanting to eat, retire, have shelter
can't be abnormal.

Innovation almost entirely only occurs because of a large profit motive.
It is very rare that the work-a-day common man ever produces enormous
benefits for society. They are generally not sufficiently motivated or
funded.

Within our society a huge profit motive is not generally considered to
be greed even if it produces enormous dysfunctional consequences, as
long as no laws were broken. The government regulators seem to not be
sufficiently aware that they are the only ones in charge of preventing
these dysfunctional consequences. At least some of them are probably
corrupt.

Post by Peter Olcott
When done incorrectly (looking
at profits only and ignoring dysfunctional consequences) can as much as
destroy the planet.

But you can't calculate all the negative externalities from an action.

Do you mean like the financial collapse that almost became another great
depression?
The people making these bad loans knew that they were very risky, they
also knew that it was not their own money that they were risking. If
financial institutions were only allowed to loan out their own money the
problem of risky loans would be self correcting. The few institutions
that take these risks would tend to not survive.

Post by Les Cargill
It might be possible to set up markets to do that for you ( ala say,
carbon offsets ) , but maybe not.

Post by Peter Olcott
The power of greed is enormous,

Possibly a carbon tax that is large enough to make good environmental
choices the less costly alternative.
We must focus on providing sufficient incentives for making the best
choices . People and societies tend to operate like the famous pavlov dog.

Post by Les Cargill
I think this is overrated. I think Gordon Gecko is a fictional
character and too much has been made of it.
Markets work because of "consumer surplus". But it is too easy to take
your eye off the ball.

Russ Roberts is slowly massaging an analysis of Adam Smith into a
model where we're all of two minds - we think one way as consumers,
another as producers.
And there remains the possibility that our emphasis on inequality may
http://marginalrevolution.com/marginalrevolution/2014/12/sentences-about-wealth-inequality.html

Les Cargill

2014-12-15 18:28:10 UTC

Post by Peter Olcott
Capitalism when done correctly channels all of the power of greed to
produce the greatest good for everyone.

If greed is to be interesting, then it has to be abnormal. It
has to be a pathology. Somebody wanting to eat, retire, have shelter
can't be abnormal.

The opposite is true. Almost all innovation is by quite ordinary people.
It's just easier to write stories where a.... Thomas
Edison is the hero rather than his minions who actually
did the work.

This has almost nothing to do with "greed".

Post by Peter Olcott
Within our society a huge profit motive is not generally considered to
be greed even if it produces enormous dysfunctional consequences, as
long as no laws were broken. The government regulators seem to not be
sufficiently aware that they are the only ones in charge of preventing
these dysfunctional consequences. At least some of them are probably
corrupt.

Having a "the government v. industry" narrative is unproductive. I
realize it's our tradition now, but government simply lacks the
resources - and always will - to "oppose" any sort of industry.

Industries self-regulate - a lot - also.

Post by Peter Olcott
When done incorrectly (looking
at profits only and ignoring dysfunctional consequences) can as much as
destroy the planet.

But you can't calculate all the negative externalities from an action.

Do you mean like the financial collapse that almost became another great
depression?

Yep. Although there were people who warned of it.

Post by Peter Olcott
The people making these bad loans knew that they were very risky, they
also knew that it was not their own money that they were risking.

It's a messy story. I recommend Calomiris/Haber "Fragile By Design". If
not the book, then the BookTv:

<http://www.booktv.org/Program/15406/Fragile+by+Design+The+Political+Origins+of+Banking+Crises+and+Scarce+Credit.aspx>

Post by Peter Olcott
If
financial institutions were only allowed to loan out their own money the
problem of risky loans would be self correcting. The few institutions
that take these risks would tend to not survive.

Just doing enough reading to become merely confused rather than
bewildered by it might take ten years.

Post by Les Cargill
It might be possible to set up markets to do that for you ( ala say,
carbon offsets ) , but maybe not.

Post by Peter Olcott
The power of greed is enormous,

Possibly a carbon tax that is large enough to make good environmental
choices the less costly alternative.

Might be. Probably not - that's the problem. I suspect carbon
offsets are simply the least bad alternative.

Post by Peter Olcott
We must focus on providing sufficient incentives for making the best
choices . People and societies tend to operate like the famous pavlov dog.

I think that much less than you apparently do. People are not stupid,
and they're largely not bad.

<snip>

--
Les Cargill

Peter Olcott

2014-12-15 18:52:36 UTC

Post by Peter Olcott
Capitalism when done correctly channels all of the power of greed to
produce the greatest good for everyone.

If greed is to be interesting, then it has to be abnormal. It
has to be a pathology. Somebody wanting to eat, retire, have shelter
can't be abnormal.

The opposite is true. Almost all innovation is by quite ordinary
people. It's just easier to write stories where a.... Thomas
Edison is the hero rather than his minions who actually
did the work.

His selection criteria for these minions was something like a 150 IQ as
the cut-off so not so ordinary after all.

Post by Les Cargill
This has almost nothing to do with "greed".

Degrees of self interest profit motive proceeding from benevolence to
greed.

Post by Peter Olcott
When done incorrectly (looking
at profits only and ignoring dysfunctional consequences) can as much as
destroy the planet.

But you can't calculate all the negative externalities from an action.

Do you mean like the financial collapse that almost became another great
depression?

Yep. Although there were people who warned of it.

Post by Peter Olcott
The people making these bad loans knew that they were very risky, they
also knew that it was not their own money that they were risking.

It's a messy story. I recommend Calomiris/Haber "Fragile By Design". If
<http://www.booktv.org/Program/15406/Fragile+by+Design+The+Political+Origins+of+Banking+Crises+and+Scarce+Credit.aspx>

Just doing enough reading to become merely confused rather than
bewildered by it might take ten years.

Post by Les Cargill
It might be possible to set up markets to do that for you ( ala say,
carbon offsets ) , but maybe not.

Post by Peter Olcott
The power of greed is enormous,

Possibly a carbon tax that is large enough to make good environmental
choices the less costly alternative.

Might be. Probably not - that's the problem. I suspect carbon
offsets are simply the least bad alternative.

Post by Peter Olcott
We must focus on providing sufficient incentives for making the best
choices . People and societies tend to operate like the famous pavlov dog.

I think that much less than you apparently do. People are not stupid,
and they're largely not bad.
<snip>

It is like the way that political campaigns are funded members of
congress and the senate must make deals that favor their election
campaign donors over and above the general electorate or they do not get
enough money to compete against the spin doctors of their competition,
thus fail to get elected or re-elected.

This forms a sort of Darwin's theory of political corruption where only
the corrupt survive. It is not that the members of congress and the
senate are themselves inherently corrupt, corruption is built into the
system and therefore a mandatory requirement. The only possible way to
get rid of this corruption is to change the system.

Les Cargill

2014-12-15 19:33:18 UTC

Post by Peter Olcott
Capitalism when done correctly channels all of the power of greed to
produce the greatest good for everyone.

If greed is to be interesting, then it has to be abnormal. It
has to be a pathology. Somebody wanting to eat, retire, have shelter
can't be abnormal.

The opposite is true. Almost all innovation is by quite ordinary
people. It's just easier to write stories where a.... Thomas
Edison is the hero rather than his minions who actually
did the work.

His selection criteria for these minions was something like a 150 IQ as
the cut-off so not so ordinary after all.

I am not sure IQ was measurable at the time. It's also unclear that
any of Edison's minions got any profit.

Post by Les Cargill
This has almost nothing to do with "greed".

Degrees of self interest profit motive proceeding from benevolence to
greed.

False alternative. The transition from beneficence to self-interest is
too subtle to survive cursory scrutiny.

Scammers learn to feign empathic responses. This makes empathy or its
correlates a non-standard. Plus, outcomes suffer from being hard to
predict.

<snip>

Post by Les Cargill
<snip>

<http://voices.washingtonpost.com/ezra-klein/2010/10/ten_things_we_think_we_know_bu.html>

We don't know.

