[GTALUG] Are you on the watch list?

[D. Hugh Redelmeier]

| From: James Knott via talk <talk at gtalug.org>

Each of these problems was caused by multiple failures, each at
varying levels in the system.

| A big part of the problem is business has been claiming they need
| deregulation to grow.

Some deregulation makes a lot of sense.  Some does not.

Businesses love to control their regulators.  Not only to reduce
regulations but to put moats around their businesses.  Often these
moves are disguised (intentionally or not) as somehow beneficial to
the broader society.

| Well, that, coupled with lack of enforcement led
| to the 2008 collapse.

Lots of things (certainly including those) led to the 2008
near-collapse.

- governments held down interest rates in a possibly ineffective
  attempt to boost sluggish economic growth.  If I remember, this
  started with the Dot Com Bomb.  But letting it run way too long
  (eight years!) seems like a bad idea.

  With low interest rates, investors did all kinds of wild things in
  a search for yield.  CDAs seemed magical: safe investments (backed
  by real property!) with decent yields.

- computers made it easy to devise complicated instruments like CDAs
  and made really fast trading possible and profitable.  They also
  made derivatives of all kinds possible.

- every few years a new financial instrument is invented, marketed,
  and then turns out to be not as great as it had seemed.

- the biggest regulatory failure, throughout our economy: too big.
  It comes in the "too big to fail", "too big to regulate", and "too
  big for the free market" varieties, at least.

- Entities made and priced loans but were not exposed to any consequent
  risk.  Hard to imagine that stupidity.

- Risk is managed by spreading it around.  That makes failure less
  devastating.  But if risks are correlated, failure cannot be avoided,
  it may even be amplified.

- Some regulators (eg. New York) considered insuring bonds a risky
  business.  So they required insurers of bonds to only insure bonds.
  These were the so-called monoline insurers.  What a crazy concept:
  bond failures might easily be correlated and the insurance contracts
  would be worthless.

|  Bernie Madoff is a perfect example of what lack
| of enforcement can do, as the SEC was pretty much handed the case on a
| silver platter yet did nothing.

And neither did his clients, some of which ought to have been smart
enough to figure out that the numbers didn't add up.

My impression is that Canadian enforcement is way less effective than
US enforcement.

|  Another example of the "benefits" of
| deregulation is the Lac Mengantic train wreck, which had just a single
| person running the train after the railway convinced the government they
| could do it safety.  The investigation showed that the trigger for this
| was the engine fire, which was due to lack of maintenance.  It also
| showed that the track was in such poor condition that it wasn't safe to
| run any trains over it.

And who knew that crude oil was explosive?  The odd mixture of stuff
from the Bakken had a lot of characteristics of gasoline or worse.
Normal crude just doesn't act that way.  Regulators didn't pay
attention and neither (apparently) did the railroads or shippers.

There were many ways (in hindsight) that the accident could have been
avoided.  If I remember correctly, the firemen turned off the idling /
burning engine, not realizing that the airbrakes would therefore let
go in a few hours.

The driver had been too lazy to set dozens of the handbrakes; there is
one on each car.  After all, it is hard and slow work and was almost
never needed.  Perhaps a better method should be provided.

This particular type of tank car is not very robust.  It is easily
breached.

The driver had parked on a high point, on the main line.  Not on a low
point, on a siding.

The town was built too close to the railway.  I would guess it was
built there to be close to the railway

|  Of course, we can't forget that our own federal
| government set up the mechanism that enabled the wealthy and large
| corporations to hide money offshore and evade taxes on it.

To what mechanism are you referring?