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Official — Economic Crash Not Computers' Fault

timothy posted more than 3 years ago | from the how-about-moral-hazard-and-too-big-to-fail dept.

Government 386

itwbennett writes "A 2-year government investigation has found what we pretty much all knew to be true: High speed trading systems were not the cause of the 2008 economic crash. 'The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire,' according to a leaked copy of the report's conclusions revealed in the New York Times."

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Funny (2)

burtosis (1124179) | more than 3 years ago | (#35022840)

That's just what my computer model said too...

Re:Funny (1)

AndyAndyAndyAndy (967043) | more than 3 years ago | (#35022944)

Simple humans! Our computer models are too perfect to fail!

Of course... (0)

Anonymous Coward | more than 3 years ago | (#35023270)

Computers are not Jewish...

Economic Collapse due to Class War (5, Insightful)

spun (1352) | more than 3 years ago | (#35022846)

The rich are waging class war against the rest of us, and transferring wealth from the average person to themselves through fraud and coercion.

Re:Economic Collapse due to Class War (1)

Anonymous Coward | more than 3 years ago | (#35022886)

[Citation Needed]

Re:Economic Collapse due to Class War (1)

Anonymous Coward | more than 3 years ago | (#35022956)

The fact that the rich are still rich or richer and the poor are even poorer.

Re:Economic Collapse due to Class War (1)

Anonymous Coward | more than 3 years ago | (#35023498)

[Understanding of the word Citation Needed]

Re:Economic Collapse due to Class War (4, Informative)

spun (1352) | more than 3 years ago | (#35023026)

Re:Economic Collapse due to Class War (1, Insightful)

Dishevel (1105119) | more than 3 years ago | (#35023234)

I am sure that the fact that it is still possible for a person to grow up poor and with determination and hard work become rich is something that you either
do not believe in or something that you do not believe happens.
Which?
Because really that is all I ask of my government when it comes to wealth equality. Not that life be fair, or that we all make comparable amounts of money.
I do not want my government to watch over those things. I only want it to ensure that it is still possible to better yourself economically if you make it
important enough in your life.
I hear way to many people whining about how much money someone else has while they waste their money on instant happiness secure in the knowledge that our tax money will allow them to never save nor think of the future. It is a truly sad way to train you citizens and it should stop.

Re:Economic Collapse due to Class War (2)

zn0k (1082797) | more than 3 years ago | (#35023368)

But that isn't all you ask of your government - in that demand is implicit that not only it be somehow feasible that you go from poor to rich, but also that it be feasible on a reasonable scale. Otherwise your condition could be fulfilled by only one out of all Americans in a generation being able to make that leap, which is a position that strikes me as unreasonable.

Few people in America are actually asking for everyone to make the same, and for the government to redistribute wealth in that fashion. They're just asking that it be easier for a poor person to make the leap to rich when investing an adequate amount of effort to do so.

Re:Economic Collapse due to Class War (2)

spun (1352) | more than 3 years ago | (#35023410)

Of course I believe that a poor person can become rich with hard work, determination, and a large amount of luck. Our society is not organized in such a way that there are high paying jobs for everyone who works hard. Plenty of people work very hard all their lives and can not rise out of poverty. The problem is institutional, not one of human laziness. It is intellectually lazy and dishonest to blame the poor for their plight. The poor are poor because the rich profit more when people have fewer options. A poor, desperate, hungry man will do things a secure man would never do, and he will do it for less money.

Hard work and determination mean very little in our system of crony capitalism. If you do not have rich friends and a wealthy background, the chances of you, or your children, or even your grandchildren rising out of poverty are fairly slim.

Re:Economic Collapse due to Class War (0)

Anonymous Coward | more than 3 years ago | (#35023460)

Yes, It is still possible for a person to grow up poor and with determination, hard work and others hard work become rich.
If you are rich, you have money that should have gone to the people that made you rich.

Re:Economic Collapse due to Class War (1)

SuricouRaven (1897204) | more than 3 years ago | (#35023550)

"I am sure that the fact that it is still possible for a person to grow up poor and with determination and hard work become rich is something that you either do not believe in or something that you do not believe happens."

Possible, yes, but rare. The unfortunate fact remains that children of the very rich basically have it made. Unless they really screw up, they can be guaranteed of a comfortably wealthy life. Everyone else can only work hard for a living - and no matter how hard they work, it still takes a lot of luck as well to advance to the higher income levels.

Re:Economic Collapse due to Class War (4, Interesting)

burtosis (1124179) | more than 3 years ago | (#35022926)

Never assign malice when simple greed and stupidity will do.

Re:Economic Collapse due to Class War (4, Informative)

Schadrach (1042952) | more than 3 years ago | (#35022978)

Err, isn't that what OP was doing? Assuming simple greed?

Re:Economic Collapse due to Class War (2)

suomynonAyletamitlU (1618513) | more than 3 years ago | (#35023280)

Arguably, if that greed is causing an economic collapse, it's stupidity, too.

Re:Economic Collapse due to Class War (0)

Anonymous Coward | more than 3 years ago | (#35023130)

Never assign malice when simple greed and stupidity will do.

So, greed != malice ?

Re:Economic Collapse due to Class War (3, Insightful)

Hatta (162192) | more than 3 years ago | (#35023152)

Greed is malice.

Re:Economic Collapse due to Class War (1)

cHiphead (17854) | more than 3 years ago | (#35023164)

Problem is, this is greed, but not stupidity.

Re:Economic Collapse due to Class War (1)

maxume (22995) | more than 3 years ago | (#35022954)

Of course, that theory depends on them being dumb enough to think that class war is going to be net profitable for them while simultaneously being smart enough to successfully wage it.