What we term "corruption" is usually poor system design - say,
law enforcement in Mexico such that it exists ( where cops there are
underpaid ).

Design is hard and we can't expect to get it right.

There is a possible "corruption" story surrounding Ferguson:
<http://marginalrevolution.com/marginalrevolution/2014/08/ferguson-and-the-debtors-prison.html>

"You dont get $321 in fines and fees and 3 warrants per household from
an about-average crime rate. You get numbers like this from b*llsh*t
arrests for jaywalking and constant low level harassment involving
traffic stops, court appearances, high fines, and the threat of jail for
failure to pay. - See more at:
http://marginalrevolution.com/marginalrevolution/2014/08/ferguson-and-the-debtors-prison.html#sthash.uqxPFuOE.dpuf"

Post by Peter Olcott
This forms a sort of Darwin's theory of political corruption where only
the corrupt survive. It is not that the members of congress and the
senate are themselves inherently corrupt, corruption is built into the
system and therefore a mandatory requirement. The only possible way to
get rid of this corruption is to change the system.

But we like it this way. 1) we lack the power to change it ( absent
some resource or process we don't know about right now ) or 2) it
reflects our actual preferences and not the stories we tell ourselves
about ourselves.

Just disentangling those is quite difficult.

--
Les Cargill

Bert

2014-12-14 16:33:46 UTC

Post by Peter Olcott
Capitalism when done correctly

Correctly?

Please elaborate.

Post by Peter Olcott
The power of greed is enormous, and when this power is utterly
constrained from producing any dysfunctional consequences

Utterly constrained? Dysfunctional consequences?

Oh, I see ... You're calling for a state-controlled economy. After all,
politicians and people with guns are much better at deciding such
things.

--
***@iphouse.com St. Paul, MN

jim <""sjedgingN0Sp\"@">

2014-12-14 19:16:00 UTC

Post by Peter Olcott
Capitalism when done correctly

Correctly?
Please elaborate.

Post by Peter Olcott
The power of greed is enormous, and when this power is utterly
constrained from producing any dysfunctional consequences

Utterly constrained? Dysfunctional consequences?
Oh, I see ... You're calling for a state-controlled economy.

Is protecting property rights from unconstrained greed
not a proper government function?

Bert

2014-12-14 19:27:09 UTC

Post by jim <""sjedgingN0Sp\"@">
Is protecting property rights from unconstrained greed
not a proper government function?

Are you taking over as Peter Olcott's representative in the thread?

Until you define "unconstrained greed," and tell us how it's to be
"utterly constrained" and how it's a threat to property rights, I have
no idea what you're talking about.

--
***@iphouse.com St. Paul, MN

jim <""sjedgingN0Sp\"@">

2014-12-14 20:41:23 UTC

Post by Bert
Until you define "unconstrained greed," and tell us how it's to be
"utterly constrained" and how it's a threat to property rights, I have
no idea what you're talking about.

Would it help you to understand
if I came to your house and beat
you to a pulp and took all your
possessions?

Bert

2014-12-14 20:58:36 UTC

Post by Bert
Until you define "unconstrained greed," and tell us how it's to be
"utterly constrained" and how it's a threat to property rights, I
have no idea what you're talking about.

Would it help you to understand
if I came to your house and beat
you to a pulp and took all your
possessions?

That's funny.

But then, you're apparently a psychopath.

--
***@iphouse.com St. Paul, MN

jim <""sjedgingN0Sp\"@">

2014-12-14 23:35:59 UTC

Post by Bert
Until you define "unconstrained greed," and tell us how it's to be
"utterly constrained" and how it's a threat to property rights, I
have no idea what you're talking about.

Would it help you to understand
if I came to your house and beat
you to a pulp and took all your
possessions?

That's funny.
But then, you're apparently a psychopath.

psychopaths don't make jokes

Peter Olcott

2014-12-15 05:31:40 UTC

Post by Bert
Until you define "unconstrained greed," and tell us how it's to be
"utterly constrained" and how it's a threat to property rights, I
have no idea what you're talking about.

Would it help you to understand
if I came to your house and beat
you to a pulp and took all your
possessions?

That's funny.
But then, you're apparently a psychopath.

psychopaths don't make jokes

Then maybe it wasn't funny ?
It was a great (hopefully hypothetical) example of unconstrained greed.

Peter Olcott

2014-12-15 05:29:24 UTC

Post by Peter Olcott
Capitalism when done correctly

Correctly?
Please elaborate.

Such that nearly every significant financial decision is almost entirely
focused on the greatest benefits to society because the incentives and
constraints are designed that way.

Post by Peter Olcott
The power of greed is enormous, and when this power is utterly
constrained from producing any dysfunctional consequences

Utterly constrained? Dysfunctional consequences?
Oh, I see ... You're calling for a state-controlled economy. After all,
politicians and people with guns are much better at deciding such
things.

An otherwise completely free market that is constraining by government
regulation from producing significant dysfunctional consequences. For
example we can know that you will not risk loaning money to people that
have a high risk of making their payments if you are only allowed to
loan your own money.

Although the above would be the most reliable way to eliminate risky
banking practices, less drastic means might possibly be nearly as
effective.

Bert

2014-12-15 16:23:26 UTC

Post by Peter Olcott
Capitalism when done correctly

Correctly?
Please elaborate.

Such that nearly every significant financial decision is almost
entirely focused on the greatest benefits to society

That's nothing remotely like capitalism, so you really ought to find
another name for your scheme.

Post by Peter Olcott
because the incentives and constraints are designed that way.

Incentives and constraints are designed? And presumably enforced.

You're advocating a police state.

--
***@iphouse.com St. Paul, MN

Peter Olcott

2014-12-15 16:39:09 UTC

Post by Peter Olcott
Capitalism when done correctly

Correctly?
Please elaborate.

Such that nearly every significant financial decision is almost
entirely focused on the greatest benefits to society

That's nothing remotely like capitalism, so you really ought to find
another name for your scheme.

http://en.wikipedia.org/wiki/Capitalism

If you notice I already did. This new name is the title of this thread.
The largest difference between [capitalism] and [optimal capitalism] is
in the latter
there is extreme diligence and effort made to prohibit all of the
otherwise dysfunctional
effects of capitalism, and thus channel all of the power of greed,
selfishness, and other
self-interest motivated action into the greatest benefit of society.

Post by Peter Olcott
because the incentives and constraints are designed that way.

Incentives and constraints are designed? And presumably enforced.
You're advocating a police state.

Is it a police state to disallow the practice of fraudulently
misrepresenting the actual risk of mutual funds comprised of bad loans?
(This was the cause of the Great Recession).

Bert

2014-12-15 16:42:37 UTC

Post by Peter Olcott
Is it a police state to disallow the practice of fraudulently
misrepresenting the actual risk of mutual funds comprised of bad
loans? (This was the cause of the Great Recession).

That's funny.

--
***@iphouse.com St. Paul, MN

Peter Olcott

2014-12-15 18:00:23 UTC

That's funny.

Then it seems that you agree that what I am proposing is *not* a police
state.

Bert

2014-12-16 16:59:16 UTC

That's funny.

Then it seems that you agree that what I am proposing is *not* a
police state.

The I guess I need to clarify.

My comment was about your claim as to the cause of the "Great
Recession."

--
***@iphouse.com St. Paul, MN

Peter Olcott

2014-12-16 18:21:09 UTC

That's funny.

Then it seems that you agree that what I am proposing is *not* a
police state.

The I guess I need to clarify.
My comment was about your claim as to the cause of the "Great
Recession."

If the greedy few continue along these lines the end result will be the
same as
the one that said "let them eat cake", it is only a matter of time.

Les Cargill

2014-12-15 18:32:50 UTC

Post by Peter Olcott
Capitalism when done correctly

Correctly?
Please elaborate.

