The Ultimate Wall Street Nightmare [Archive]

U376977

09-15-2008, 02:35 PM

Please read this whole article. What he writes below is chilling. At the time he wrote this BoA deal with Merrill had not happend. The CEO of Merrill and BoA put the whole deal together over the weekend. Below Martin's comments about Lehman, I have posted a paragraph from National Mortagage News about the BoA purchase. We as the people of God can pray and change things. It could be that we are sitting in a very comfortable chair not knowing it is resting on a timebomb that will change our whole way of life.

http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=2234

In the wake of Lehman's demise, Fed Chairman Bernanke and Treasury Secretary Paulson will try to put out the word that it's no great trauma.

But it's a lie and they know it. If they openly admitted that the Lehman collapse will paralyze Wall Street, torpedo the stock market and sink the economy, they'd have to pony up $100 billion or more to support it. Instead, their agenda was to push big banks to put up the money. And they failed to do so.

No matter what, there's no denying that the Lehman debacle is a massive and immediate threat to U.S. and global markets. At the latest reckoning, Lehman had $691 billion in assets. That makes it bigger than Wachovia, twice as big as Washington Mutual, and over sixteen times larger than Schwab.

Lehman's debts — at $668.6 billion — are also enormous. Even if you added together all the debts of TD Ameritrade, E-Trade and Schwab, you'd still have only $108.5 billion, or less than one-sixth the total debts which Lehman reports.

In fact, among brokers, there are only two other U.S. firms that beat Lehman in the debt category: Morgan Stanley, with $1 trillion, and Merrill Lynch, with $988 billion.

Can you imagine anyone in his right mind making the argument that a Merrill Lynch downfall would be "no great trauma to investors and financial markets"? Of course not.

The reality: The collapse of America's third-largest brokerage operation is very serious business with equally serious consequences. The primary concern ...

Defaults on Derivatives

We've lost count of how many times the authorities have virtually sworn on a stack of Bibles that "our financial system is fundamentally sound."

But no one could possibly lose count of their recent desperate efforts to prevent the system's collapse — actions which directly belie their words:

One — the coordinated efforts by central banks to flood the global economy with liquidity in the summer of 2007.

Two — the hasty bailout of Bear Stearns in March of this year.

Three — the giant Fannie and Freddie rescue announced just eight days ago.

Each time they intervene, they say "we must not reward CEOs who deceive the public and walk off with multibillion dollar bonus checks." And each time they say it's the "last time we'll make an exception to that rule."

But then they go ahead and do it anyhow, not only breaking their own word ... but also trashing the long tradition of restraint established by their predecessors since the Great Depression.

Why? Because they had neither the courage nor the audacity to confront Wall Street's ultimate nightmare: A collapse in the giant mountain of derivatives.

Derivatives are essentially bets on interest rates, foreign currencies, stocks or specific events like the bankruptcy of a particular company. The interest rate-related bets are by far the biggest. But the bets on bankruptcies — called credit default swaps — are the fastest growing and the most volatile.

These derivatives were originally designed to help hedge investments reduce risk — like insurance policies. But in practice, they've been increasingly used to leverage investments, increasing the risks of participants.

Here are some essential facts that illustrate the enormity of the problem ...

* The amounts are absurdly large. The total "notional," or face value, of derivatives held by U.S. banks is $180 trillion, and it's three times that much globally. This figure is said to overstate the actual market risk. But it does not overstate the risk of defaults such as those that could be triggered by the failure of a company the size of Lehman Brothers.

* Over 90% of all derivatives are traded outside of regulated exchanges. Consequently, other than very general information, the authorities have no mechanism for keeping track — let alone efficiently cleaning up the mess in the wake of a giant failure.

* Off the balance sheets. Some companies report nothing more than the total value of their derivatives in footnotes to their financial statements. Others don't report at all. Consequently, the actual risk, amounts and even the very existence of derivatives is often poorly disclosed to investors.

* Disclosure in the brokerage industry is especially bad. Many brokerages are private and do not disclose more than their rank and serial number. The SEC collects sparse data and does not publish it. So if you want to figure out how much derivates risk your broker is exposed to, good luck! Getting the information can be like pulling teeth.

* Concentrated in the hands of five major players. Nearly 97% of all U.S. bank-held derivatives are concentrated in the hands of just five major U.S. banks — JPMorgan Chase, Citibank, Bank of America, Wachovia and HSBC.

* Far larger than assets. As you can see in the chart to the left, the pile-up of derivatives greatly exceeds the total assets of the firms. At the same time, in most cases, the default risk related to these holdings greatly exceed the banks' capital.

* Big brokers are also loaded with derivatives. Merrill Lynch has $4.2 trillion. Morgan Stanley has $7.1 trillion. As best we can determine, Lehman Brothers has significantly less — $729 billion. But in proportion to its dwindling capital, its exposure seems to be among the worst.

* The capital of major firms has been further weakened by recent losses and the failure to raise enough capital to cover them. The chart below tells the story in a nutshell:

U376977

09-15-2008, 02:36 PM

Continued......

Consistently, in bank after bank, the losses suffered from the mortgage and credit crisis have exceeded the amount of new capital they could raise. This was true when investors still had confidence in their ability to overcome the difficulties. It's even more true today.
Here's the great dilemma: The tangled web of bets and debts linking each of these giant players to the other is so complex and so difficult to unravel, it may be impossible for the Fed to protect the financial system from paralysis if just one major player defaults. And if Lehman is not that player, the next one will be.
To understand why, put yourself in the shoes of a senior derivatives trader at a big firm like Morgan Stanley (which has $7.1 trillion in derivatives on its books and about $10 billion in capital).

Let's say you're personally responsible for $500 billion in derivatives contracts with Bank A, essentially betting that interest rates will decline.

By itself, that would be a huge risk. But you're not worried because you have a similar bet with Bank B that interest rates will go up.
It's like playing roulette, betting on both black and red at the same time. One bet cancels the other, and you figure you can't lose.
Here's what happens next ...
Interest rates go up, reflecting a 2% decline in bond prices.
You lose your bet with Bank A.
But, simultaneously, you win your bet with Bank B.
So, in normal circumstances, you'd just take the winnings from one to pay off the losses with the other — a non-event.
But here's where the whole scheme blows up and the drama begins: Bank B suffers large mortgage-related losses. It runs out of capital. It can't raise additional capital from investors. So it can't pay off its bet. Suddenly and unexpectedly ...
You're on the hook for your losing bet.
But you can't collect on your winning bet.
You grab a calculator to estimate the damage. But you don't need one — 2% of $500 billion is $10 billion. Simple.
Bottom line: In what appeared to be an everyday, supposedly "normal" set of transactions ... in a market that has moved by a meager 2% ... you've just suffered a loss of ten billion dollars, wiping out all of your firm's capital.
Now, you can't pay off your bet with Bank A — or any other losing bet, for that matter.
Bank A, thrown into a similar predicament, defaults on its bets with Bank C, which, in turn, defaults on bets with Bank D. Bank D has bets with you as well ... it defaults on every single one ... and it throws your firm even deeper into the hole.
So now do you understand why bookies belong to the Mafia and why gamblers who welsh on their debts wind up at the bottom of the East River? It's because defaulting gamblers are a grave threat to the entire system, just like Lehman Brothers is today.

