We've been here before

Crypto is just a new playground for greed

Remember the good old days on Wall Street back in the early aughts, when real estate was shooting up, people were refinancing their mortgages and spending wildly on, well, just about anything at all, and the markets were booming?

It was a time of happy-talk, low risk or no risk at all investing.  Banks and investment banks, which had been controlled by the Glass-Steagall Act, that prohibited bank holding companies from owning other financial institutions, were cut loose from those nasty, nasty regulations, removing the distinction which had existed between investment banks, which dealt in stocks and bonds, and conventional banks, which took in money and loaned it out and made profits on the interest on the loans.  Now banks could take depositor money and invest it in risky areas like stocks, and investment banks could compete with commercial banks.  It was free-for-all time in the previously staid world of banking.

Regulators started loosening leashes all over the place.  In 2004, the Securities and Exchange Commission (SEC) relaxed the so-called “net capital rule,” which set fairly strict rules for calculating how much liquid capitol investment banks had to maintain on hand in case customers want to liquidate their assets, which is to say, sell their stocks.  This enabled investment banks to compete with commercial banks by using new computational models to calculate the net capital they had on hand, which enabled them to take previously protected amounts of money they held and put it in other kinds of investments, which of course they hoped would earn sufficient enough returns that they could continue to cover investors if and when they decided to pull their money out of the market.

It was complicated, and it got worse.  The new rules for banks, investment banks and banking holding companies became a labyrinth on purpose.  The intent was to make it easier for the big guys to make money and harder for the little guys.  Obfuscation piled on obfuscation after obfuscation.   You weren’t supposed to understand how it all worked. Only they were.