Such that nearly every significant financial decision is almost entirely
focused on the greatest benefits to society because the incentives and
constraints are designed that way.

But when people make trades they already do that. Where we get into
trouble is when we try to game ourselves.

Post by Peter Olcott
The power of greed is enormous, and when this power is utterly
constrained from producing any dysfunctional consequences

Utterly constrained? Dysfunctional consequences?
Oh, I see ... You're calling for a state-controlled economy. After all,
politicians and people with guns are much better at deciding such
things.

An otherwise completely free market that is constraining by government
regulation from producing significant dysfunctional consequences.

But we can't accurately predict dysfunctional consequences.

Post by Peter Olcott
For
example we can know that you will not risk loaning money to people that
have a high risk of making their payments if you are only allowed to
loan your own money.

But behind that story is the story of trying to loan money to people
who lived in post-industrial areas and didn't have good credit, but
who could probably make mortgage payments anyway.

And it worked - for a while.

Post by Peter Olcott
Although the above would be the most reliable way to eliminate risky
banking practices, less drastic means might possibly be nearly as
effective.

Emphasis "might" :)

--
Les Cargill

Peter Olcott

2014-12-15 19:00:54 UTC

Post by Peter Olcott
Capitalism when done correctly

Correctly?
Please elaborate.

Such that nearly every significant financial decision is almost entirely
focused on the greatest benefits to society because the incentives and
constraints are designed that way.

But when people make trades they already do that. Where we get into
trouble is when we try to game ourselves.

Fraudulent information causes bad trades.

Post by Peter Olcott
The power of greed is enormous, and when this power is utterly
constrained from producing any dysfunctional consequences

Utterly constrained? Dysfunctional consequences?
Oh, I see ... You're calling for a state-controlled economy. After all,
politicians and people with guns are much better at deciding such
things.

An otherwise completely free market that is constraining by government
regulation from producing significant dysfunctional consequences.

But we can't accurately predict dysfunctional consequences.

We can accurately predict many dysfunctional consequences such as the
case of fraudulent misrepresentation of of the risks of bundles of bad
loans.
Prohibiting this fraudulent misrepresentation can certainly prevent very
obvious dysfunctional consequences.

Post by Peter Olcott
For
example we can know that you will not risk loaning money to people that
have a high risk of making their payments if you are only allowed to
loan your own money.

But behind that story is the story of trying to loan money to people
who lived in post-industrial areas and didn't have good credit, but
who could probably make mortgage payments anyway.

The problem is that an accurate assessment of the actual risk was not
passed along to the investors. Instead it was fraudulently
misrepresented. The system would have been self-adjusting if this risk
assessment was accurately conveyed. The people with questionable credit
would not be able to afford the resulting higher interest rates.

Post by Les Cargill
And it worked - for a while.

Post by Peter Olcott
Although the above would be the most reliable way to eliminate risky
banking practices, less drastic means might possibly be nearly as
effective.

Emphasis "might" :)

jim <""sjedgingN0Sp\"@">

2014-12-15 19:44:30 UTC

Post by Peter Olcott
We can accurately predict many dysfunctional consequences such as the
case of fraudulent misrepresentation of of the risks of bundles of bad
loans.
Prohibiting this fraudulent misrepresentation can certainly prevent very
obvious dysfunctional consequences.

The prohibition on misrepresenting the contents of
mortgage backed securities has always existed. The
remedy if loan documentation turns out to be
false is that the loan originator is required
to buy back the loan.

The government has collected around $40 billion
dollars on securities that were sold to Fannie
and Freddie by misrepresentations. It would be
\much higher but most of the loan originators
that were selling bad loans went bankrupt in 2007
and 2008.

Private investors have not had much luck
with buy backs.
That is mostly because F&F required lenders
to adhere to high standards. F&F wouldn't
buy securities unless the loan were represented
to be made to borrowers with good credit rating,
adequate income to repay and a down payment.

On the other hand, Private investors
bought up trillions of dollars in securities
that were represented to bcontain loans
to people who had poor credit ratings, unstated
income to repay and no down payment.
These loans were financed by private investors
because it was believed that if you charged high
enough interest and fees you could make a
profitable loan to just about anyone with a pulse.

Peter Olcott

2014-12-15 23:08:29 UTC

Add thirty years in prison and you might have a sufficient disincentive.

Post by jim <""sjedgingN0Sp\"@">
The government has collected around $40 billion
dollars on securities that were sold to Fannie
and Freddie by misrepresentations. It would be
\much higher but most of the loan originators
that were selling bad loans went bankrupt in 2007
and 2008.

That is why we need harsh prison terms added to the financial penalties.

Post by jim <""sjedgingN0Sp\"@">
Private investors have not had much luck
with buy backs.
That is mostly because F&F required lenders
to adhere to high standards. F&F wouldn't
buy securities unless the loan were represented
to be made to borrowers with good credit rating,
adequate income to repay and a down payment.
On the other hand, Private investors
bought up trillions of dollars in securities
that were represented to bcontain loans
to people who had poor credit ratings, unstated
income to repay and no down payment.
These loans were financed by private investors
because it was believed that if you charged high
enough interest and fees you could make a
profitable loan to just about anyone with a pulse.

Trillions sounds unreasonably high.
It is unlikely that sufficient details of the bad credit ratings were
provided or
the risks could have been much more accurately projected.

jim <""sjedgingN0Sp\"@">

2014-12-16 01:31:44 UTC

Add thirty years in prison and you might have a sufficient disincentive.

Would you throw a car salesman in jail for 30
years if he sells a lemon?

Except for the years of the housing bubble the standard
Rep and Warranty clause has always work as an incentive
not to misrepresent the quality of assets in asset backed
securities.

That is why we need harsh prison terms added to the financial penalties.

Fraud is punishable by prison sentences, but
the level of proof needed to convict is much
higher. A lot of people could have been
convicted if there was the will to pursue it.
It took a bunch of people to falsify loan
documents including borrowers, lenders, real
estate agents, mortgage brokers and appraisers.

Trillions sounds unreasonably high.
It is unlikely that sufficient details of the bad credit ratings were
provided or
the risks could have been much more accurately projected.

It was about $5 trillion worth of mortgages that were
financed by private investors through securities.
Loading Image...

Not all the loans in those securities were high risk.
The securities were a mixture of high risk and
low risk loans. The investor could choose the
level of risk exposure. As long as house
prices were going up the high risk tranches
provided a very high return. It was the huge
demand for the highest risk investments that
drove mortgage originators to give loans to
anyone willing to sign.

The calculation of projected risk of these loans
was quite simple ~ if house prices went down
the loans would no longer make money. But
investors were confident that house prices can't
go down.

Peter Olcott

2014-12-16 13:56:09 UTC

Add thirty years in prison and you might have a sufficient disincentive.

Would you throw a car salesman in jail for 30
years if he sells a lemon?

All fraud must be prosecuted. If he sells a lemon and every indication that
the car is being sold as is with no guarantees of any kind then this is not
criminal fraud, yet still unethical. The 30 years of prison time is reserved
for the the cases of fraud that devastate the whole economy.

Post by jim <""sjedgingN0Sp\"@">
Except for the years of the housing bubble the standard
Rep and Warranty clause has always work as an incentive
not to misrepresent the quality of assets in asset backed
securities.

That is why we need harsh prison terms added to the financial penalties.

We need a more airtight system of validating these things such that
specific
individuals can be held totally accountable. Sworn affidavits that the
person
providing the information has verified that it is correct with an automatic
20 year prison term if the information proves to be incorrect whether or not
the error was intentional. Along with this we need secure information
systems
that eliminate the possibility of honest mistakes. If these systems are
sufficiently
designed fraud could be made next to impossible.

Trillions sounds unreasonably high.
It is unlikely that sufficient details of the bad credit ratings were
provided or
the risks could have been much more accurately projected.