Now do you see why the $180 trillion in U.S. derivatives, supposedly overstating the true risk, is actually a lot riskier than almost everyone cares to admit? It's because defaulting banks or brokerage firms are also a grave threat to the entire system.
And now do you understand why Mr. Bernanke and Mr. Paulson are probably bluffing?
Don't let them fool you. The Lehman Brothers debacle is a far greater threat than anyone has dared tell you. And if you haven't done so already, you must take the urgent defensive action we've been recommending day after day, week after week.
All the instructions are in my recent Money and Markets issues.
In a nutshell: Sell all your vulnerable stocks and bonds before it's too late, stashing the proceeds in cash with short-term Treasuries or a Treasury-only money market fund. And to the degree that you're unable to sell, buy inverse ETFs to protect yourself from devastating losses.
Don't wait for the market's reaction to the Lehman collapse. Act now.
Good luck and God bless!
Martin

Merrill deal......

With Merrill Deal, BoA in Charge of More B&C
Thanks to its historic weekend deal to buy ailing Wall Street giant Merrill Lynch, Bank of America soon will find itself the not-so-proud owner of nearly $154 billion in subprime residential servicing rights, or about 15% of the A-minus to D market. Meanwhile, the future of Aurora Loan Services of Colorado is in doubt with the just-announced bankruptcy of its parent, Lehman Brothers [see item below.]. According to figures compiled by National Mortgage News and the Quarterly Data Report, Aurora is the nation's largest servicer of alternative-A loans, with receivables of $83.9 billion at midyear. Merrill's subprime servicing division, Home Loan Services of Pittsburgh, has $39.8 billion in A-minus to D receivables. Countrywide Home Loans, which Merrill took control of July 1, serviced $100.7 billion in subprime at June 30. BoA's chief executive Ken Lewis has made it clear that he does not like the subprime business at all, which means the bank in time will likely move to sell its exposure in this crumbling sector or let the portfolios run off. Merrill also owns Wilshire Credit Corp., Beaverton, Ore., which has an estimated $14 billion in subprime receivables. Merrill, since buying the company about four years ago, has declined to provide any financial information about Wilshire.

SDG

09-15-2008, 02:36 PM

Yeah and we need four more years of this ...

Housing market dead .... highest unemployment in years ... gas price gouging .... out of control inflation

Vote McCain-Palin
:ursofunny:club

its the economy, stupid.

SDG

09-15-2008, 02:39 PM

Of course it's all about abortions and same-sex marriage ... those two issues should carry the day and even make you a Christian voter.

Riiiiiiiiiiiiiiiiiiiiiigggggggggggggggggggggggght.

SDG

09-15-2008, 02:45 PM

Maybe PP is right ... now bank failures.

This is now eerily looking like the beginning of the Great Depression ...

U376977

09-15-2008, 02:48 PM

Yeah and we need four more years of this ...

Housing market dead .... highest unemployment in years ... gas price gouging .... out of control inflation

Vote McCain Palin

My clear choice. However, whoever gets in will have a huge mess on their hands.

Here is the question you have to ask....economically speaking...who would you rather have making deals and passing regs trying to get us out of the mess....Osama who has never written a law (basically just showed up for roll call every day and hit a yes/no switch), or McCain a seasoned senator who has actually worked in government since the Regan.

VP, Palin---a person who has been baptized in the name. And is understanding to our viewpoint. And she actually governed a state.
Biden, OMG---could he actually be just heartbeat away from Prez....?

SDG

09-15-2008, 02:52 PM

My clear choice. However, whoever gets in will have a huge mess on their hands.

Here is the question you have to ask....economically speaking...who would you rather have making deals and passing regs trying to get us out of the mess....Osama who has never written a law (basically just showed up for roll call every day and hit a yes/no switch), or McCain a seasoned senator who has actually worked in government since the Regan.

VP, Palin---a person who has been baptized in the name. And is understanding to our viewpoint. And she actually governed a state.
Biden, OMG---could he actually be just heartbeat away from Prez....?

Obama has authored legislation, U3. Myth. Unfactual.

Some:

"Federal Funding Accountability and Transparency Act"
http://obama.senate.gov/press/060908-senate_passes_c/

A bill that seeks international cooperation to keep weapon's out of the hands of terrorists
http://obama.senate.gov/press/060523-lugar-obama_bil/

"Honest Leadership and Open Government Act of 2006 (Introduced in Senate)"
http://thomas.loc.gov/cgi-bin/query/z?c109:s.2180: That's what we need a seasoned gov't sychophant like McCain in the pocket of these corporate thieves.

Ferd

09-15-2008, 02:53 PM

mizpeh

09-15-2008, 02:55 PM

Ferd

09-15-2008, 03:02 PM

least anyone should think I might now agree with DanA, on politics, let me state as clearly as possible.

the LAST thing we need during this time is a committed socialist at the helm. voting for Obama is a vote to drive a stake thru the heart of the US Economy.

Ferd

09-15-2008, 03:02 PM

And No DanA, Obama hasnt done anything of serious note as a US Senator.

rgcraig

09-15-2008, 03:06 PM

I'm not worried about my bank account as it's not too much to lose, however, I'm sure this will affect my 401(k) and I can't get to it anyway.

SDG

09-15-2008, 03:25 PM

Ferd

09-15-2008, 04:00 PM

Sounds like he will be FDR of this generation ... Ferd.

Be it as it may.

God help us. we are still paying for FDRs malfeasance.

A little perspective might be in order.

1989 1000 banks failed
1987 the stock market fell 508 points (23% of its total value)

Today’s stock market move was 504 points but only 2% of the total value.

SDG

09-15-2008, 04:06 PM

In isolation comparing things like that would seem like no biggie ...

Taking in the other economic factors ... might paint a grimmer picture.

It's the sum of it all that will make or break this economy.

U376977

09-15-2008, 04:40 PM

OK, someone go find PP and take a defibraltor....

even I am on the verge of panic..... not quite but almost.

we have had bank failures before..... over a thousand in 1989.

things are certainly not real good right now that is for sure.

