Quote:
Originally Posted by cykoe6
There are structural problems in the banking sector relating to overexposure to real estate loans. Fannie and Freddie were the main players in that market and their failure would have created more instability in the financial sector. It is going to be a rough ride for banks with real estate loan exposure just like it always is in a real estate bubble collapse. That does not mean that the overall economy is bad. Transportation companies in particular are starting to recover as the price of oil comes down. The transportation sector is more important to the overall health of the economy than than the failure of a few highly leverage investment banks.
Most of these banks that are failing had turned themselves into hedge funds holding large amounts of risky real estate related derivatives. Their failure is the natural result of a shake out in that market. They made big bets and lost. It is not indicative of a larger systemic problem in the overall economy. The systemic problem exists within the financial sector itself.
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So the fundamentals of our economy are strong as long as we have a trillion dollars in taxpayer money to fix it when problems arise.
I think what you are talking about is a fundamental issue in the economy. The ability for these banks and financial institutions to take such risks with money they essentially don't have. To play games with the accounting figures to show inflated profits that don't exist to boost a stock price. The ridiculous amounts of greed that puts every single American at risk because of their lack of fundamental principles.
If you don't think a few companies that can put the entire economy and every taxpayer at huge financial risk is a fundamental problem in our economy, I don't know what I can say.