It was about $5 trillion worth of mortgages that were
financed by private investors through securities.
http://www.weebly.com/uploads/4/0/4/4/4044041/graph_2.png
Not all the loans in those securities were high risk.
The securities were a mixture of high risk and
low risk loans. The investor could choose the
level of risk exposure. As long as house
prices were going up the high risk tranches
provided a very high return. It was the huge
demand for the highest risk investments that
drove mortgage originators to give loans to
anyone willing to sign.
The calculation of projected risk of these loans
was quite simple ~ if house prices went down
the loans would no longer make money. But
investors were confident that house prices can't
go down.

If regulations were in place to prohibit loans to those that can not
afford them
this could not occur, or at least would have far less impact. I always
keep a huge
safety margin in my budget to cover unexpected expenses. A sufficient
safety
margin must be made mandatory. Although income can be easily verified along
with how long the person has been on the job, numerous expenses could be
hidden. The failure to report all expenses must be made a criminal offense.

There are heuristics based on historical data that will show appropriate
safety
margins. Also this safety margin must be put into saving accounts for future
unexpected expenses, not merely blown. I am sorry your loan application has
been rejected because you have not consistently saved 10% of your income
for the last two years.

jim <""sjedgingN0Sp\"@">

2014-12-16 14:22:15 UTC

Post by jim <""sjedgingN0Sp\"@">
The calculation of projected risk of these loans
was quite simple ~ if house prices went down
the loans would no longer make money. But
investors were confident that house prices can't
go down.

If regulations were in place to prohibit loans to those that can not
afford them

Who is going to decide who can afford the loan?

If the the loaned money comes from depository
facilities or from government sponsored agencies,
there are strict guidelines about who
qualifies for a loan.

If the money comes from private investors it
is entirely up to the lender to decide who
they consider to be credit worthy.

The overwhelming majority of loans that failed
during the housing bubble meltdown were loans
where the money came from private investors.
In a free market economy the govt doesn't
tell people to what extent they can risk
their own money.

Post by Peter Olcott
this could not occur, or at least would have far less impact. I always
keep a huge
safety margin in my budget to cover unexpected expenses. A sufficient
safety
margin must be made mandatory. Although income can be easily verified along
with how long the person has been on the job, numerous expenses could be
hidden. The failure to report all expenses must be made a criminal offense.

Even in your Draconian world where everyone
must give complete accounting to the govt.,
people will still lose their jobs or get
sick and be unable to pay their mortgage.

Post by Peter Olcott
There are heuristics based on historical data that will show appropriate
safety
margins. Also this safety margin must be put into saving accounts for future
unexpected expenses, not merely blown. I am sorry your loan application has
been rejected because you have not consistently saved 10% of your income
for the last two years.

And if some private party like a rich aunt
wants to give you a loan you will make
that illegal unless the govt approves??

Peter Olcott

2014-12-16 16:34:57 UTC

If regulations were in place to prohibit loans to those that can not
afford them

Who is going to decide who can afford the loan?

Econometrics.
Historical data of the correlation of credit worthiness factors to
default rates
during recessions.

Post by jim <""sjedgingN0Sp\"@">
If the the loaned money comes from depository
facilities or from government sponsored agencies,
there are strict guidelines about who
qualifies for a loan.
If the money comes from private investors it
is entirely up to the lender to decide who
they consider to be credit worthy.

That is not the way it works in practice.
In practice the loan is approved by the person making the sales
commission and
then bundled together with many such loans into mutual funds where the
details of the loan application are not passed along.

Post by jim <""sjedgingN0Sp\"@">
The overwhelming majority of loans that failed
during the housing bubble meltdown were loans
where the money came from private investors.
In a free market economy the govt doesn't
tell people to what extent they can risk
their own money.

The details of the credit worthiness factors were not passed along to
the mutual
fund investors and often the broad measures of credit worthiness that
were provided
were fraudulently misrepresented.

Even in your Draconian world where everyone
must give complete accounting to the govt.,
people will still lose their jobs or get
sick and be unable to pay their mortgage.

That is why a safety buffer of perpetual savings of 10% of income would
be mandatory.
If you can not afford to save 10% of your income, then you can not
afford any mortgage.
The 10% is not extra money that is never needed. The 10% is money that
will definitely
be required for unpredictable expenses.

Post by Peter Olcott
There are heuristics based on historical data that will show appropriate
safety
margins. Also this safety margin must be put into saving accounts for future
unexpected expenses, not merely blown. I am sorry your loan
application has
been rejected because you have not consistently saved 10% of your income
for the last two years.

And if some private party like a rich aunt
wants to give you a loan you will make
that illegal unless the govt approves??

Person to person transactions will not be regulated except that fraudulent
misrepresentation might result in a lawsuit.

jim <""sjedgingN0Sp\"@">

2014-12-16 20:34:54 UTC

The details of the credit worthiness factors were not passed along to
the mutual
fund investors and often the broad measures of credit worthiness that
were provided
were fraudulently misrepresented.

People invest in mutual funds because they want
somebody else to manage their investment. Very
little is passed along to mutual fund investors.
Mutual funds were not the only ones buying
private mortgage backed securities.
In general investors relied upon the ratings agencies
to look at the underlying loans and determine the
level of risk.
Any investor who wanted to know could tell
that the private label mortgage backed
securities were filled with high risk loans.
To a large extent it was the investors who
directed the mortgage originators to produce
more and more high risk loans because the
high-risk rate of return is what investors
opted for most. Everybody knew that the
high risk high return investments were funding
loans to borrowers that did not qualify
for loans financed by deposit institutions
and Freddie and Fannie.

Post by jim <""sjedgingN0Sp\"@">
Even in your Draconian world where everyone
must give complete accounting to the govt.,
people will still lose their jobs or get
sick and be unable to pay their mortgage.

That is why a safety buffer of perpetual savings of 10% of income would be mandatory.
If you can not afford to save 10% of your income, then you can not afford any mortgage.
The 10% is not extra money that is never needed. The 10% is money that will definitely
be required for unpredictable expenses.

There is no reason to regulate private
investors in the mortgage market. There are
practically zero mortgages being financed by
private investors today.
https://www.economy.com/mark-zandi/documents/2013-06-26-Resurrection-of-RMBS.pdf

The savings requirement is already there in
the form of a down payment. The GSEs have established
standards that accurately predict who is is a good
candidate for a loan. That is why the loan losses
by Freddie and Fannie were much lower than the
loan losses of private investors.

Peter Olcott

2014-12-17 04:08:44 UTC

The details of the credit worthiness factors were not passed along to
the mutual
fund investors and often the broad measures of credit worthiness that
were provided
were fraudulently misrepresented.

These rating agencies fraudulently misrepresented the risk and when
an attempt was made to hold them accountable they threatened to
stop provide ratings.

Post by jim <""sjedgingN0Sp\"@">
Any investor who wanted to know could tell
that the private label mortgage backed
securities were filled with high risk loans.
To a large extent it was the investors who
directed the mortgage originators to produce
more and more high risk loans because the
high-risk rate of return is what investors
opted for most. Everybody knew that the
high risk high return investments were funding
loans to borrowers that did not qualify
for loans financed by deposit institutions
and Freddie and Fannie.

They certainly did not know the specific degree of the risk.

That is why a safety buffer of perpetual savings of 10% of income would be mandatory.
If you can not afford to save 10% of your income, then you can not afford any mortgage.
The 10% is not extra money that is never needed. The 10% is money that will definitely
be required for unpredictable expenses.

No such thing as GNMA mutual funds?
Vanguard still carries them, and I used to be invested in them.

Post by jim <""sjedgingN0Sp\"@">
The savings requirement is already there in
the form of a down payment. The GSEs have established
standards that accurately predict who is is a good
candidate for a loan. That is why the loan losses
by Freddie and Fannie were much lower than the
loan losses of private investors.

jim <""sjedgingN0Sp\"@">

2014-12-17 12:32:46 UTC

The details of the credit worthiness factors were not passed along to
the mutual
fund investors and often the broad measures of credit worthiness that
were provided
were fraudulently misrepresented.

