Financial Crisis

Here is a blog entry that traces the deregulation of the US financial industry to its current crisis state as the acts of a self interested industry abetted by extremist ideology. It is a nice historical review of how the disaster developed. It concludes by modestly calling for an appropriate balance between deregulation and regulation.

... just a few years before the S&L crisis culminated in a massive U.S. taxpayer bailout, the deregulators undeterred, had set their sight on a far bigger prize, the elimination of barriers between investment banks and commercial banks, as represented by the Glass-Steagall act, which was put in place as a response to the stock market crash of 1929 and the ensuing Great Depression.

...

Free markets are constantly evolving and innovating. Rather then always turning to deregulate though, perhaps its time to work more towards liberalization & modernization but not to the point of removing the systems of checks and balances that helped to make America the great economic power that it is.

And what will be the total cost of this financial mess? An estimate by the IMF says $1 Trillion:

International Monetary Fund said losses stemming from the U.S. mortgage crisis may approach $1 trillion, citing a "collective failure'' to predict the breadth of the crisis.

Falling U.S. house prices and rising delinquencies may lead to $565 billion in mortgage-market losses, the IMF said in its annual Global Financial Stability report, released today in Washington. Total losses, including the securities tied to commercial real estate and loans to consumers and companies, may reach $945 billion, the fund said.