Re:Economic Collapse due to Class War (1)

spun (1352) | more than 3 years ago | (#35023076)

They do not care about net profitability. They care about power and control, which comes from wealth inequality. They want the poor to be very, desperately poor and thus easier to control. Overall, their tactics might make our society poorer, but they only care about relative wealth, not absolute wealth. If there were a way to make everyone on the planet 1,000 times richer than the richest man alive today, say the invention of true nano-asemblers, the wealthy sociopaths would fight it tooth and nail. They do not want everyone to be fabulously wealthy. They want to be wealthy, while everyone else is poor.

Re:Economic Collapse due to Class War (2)

martas (1439879) | more than 3 years ago | (#35023092)

Of course they are. Nash equilibrium, dude -- remember that "they" don't act according to a single will, they compete with each other. It's a "tragedy of the commons" situation, where "they" will suck "us" dry until there's nothing left to suck, and then everything will collapse. Though that's probably not so bad for "them" -- I'm sure Shanghai ain't such a bad place to live, if you have the money.

Re:Economic Collapse due to Class War (1)

Chris Burke (6130) | more than 3 years ago | (#35023186)

Yes, and how exactly is that a strong argument against the theory?

I'm smart enough to design high-performance microprocessors, dumb enough to check in code that breaks the processor model.

Your post requires you to be simultaneously smart enough to realize that the OP's theory requires simultaneous smartness and dumbness, but be dumb enough not to realize that this describes everyone, and even exceedingly smart people can make fundamental failures in judgment. Especially because everyone is also both rational and irrational, and sometimes the irrational part of their mind doesn't want to think about long term consequences.

Ya see?

Re:Economic Collapse due to Class War (1)

maxume (22995) | more than 3 years ago | (#35023288)

He thinks it is about power and control, which I doubt. I think that the wealth disparity in this country certainly has roots in the wealthy working to protect and amplify their wealth, but I'm much less convinced that they give two shits about controlling other people (they certainly desire to use other people to increase their wealth and certainly reach for power when they see it, but power over throngs of people they don't care about?).

Re:Economic Collapse due to Class War (1)

Chris Burke (6130) | more than 3 years ago | (#35023520)

Obtaining power over others is traditionally how the extremely wealthy have acquired their wealth but more importantly retained it over great periods of time. They only don't care about the throngs of people to the extent that they have no chance of usurping their position as the elite. Which means having power over them.

Feudal lords didn't acquire their land and wealth and then let the peasants go about their lives as they choose. They wouldn't have stayed feudal lords very long that way.

Re:Economic Collapse due to Class War (0)

Anonymous Coward | more than 3 years ago | (#35023428)

They know the system will collapse eventually. They're just planning on it happening after they're gone.

Re:Economic Collapse due to Class War (4, Interesting)

royallthefourth (1564389) | more than 3 years ago | (#35023014)

What's more, our institutions are arranged in such a way that this is the natural outcome. The state has colluded with business since the beginning of the United States; this is how the colony projects were formed. George Washington was the richest man on the continent at the time of the revolution. It is only natural that he (and others like him) set up a system that makes sense from their perspective.

At one point or another, the common man needs to set up a state that works for his interests. Eventually working Americans will grow tired of working to enrich others while they suffer from illiteracy and treatable diseases. They will seize control of the state and industrial structures and finally determine their own future.
The biggest questions are when this will occur and will they have a plan for what to do after it happens, or will it succumb to demagoguery?

Re:Economic Collapse due to Class War (2)

spun (1352) | more than 3 years ago | (#35023114)

To set up a state that protects the interests of the common man, he would need to rebel violently, because the current owning class will not give up their privilege easily. Violent rebellions almost always lead to tyranny, as the most ruthless are best able to take advantage of the chaos of violent rebellion. For example, see every single violent revolution except ours.

Re:Economic Collapse due to Class War (2)

royallthefourth (1564389) | more than 3 years ago | (#35023266)

If you are suggesting that the United States hasn't caused incredible brutality, you are quite wrong. If any African slaves were still around, they would tell you so. The Indians can certainly still testify to it, and might do so here, if they had running water and consistent electricity on the reservation. Pro-business dictators in Latin America and the Middle East (installed by the United States) have caused more suffering than the worst of Stalin's purges.

Even so, modern day communists still seek to avoid the failings of someone like Stalin while building upon his successes. Liberal democracy makes no such attempts; it's just business as usual for centuries.

Re:Economic Collapse due to Class War (1)

spun (1352) | more than 3 years ago | (#35023440)

Ah, no. I am suggesting that, out of dozens of states which held a revolution to overthrow tyranny, most have ended up with more tyranny. We got lucky.

As for the rest, you are preaching to the choir. I'm a social anarchist, though most would just call me a socialist, and I am educated in the real history of our nation.

Re:Economic Collapse due to Class War (1)

maxume (22995) | more than 3 years ago | (#35023338)

He is positing that George Washington established the tyranny of wealth that you are complaining about above.

Re:Economic Collapse due to Class War (1)

operagost (62405) | more than 3 years ago | (#35023146)

I think we pretty well answered all those questions in the 20th century, Karl. Do we really need millions more dead?

At one point or another, the common man needs to set up a state that works for his interests.

Yes. If only we had a 'constitution', under which people would be allowed to govern themselves, rather than by a despot or oligarchy. Naturally, even with such a document, we would have to vigilant, responsible, and unselfish to ensure that crooks would not try to wrest the system away from us and cause it to collapse.

Re:Economic Collapse due to Class War (2)

roman_mir (125474) | more than 3 years ago | (#35023160)

Well yes, and all of those rich people who are doing that, they are found in Washington DC.