These rating agencies fraudulently misrepresented the risk and when
an attempt was made to hold them accountable they threatened to
stop provide ratings.

The rating agencies did a poor job of predicting
the future. That isn't the same as fraud.

They certainly did not know the specific degree of the risk.

There would be no risk involved if you knew the
outcome in advance.

That is why a safety buffer of perpetual savings of 10% of income would be mandatory.
If you can not afford to save 10% of your income, then you can not afford any mortgage.
The 10% is not extra money that is never needed. The 10% is money that will definitely
be required for unpredictable expenses.

No such thing as GNMA mutual funds?
Vanguard still carries them, and I used to be invested in them.

GNMA invests in Treasury and Government sponsored
securities. It looks like this mutual fund performed
well during the financial meltdown.
http://money.usnews.com/funds/mutual-funds/intermediate-government/vanguard-gnma-fund/vfiix/performance

Those are not the type of securities that
funded the reckless lending during housing bubble.
The reckless lending was funded by private
investors through private channels.

As I said government sponsored lending was
well regulated and relatively safe and sound.

But many savers were not happy getting a modest
return on their savings. Those savers poured
trillions into non-agency sponsored lending
through private label securities that gave
a much higher rate of return (for a while) in
exchange for much higher risk
http://securitization.weebly.com/private-label-mbs.html

Investors who put money into private label
securities knew they were gambling in the hopes
of getting fatter returns. Are you proposing
to outlaw all forms of gambling?

Peter Olcott

2014-12-17 15:39:12 UTC

The details of the credit worthiness factors were not passed along to
the mutual
fund investors and often the broad measures of credit worthiness that
were provided
were fraudulently misrepresented.

These rating agencies fraudulently misrepresented the risk and when
an attempt was made to hold them accountable they threatened to
stop provide ratings.

The rating agencies did a poor job of predicting
the future. That isn't the same as fraud.

They provided good ratings for bad loans this is either fraud or gross
negligence.

They certainly did not know the specific degree of the risk.

There would be no risk involved if you knew the
outcome in advance.

As long as the ratings provided were as accurate as possible the burden
(under the current system) would be on the investor. Either through
intentional fraud or gross negligence the ratings were not always as
accurate as possible. Bad loans were called good loans when they were
combined together as groups of loans.

That is why a safety buffer of perpetual savings of 10% of income would be mandatory.
If you can not afford to save 10% of your income, then you can not
afford any mortgage.
The 10% is not extra money that is never needed. The 10% is money
that will definitely
be required for unpredictable expenses.

No such thing as GNMA mutual funds?
Vanguard still carries them, and I used to be invested in them.

Government National Mortgage Association.
These are mortgages that are financed by private investors today.

Post by jim <""sjedgingN0Sp\"@">
Those are not the type of securities that
funded the reckless lending during housing bubble.
The reckless lending was funded by private
investors through private channels.
As I said government sponsored lending was
well regulated and relatively safe and sound.
But many savers were not happy getting a modest
return on their savings. Those savers poured
trillions into non-agency sponsored lending
through private label securities that gave
a much higher rate of return (for a while) in
exchange for much higher risk
http://securitization.weebly.com/private-label-mbs.html
Investors who put money into private label
securities knew they were gambling in the hopes
of getting fatter returns. Are you proposing
to outlaw all forms of gambling?

I am proposing what-so-ever is required to prevent another Great Recession.
Of the possible solutions, the selected solution should have minimum
dysfunctional consequences.

In the case where investors want to invest money in loans that have the
poorest
possible rating, and the quantified details of the reason why these
loans have
the poorest possible rating are provided, along with the default rates
of these
loans during recessions, there is not much more that should be said
besides let
the buyer beware.

In the case where ratings companies provided incorrect ratings either
through
intentional fraud or gross negligence and this error resulted is a
significant
adverse impact to the economy, intentional fraud should result in very long
prison terms and compensatory damages up to and including taking the whole
company away from its owners. In the case of gross negligence where
intentional
fraud can not be proven, the same degree of compensatory damages should be
assessed.

Optimal capitalism provides a sufficient degree of incentives to
encourage the
maximum beneficial result to society, and also provides a sufficient
degree of
disincentives to minimize adverse effects on society.

jim <""sjedgingN0Sp\"@">

2014-12-17 17:25:23 UTC

Post by jim <""sjedgingN0Sp\"@">
The rating agencies did a poor job of predicting
the future. That isn't the same as fraud.

They provided good ratings for bad loans this is either fraud or gross
negligence.

Everyone agrees they did their job poorly.
Their job is mostly about predicting future events.
They failed to predict the future accurately.
It would be pretty hard to prove that was fraud.

I'm not saying it wasn't fraud. I'm just saying
that if your job is predicting the future it
is pretty dang hard for someone else to prove
you are doing it honestly or dishonestly.

Post by jim <""sjedgingN0Sp\"@">
There would be no risk involved if you knew the
outcome in advance.

That is your false representation. The failure
of ratings was due to a failure to
correctly predict what the mortgage market
would do. It was assumed that the high failure
rate of the high risk loans would not drag
down prices of all housing. It was assumed
that the portion of the securities with quality
mortgages would retain their value. That was a
bad assumption, but it doesn't amount to fraud.

Post by Peter Olcott
No such thing as GNMA mutual funds?
Vanguard still carries them, and I used to be invested in them.

Government National Mortgage Association.
These are mortgages that are financed by private investors today.

No, again this is your misrepresentation of
the facts. The quality of these loans were
guaranteed by the federal govt. The investors
role was no different than buying a savings
bond from the federal govt. The federal govt was
picking the investments not the private sector.
The investor was insulated from risk in exchange
for a much lower rate of return than was possible
by privately issued mortgage backed securities.

The loans that caused the housing bubble were
loans financed by private investors through
private channels. Private investors are
allowed to gamble and take as much
risk as they want.

Post by jim <""sjedgingN0Sp\"@">
Investors who put money into private label
securities knew they were gambling in the hopes
of getting fatter returns. Are you proposing
to outlaw all forms of gambling?

I am proposing what-so-ever is required to prevent another Great Recession.
Of the possible solutions, the selected solution should have minimum
dysfunctional consequences.

Your proposal assumes the government can predict which
bad investment decisions the private sector will
be making and get law passed to prevent those
decisions before they happen. That is every
bit as foolish as those who believe that private
markets always reach the best possible decisions.

Post by Peter Olcott
In the case where investors want to invest money in loans that have the
poorest
possible rating, and the quantified details of the reason why these
loans have
the poorest possible rating are provided, along with the default rates
of these
loans during recessions, there is not much more that should be said
besides let
the buyer beware.
In the case where ratings companies provided incorrect ratings either
through
intentional fraud or gross negligence and this error resulted is a
significant
adverse impact to the economy, intentional fraud should result in very long
prison terms and compensatory damages up to and including taking the whole
company away from its owners. In the case of gross negligence where
intentional
fraud can not be proven, the same degree of compensatory damages should be
assessed.
Optimal capitalism provides a sufficient degree of incentives to
encourage the
maximum beneficial result to society, and also provides a sufficient
degree of
disincentives to minimize adverse effects on society.

Peter Olcott

2014-12-17 20:10:58 UTC

Post by jim <""sjedgingN0Sp\"@">
The rating agencies did a poor job of predicting
the future. That isn't the same as fraud.

They provided good ratings for bad loans this is either fraud or gross
negligence.

Everyone agrees they did their job poorly.
Their job is mostly about predicting future events.
They failed to predict the future accurately.
It would be pretty hard to prove that was fraud.
I'm not saying it wasn't fraud. I'm just saying
that if your job is predicting the future it
is pretty dang hard for someone else to prove
you are doing it honestly or dishonestly.