That is true, but look at the possible exposure to the FDIC and there is no way they can stand behind all the deposits--if the domino effect takes place.

That is why I posted this...I read this kind of stuff everyday. I hope that a few people can bind together in prayer for our country and for this coming election. We are need of a miracle. Wilkerson wrote a few years ago that we could see housing crash up to 70% of its value. Some areas of the country are at 30% and continuing to fall.

There has been negative HPA before---but never on a national level. Since records have been kept the nation has enjoyed home price appreciation. Remember the addage--as goes housing so goes the economy. Economists I have read write that there has never been a recovery without housing. The housing market must turn around--many people think that the economy is in a minor bump, judging by GDP and the meager groweth, but we could be on the opening wave of a major downturn and many quarters of negative groweth. The worst housing market in modern histroy=the worst economy in history, fed and Paulson cannot keep it propped up indefinately.

We need to watch the FOMB action this week and the target funds rate. If they lower to 1.75% the real rate is already at a -negative. Another .25 in the negative will definately mean higher fuel, groceries, clothes etc. Another squeeze on the pocketbooks.

Ferd

09-15-2008, 04:45 PM

That is true, but look at the possible exposure to the FDIC and there is no way they can stand behind all the deposits--if the domino effect takes place.

That is why I posted this...I read this kind of stuff everyday. I hope that a few people can bind together in prayer for our country and for this coming election. We are need of a miracle. Wilkerson wrote a few years ago that we could see housing crash up to 70% of its value. Some areas of the country are at 30% and continuing to fall.

There has been negative HPA before---but never on a national level. Since records have been kept the nation has enjoyed home price appreciation. Remember the addage--as goes housing so goes the economy. Economists I have read write that there has never been a recovery without housing. The housing market must turn around--many people think that the economy is in a minor bump, judging by GDP and the meager groweth, but we could be on the opening wave of a major downturn and many quarters of negative groweth. The worst housing market in modern histroy=the worst economy in history, fed and Paulson cannot keep it propped up indefinately.

We need to watch the FOMB action this week and the target funds rate. If they lower to 1.75% the real rate is already at a -negative. Another .25 in the negative will definately mean higher fuel, groceries, clothes etc. Another squeeze on the pocketbooks.

clearly there is issues. big issues. but disaster that some are suggesting this is.... Obama likening it to the great depression is at the very least outrageous.

unemployment
then:50%
now 6%

Home foreclosures:
then 50%
now 2.75%

Business profets:
then: for 4 years no one made money
now: more than 50% of businesses posted profets in the last quarter.

There are serious issues that need addressing (like why Fannie May and Freddie Mac are getting a free pass)... but relitive stability in this economy remains at least visable.

Nahum

09-15-2008, 04:48 PM

Maybe PP is right ... now bank failures.

This is now eerily looking like the beginning of the Great Depression ...

OK, someone go find PP and take a defibraltor....

even I am on the verge of panic..... not quite but almost.

we have had bank failures before..... over a thousand in 1989.

things are certainly not real good right now that is for sure.

Hey boys, you're gonna think I am looney, but my opinion about all of this was based on a "feeling." I know that sounds corny, but I really have felt in my spirit man that something economically catastrophic was about to occur.

Plus, before my 92 year old grandma died last year, she warned all of us that this was coming. She said the overall spiritual atmosphere was the same as that of the Great Depression.

And now back to your regularly scheduled mocking.:snapout

MikeinAR

09-15-2008, 04:51 PM

Obama has authored legislation, U3. Myth. Unfactual.

Some:

That's what we need a seasoned gov't sychophant like McCain in the pocket of these corporate thieves.

Thanks for clearing that up Daniel. It's one of the favortie party lines making the rounds right now, depsite the fact it's a proven falsehood.

People are entitled to their own opinions, just not their own facts.

Ferd

09-15-2008, 04:56 PM

Ferd

09-15-2008, 05:00 PM

Thanks for clearing that up Daniel. It's one of the favortie party lines making the rounds right now, depsite the fact it's a proven falsehood.

People are entitled to their own opinions, just not their own facts.

I think the shorthand is "Obama hasnt done anything as a senator" really means he has not accomplised anything of real substance.

He has 1 bill that he makes a serious claim about, that bill was little more than Senate business. it was supported overwhelmingly by both sides.

Obama has not been tested as a senator in any real meaningful way.

Nahum

09-15-2008, 05:04 PM

i aint mocking you.... now....

im not with you.... yet... and I am still looking to balance the bad news with context.

Lets all take a deep breath and watch Kudlow and Company in 4 minutes to get the skinny, shall we?

PS, I certainly aint gonna challenge your dear grandmother on the spiritual status of the country, then and now. there very well might be a connection.

Bro, it's all good.

Grandma was speaking about the overall atmosphere. The "feel" of the time period. It really, really bothered her, and she was in her right mind until the very day she died. She had never talked like that before last year.

She begged us to "hord." To lay up some things. To prepare for it.

Now, I am no survivalist guy, but I'm not stupid either.

It's bad right now. Really bad.

It's one thing to talk about fuel prices, another thing entirely to talk about massive bank failures. It's not so much the number of banks as it is the SIZE of the banks.

And btw, have we even considered what a revived Soviet empire is going to do to the global economy?

MikeinAR

09-15-2008, 05:07 PM

I think the shorthand is "Obama hasnt done anything as a senator" really means he has not accomplised anything of real substance.

He has 1 bill that he makes a serious claim about, that bill was little more than Senate business. it was supported overwhelmingly by both sides.

Obama has not been tested as a senator in any real meaningful way.

Republican Senator Dick Lugar of Indiana would disagree with you, but your welcome to your definition of "meaningful" Ferd. I like ya anyway. :snapout

Rhoni

09-15-2008, 05:13 PM

Come on...Obama doesn't even have a plan much less a better one than Bush!

Ferd

09-15-2008, 05:13 PM

Republican Senator Dick Lugar of Indiana would disagree with you, but your welcome to your definition of "meaningful" Ferd. I like ya anyway. :snapout

Has he been to "battle" in the senate? has he gotten something done when half his own party wasnt very happy about what he was doing?

Not by a long shot.

Has he written "a bill" yes. has anything he has done (Including that non-proliferation bill) had a real impact on American lives?

Not by a long shot.

Hey, here you go, the guy is a reformer right? He also came up in Chicago politics. Did he stand up to the corruption in Chi-town? even a teeny tiny little bit?

LOL! yea right.

Obama is as untested at every level that a guy can be when it comes to making real, hard, decisions.

hows that for a definition?