The class warfare is one of the last attempts of a failed government, that has spent everything it could and couldn't, to divert attention from themselves. When an empire falls apart it starts class warfare, and its started by the government, who divert the attention from themselves.

Without government creating monopolies, there wouldn't be such huge disparities and differences between the 'rich' and the 'poor' (and by the way, the 'poor' in USA are not the same as 'poor' in Bangladesh.)

The monopolies that government creates end up enriching some people beyond believe, while destroying the competition and market and driving capital and jobs away, all while the government is getting bigger and bigger, promising to spend ever more, much more than the economy has to provide.

Eventually the government's only 'solution' is to PRINT and BORROW and as long as they can borrow they will, but they will absolutely not stop printing until it's Zimbabwe.

Don't be fooled, gov't is destroying your life, it is destroying your money, it is destroying your ability to buy anything, it is taking away your food and energy by printing the money and creating all the inflation in the middle of a financial crisis that is structural in nature and the government has structured it.

Re:Economic Collapse due to Class War (3, Interesting)

spun (1352) | more than 3 years ago | (#35023352)

You put the cart before the horse. Government is just a tool, like a gun. It can be used for good or for evil. Tools do not have motivations of their own. They do what their owners make them do. We own our own government, but we have let it slip out of our control.

Monopolies exist outside of government creation and control. Natural monopoly is only one case where the free market fails. When it does, we need another mechanism. The free market will not stay free on its own. The rich will use their wealth to control and dominate the market, with r without government. In fact, it is easier for them to dominate the market without government regulations.

Our government is a democratic republic. It is hard for the wealthy to maintain control over it. They would rather it simply not exist, or failing that, that it do nothing to protect you, the cattle, from them, the owners. Government is not the problem, the rich controlling the government is the problem.

Re:Economic Collapse due to Class War (5, Interesting)

Hatta (162192) | more than 3 years ago | (#35023286)

Indeed. Consider this. The economic losses to banks alone from the Financial crisis are estimated at 4 trillion [nytimes.com] . Total property crime in 2009 adds up to 15 billion [fbi.gov]

That's less than half a percent! When you look at it this way, it's not disproportionate to suggest that the entire law enforcement budget of the United States be spent on bringing these criminals to justice. Yet, in most cases the people responsible for crashing the entire economy get million dollar bonuses for it.

Honestly, the only way I can interpret this is that it's intentional. Our system is not intended to provide justice at all. It exists only to protect the wealthy. We have no justice system in the US, we have an exploitation system.

Re:Economic Collapse due to Class War (1)

Provocateur (133110) | more than 3 years ago | (#35023300)

No, we are not.
 
/me returns to admiring the polished woodgrain on his custom-made PC

Re:Economic Collapse due to Class War (1)

spun (1352) | more than 3 years ago | (#35023472)

But you aren't rich. You are middle class. I highly doubt that any real rich person posts on Slashdot. Remember, $250,000 a year is only upper middle class, it does not put you in the owning class. If you make less than a million a year, you are what a rich person would call a peasant.

Re:Economic Collapse due to Class War (3, Insightful)

Lord Ender (156273) | more than 3 years ago | (#35023358)

What? If anything, it was the opposite. The Rich were transferring money to the poor so that they could buy houses they could not afford. Once the bubble that caused burst, the poor lost their houses (which they couldn't afford in the first place) and the rich lost their money (foreclosing on underwater mortgages == losing money!).

Of course, the rich had bet everything (including the deposits in your bank accounts) on those mortgages. This is when the government decided to give your childrens' money to the rich to prevent the crash from becoming a collapse. But the government's action is the result of the crash, not the cause of it.

Re:Economic Collapse due to Class War (1)

maxume (22995) | more than 3 years ago | (#35023456)

give your childrens' money to the rich

That's a bit much, the richest people involved in the bailouts were the banks, and for the most part, the government actually made money on that investment. AIG was a giant black hole, but protecting all those insurance policies was likely worth it.

Re:Economic Collapse due to Class War (1, Insightful)

spun (1352) | more than 3 years ago | (#35023502)

Hahaha, good one. No, the poor are being scammed out of years worth of mortgage payments by the bank owning rich. Please look at current statistics. Look at the stock market, look at Wall Street Bonuses. The rich did not have to tighten their belts at all. The top one percent control more of the country's wealth today than they did when Bush took office. The crash, and the government response to it, were all decided upon ahead of time by the few wealthy banking families that control our monetary policy. It was a deliberate effort to bankrupt the government by stealing our tax dollars.

Re:Economic Collapse due to Class War (1)

jellomizer (103300) | more than 3 years ago | (#35023424)

Sure place no blame on the average public. Even after a lot of media coverage about the housing market being in a bubble and could pop. A lot of the average person was putting their own money into this as a way to get rich quick. The banks and the other rich were trying to meet demand. As they were many other sources that would have put them out of business if they didn't try to meet the demand. The average person is just as greedy if not more then the rich. I have seen the rich warning the average person. But they didn't listen.

Do you really want a class of people telling us what is right and wrong. If not then you shouldn't blame them for not going out of their way to stopping you from doing something stupid.

Re:Economic Collapse due to Class War (1)

spun (1352) | more than 3 years ago | (#35023534)

We do have a class of people telling us what is right and what is wrong. Working to make the rich richer is right, anything else is wrong. You do not get to decide on the course our country takes, on where we focus our efforts, on what projects we decide are important. You are not owning class, so you do not get to decide. You can work for the rich, or develop new markets for them by starting your own business which they will bankrupt after you develop demand for them. That is all.

