Hacker News Reader

Comment by heavyset_go | Hacker News Reader

> For instance the financial crisis. One big reason for this was regulations forcing banks to make awful loans in Bush’s “ownership economy”.

No, it wasn't. Regulations didn't force credit rating agencies to give AAA ratings to securities backed by subprime mortgages[1]. Greed did.

[1] https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the...

View on HN

But regulations did force companies to accept credit ratings from and use rating agencies that, under other regulations, had explicit immunity from liability for bad faith ratings. Even if companies knew the credit ratings were fraudulent, they were required to use them per regulation.

The regulatory framework for credit ratings created a serious moral hazard out of whole cloth, and then actively shielded bad actors from scrutiny. It was a clear and obvious case of regulatory malfeasance, and while the subprime mortgage issue was a manifest consequence of that malfeasance, they did not cause it.

The government allowed this regulatory capture by credit agencies to occur because it directly benefitted the government as well, as they are required to rely on these same credit agencies for their own debt instruments.

So, the government benefited from the creation of the housing bubble in its own debt instruments, the same debt instruments that would go into the hands of the people who were being swindled by the banks that were the original cause of the bubble.

Saying "greed" caused X is surely just another way of saying that X was profitable?

So if regulations made X profitable, I'd blame regulation for X.

In my mind, greed is a human character trait that exists regardless of the political environment, much like breathing.

To people like OP, it seems to be... something else. I can't quite understand what.

Greed is a trait we dislike in humans. Rewarding it is a mistake.

One of my favorite interpretations of why capitalist/free markets have been so successful is that it channels human greed into productive use that benefits society.

So I think it's fine to reward greed when it does good things - even though it's not from the noblest motive.

But you can't "fix" greed. Even punishing greed doesn't make people less greedy. That's a bit like thinking that the war on drugs will make people want drugs less, or even seek them out less. Constraining an inflexible market only moves it to places you no longer control.

You don't have to fix the greed, you have to add oversight and accountability with things like mandatory reporting that make it not worth doing these activities on any profitable scale.

>But you can't "fix" greed. Even punishing greed doesn't make people less greedy. That's a bit like thinking that the war on drugs will make people want drugs less

Or that punishing robbing banks makes people do it less?

Cant fix murdering people either, even punishing them dosen't stop it. We just have to accept that sometimes people get murdered. /s

Drop the /s and you’re right! We can’t fix people’s desire to murder other people. We punish harshly as a deterrent but unfortunately someone who’s in a place where they’ll murder someone usually isn’t weighing the risk or making a list of pros and cons. So people get murdered. It’s inevitable and there’s very little we can do to prevent it in general.

The point it is isnt a justification to let people go around murdering others.

Punishing bank robbing doesn’t make people want to rob banks any less. It just changes the incentive structure such that it’s not worth it to most would-be robbers with normal risk tolerance.

Bank robbing is an activity where punishment actually moves the needle on the risk of doing it. When you try punishing marijuana use you find out that the risk of getting caught is so low that even extremely steep punishments don’t affect people’s willingness to do it. Same with jaywalking.

>That's a bit like thinking that the war on drugs will make people want drugs less That might have been possible if that was the actual goal

Reply on news.ycombinator.com