Back to the economy. Im in a panic, Larry Kudlow has been preimpted. ouch.

SDG

09-15-2008, 06:05 PM

clearly there is issues. big issues. but disaster that some are suggesting this is.... Obama likening it to the great depression is at the very least outrageous.

unemployment
then:50%
now 6%

Home foreclosures:
then 50%
now 2.75%

Business profets:
then: for 4 years no one made money
now: more than 50% of businesses posted profets in the last quarter.

There are serious issues that need addressing (like why Fannie May and Freddie Mac are getting a free pass)... but relitive stability in this economy remains at least visable.

Your numbers are skewed ... we'd have to look at the numbers prior to the Great Depression ... to compare apples with apples.

SDG

09-15-2008, 06:06 PM

I understand also unemployment was 25% during the Depression.

Rev

09-15-2008, 06:20 PM

my clear choice. However, whoever gets in will have a huge mess on their hands.

Here is the question you have to ask....economically speaking...who would you rather have making deals and passing regs trying to get us out of the mess....osama who has never written a law (basically just showed up for roll call every day and hit a yes/no switch), or mccain a seasoned senator who has actually worked in government since the regan.

Vp, palin---a person who has been baptized in the name. And is understanding to our viewpoint. And she actually governed a state.
Biden, omg---could he actually be just heartbeat away from prez....?

none of the above!

OP_Carl

09-15-2008, 07:06 PM

These are some very serious times.

We could pull out of them in pretty short order.

Sadly, I fear that government intervention to "fix" the problem will prolong the agony, just as in the Great Depression.

This was brought to you by the unwise lending mandates of President Carter, and the unwise de-regulation of the exchanges by President Bush, and the unwise delay of the inevitable by the Federal Reserve, which kept interest rates low to keep inflating the bubble.

Stupid policies. Stupid lending. Stupid borrowing. Unbridled executive greed. Corporate insider appointees. Relaxed regulation. Apathetic public.

Perfect Economic Storm.

What needs to happen now is to find out who benefited from this. A team of investigators needs to flood Wall Street and find the people responsible. They need to be frog-marched out of their ivory towers and secluded mountain estates in leg-irons. This was a planned and controlled event. If it wasn't, our currency would have taken a parallel nosedive.

The answer is to cut government back to a skeleton crew, and cease direct government intervention in the economy and the currency. Instead we're probably going to see proposals to nationalize or socialize the economy. Subsistence farming never looked so good.

MikeinAR

09-15-2008, 07:20 PM

OP_Carl

09-15-2008, 07:27 PM

I'm not sure where you stand on deregulation, but I've personally had enough of it. The problem was the goverment deregulated to the point that we got the sub-prime mortgage lending and adjustable rate mortgages.

I'm ready for government to regulate for a change and clean some of this mess up. That's not popular with conservatives but their deregulation has failed miserably.

I may be a conservative but I'm not an anarchist! Free markets require regulation, anti-trust, and monopoly laws.

The de-regulation of the banks and commodities firms by the Bush Administration are directly responsible for this mess. Putting Henry Paulson, former CEO of Goldman-Sachs (one of the two remaining large investment banks, what a coincidence! ) in as Treasury Secretary was like handing an axe to the fox guarding the chickens.

MikeinAR

09-15-2008, 07:31 PM

U376977

09-15-2008, 07:35 PM

OK, someone go find PP and take a defibraltor....

even I am on the verge of panic..... not quite but almost.

we have had bank failures before..... over a thousand in 1989.

things are certainly not real good right now that is for sure.

That is true, but look at the possible exposure to the FDIC and there is no way they can stand behind all the deposits--if the domino effect takes place.

Concerning housing, David Wilkerson wrote a few years ago that we could see housing crash up to 70% of its value. Some areas of the country are at a +30% and continuing to fall, averages -HPA is 25%. What is odd most people do not think their home has decreased in value. IT HAS. There are about 120 MSAs and all of them have declined. Whoever is reading this...your home has declined in value, only question is how much $$?

There has been regional negative HPA before---but never on a national level. Since records have been kept the nation has enjoyed home price appreciation. Remember the addage--as goes detroit so goes the economy, well now it is as goes housing so goes the economy. Economists I have read write that there has never been a recovery without a strong housing market. The housing market must turn around for recovery--many people think that the economy is in a minor bump, judging by GDP and the meager groweth, but we could be on the opening wave of a major downturn and many quarters of negative groweth. The worst housing market in modern histroy=the worst economy in history, Fed and Paulson cannot keep it propped up indefinately.

We need to watch the FOMB action this week and the target funds rate. If they lower to 1.75% the real rate is already at a -negative. Another -.25 will definately mean higher fuel, groceries, clothes etc. Another squeeze on the pocketbooks.

It is not about Obama and McCain. I personally think McCain is more suited to be an economic Pres. But he will still have a major recession or depression to deal with.

U376977

09-15-2008, 07:42 PM

I may be a conservative but I'm not an anarchist! Free markets require regulation, anti-trust, and monopoly laws.

The de-regulation of the banks and commodities firms by the Bush Administration are directly responsible for this mess. Putting Henry Paulson, former CEO of Goldman-Sachs (one of the two remaining large investment banks, what a coincidence! ) in as Treasury Secretary was like handing an axe to the fox guarding the chickens.

Actually the dereg trend started way back in the Carter admin. and picked up a lot of steam with Regan.

But that does not matter....the Pres Demo or Rep. is not "directly responsible" for this. You have to lay the blame on the Fed. they are the regulators!!! Go all the way back to Greenspan and the .com bubble that he did not allow us to go into recession over, the almost free easy money and loose credit markets. Home ownership of 70+%, when the actual taget rate, per JP Morgan Chase/and Freddie Mac economists should be no more than 65% and maybe less.

Nahum

09-16-2008, 06:25 AM

A new morning brings us the news that insurance giant AIG intends to declare bankruptcy. AIG is over 75 billion in debt.

Friends, this is grim.

RevDWW

09-16-2008, 06:47 AM

A new morning brings us the news that insurance giant AIG intends to declare bankruptcy. AIG is over 75 billion in debt.

Friends, this is grim.

And then WaMu and Wachoiva...........

U376977

09-16-2008, 07:05 AM

And then WaMu and Wachoiva...........

Ruimor has it that there are some JP Morgan suits in WaMu offices. They alraeady purchaseed their warehouse line a few months ago and are funding loans on it out of the old WaMu TX office. But the balance sheet is not attractive--it will be a cheap purchase if they closes the deal.

MissBrattified

09-16-2008, 07:10 AM

God help us. we are still paying for FDRs malfeasance.