Makes sense. (3, Insightful)

RyuuzakiTetsuya (195424) | more than 3 years ago | (#35022852)

I mean, the problems largely stem from scuzzy bankers and brokers buying and selling what they knew was garbage, along with problems with the fed's lousy idea of what an interest rate is, etc.

It's like finding out that the Minnesota bridge collapse wasn't the fault of computers either. No big deal.

Re:Makes sense. (4, Insightful)

UnknowingFool (672806) | more than 3 years ago | (#35023068)

And people ignoring history. Everyone from investors to banks to insurance companies were betting on housing markets never falling. Anyone who has studied housing markets know they have periods of downturn and growth. All markets are cyclical. When housing fell, everyone panicked and realized that they were invested into the trillions into a market worth substantially less.

Re:Makes sense. (0)

Anonymous Coward | more than 3 years ago | (#35023400)

I have to disagree, I believe most people knew it was unsustainable and were just trying to cash in before it fell apart. These were people (albeit sleazy) who are for the most part pretty intelligent. Most people who play the market understand that markets are cyclical including the gambling addict running to Las Vegas, they are just try to ride the winning streak as long as possible.

Re:Makes sense. (5, Insightful)

dkleinsc (563838) | more than 3 years ago | (#35023414)

Actually, only complete morons were betting that the housing market never fell. The smart evil bastards that make up most of Wall Street knew the market would collapse, but were doing their best to ensure that when it did so they'd lose nothing.

For instance, Goldman Sachs would buy credit default swaps from AIG, which meant that they could never lose money on buying up a bad loan (because AIG was going to be left paying the piper if it did). Now, in order to get a good rate from AIG, Goldman also made those investments look much better than they were, so AIG was thinking "those suckers, we're never going to have to pay a claim on this". And of course Too Big To Fail meant that if the shit really hit the fan, they could be assured that Uncle Sam would be the one holding the bag.

And to compound the problem, the individuals at those companies knew that they were never going to be personally liable for any of it. So the manager at AIG was happy to sell credit default swaps and make big bonuses - the worst that could possibly happen is he would get fired after making big bucks.

Re:Makes sense. (0)

Anonymous Coward | more than 3 years ago | (#35023218)

You're right in that there findings are not a big deal. But its also a good thing that they looked into it. Imagine if it had been the computers' fault and nobody checked into it. This kind of shit would just keep happening...

Re:Makes sense. (1)

tigre (178245) | more than 3 years ago | (#35023430)

You're right in that there findings are not a big deal. But its also a good thing that they looked into it. Imagine if it had been the computers' fault and nobody checked into it. This kind of shit would just keep happening...

So instead, it's the people's fault, and this kind of shit will just keep happening...

Re:Makes sense. (1)

roman_mir (125474) | more than 3 years ago | (#35023228)

The problem is actually the Fed in the first place, the Fed and Treasury and all government spending, which could NEVER be paid for, it's just that NOW, that there are no jobs and eventually the credit to US government will stop, you will find out - you were living much beyond your means for too long.

The Wars and SS and Medicare and Medicaid and EI and all the departments: energy, transportation, education, agriculture, small business, fda, faa, fcc, epa. Also IRS and Fed and FDIC and all other government initiatives - they never could be paid for fully anyway, but with fewer and fewer jobs and with less and less economic activity they can't be afforded at all.

Now, are the bankers responsible? Well of-course they are. They are responsible in the same way that an alcoholic that runs his car over you. But the alcohol, where did it get the alcohol? It was in the car, supplied by the government, even mandated by the government.

Freddie/Fannie + FDIC + 1-0% interest rates - that was the mandate. Mandate to give bad mortgage loans, mandate to 'securitize' them, you know that HUD invented mortgage securitization?

Get rid of government spending, stop all government programs, shut down all government offices, fire all government officials, abolish all government departments, break the government money printer and you will start on the healing process, but first you will go through the breaking process of getting de-intoxicated, as economy restructures and loses maybe 60% of the jobs and then prices for everything fall, including labor, all regulations are repealed, THEN you will have capital come back to USA and there will be jobs again.

This was done before, you know, it's not radical and crazy. Hardin did it in 1920 to stop that Fed created recession, that recession was over in 1 year.

Re:Makes sense. (1)

Blakey Rat (99501) | more than 3 years ago | (#35023272)

They made those bad investments because there were insurance companies willing to *insure* those bad investments.

The failure was on multiple levels.

Re:Makes sense. (1)

pieterh (196118) | more than 3 years ago | (#35023284)

Bankers are pretty scuzzy, yes, but they've always been so. There are good reasons why the financial markets turned to more and more risky products over the years, and computers have a lot to do with it. It comes down to the ever falling cost of IT, and the erosion of banks' monopoly over large IT systems capable of handling trillions of transactions a year. With the loss of this monopoly, they could not sustain profit margins of 6% or so on normal banking products. And without such margins they could not get funding from stock markets. And without that they could not grow and compete in an ever flatter global market.

So you have a financial industry running out of stuff to make money from, and thus driven to take on more and more risky products, where risk means profit (as long as you can win the game, which banks calculate they can almost always do). Thus derivatives on mortgages, credit card debt, intellectual property (patents), even other derivatives... anything with a 10% annual return. The alternative was retreat from stock market money, which only a small specialized bank could do.

Greed and scuzziness are ancient and did not cause this crash, they were just part of the gravity slope. The real cause is the seismic shift in what a "financial product" is, caused by the cost of IT tending towards zero. That seismic shift is so large it caused an earthquake, the crash. The shifts aren't done, and the impact of cheap IT on this sector is not done, and banks as we knew them are probably gone forever, to be replaced by state-sanctioned monopolies.

