Love the comments.

1. I was simplifying. Different banks played different roles but yes, the bankers should have known. However, most of the companies making the home loans were selling them off to Fannie Mae and collecting the loan origination fees, so they were fine. They made their money and passed the risk off on to a government-backed entity that was getting increased funding from Barney Frank and Chris Dodd. You also had inadequate regulation of mortgage-backed securites and credit default swaps, which led to Bear Stearns’ failure and eventual bailout. I’m not trying to let bankers off the hook — I was tyring to simplify. Not all banks messed up here. Some banks played by the rules and worked the system. Others gambled and lost.

2. I couldn’t agree more: bailing out the banks was stupid. It set a precedent: fail and the government will help you. This symbiotic relationship is at the heart of this. The banks fail and want bailouts so they need government or they’ll have to sell off everyrhing. The government sees this as a chance to gain leverage so they bail them out and hope to exert control. If banks don’t want to be controlled, they can not accept the funding. I’m not in favor of bailouts at all. Capitalism requires that you earn your profits and you bear your losses.

3. Right again. If we go single-payer, that would improve the competitiveness of many American firms. But that’s not where we’re headed. Companies that don’t offer health insurance face fines, and some estimates of the public option put it at more than private insurance. There’s just so much uncertainty that they’re waiting. Maybe it will be good for small business, maybe it will be bad for small business — but why take the risk now when you don’t have to? That’s all I’m saying.

4. This post is just about the fact that Obama wants banks to lend more than they’re lending now. It went a bit into the history, but please don’t think I’m absolving banks of any problems. They took risks they should not have taken and they should have been allowed to fail.

5. Don’t get me started on California. It’s much more about spending than anything else — they didn’t have a balanced budget when the economy was booming, how could Schwarzenegger possibly expect to balance a budget in lean times? (And any student whose household income is less than $70K — last I checked — gets free tuition.)

6. Glad you feel better for venting a little. Now you know how I feel after writing a post.

I always enjoy reading your posts because none of my friends ever seem to want to get into this stuff. Or if they do, they don’t delve deep enough. Superficial haters on both sides are no fun whatsoever. You on the other hand,actually think and invite commentary. Of course, you are a professor, and that is what professors do. So just a few comments on this — I admit I am not an economist, so I will not get too technical here. Yet a couple of things I feel strongly about: for starters, let’s take your quote, “when they (banks) suddenly found themselves with housing assets that weren’t worth nearly as much as they thought they were worth a year before…”. I think you are giving the banks way more benefit of the doubt than they deserve. You are excusing them for not seeing what was to me (as a non-economist mind you) as an obvious BUBBLE if I ever saw one! Houses in CA triple in 7 years in price without any significant increase in real income of the people?! What banker can explain that they didn’t see this coming!? This did not happen ’suddenly’! I know you must have seen this coming, professor! Don’t we deserve to be angry at the banks for not “calling this”? For that matter, I am upset at my government for not “calling it” either!

Then when you later talk about the government wanting to have power over banks, etc., it seems to me that the ‘capitalist’ banks sure want ’socialist’ help when they hurt! Nowadays, a banking ‘crisis’ gets a bailout in a matter of days, but a healthcare crisis (50 million with nada) gets cries of socialism and the capitalistic big pharma / insurers are spending millions everyday to stop reform. Double standard to say the least in my opinion. For that matter, there is no government as long as big business and special interests have the money and power that they do. Government is really a puppet for those with money. And what is wrong with healthcare? It seems that opponents of reform see evil in this, but bailing out ’stupid’ banks (who did not see this coming) is good (not evil)?

Lastly, you mentioned that small businesses are worried about hiring people because they are worried about healthcare reform. Any government option plan will be cheaper than private insurance, so as I see it, this would be cheaper for small businesses. Unless perhaps the small business in question is not providing anything insurance-wise now, and is imposed fines with reform (or mandatory coverage). I would think, however, that on the whole, cheaper options for healthcare are actually better for all businesses in the long run. For that matter, single payer insurance would be best for business — wouldn’t cost businesses anything if it is paid for entirely with tax dollars. Not to mention if reform increases the number of people with insurance, we will all be healthier for it. Don’t forget the cost of lost productivity of sick workers! Lose a worker to cancer because he has no insurance and you’re going to pay literally for that loss, in fact we would all pay indirectly.

In the end, I realize that these points are all complex and open to debate. But I have serious issues with giving banks the benefit of the doubt as if they are innocent in this economy. And to allow a socialist bailout of banks and then cry socialism for healthcare in my mind is insane (not that I am saying you are insane), but I think it is hypocritical. As a final note, increasing UC students’ tuition by 32% because of the bankers’ and our government’s naivete (in letting this bubble happen and not doing anything about it until it popped) is not only ridiculous but this is evil and not good for society! Punish our youth for this stupid mistake! Leave them alone! Make the banks pay for California’s disaster which has everything to do with real estate in my opinion. Or make Greenspan pay! He sat there and denied any bubble! Idiot! (I am sorry if this sounds childish to call him such a name but please!) How smart was that!? Ok, I am done. I feel better now…Thanks for the post as always.