That they didn’t learn the lesson was evidenced by the crash of 1929, and after that the Government got involved and it lasted until world war 2.

Socialising the debt will only prolong the problems. You can’t spend your way to wealth, and that is what America, and to much the same degree the rest of the West has been living for 20 years.

The people who approved 100% mortgages, Loans to unemployed people, and those who were not credit worthy deserve to go broke. And those who got the loans deserved to lose their houses.

Unfortunately today no one is allowed to fail! And that is simply unrealistic. If you stop failure the only alternative is to penalize the successful. And that will drag down the entire structure.

For the past thirty years, the Wall Street investment banks have been steadily taking business away from the commercial banks. The reasons for this have been lower and more favorable capital requirements, the relative freedom from regulation, the cost of deposit insurance, and a greater willingness to take risks, since a commercial bank is taking the risk itself and the investment bank is taking the risk on behalf of its investor customers.

The recent turmoil has upended almost all of these advantages. All the big investment banks are now owned by commercial banks or have been forced to convert to commercial banks, so the capital cost advantage is gone. Regulations are likely to get much stricter on Wall Street. Since the Fed is now bailing out money market funds, deposit insurance costs on those funds cannot be far behind. And excessive risk taking is not likely to be rewarded in either a commercial or an investment bank. The playing field has leveled so that commercial bank products such as loans and deposits are going to be much more attractive to both borrowers and investors than the commercial paper, structured investment products, and money market funds Wall Street offered.

Another advantage to the commercial banks is the relative gap between prime and LIBOR. LIBOR loans are been very cheap for the customer. If the recent rise in LIBOR is sustained for any length of time, this will represent a significant profit increase for commercial banks, who have a substantial portion of their comercial loans tied to LIBOR.

The coming years may be the commercial banks’ time in the sun. That being said, I agree with your conclusion that this is not the time to invest in bank stocks. Purely aside from problems arising from sub-prime loans, credit default swaps, and all the other toxic waste banks may have on their balance sheets, the political environment is likely to be toxic as well; Congress is likely to pass a number of ill-considered programs mandating credit allocations, additional aid to “under-served communities”, etc.

Watchful waiting!

See Also: What benefits do the taxpayers get out of the bailout bill?, No investigation of those who caused fake ‘crisis’, 7 Out Of 9 Banks Agree: Bailout Is A Failout, AIG Execs Caught Wasting Even More Of Our Money After Bailout, JPMorgan Respon……

With inventories at its peak, higher interest rates and portfolios like http://www.BuyMyHouseBeforeTheBankTakesIt.com only creates a recipe for panic. What we have left to our real estate market is the necessity buyer, and if the economy does not pick up soon, corporate America will freeze and the relocation market will dry up. The best thing the Federal Government should do at this time is to offer 4% fixed rate mortgages for the refinance of the principal of their homes to people who can afford it (standard lending practices). This would free up household disposable income, create a market for the banking industry, and create jobs so people could start spending a little again.