That's my view, anyhow. :-)

Re:Makes sense. (1)

MoeDrippins (769977) | more than 3 years ago | (#35023308)

If you could make fees on selling something that you could then have a guaranteed buyer to who to resell, at cost or better, and them carry 100% of any future risk... who wouldn't take that deal? I'm not sure why you're being modded Troll, since that's largely what happened.

Re:Makes sense. (1)

RavenChild (854835) | more than 3 years ago | (#35023466)

SCSI bankers? Sounds like it was the computer's fault.

Re:Makes sense. (5, Insightful)

need4mospd (1146215) | more than 3 years ago | (#35023546)

My question, now that we have this report, where are the prosecutions? Surely it's found that certain individuals or corporations share responsibility in creating the situation that caused economic downturn, right? There are mentions of fraud dozens of times throughout the report. Fraud is a crime last I checked. People should be going to jail en masse, from the greedy loan officer that forged paperwork to the upper management that did nothing while supervising it, all the way up to the previous and current Secretary of Treasury if necessary.

We all get worked up over pictures of oil covered birds in the marshes of Louisiana, yet we just sit here and take it when the leaders of our country rob us at gun point.

I blame society. (1)

gestalt_n_pepper (991155) | more than 3 years ago | (#35022860)

I mean, why not?

Re:I blame society. (1)

SnarfQuest (469614) | more than 3 years ago | (#35023198)

It was obviously bad toilette training. You start them off wrong, and they'll collapse your banking system every time.

Ban human trading (3, Interesting)

alvinrod (889928) | more than 3 years ago | (#35022874)

There are a lot of complaints about automated trading on /., but at least the machines don't know how to be dishonest or cheat the system. Perhaps we should just leave trading to the machines and ban humans from participating. Something tells me that there would be fewer problems in the long run.

Re:Ban human trading (0)

Anonymous Coward | more than 3 years ago | (#35023002)

That's what SKYNET wants you to think. Meatbag.

Re:Ban human trading (1)

Schadrach (1042952) | more than 3 years ago | (#35023006)

So, how wealthy do I need to be to get in on the effectively guaranteed returns of algorithmic high frequency trading? I mean, after all, if someone else learns how to make a profit from the activities of my algorithm, I can just demand the trades be reverted and them drug into court for daring to cost their betters money, right?

Re:Ban human trading (1)

michelcolman (1208008) | more than 3 years ago | (#35023118)

Exactly. Try to get a good price for buying an illiquid stock by aiming between bid and ask, and watch both bid and ask go up. Bid in between the new spread, and watch them both go up again. Finally settle for the new ask price, then watch the price drop back down again. They call it "providing liquidity".

Now try the same again, bidding higher and higher, then turn the tables around and sell at the higher price. Guess what? Your ass gets dragged into criminal court for manipulating stock prices.

Re:Ban human trading (1)

michelcolman (1208008) | more than 3 years ago | (#35023008)

The problem is that the computers are programmed by people who want to maximize their own profit. They are not sentient, moral creatures, they are simply doing what people tell them to do, so if those people are telling them to cheat or be dishonest, they will. The only difference is that the computers are better at it.

Re:Ban human trading (1)

alvinrod (889928) | more than 3 years ago | (#35023482)

If all of the computers are similarly programmed, they'll have a fairly level playing field. What I'm saying is that if only machines were allowed to trade, it would be impossible for insider trading to occur unless you could program that machines for that as well.

The point I was trying to make is that machines can only do what they're programmed to do. They're not smart enough yet to be dishonest of their own accord. You can program that act in such a manner, but they'll do so predictably. The idea is that one machine can't suddenly decide to go rouge and ruin an entire market for its own gain.

Someone could attempt to design a system that might act in such a way, but you could require that the trading algorithms go through some sort of certification process to ascertain whether or not they're designed to act maliciously.

Re:Ban human trading (0)

Anonymous Coward | more than 3 years ago | (#35023332)

As a programmer, I say YES!! Just let me write my own algorithms and buy a small country in a decade or two.

Even if that is true (0)

Anonymous Coward | more than 3 years ago | (#35022890)

HFT is still a problem.

Re:Even if that is true (1)

nedlohs (1335013) | more than 3 years ago | (#35023094)

And vandalism is also still a problem, along with shoplifting.

Doesn't mean they have any relevance to the issue at hand.

Re:Even if that is true (1)

Jeppe Salvesen (101622) | more than 3 years ago | (#35023306)

Indeed. HFT takes money from investors who do their homework. We (citizens, corporations, gov't) need to accept that the world won't end tomorrow, so we must ensure our short-term solutions are not going to f*ck us over in the future. The debt bubble is a good example: It was just so darned comfortable to enjoy the easy growth that came from accepting ever more debt and relaxing risk management practices. There were plenty of risks, but who listens to naysayers when we're in a party mood? And HFT is another such example: It's very, very profitable, but also an obstacle to making investment less short-term and more focused on fundamentals.

But, but,... (1)

cinderellamanson (1850702) | more than 3 years ago | (#35022892)

shouldn't they have just taken the bankers word for it and fired the software guys? What's going on here, everyone blames technology?

I blame the FED. (1)

nervous_banshee (1141217) | more than 3 years ago | (#35022910)

Who's with me?

Re:I blame the FED. (1)

flaming error (1041742) | more than 3 years ago | (#35023340)

I'm with you. The "Federal Reserve" is a privately owned banking cartel, engineered by banks, for banks. The system is a collossal Ponzi scheme designed to siphon wealth off to bank owners, and (unfortunately) eventually collapse under it's own weight.