Hmmm...my mother was born into the depression, and she has quite a different point of view. She says, (and I quote), "FDR saved the day by opening up jobs for poor people." Now, she's a good Republican (moreso than I am), but in her 75-year-old opinion, FDR was a good president for that reason alone.

I'm just pointing out that it may seem different to those who actually experienced an economy downfall, and know what it's like to have food rations and dirt floors.

If I thought Obama could actually solve the economy's ills, I might vote for him. But he really doesn't have any good plans, other than "alleviating" extra work during tax season by streamlining paperwork. (Oh, and his proposal discussed under "I want what's best for you" would also do the following: Allow the government to pull your financial information for your taxes directly from your bank accounts, AND it would put may tax preparers out of a job. Sure. Great for the economy, and great for my privacy.)

That's just one little section of his "plans" to help the economy. (But almost all his points are equally trivial and stupid.) Thanks, but no thanks. That would be like a president addressing the war by suggesting we send the soldiers more comfortable shoes. :crazy Obama is NO FDR.

Tyk

09-16-2008, 07:21 AM

I would likely vote for Obama if I believed he was sincere. I'm just not convinced.

MissBrattified

09-16-2008, 07:25 AM

The main problem I have with Obama's outlined "plan" for the economy is that he addresses smaller issues that make voters feel good in the short term, but in reality (even if he does intend to carry out everything he has listed), these proposals will NOT fix a broken economy. Sweeping changes are needed, and almost everything he proposes reeks of more governmental control, rather than arms-length assistance and solutions.

Pressing-On

09-16-2008, 07:30 AM

It's not necessary to be pessimistic.

This Too Will Pass

Yes, the problems to be worked out this time seem scarier than most. And watching institutions like Bear and Lehman fail, and Merrill Lynch taken over just like that, doesn't inspire confidence.

But they're no different from other investment firms of the past that have paid the price for making too many bad decisions or taking too many risks in what is already a high-risk business.

How long all this will last is anyone's guess. But this a big country, with a highly liquid market and a still-strong economy. We'll get through it.

http://www.ibdeditorials.com/IBDArticles.aspx?id=306370630265658

The Resilience of American Finance

The turmoil in the financial markets will reorganize the financial landscape. But this does not mean the financial industry will shrink dramatically. In fact the current crisis could well lead to an increase in the demand for financial services, as the world grapples with the need for new financial instruments, new risk management techniques, and the increasing complexity of the financial world.

We can argue about who was responsible for the overleveraging of the financial industry and the poor to nonexistent credit standards that prevailed in real estate. Certainly the regulatory agencies, including the Federal Reserve, should have sounded a warning. But the lion's share of the blame must go to the heads of the financial firms that issued and held these flawed credit instruments and then, in many cases, "doubled down" by buying more when their price was falling.

It is shocking that firms that withstood the Great Depression are now failing in what economists might not even call a recession. But their failure was not caused by lack of demand for their services. It was caused by management's unwillingness to understand and face the risks of the investments they made. The names of the players will change, but the future growth of the financial services industry is assured.

http://online.wsj.com/article/SB122152085270539225.html

Paulson's Courageous Action
By Larry Kudlow

In our capitalist system there are losers as well as winners. There are failures as well as successes. Harking back to the eminent economist Joseph Schumpeter, the old failures will be replaced by new enterprises.

Obama is on the campaign trail predictably charging that a lack of regulations during the Bush era is responsible for the current mess. But he’s misreading history. As George Mason economist Tyler Cowen wrote in the New York Times, one of the problems with the U.S. financial system is not a lack of regulation, but a lack of smart and effective regulation.

It’s easy to be overly pessimistic right now. But that negativism is not written in stone. Mr. Paulson talks about a housing and financial recovery in terms of months, not years. And I think he’s right. But his courageous action to put a stop to bailout fever will do as much as anything to move the nation toward recovery.

http://www.realclearmarkets.com/articles/2008/09/paulsons_courageous_action.html

MissBrattified

09-16-2008, 07:53 AM

Referring to "Obama" as the next FDR might be quite the misnomer.

"...War ended the Depression simply because of increased government spending, an intensified version of what Roosevelt was already doing with the WPA and similar programs.. Responding to the external threats posed by the Axis Powers (Germany, Japan and Italy) Roosevelt and the Congress threw fiscal caution to the wind and spent what was necessary to win the war. In so doing, they also achieved pre-Depression levels of employment and prosperity.

What then is the legacy of the New Deal as a whole? Would it have ended the Depression? The best answer to that is that it went a long way toward alleviating the worst suffering of the Depression while still being captive to the conventional thinking (political, fiscal, racial) of the day. We cannot answer that question of whether it could have ended the Depression based on historical facts. World War II interrupted the process.

What are the other long-term consequences of the Depression and New Deal? The rise of the "Roosevelt Coalition" of farmers, union members, working class people, Northern blacks and liberals made the Democratic Party the nation's dominant party for almost sixty years. Further, the political consensus that developed after World War II held that never again should the government allow another depression to take hold. Thus, there followed an unprecedented level of federal economic intervention. This huge expansion in the role, size and power of government in American social and economic life is aptly summed up in Republican President Richard Nixon's famous 1971 remark, "We're all Keynesians now."' --Source (http://iws.ccccd.edu/kwilkison/Online1302home/20th%20Century/DepressionNewDeal.html)

Ferd

09-16-2008, 08:14 AM

Hmmm...my mother was born into the depression, and she has quite a different point of view. She says, (and I quote), "FDR saved the day by opening up jobs for poor people." Now, she's a good Republican (moreso than I am), but in her 75-year-old opinion, FDR was a good president for that reason alone.

I'm just pointing out that it may seem different to those who actually experienced an economy downfall, and know what it's like to have food rations and dirt floors.

If I thought Obama could actually solve the economy's ills, I might vote for him. But he really doesn't have any good plans, other than "alleviating" extra work during tax season by streamlining paperwork. (Oh, and his proposal discussed under "I want what's best for you" would also do the following: Allow the government to pull your financial information for your taxes directly from your bank accounts, AND it would put may tax preparers out of a job. Sure. Great for the economy, and great for my privacy.)

That's just one little section of his "plans" to help the economy. (But almost all his points are equally trivial and stupid.) Thanks, but no thanks. That would be like a president addressing the war by suggesting we send the soldiers more comfortable shoes. :crazy Obama is NO FDR.

My grandfather was born in 1910 and was a principle during the great depression.

He was a life long democrat and voted against FDR every single time. As a grown educated man, papa told me many times that FDR caused more problems than he solved.

Papa was also was president of the democratic executive commettee in our parish for somewhere around 60 years.

Thats a little different perspective on the great depression.

