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--- In amibroker@xxxxxxxxxxxxxxx, "Tomasz Janeczko" <groups@xxx> wrote:
> You may have some valid points here but
> 10% for me at least is not really anything worth panicing
> plus making people belive that central bank will always step in and
> bail out the market in case of any 5% down move
> makes people just more reckless in their decisions and this in turn
> may create new (old?) problems in long term.
The point is misunderstood. It's the nature of the problem that makes the intervention necessary. Banks are a high leverage business, that carry an enormous public interest and rely on confidence to warrant their services.
Unless they are obliged to set aside reserves in the same measure of the passive (deleveraging), in cases of information asimmetries, such as the current one, the confidence could broke down and default the system.
Regulations are needed when actions produce externalities, costs of your mistakes that become everyone's costs. This suggests that the US mortgage market too was out of control.
j
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