Strong claims require strong evidence, right?

1) Go to Google Images and search "federal debt". You will see charts indicating an exponential function, where we currently are in a nearly vertical rise.

2) Next google "federal deficit". This is basically the amount we are behind on our loan payments.

3) If you want some background, here's some interesting reading:

"What Has Government Done to Our Money?" by Murray N. Rothbard
(free download at http://mises.org/money.asp [mises.org] )

"The Creature from Jekyll Island" by G. Edward Griffin
"The Web of Debt" by Ellen Hodgson Brown (I trust the history more than the recommendations)

God dammit (0)

marco.antonio.costa (937534) | more than 3 years ago | (#35022934)

It was the Fed. Everyone already knows.

It 'obvious (0)

Anonymous Coward | more than 3 years ago | (#35022992)

Only a fool could believe in the thesis of the New York Times - http://marcobruni.info

/. News Network (1)

Even on Slashdot FOE (1870208) | more than 3 years ago | (#35023012)

Years after $Trading_Houses intentionally create a bubble to trick gullible people into giving them money, people finally admit that maybe there were actual people involved in the stock market crash. As opposed to it being the fault of the inanimate objects designed and put into place at the behest of the trading houses

Kind of like with the dutch tulip bubble, but less pretty.

Who are they blaming then? (0)

Anonymous Coward | more than 3 years ago | (#35023038)

In the leaked conclusions, the Financial Crisis Inquiry Commission appears to largely exonerate the systems themselves, instead blaming economic, political and banking mismanagement. Heavy risk-taking and poor regulation had played a key role, it said. This leaves open the possibility that while the existence of the systems is not blamed, their prevalence within trading and the ways in which they are used may come under fire in the full report.

"The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble," said the report.

But while algorithmic systems were not to blame, the complexity of financial products - with many finance staff admitting they did not understand the products or the risks - played a key role, it said. Decisions not to regulate some derivatives during Bill Clinton's presidency in the 1990s were a "key turning point in the march toward the financial crisis".

There are also reports that the study concludes several banks or trading firms broke the law on the run up to the crash.

uh, credit crash, not "flash crash." (4, Insightful)

swschrad (312009) | more than 3 years ago | (#35023044)

the "flash crash" of fall 2010 was caused by robotraders.

the "credit crash" of fall 2008 was caused by greedy streetpunks passing crap paper around in the form of wispy visions of a bad translation of a murky photo of a dim shadow of the promise of someday showing a bad asset. and taking big bonuses every time the stinking pile came around for another rubber stamp.

the only possible report on cause could be "everybody failed as soon as this unregulated activity was allowed."

that's what published.

duh.

Re:uh, credit crash, not "flash crash." (1)

Anonymous Coward | more than 3 years ago | (#35023490)

The next crash will be the fall of the dollar (US), and mayhem in the streets (for real, no question), unless the National deficit is cut drastically, and spending is cut along with it. American don't seem to understand their own history too well, now do they...

WTF? (4, Informative)

Sponge Bath (413667) | more than 3 years ago | (#35023052)

Was this EVER a proposed cause of the global economic crisis put forth by any reputable source? At first I thought the article was talking about the flash crash last May. I was unaware anyone could look past the many obvious causes of the 2008 collapse and try to blame high speed trading.

Re:WTF? (1)

Plugh (27537) | more than 3 years ago | (#35023232)

Quoth Sponge Bath:
> At first I thought the article was talking about the flash crash last May."
Thank you, I had made the same assumption. Else... WTF is the point of running the gorram story? ... ...
Slashdot editors suck.
Thank you again.

Re:WTF? (1)

XiaoMing (1574363) | more than 3 years ago | (#35023522)

Was this EVER a proposed cause of the global economic crisis put forth by any reputable source? At first I thought the article was talking about the flash crash last May. I was unaware anyone could look past the many obvious causes of the 2008 collapse and try to blame high speed trading.

What was done back in 2008 wasn't explicitly illegal, just very dishonest and clever exploits of recent deregulation deregulation and loopholes. And as we see now with their taxpayer funded bonuses, the perpetrators of that bullshit are no less bold than they were back then.

What happened in 2010 also wasn't illegal, but obviously scared the crap out of everyone as well (granted on a much shorter-lasting timescale). Did we fix the root of that issue? No, there are some stops put in to bandage any future user-error, but obviously nothing to address the fundamental issue that very rich organizations with very expensive computers are now trading and selling stocks at a rate faster than a human can blink.

Both of these situations suck, but it seems purpose of this report trying to take blame AWAY from the latter, is to remove any potential excuses that the economic titans could possibly use to further weasel their way out of accountability for the former. If anything, we'll see more emboldened algorithms in the microsecond trading arena, but in exchange for possibly more expedited reinstatement/improvements on regulations at a grander level.

What a joke (4, Insightful)

nedlohs (1335013) | more than 3 years ago | (#35023056)

The full 576 page investigation, out this afternoon, was the product of extensive research and interviews with over seven hundred witnesses. But only six of the 10 commission members, all of them Democrats, have backed the final report.

Yeah, "extensive" research and interviews. Only of the very people who didn't see it coming of course, because the legion of people who predicted it in advance wouldn't have any idea as to the causes.

You can guarantee the answer will be "there was enough regulation" by the gazillion regulations that did exist at the time and we need a gazillion more. Rather than "maybe the Fed settings rates at almost 0% for so long wasn't such a wise idea, oh and maybe when banks are making million dollar loans to people with no income and no assets the regulators and ratings agencies should take a look-see (you know doing their jobs)".

And yes some things that weren't regulated should have been (if it looks like insurance and quacks like insurance then maybe is is insurance even if they call it a credit default swap).