Ferd

09-16-2008, 08:16 AM

MissBrattified

09-16-2008, 08:22 AM

My grandfather was born in 1910 and was a principle during the great depression.

He was a life long democrat and voted against FDR every single time. As a grown educated man, papa told me many times that FDR caused more problems than he solved.

Papa was also was president of the democratic executive commettee in our parish for somewhere around 60 years.

Thats a little different perspective on the great depression.

Well, my Grandpa was a die-hard democrat who voted for FDR. :)

Obviously there were differing views even back in the day, but the reality is that whether it was the war that ended the depression or FDR policies, resolution occurred during FDR's presidency, ergo, he (and his policies) get the credit. Hoover may have had good ideas, but since he didn't have a chance to implement them, we can't know for sure if they were good solutions. Perception is everything, when it comes to politics.

Pressing-On

09-16-2008, 08:28 AM

This might be fun. Can either of you tell me exactly what deregulations GWB and crew did that led to this failure in the banking industry?

I ran Op_Carl's comment by someone on another forum and asked for comment. I can't post it here but it had to do with something about "bull, uh"......

:ursofunny

U376977

09-16-2008, 09:20 AM

This might be fun. Can either of you tell me exactly what deregulations GWB and crew did that led to this failure in the banking industry?

No they cannot. Somehow that seems to be a problem with libs. They have more faith than anyone....they will continue to believe in the Harry Reid crowd..and GWB is the evil antichrist with no facts at all. ???

The facts are the banking system began to go ary---hindsight is 20/20 under Clinton when traditional banks were seperated from investment banks. This fact was admitted by Reish (remember Clintons labor sec. and now Osama's econ. advisor) in a TV interview on MSNBC. But it cannot be laid on the Pres. It was the Fed and not so much degreg but the lack of new regs when now financial instruments were created to overleverage these firms. Greenspan and the FED was alseep at the wheel.

Ferd

09-16-2008, 10:43 AM

...still waiting on a list of deregulation policies by the Bush administration that has led to the current financial crisis....

tick tock....

tbpew

09-16-2008, 01:46 PM

This might be fun. Can either of you tell me exactly what deregulations GWB and crew did that led to this failure in the banking industry?

The article indicates that derivatives are not subject to banking regulator oversight (my apology for any repetition for those who read the authors words).

Reading it from my unlearned condition.....
these banks (Citi, Morgan, BoA, Wichovia, ?) started being insurance underwriters where policies pay out depending on which way interest rates move in the short term. It was a new market from which to gain revenue because of security of your capital holdings. IMO, an aspect of a regulated side (capital holdings) has been a surety involving an unregulated business activity (derivatives).

As a relatively new industry/business sector, conceived to hedge exposure to potential rate volitility within financial markets and brokerages, it functioned independantly of banking rules. So when a derivative holder (insurer?) is the same company that gets demolished in another market (real estate / mortgage holders), the company can not cover its exposure as an insurance underwriter because it does not have any real capital because of a the imploding real estate sector.

So it seems that once again, a highly technical industry's cleverness (or greed) develops a new game using some kind of an undetected VIRTUAL backstop using vaporware/fictional substance (think: Enron), but when a 50 year storm comes along, the foundation is revealed to be sand.

I am very interested in seeing how each of us adapt and cope with inconvenience. It does seem that this cycle has the capability to shake whatever can be shaken.

So we have now seen the fall of Brokerage Lehman(?).
BoA has acquired (at a discount) a large scale potential for sickness.
If one of the top five banks fails, we will get to see if panic is still the public enemy No.1.

Ferd

09-16-2008, 02:12 PM

The article indicates that derivatives are not subject to banking regulator oversight (my apology for any repetition for those who read the authors words).

Reading it from my unlearned condition.....
these banks (Citi, Morgan, BoA, Wichovia, ?) started being insurance underwriters where policies pay out depending on which way interest rates move in the short term. It was a new market from which to gain revenue because of security of your capital holdings. IMO, an aspect of a regulated side (capital holdings) has been a surety involving an unregulated business activity (derivatives).

As a relatively new industry/business sector, conceived to hedge exposure to potential rate volitility within financial markets and brokerages, it functioned independantly of banking rules. So when a derivative holder (insurer?) is the same company that gets demolished in another market (real estate / mortgage holders), the company can not cover its exposure as an insurance underwriter because it does not have any real capital because of a the imploding real estate sector.

So it seems that once again, a highly technical industry's cleverness (or greed) develops a new game using some kind of an undetected VIRTUAL backstop using vaporware/fictional substance (think: Enron), but when a 50 year storm comes along, the foundation is revealed to be sand.

I am very interested in seeing how each of us adapt and cope with inconvenience. It does seem that this cycle has the capability to shake whatever can be shaken.

So we have now seen the fall of Brokerage Lehman(?).
BoA has acquired (at a discount) a large scale potential for sickness.
If one of the top five banks fails, we will get to see if panic is still the public enemy No.1.

wonderful post. I agree this played some roll (and not a small roll) in this mess.

but I think it illistrates a point here.

A couple of people are talking about deregulation by the Bush Adminstration being a cause of the mess. I still would like someone (anyone) to point to speicific legislation pushed by GWB and company, or a set of rule changes made by GWB and company that equals deregulation.

tbpew

09-16-2008, 02:29 PM

wonderful post. I agree this played some roll (and not a small roll) in this mess.

but I think it illistrates a point here.

A couple of people are talking about deregulation by the Bush Adminstration being a cause of the mess. I still would like someone (anyone) to point to speicific legislation pushed by GWB and company, or a set of rule changes made by GWB and company that equals deregulation.

I am pretty confident there is nothing they can point to. The fact that the real estate boom/bust industry BOOMED AND went 'BUST' during his term as president, will simply give angry people an effigy to burn.

If BHO gets into office, it could be during his watch that large numbers of persons can watch their equity-backed (in DJIA) IRA's evaporate to 1995 levels (7500). I just do not think a BHO type will be viewed as a calming voice in equity markets.

Pressing-On

09-16-2008, 02:33 PM

I am pretty confident there is nothing they can point to. The fact that the real estate boom/bust industry BOOMED AND went 'BUST' during his term as president, will simply give angry people an effigy to burn.

If BHO gets into office, it could be during his watch that large numbers of persons can watch their equity-backed (in DJIA) IRA's evaporate to 1995 levels (7500). I just do not think a BHO type will be viewed as a calming voice in equity markets.
I agree with you on that! :thumbsup

Ferd

09-16-2008, 02:42 PM

rgcraig

09-16-2008, 06:46 PM

Fed to provide $85 billion bridge loan to AIG: source 44 minutes ago

http://news.yahoo.com/s/nm/aig_loan_dc

(Reuters) - The Federal Reserve will provide a roughly $85 billion bridge loan to AIG (AIG.N) and take a nearly 80 percent stake in the company, according to a source briefed on the matter.