Providing an AA rating for bonds that are actually grade C is not
about predicting the future, it is about accurately reporting the truth
without either fraud or gross negligence.

Post by jim <""sjedgingN0Sp\"@">
There would be no risk involved if you knew the
outcome in advance.

(See above)

Post by Peter Olcott
No such thing as GNMA mutual funds?
Vanguard still carries them, and I used to be invested in them.

Government National Mortgage Association.
These are mortgages that are financed by private investors today.

No, again this is your misrepresentation of
the facts. The quality of these loans were

What I am saying is a tautology due to the fact that I can buy a
Vanguard GNMA fund right now.

Post by jim <""sjedgingN0Sp\"@">
guaranteed by the federal govt. The investors
role was no different than buying a savings
bond from the federal govt. The federal govt was
picking the investments not the private sector.
The investor was insulated from risk in exchange
for a much lower rate of return than was possible
by privately issued mortgage backed securities.
The loans that caused the housing bubble were
loans financed by private investors through
private channels. Private investors are
allowed to gamble and take as much
risk as they want.

Yes this would make a big difference.

I am proposing what-so-ever is required to prevent another Great Recession.
Of the possible solutions, the selected solution should have minimum
dysfunctional consequences.

The government could at least hold the ratings agencies accountable
for accurately grading the risk of loans from AAAA to C (not a prediction
of the future merely a summary of the of quantified investment risk
factors).

Criminal fraud and gross negligence should have penalties corresponding
to their impact on society, up to and including life in prison for fraud
and confiscation of the entire ratings company for gross negligence.

jim <""sjedgingN0Sp\"@">

2014-12-17 21:36:09 UTC

Post by Peter Olcott
Government National Mortgage Association.
These are mortgages that are financed by private investors today.

No, again this is your misrepresentation of
the facts. The quality of these loans were

What I am saying is a tautology due to the fact that I can buy a
Vanguard GNMA fund right now.

That mutual fund contains more than mortgages and
those mortgages are not fully financed by private
investors. The government is the guarantor
of those mortgages.

Yes this would make a big difference.

I am proposing what-so-ever is required to prevent another Great Recession.
Of the possible solutions, the selected solution should have minimum
dysfunctional consequences.

I don't really disagree with you that what the rating
agencies did amounted to fraud but proving it in a
court of law is something else. All the rating statements
contain language that makes it clear they are making
predictions and the raters don't know what
trhe future will bring.

Rating mortgages is purely a matter of predicting.
The biggest prediction failure was in home prices.
Had home prices not dropped more than predicted the
ratings would ultimately not have been wrong.

Post by Peter Olcott
Criminal fraud and gross negligence should have penalties corresponding
to their impact on society, up to and including life in prison for fraud
and confiscation of the entire ratings company for gross negligence.

Fraud does have penalties. But when predictions
fail to be accurate the courts don't see that as fraud.

Where the government has been successful in
prosecuting a ratings agency for fraud is in
making false statements about the rating agencies
financial interest in securities they were rating.

http://blogs.orrick.com/securities-litigation/2013/07/16/where-theres-smoke-theres-firrea-part-two/
"To reassure banks and investors that its ratings were accurate, S&P
issued a “Code of Conduct,” containing promises that it had established
policies and procedures to address these conflicts of interest. The DOJ
alleged that the “Code of Conduct” statements were false and material to
investors."

Peter Olcott

2014-12-18 12:55:04 UTC

Post by Peter Olcott
Government National Mortgage Association.
These are mortgages that are financed by private investors today.

No, again this is your misrepresentation of
the facts. The quality of these loans were

What I am saying is a tautology due to the fact that I can buy a
Vanguard GNMA fund right now.

That mutual fund contains more than mortgages and
those mortgages are not fully financed by private
investors. The government is the guarantor
of those mortgages.

Yes this would make a big difference.

I am proposing what-so-ever is required to prevent another Great Recession.
Of the possible solutions, the selected solution should have minimum
dysfunctional consequences.

I don't really disagree with you that what the rating
agencies did amounted to fraud but proving it in a
court of law is something else. All the rating statements
contain language that makes it clear they are making
predictions and the raters don't know what
trhe future will bring.
Rating mortgages is purely a matter of predicting.
The biggest prediction failure was in home prices.
Had home prices not dropped more than predicted the
ratings would ultimately not have been wrong.

Although risk factors are a proxy for predicting the future, obtaining
them does not require predicting the future at all. The number of
time the loan applicant was late with payments on other obligations
the length of their employment, the amount of annual income from
this employment, the number of missed payments to other obligations,
the amount of disposable income, there are at least some of the
factors that could be summarized into a credit score. A new factor could
be added, whether or not the loan applicant has consistently saved
10% of their income to pay for future unexpected expenses.

Fraud does have penalties. But when predictions
fail to be accurate the courts don't see that as fraud.

If the borrowers credit scores are misrepresented, it could be fraud until
proven otherwise, and then it would be gross negligence. Gross negligence
that results in devastating effects on the economy could result in
forfeiting
the entire company.

Post by jim <""sjedgingN0Sp\"@">
Where the government has been successful in
prosecuting a ratings agency for fraud is in
making false statements about the rating agencies
financial interest in securities they were rating.

If we can not prove fraud then gross negligence is presumed and you
lose your whole company. We must have sufficient disincentives for
anything and everything that devastates the whole economy, merely
having disincentives can be woefully inadequate if they are not sufficient.

Post by jim <""sjedgingN0Sp\"@">
http://blogs.orrick.com/securities-litigation/2013/07/16/where-theres-smoke-theres-firrea-part-two/
"To reassure banks and investors that its ratings were accurate, S&P
issued a “Code of Conduct,” containing promises that it had
established policies and procedures to address these conflicts of
interest. The DOJ alleged that the “Code of Conduct” statements were
false and material to investors."

jim <""sjedgingN0Sp\"@">

2014-12-18 13:58:23 UTC

Post by jim <""sjedgingN0Sp\"@">
Rating mortgages is purely a matter of predicting.
The biggest prediction failure was in home prices.
Had home prices not dropped more than predicted the
ratings would ultimately not have been wrong.

Credit scores of borrowers are already computed
along those lines.

Investors were well aware that private label securities
contained mortgages given to people with poor credit scores.
That was the whole point of investing in those securities.
It was those high risk mortgages that gave those securities
the higher rate of returns.
If investors wanted a nice safe investment that paid
a low but safe return on investment the investor could
put their money in something like Vanguard's GNMA mutual fund

Fraud does have penalties. But when predictions
fail to be accurate the courts don't see that as fraud.

No company by itself produced devastating effects
on the economy. The devastating effects were created by
the actions of borrowers, lenders, real estate agents,
mortgage brokers, investment bankers and appraisers in
addition to the action of the ratings agencies.

That is not the way the law works. You can't just, after
the fact, create law to criminalize something done in
the past based on not liking the outcome.

Peter Olcott

2014-12-18 16:43:25 UTC

Credit scores of borrowers are already computed
along those lines.
Investors were well aware that private label securities
contained mortgages given to people with poor credit scores.
That was the whole point of investing in those securities.
It was those high risk mortgages that gave those securities
the higher rate of returns.
If investors wanted a nice safe investment that paid
a low but safe return on investment the investor could
put their money in something like Vanguard's GNMA mutual fund

They needed to know these things too:
1) The mean, median, standard deviation of the credit scores.
2) The factors the the credit score is comprised of.
3) The weighting of these factors is Fair Issac proprietary.
4) The correlation of credit scores to default rate during recessions.

Post by Peter Olcott
Criminal fraud and gross negligence should have penalties
corresponding
to their impact on society, up to and including life in prison for fraud
and confiscation of the entire ratings company for gross negligence.

Fraud does have penalties. But when predictions
fail to be accurate the courts don't see that as fraud.