High speed trading is completely irrelevant since this wasn't triggered by a sudden drop in the prices of things involved in high speed trading in the first damn place.

Re:What a joke (1)

Klinky (636952) | more than 3 years ago | (#35023298)

...maybe when banks are making million dollar loans to people with no income and no assets the regulators and ratings agencies should take a look-see (you know doing their jobs).

It's kind of hard to be objective when the banks and investment firms fund the regulators and ratings agencies... Definitely not a conflict of interest!

another gov't commission bs (2, Insightful)

roman_mir (125474) | more than 3 years ago | (#35023058)

You know, results of a government commission that was established to figure out the causes for the financial crisis of 2008 came out, and that commission was a charade, just like this one.

That commission "found" that the crisis was caused by lack of regulations, that low interest rates and Freddie/Fannie had nothing to do with the housing bubble, they "found" that the only thing that government did "wrong" was let the Lehman brothers fail and that the future crisis can only be avoided if there is more government regulations.

Lets start with this: I despise the governments.

The results of that commission were just as well known in advance as the results of the one from this story. Of-course a government commission will find that what is needed is more government and that whatever structural problems that are caused by government are not the real problems.

THIS IS THE SAME BULLSHIT.
IT IS BULLSHIT, DO NOT BELIEVE A SINGLE WORD THAT YOU ARE READING IN THE FABRICATED CONCLUSIONS OF THESE COMMISSIONS.

They are finding one thing: there is need for more government.

They are finding this other thing: whoever is in power cannot be blamed.

That's all.

Re:another gov't commission bs (1)

operagost (62405) | more than 3 years ago | (#35023190)

I agree with this post. I have little hope that Slashdot will get it, because we've swung from the 1990s Slashdot where 90% of the geeks were a sneeze from being anarchists to 90% of the "geeks" wanting everyone to support them through the government without having to worry about being productive.

Re:another gov't commission bs (1)

Jeremy Erwin (2054) | more than 3 years ago | (#35023262)

You should be quite happy with the findings, then. If there was systemic failure; if it was the fault of institutions, then it follows that new rules can be devised to adjust the behavior of these systems or institutions. But if it turns out that individuals made, by pure happenstance, stupid and inane decisions, than no law can possibly prevent them from doing so again. Capitalism triumphs over the laws of man!

Re:another gov't commission bs (1)

roman_mir (125474) | more than 3 years ago | (#35023320)

No. They are "finding" that the government can "regulate" the market so that this will not happen again.

That's bullshit.

What you are saying is that the market has caused this crash, I have been saying forever: the government has killed the free market and that is why you have no competition, and that is why there are no trade houses that are retail friendly.

There is a market for retail trading, but it's impossible to have your own trading house, and has been impossible for a very long time because of all the government regulations that protect the monopolies that exist in that business.

I cannot be happy until the government burns in hell for what they have done to the market.

Re:another gov't commission bs (1)

Klinky (636952) | more than 3 years ago | (#35023438)

You should despise corruption over a specific institution. The government & many private institutions are all culpable in the financial meltdown. What safeguards did the private firms have to protect themselves and the economy from meltdown? None. They took advantage of the situation, which is what most corporations do and with the US economy setup to value short-term growth gains over stability you will have a lot of shortsighted investments with most of the prosperity coming in the form of fraudulent growth predicated off a bubble.

Re:another gov't commission bs (0)

Anonymous Coward | more than 3 years ago | (#35023458)

Of-course a government commission will find that what is needed is more government

The problem is that if we don't pass a law banning people from stabbing themselves in the face, they go and stab themselves in the face then cry that "the government made them do it!" because the government didn't stop them.

Yeah, sure, some banks were pressured into loaning to people who shouldn't have gotten loans due to the CRA enforcement Clinton was pushing with his executive orders. This is a terrible thing, which is why Bush undid Clinton's executive order. Didn't do a damn thing to stop everyone else who was doing it because they wanted to. Most of the people doing it weren't even banks and were never covered by banking regulations at all. Like GM, who used to be a car company until they sacrificed their little hobby business selling some cars on the side in order to save their primary business, the GMAC finance department now known as Ally bank, in order to cash in on the government bailout and recover from their toxic loans they made as ditech.com.

What's needed is to ban bailouts entirely. Never save another bank, car company, airline or anything. Iceland has shown us that nobody is "too big to fail" and that once the shock and awe is over, everyone gets back to life as usual. That includes cutting off Fannie and Freddie.

It's no one's fault (2)

Jeremy Erwin (2054) | more than 3 years ago | (#35023096)

Andrew Leonard says it's pretty much a waste of time [salon.com] .

I'm sure that committee members would have liked to assign blame; it's just that they didn't have the votes.

Re:It's no one's fault (1)

operagost (62405) | more than 3 years ago | (#35023222)

Salon is a waste of time.

When the commission was first announced, the great hope was that it would serve a purpose similar to the famous Pecora hearings held in the aftermath of the Great Depression. During the course of those hearings Pecora became a public hero, and his efforts laid the groundwork for the Securities Act of 1933, the Glass-Steagall Act of 1933 and the Securities Exchange Act of 1934.

Because those policies worked? No-- instead we suffered another seven years of depression.

Re:It's no one's fault (1)

Hatta (162192) | more than 3 years ago | (#35023370)

Who needs votes? If we put every suit on Wall Street up against the wall and blew their fucking brains out, that would be a lesser injustice than letting them get away with this.