CNBC earlier reported the bridge loan would be secured and that shareholders would be severely diluted by the bailout.

Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and others were involved in the talks, CNBC said, adding that the bailout plan being negotiated "isn't a conservatorship."

Aquila

09-16-2008, 07:34 PM

Aquila

09-16-2008, 07:38 PM

This might be fun. Can either of you tell me exactly what deregulations GWB and crew did that led to this failure in the banking industry?

Here's an interesting article....

The Subprime Mess and Phil Gramm: An Experiment in Deregulation
June 24, 2008 - 04:12 PM
Category: Miscellaneous
Tags: Senator Phil Gramm, John McCain, George Bush, Senate, Congress, subprime, mortgage mess, deregulation, Enron, Secretary Paulson, UBS, Mother Jones
9 Comments Print Article Feed
http://losangeles.injuryboard.com/miscellaneous/the-subprime-mess-and-phil-gramm-an-experiment-in-deregulation.aspx?googleid=242468

In 1933, a few years following the stock market crash, Congress passes the Glass-Steagall Act, in hopes that regulating banks will help prevent market instability, particularly amongst Wall Street banks. The purpose of the act is to separate commercial banks that focus on consumers from investment banks, which deal with speculative trading and mergers.

The Glass-Steagall Act provided the proper oversight and entity separation that would prohibit banks and other financial companies from merging into giant trusts (conflict of interests) -- giant trusts or corporations being more powerful, naturally, and having the seemingly limitless capital to lobby their corporate interests, however, with a very myopic scope (particularly when it comes to factoring in potential losses -- most banks, as seen in contemporary times, chose not to anticipate losses in the mortgage market; they presumed home prices would continue to appreciate).

In 1999, former Senator Phil Gramm (who is, incidentally, Senator John McCain's economic adviser and cochairs his presidential campaign) set out to completely gut the Glass-Steagall Act, and did so successfully, replacing most of its components with the new Gramm-Leach-Bliley Act: allowing commercial banks, investment banks, and insurers to merge (which would have violated antitrust laws under Glass-Steagall). Sen. Gramm was the driving force behind the Gramm-Leach-Bliley Act, as he had received over $4.6 million from the FIRE sector (Finance, Insurance and Real Estate donations) over the previous decade, and once the Act passed, an influx of "megamergers" took place among banks and insurance and securities companies, as if they had been eagerly awaiting the passage of Gramm's Act. Everything in between Glass-Steagall and Gramm-Leach-Bliley (i.e. Savings and Loan crisis/bust) was, in large part, the incubation period for what would take place over the nine years that would follow the passage of Gramm's Act: an experiment in deregulation.

Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act. It is likely that few senators read this bill, if any. The essence of the act was the deregulation of derivatives trading (financial instruments whose value changes in response to the changes in underlying variables; the main use of derivatives is to reduce risk for one party). The legislation contained a provision -- lobbied for by Enron, a major campaign contributor to Gramm -- that exempted energy trading from regulatory oversight. Basically, it gave way to the Enron debacle and ushered in the new era of unregulated securities. Interestingly enough, Gramm's wife, Wendy, had been part of the Enron board, and her salary and stock income brought in between $900,000 and $1.8 million to the Gramm household, prior to the passage of the Commodity Futures Modernization Act.

In 2003, Gramm left the Senate to join UBS, which had acquired investment house PaineWebber due to his deregulation bill. At UBS, Gramm lobbied Congress, the Fed and the Treasury Department. During Gramm's tenor at UBS and as a lobbyist, Congress passed the Responsible Lending Act, billed as an anti-predatory-lending measure, but was called the "Loan Shark Protection Act" by consumer advocates, as it was designed to preempt stronger state laws against anti-predatory lending. The Fed largely ignored the underlying and growing problems within the subprime mortgage/housing markets, as Bernanke famously acknowledged the housing market in April, 2007 as, "[showing] signs of softening," but said that a "sharp slowdown," is unlikely. Then, according to Mother Jones magazine, Henry Paulson became the Treasury Secretary in July, 2007, when, "In 2005, [at] Goldman [he] securitized $68 billion in residential mortgages and $23 billion in 'other assets' primarily related to CDOs," (Mother Jones, August, 2008). With such self-interest, and a lack of the nation's interest, we can see how this subprime mess was allowed to escalate to such great proportions.

Some justice was served, however, this spring, as UBS became one of the subprime debacle's biggest losers, having to write down $37 billion -- the same amount as their previous four years of profits combined. UBS also made the public aware that two-thirds of its losses were due to reckless investing in collateralized debt obligations (CDOs).

Now, Gramm has a second chance of extending his out-of-touch and ill-performing policies, as Senator John McCain appointed Gramm to be his "economic expert" and cochair of his presidential campaign, last year. Also, it is likely that if Senator McCain were to win in November, Gramm would be our next Treasury Secretary, which means more of the same deregulatory mess and the continuation of failed and insidious economic policies.

Aquila

09-16-2008, 07:39 PM

Here's another....

http://www.prospect.org/cs/articles?article=the_conservative_origins_of_the_s ubprime_mortgage_crisis

Jekyll

09-16-2008, 08:00 PM

Sounds like he will be FDR of this generation ... Ferd.

Be it as it may.

Now with 99% of your 17k posts being absolute nonsense, mindless jabber, and aimless fairytales,

This has to be one of the most moronic statements I have heard, especially from the great Kettle himself.

Guess who relaxed all of the regulations for the investment banks and hedge funds??? Your good ole boy Clinton. That's right, we've been paying for Clinton's demoralizing pillage of any ethics our economic structure and fabric had during the 90's.

That's right, we don't need 8 more years of Clinton's ignorant and ethicless policies.

OP_Carl

09-16-2008, 08:01 PM

Actually the dereg trend started way back in the Carter admin. and picked up a lot of steam with Regan. President Jimmy Carter used policy to pressure banks to lend to the "disadvantaged" social groups that were under-represented in home ownership. Equal Housing or some such. In 2002, President Bush did the same thing when he called for 1 million new minority homeowners. Banks were pressured to relax rules in an effort to meet quotas. At the same time, President Bush de-regulated the risk rules for the SEC.

I think in retrospect a 20% down payment seems like a pretty decent equalizer for home ownership.