There are very few companies that rate the investment risk of loans.
There is only one company the produces a consumer credit score (Fair
Issac).
If these few companies significantly misrepresent the risk of even a single
class of investments, this single type of error can have devastating ripple
effects on the entire economy.

That is not the way the law works. You can't just, after
the fact, create law to criminalize something done in
the past based on not liking the outcome.

(1) Fraud is already a criminal act.

(2) If we can't prove intentional fraud the default of compensatory damages
(to the whole economy) for gross negligence is actionable.

BeamMeUpScotty

2014-12-18 16:14:22 UTC

Post by Peter Olcott
Government National Mortgage Association.
These are mortgages that are financed by private investors today.

No, again this is your misrepresentation of
the facts. The quality of these loans were

What I am saying is a tautology due to the fact that I can buy a
Vanguard GNMA fund right now.

That mutual fund contains more than mortgages and
those mortgages are not fully financed by private
investors. The government is the guarantor
of those mortgages.

Yes this would make a big difference.

I am proposing what-so-ever is required to prevent another Great Recession.
Of the possible solutions, the selected solution should have minimum
dysfunctional consequences.

I don't really disagree with you that what the rating
agencies did amounted to fraud but proving it in a
court of law is something else. All the rating statements
contain language that makes it clear they are making
predictions and the raters don't know what
trhe future will bring.
Rating mortgages is purely a matter of predicting.
The biggest prediction failure was in home prices.
Had home prices not dropped more than predicted the
ratings would ultimately not have been wrong.

Fraud does have penalties. But when predictions
fail to be accurate the courts don't see that as fraud.

Why is it that when oil prices are high we hear that it "doesn't" create
inflation but when the prices are low somehow it becomes deflationary?

Is fiat currency in a consumer economy linked to energy instead of Gold
and is that exactly what BitCoin does? Doesn't BitCoin link it's price
to the cost of the energy needed to create and maintain BitCoins. When
the value of BitCoins themselves is low the people creating BitCoins
start turning off their computer equipment because it costs more in
energy to produce than that BitCoin is worth.

http://beginnersinvest.about.com/od/inflationrate/a/What-Is-An-Inflation-Index.htm

What about an *ENERGY* backed currency rather than Gold backed or fiat.

[""""Manipulation? The entire system is based on government statistics.""""]
http://mises.ca/posts/articles/kilowatt-money-another-zombie-fiat-money-scheme/

But our Petro Dollars are already ENERGY backed dollars?

jim <""sjedgingN0Sp\"@">

2014-12-18 19:11:58 UTC

Post by BeamMeUpScotty
Why is it that when oil prices are high we hear that it "doesn't" create
inflation but when the prices are low somehow it becomes deflationary?

Why is it that you still keep lying about there being
inflation when oil prices are now falling?

Post by BeamMeUpScotty
What about an *ENERGY* backed currency rather than Gold backed or fiat.

When the dollar was tied to gold before 1971
the US economy was addicted to consuming
more and more oil. Before 1971 the US
consumption of oil doubled every 10 years.

Since getting away from gold standard the
US economy has become much less dependent on
consuming oil. The amount of petroleum that
the average American uses is less today than
it was in 1971.

Inflation is the result of a free market
economy ridding itself of the addiction
to consuming more and more of a dwindling
resource that it is addicted to. The choice
was either endure inflation or putting an end
to letting markets determine prices. Nixon
tried price controls but it was obvious that
was not going to work.

BeamMeUpScotty

2019-04-23 20:59:04 UTC

Post by BeamMeUpScotty
Why is it that when oil prices are high we hear that it "doesn't" create
inflation but when the prices are low somehow it becomes deflationary?

Why is it that you still keep lying about there being
inflation when oil prices are now falling?

OIL prices are apparently *ONLY* one cause of inflation.

Post by BeamMeUpScotty
What about an *ENERGY* backed currency rather than Gold backed or fiat.

When the dollar was tied to gold before 1971
the US economy was addicted to consuming
more and more oil. Before 1971 the US
consumption of oil doubled every 10 years.
Since getting away from gold standard the
US economy has become much less dependent on
consuming oil. The amount of petroleum that
the average American uses is less today than
it was in 1971.
Inflation is the result of a free market
economy ridding itself of the addiction
to consuming more and more of a dwindling
resource that it is addicted to.

This is a contradiction since the fossil fuel like oil and gas is NOT
dwindling, and the USA in fact produces more than we did in the past
thanks to technology that has increased production and supplies by using
oil and gas that was once a wasted oil and gas and is now pumped out
using fracking.

Post by jim <""sjedgingN0Sp\"@">
The choice
was either endure inflation or putting an end
to letting markets determine prices. Nixon
tried price controls but it was obvious that
was not going to work.

Socialism never works...

--
That's Karma

jim <""sjedgingN0Sp\"@">

2014-12-24 23:09:36 UTC

Post by jim <""sjedgingN0Sp\"@">
The rating agencies did a poor job of predicting
the future. That isn't the same as fraud.

They provided good ratings for bad loans this is either fraud or gross
negligence.

Probably true, but you can't prove it.
Considering that the only thing
the ratings agencies have is reputation
they shot themselves in the foot pretty bad.

Post by jim <""sjedgingN0Sp\"@">
There would be no risk involved if you knew the
outcome in advance.

No that is not accurate. Maybe you should be put
away for 30 years.

It was well understood by investors that loans that
had a high risk of failure were mixed with loans
that had lower risk. Without that mix the securities
would not have had the high rate of return that investors
wanted.

If investors wanted a safe low-risk low rate of
return they could put their money in something
like the Vanhaurd GNMA fund that you mentioned.

All that information was provided. These particular
type of loan and securitization scheme didn't have
a long track record, but they performed well during
the 2001 recession and at every other time up to
the point when suddenly they didn't.

Read this story of one investor who actually read
much of the loan documentation on private label securities
and made billions by finding the ones that were most
likely to fail and betting against them.
http://www.vanityfair.com/business/features/2010/04/wall-street-excerpt-201004

BeamMeUpScotty

2014-12-16 15:17:55 UTC

Post by Peter Olcott
All fraud must be prosecuted. If he sells a lemon and every indication that
the car is being sold as is with no guarantees of any kind then this is not
criminal fraud, yet still unethical. The 30 years of prison time is
reserved for the the cases of fraud that devastate the whole economy.

And yet if you bought an Edsel, your Lemon could be worth today about
100 times what you paid for it....

Then who was unethical? Risk is a part of every part of commerce.

Criminal laws like ones against fraud, distort the market place.

And an excessive number of the laws distorts the markets excessively.

Government's own success at making laws is it's own demise, or in
reality Liberalism is it's own worst enemy.

Peter Olcott

2014-12-16 16:17:01 UTC

And yet if you bought an Edsel, your Lemon could be worth today about
100 times what you paid for it....

Your example of the Edsel showed why we should not try to regulate
ethics and
instead restrict our regulations to things such as fraud.

Post by BeamMeUpScotty
Then who was unethical? Risk is a part of every part of commerce.
Criminal laws like ones against fraud, distort the market place.

It sounds to me that you may be evil.
Fraud is a kind of deception which is a kind of lie.
If we should not prohibit lying and cheating, then why stop there?
Why not make murder legal too?

We can go back to the old West where the fastest gun defined who was right.
Whether or not this is dysfunctional or beneficial would be determined
entirely by whether or not oneself was or was not the fastest gun.

Post by BeamMeUpScotty
And an excessive number of the laws distorts the markets excessively.
Government's own success at making laws is it's own demise, or in
reality Liberalism is it's own worst enemy.

BeamMeUpScotty

2014-12-16 16:24:30 UTC

Post by Peter Olcott
All fraud must be prosecuted. If he sells a lemon and every
indication that
the car is being sold as is with no guarantees of any kind then this is not
criminal fraud, yet still unethical. The 30 years of prison time is
reserved for the the cases of fraud that devastate the whole economy.

And yet if you bought an Edsel, your Lemon could be worth today about
100 times what you paid for it....

