MORAL HAZARD: ECONNED by Yves Smith

  "But the existence of better brakes, instead of increased safety, merely encouraged everyone to drive faster.  And the brakes haven't performed too well either."

Procyclicality: The Economic Phenomenon of 2008

     When borrowers default on loans, those losses eat into a bank's capital.  The bank, under pressure from regulators to protect its eroded capital, stops lending.  That, in turn, can force corporate borrowers to shrink and lay off workers.  Those workers default on credit cards and other loans, further eroding bank capital.  So banks lend even less.  Next thing you know unemployment goes up, access to credit is down, banks fail, foreclosures skyrocket. 
     It is a tendency of banks, and the regulations that govern them, to exacerbate the cycle, both the ups and the downs. 
     Countercyclicality:  Get the banks to arrange capital in good times that can be tapped in times of stress.  This protects them from having to reach out to investors during times of stress, which makes the process more costly.  (In other words, Contingent Collateral)

H.R.2735 The Motor Vehicle Owners' Right To Repair Act

     This Act is vital to the future of the automotive aftermarket.  This legislation guarantees vehicle owners' freedom to choose where, how and by whom their vehicles are maintained and repaired. 
     Modern automobiles contain advanced technology that monitors or controls vitually every function of the vehicle including the braking system, steering mechanism, air bags, ignition, lubrication and emission control systems.
     Car owners and independent shops must have full access to the information and tools necessary to accurately diagnose, repair, reprogram or install reliable replacement parts.
     This information  and equipment is necessary to ensure proper operation of critical safety and emission control systems.
     Without access to such information, motorists are forced to patronize new car dealerships, which may not be convenient, accessible or otherwise desirable to the car owner.  Moreover, this lack of competition and consumer choice will inevitably lead to higher repair prices. 
     If restrictions on access to computer codes and tools are allowed to occur, other vehicle technology may follow, helping to ensure car company monopoly on vehicle repair and maintenance and further limiting consumer choice.   

The Ultimate Irony

Never before has so much taxpayer money been dedicated to save an industry from the consequences of its own mistakes. In the ultimate irony, it went to an industry that had insisted for decades that it had no use for the government and would be better off regulating itself--and it was overseen by a group of policymakers who agreed that government should play little role in the financial sector.

Too Big to Fail

Another problem is that a failing institution could have thousands of open transactions with its counterparties, which are largely other financial institutions.
Finally, the failure of one bank can cause investors or counterparties to lose confidence in another, similar bank.
For these reasons, many people have said that the real problem is not the size of the bank (convenientially measured by the total value of its assets), but its interconnectedness. But whatever the term "too big to fail," "too interconnected to fail," "systemically important" (preferred by Ben Bernake), "tier 1 financial company" (preferred by the Treasury Department)--the fact remains that certain financial institutions cast a sufficiently large shadow over the financial system that they cannot be allowed to fail...

America's Economy: The Emerging Market Crisis

Crises were for countries with immature economies, insufficiently developed financial systems, and weak political systems, which had not yet achieved long-term stability--countries like Thailand, Indonesia, and South Korea. These countries had three main characteristics that created the potential for serious instability in the 1990's: high levels of debt, cozy relationships between the government and powerful individuals in the private sector, and dependence on volatile inflows of capital from the rest of the world. Together, these ingredients led to economic disaster. Debt-fueled booms, collapsing bubbles, and panic-stricken financial systems were all reminiscent of the Crash 0f 1929, but the conventional wisdom was that the United States had put these growing pains behind it, thanks to strong corporate governance, deposit insurance, and robust financial regulation. Emerging market crises were an opportunity for the United States to teach the world how to deal with financial crises. Few people suspected that, despite the many obvious differences between emerging Asian economies and the world's largest economy, some of those lessons would be relevant to the United States only a decade later.

THE VISIONARY HEDGE FUND MANAGER/Michael Burry

He'd always been different from what one might expect a hedge fund manager to be. He wore the same shorts and t-shirts to work for days on end. He refused to wear watches or even his wedding ring. To calm himself at work he often blared heavy metal music. "I think these personal foibles of mine were tolerated among many as long as things were going well, they became signs of incompetence or inability on my part-even among employees and business partners. The partners closest to me tend to ultimately hate me... This business kills a part of life that is pretty essential. The thing is, I haven't identified what it kills. But it is something vital that is dead inside of me. I can feel it" On a portfolio of $550 million he realized profits of greater than $720 million. His investors offered him no praise whatsoever!