Haven't read page 567 yet, but report is bogus (0)

Anonymous Coward | more than 3 years ago | (#35023144)

Or at least the conclusions drawn are bogus. Algorithmic trading and hedge funds absolutely must be identified as a contributing factor in this 'crisis'. This kind of trading allows for some degree of arbitrage. The current pricing models, like GARCH, are not suitable for situations where traders are making decisions without having to assume the same risk as the other agents in the market.

But hey, go ahead and push your agenda Democrats. The factors they've identified as 'most important' are actually pretty important. It's just sad to see them poo-poo a systemic pathology of our stock market.

Nationalize the Banks (4, Interesting)

Charliemopps (1157495) | more than 3 years ago | (#35023182)

Nationalize the Banks - before it gets any worse.
If this were happening to any other country on earth the State Department would be leaning heavily on them to nationalize their failing banks. It's happened hundreds of times in the past and will happen again. Now that it's us, we're just too damned proud to suck it up and do what needs to be done.

Re:Nationalize the Banks (1)

operagost (62405) | more than 3 years ago | (#35023276)

Considering all the security issues with social networking sites, maybe we should nationalize the software industry. I'm sure you'll be on board with that.

Re:Nationalize the Banks (1)

iammani (1392285) | more than 3 years ago | (#35023544)

Of course! If the security issues in social networking sites cause a economic crisis, count me in!

Re:Nationalize the Banks (0)

Anonymous Coward | more than 3 years ago | (#35023348)

OMG, are you crazy?

The crisis was a result of ... (3, Insightful)

handy_vandal (606174) | more than 3 years ago | (#35023264)

"'The crisis was the result of [human action] criminal behavior and [inaction] failure of law enforcement to do anything about it."

Skynet calculations? (0)

Anonymous Coward | more than 3 years ago | (#35023310)

Maybe this is just what the robots want us to think...

How about this. (1)

Nautica (681171) | more than 3 years ago | (#35023322)

Could it be, that part of the problem is from the $50 million they spent on this 2 year investigation. Nah.. That's just me over reacting.. Nothing to see here move on!

2 year government study? (1)

Tenant129 (1362913) | more than 3 years ago | (#35023474)

"Yep, grass is green. We finally confirmed it."

Blame? (2)

jc42 (318812) | more than 3 years ago | (#35023496)

The idea that "blame" could be assigned to a manufactured object with no mind or volition of its own is decidedly weird. Usually, when a machine is part of the cause of a disaster, the blame is assigned to the people who built and/or operated the machine. It makes no sense to blame the machine, since it had no choice in how it behaved.

Maybe the authors think that we've actually built an Artificial Intelligence and put it in charge of our financial system. If so, maybe we should replace them with one of those computers.

A Summary of Report Conclusions (1)

Fantom42 (174630) | more than 3 years ago | (#35023518)

A summary of the report's conclusions:

- We conclude this financial crisis was avoidable. The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public.

- We conclude widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets. The sentries were not at their posts, in no small part due to the widely accepted faith in the selfcorrecting nature of the markets and the ability of financial institutions to effectively police themselves. More than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe.

- We conclude dramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis. There was a view that instincts for self-preservation inside major financial firms would shield them from fatal risk-taking without the need for a steady regulatory hand, which, the firms argued, would stifle innovation. Too many of these institutions acted recklessly, taking on too much risk, with too little capital, and with too much dependence on short-term funding.

- We conclude a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis. In the years leading up to the crisis, too many financial institutions, as well as too many households, borrowed to the hilt, leaving them vulnerable to financial distress or ruin if the value of their investments declined even modestly. For example, as of 2007, the five major investment banks—Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley—were operating with extraordinarily
thin capital. By one measure, their leverage ratios were as high as 40 to 1, meaning for every $40 in assets, there was only $1 in capital to cover losses.

- We conclude the government was ill prepared for the crisis, and its inconsistent response added to the uncertainty and panic in the financial markets. As our report shows, key policy makers—the Treasury Department, the Federal Reserve Board, and the Federal Reserve Bank of New York—who were best positioned to watch over our markets were ill prepared for the events of 2007 and 2008. Other agencies were also behind the curve. They were hampered because they did not have a clear grasp of the financial system they were charged with overseeing, particularly as it had evolved in the years leading up to the crisis.

- We conclude there was a systemic breakdown in accountability and ethics. The integrity of our financial markets and the public’s trust in those markets are essential to the economic well-being of our nation. The soundness and the sustained prosperity of the financial system and our economy rely on the notions of fair dealing, responsibility, and transparency. In our economy, we expect businesses and individuals to pursue profits, at the same time that they produce products and services of quality and conduct themselves well. Unfortunately—as has been the case in past speculative booms and busts—we witnessed an erosion of standards of responsibility and ethics that exacerbated the financial crisis. This was not universal, but these breaches stretched from the ground level to the corporate suites.

THESE CONCLUSIONS must be viewed in the context of human nature and individual and societal responsibility. First, to pin this crisis on mortal flaws like greed and hubris would be simplistic. It was the failure to account for human weakness that is relevant to this crisis. Second, we clearly believe the crisis was a result of human mistakes, misjudgments, and misdeeds that resulted in systemic failures for which our nation has paid dearly. As you read this report, you will see that specific firms and individuals acted irresponsibly. Yet a crisis of this magnitude cannot be the work of a few bad actors, and such was not the case here. At the same time, the breadth of this crisis does not mean that “everyone is at fault”; many firms and individuals did not participate in the excesses that spawned disaster. We do place special responsibility with the public leaders charged with protecting our financial system, those entrusted to run our regulatory agencies, and the chief executives of companies whose failures drove us to crisis. These individuals sought and accepted positions of significant responsibility and obligation. Tone at the top does matter and, in this instance, we were let down. No one said “no.”

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