Your example of the Edsel showed why we should not try to regulate
ethics and
instead restrict our regulations to things such as fraud.

Post by BeamMeUpScotty
Then who was unethical? Risk is a part of every part of commerce.
Criminal laws like ones against fraud, distort the market place.

It sounds to me that you may be evil.
Fraud is a kind of deception which is a kind of lie.
If we should not prohibit lying and cheating, then why stop there?
Why not make murder legal too?

We do... Obama has droned hundreds of people to death and according to
Liberals it was all legal.

Bush poured water on some and he's a war criminal.

Peter Olcott

2014-12-16 16:47:29 UTC

Post by Peter Olcott
All fraud must be prosecuted. If he sells a lemon and every
indication that
the car is being sold as is with no guarantees of any kind then this is not
criminal fraud, yet still unethical. The 30 years of prison time is
reserved for the the cases of fraud that devastate the whole economy.

And yet if you bought an Edsel, your Lemon could be worth today about
100 times what you paid for it....

Your example of the Edsel showed why we should not try to regulate
ethics and
instead restrict our regulations to things such as fraud.

Post by BeamMeUpScotty
Then who was unethical? Risk is a part of every part of commerce.
Criminal laws like ones against fraud, distort the market place.

It sounds to me that you may be evil.
Fraud is a kind of deception which is a kind of lie.
If we should not prohibit lying and cheating, then why stop there?
Why not make murder legal too?

We do... Obama has droned hundreds of people to death and according to
Liberals it was all legal.
Bush poured water on some and he's a war criminal.

You have an excellent point there, well put.

This thread is entirely focused on [optimal capitalism] thus these
tangents are off-topic. Do you really think that all forms of lying,
cheating and fraud should be permitted ?

BeamMeUpScotty

2014-12-16 17:05:02 UTC

And yet if you bought an Edsel, your Lemon could be worth today about
100 times what you paid for it....

Your example of the Edsel showed why we should not try to regulate
ethics and
instead restrict our regulations to things such as fraud.

Post by BeamMeUpScotty
Then who was unethical? Risk is a part of every part of commerce.
Criminal laws like ones against fraud, distort the market place.

It sounds to me that you may be evil.
Fraud is a kind of deception which is a kind of lie.
If we should not prohibit lying and cheating, then why stop there?
Why not make murder legal too?

We do... Obama has droned hundreds of people to death and according to
Liberals it was all legal.
Bush poured water on some and he's a war criminal.

You have an excellent point there, well put.
This thread is entirely focused on [optimal capitalism] thus these
tangents are off-topic. Do you really think that all forms of lying,
cheating and fraud should be permitted ?

first amendment Free speech says lying is NOT a crime....

So without violating someones first amendment you can catch them for
violating other people's rights. The actual fraud would be agreeing to
something and then NOT delivering it, it would NOT be a lie but a breach
of contract meaning that you didn't fulfill or pay your debt.

We have no debtors prison.

Peter Olcott

2014-12-16 17:44:08 UTC

And yet if you bought an Edsel, your Lemon could be worth today about
100 times what you paid for it....

Your example of the Edsel showed why we should not try to regulate
ethics and
instead restrict our regulations to things such as fraud.

Post by BeamMeUpScotty
Then who was unethical? Risk is a part of every part of commerce.
Criminal laws like ones against fraud, distort the market place.

It sounds to me that you may be evil.
Fraud is a kind of deception which is a kind of lie.
If we should not prohibit lying and cheating, then why stop there?
Why not make murder legal too?

We do... Obama has droned hundreds of people to death and according to
Liberals it was all legal.
Bush poured water on some and he's a war criminal.

You have an excellent point there, well put.
This thread is entirely focused on [optimal capitalism] thus these
tangents are off-topic. Do you really think that all forms of lying,
cheating and fraud should be permitted ?

first amendment Free speech says lying is NOT a crime....
So without violating someones first amendment you can catch them for
violating other people's rights. The actual fraud would be agreeing to
something and then NOT delivering it, it would NOT be a lie but a breach
of contract meaning that you didn't fulfill or pay your debt.
We have no debtors prison.

For example the used car dealer says there is nothing wrong with the vehicle
that actually needs a new transmission. We might be able to let this kind of
thing be handled by tort law.

The kind of things that devastate the whole economy can not be allowed to
slip through the cracks. There must be sufficient disincentive
prohibiting things
that can devastate the economy. 30 years in prison would work. Being
sued for
money that one no long has (or is hidden offshore) does not work.

If USA was still an actual democracy instead of being a sort of
oligarchy the
ideas that I am proposing would be a no-brainer. The few people that benefit
from these economically devastating fraudulent actions would be over-ruled
by the majority.

Bert

2014-12-16 17:01:41 UTC

Post by Peter Olcott
Capitalism when done correctly

Correctly?
Please elaborate.

Such that nearly every significant financial decision is almost
entirely focused on the greatest benefits to society because the
incentives and constraints are designed that way.

But when people make trades they already do that.

No reasonable trader ever does that; he trades based on the greatest
benefit to himself. In a free trade, each party to the trade believes
he's received the greater, or at least equivalent, benefit.

That society as a whole benefits from free trade is simply a side
effect.

--
***@iphouse.com St. Paul, MN

Peter Olcott

2014-12-16 18:18:46 UTC

Post by Peter Olcott
Capitalism when done correctly

Correctly?
Please elaborate.

Such that nearly every significant financial decision is almost
entirely focused on the greatest benefits to society because the
incentives and constraints are designed that way.

But when people make trades they already do that.

No reasonable trader ever does that; he trades based on the greatest
benefit to himself. In a free trade, each party to the trade believes
he's received the greater, or at least equivalent, benefit.
That society as a whole benefits from free trade is simply a side
effect.

Optimal capitalism occurs when every financial choice is constrained to
produce the
greatest benefit to society. Lying, cheating, and stealing have
substantial detrimental
consequences to society, thus must be prohibited.

The purpose of patents is not to make inventors wealthy, the purpose of
patents is
to provide sufficient incentive for innovation. Capitalism is optimized
when self-interest
is channeled to maximize the benefits to society.

The reason that the USA is so prosperous is that capitalism has done
this. The great failure
of communism is that the incentives to provide the greatest benefit to
society were mostly
missing. In recent decades we have lost our way, we have forgotten that
the purpose of
capitalism is to benefit society and instead are only looking at profits.

The reason that we have lost our way is the transition from a democracy
to an oligarchy.
When the desires of the few supersede the benefits of the many
capitalism fails its intended
purpose.

Bert

2014-12-16 18:55:45 UTC

Post by Peter Olcott
Optimal capitalism occurs when every financial choice is constrained
to produce the greatest benefit to society.

And you're just the guy to do the restraining, making the personal
decision about what will "produce the greatest benefit to society."

Right?

--
***@iphouse.com St. Paul, MN

Peter Olcott

2014-12-16 19:09:43 UTC

Post by Peter Olcott
Optimal capitalism occurs when every financial choice is constrained
to produce the greatest benefit to society.

And you're just the guy to do the restraining, making the personal
decision about what will "produce the greatest benefit to society."
Right?

Not at all.
I am the guy that points out that the ship is going in the wrong
direction and why.
I am a big picture kind of guy.

It does seem to be the case that those actions most devastating to the
economy
should have sufficient disincentive attached to them such that the
occurrence of
these actions and their resulting devastating effect on the economy is
minimized.

The above paragraph is where my greatest certainty is, the details
regarding how
to best implement the correction of this problem are far less certain.

The excuse that a good solution can not be found might be addressed by
making
a very harsh solution as the default solution if no other solution is
proposed.
It is all a matter of providing sufficient incentives to encourage the
best and
discourage the worst. You get what you pay for, if you provide
incentives for
corruption, (as is the current situation) then that is what you will get.

Dale

2014-12-19 15:11:06 UTC