But that does not matter....the Pres Demo or Rep. is not "directly responsible" for this. You have to lay the blame on the Fed. they are the regulators!!! Go all the way back to Greenspan and the .com bubble that he did not allow us to go into recession over, the almost free easy money and loose credit markets. Home ownership of 70+%, when the actual taget rate, per JP Morgan Chase/and Freddie Mac economists should be no more than 65% and maybe less.

The Fed does not hold the blame. They were doing the bidding of others when they used rate changes to prolong the bubble. The Fed has only one trick: interest rates. The executive branch was using policy to pressure a lot of this.

I think it is a mistake for government to become so meddlesome that the American dream becomes the American mandate. Everybody wants a photo-op doing something to help the "virtuous poor." News Flash: Most poor people have poor financial management skills.

Obama supporters say we cannot afford four more years of 'this.' What they do not understand is that what it is that we cannot afford is four more years of inexperience guided by advisors with ulterior motives - which is exactly what Obama & Biden will bring.

Historically, our economy has always suffered when government attempted to "fix" it.

Aquila

09-16-2008, 08:20 PM

Now with 99% of your 17k posts being absolute nonsense, mindless jabber, and aimless fairytales,

This has to be one of the most moronic statements I have heard, especially from the great Kettle himself.

Guess who relaxed all of the regulations for the investment banks and hedge funds??? Your good ole boy Clinton. That's right, we've been paying for Clinton's demoralizing pillage of any ethics our economic structure and fabric had during the 90's.

That's right, we don't need 8 more years of Clinton's ignorant and ethicless policies.

If you remember Clinton championed himself as a New Democrat and signed various bills strongly supported by conservatives to the dismay of his more liberal constituency. NAFTA's another example.

OP_Carl

09-16-2008, 08:24 PM

This might be fun. Can either of you tell me exactly what deregulations GWB and crew did that led to this failure in the banking industry?

Sure.
Here is where President Bush urged disastrous policy: Goerge Bush speech at HUD in 2002 (http://www.hud.gov/news/speeches/presremarks.cfm)
One of the things that we've got to do is to address problems straight on and deal with them in a way that helps us meet goals. And so I want to talk about a couple of goals and -- one goal and a problem.

The goal is, everybody who wants to own a home has got a shot at doing so. The problem is we have what we call a homeownership gap in America. Three-quarters of Anglos own their homes, and yet less than 50 percent of African Americans and Hispanics own homes. That ownership gap signals that something might be wrong in the land of plenty. And we need to do something about it.

We are here in Washington, D.C. to address problems. So I've set this goal for the country. We want 5.5 million more homeowners by 2010 -- million more minority homeowners by 2010. (Applause.) Five-and-a-half million families by 2010 will own a home. That is our goal. It is a realistic goal. But it's going to mean we're going to have to work hard to achieve the goal, all of us. And by all of us, I mean not only the federal government, but the private sector, as well.

And so I want to, one, encourage you to do everything you can to work in a realistic, smart way to get this done. I repeat, we're here for a reason. And part of the reason is to make this dream extend everywhere.

I'm going to do my part by setting the goal, by reminding people of the goal, by heralding the goal, and by calling people into action, both the federal level, state level, local level, and in the private sector. (Applause.)

And so what are the barriers that we can deal with here in Washington? Well, probably the single barrier to first-time homeownership is high down payments. People take a look at the down payment, they say that's too high, I'm not buying. They may have the desire to buy, but they don't have the wherewithal to handle the down payment. We can deal with that. And so I've asked Congress to fully fund an American Dream down payment fund which will help a low-income family to qualify to buy, to buy. (Applause.)

We believe when this fund is fully funded and properly administered, which it will be under the Bush administration, that over 40,000 families a year -- 40,000 families a year -- will be able to realize the dream we want them to be able to realize, and that's owning their own home. (Applause.)

Aquila furnished the data about the deregulation, sponsored by Gramm, that President Bush signed into law (not many vetos from this big-government "conservative," huh?)

Check this out, too:
Economics editor of UK Times explains how Treasury Secretary Paulson's moves will end foreign investment in U.S. banks (http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article4761265.ece)
By deciding essentially to wipe out shareholders in Fannie Mae and Freddie Mac and acting even more harshly to the shareholders of Lehman Brothers this weekend, Mr Paulson has sent the clearest possible message to investors around the world: do not buy shares in any bank or insurance company that could, under any conceivable circumstances, run short of capital and need to ask for government help; if this happens, the shareholders will be obliterated and will not be allowed to participate in any potential gains should the bank later recover.

This punitive policy towards the shareholders in Fannie, Freddie and Lehman, who had put more than $20billion of capital into these companies in the hope of keeping them alive, means that no US bank or insurance company can hope to raise any extra capital in the foreseeable future.

This is true of both domestic investors and the Middle Eastern and Asian sovereign wealth funds, whose trillions of dollars of assets were, until a month ago, viewed as an ultimate safety net for the Western financial system.

Both groups have been so badly burnt by Mr Paulson that they are unlikely to support any refinancing by an American bank. And because governments and central bankers elesewhere, particularly in Britain, have loudly praised Mr Paulson's punitive treatment of shareholders, investors would presumably reach similar conclusions about the folly of helping any British bank.

The upshot is that any US or British bank that suffers unexpected losses or is subject to a powerful speculative attack by stock market short-sellers has nowhere to turn. And that in turn means that the total liquidation of a large financial institution in America, Britain or Europe is now seriously conceivable for the first time.

What makes the situation even more alarming is the perversity of the hardline approach taken by the US and British authorities. The investors who were “punished” by the loss of shareholder wealth in Fannie Mae, Freddie Mac and Lehman were not the speculators who encouraged and financed their reckless lending in 2004-06. They were value-orientated investors betting on a long-term recovery in the US economy and whose willingness to invest on the basis of such recovery could have prevented these companies' collapse.

By wiping out these investors - and instead rewarding the speculators who were trying to drive the share prices of these companies down to zero and thereby put them out of business - Mr Paulson has tilted the balance of power in the financial markets to a point where it is impossible to say for certain that any financial institution will survive.

In short, Mr Paulson has created an open season for speculators to attack financial companies around the world. These attacks are likely to continue and grow in ferocity until the point when governments start supporting not just the deposits and bonds, but also the shares of financial institutions whose survival is essential to keeping their economies running.

But surely it is impossible to suggest such a misunderstanding of basic finance from Mr Paulson, a former chairman of Goldman Sachs? Perhaps.

But then it is worth recalling that Andrew Mellon, the US Treasury Secretary under Herbert Hoover in 1929, was also considered the leading financier of his generation, It is also worth recalling that Donald Rumsfeld was supposed to know something about military strategy and President Bush, a former governor of Texas, about emergency flood control.

Aquila

09-16-2008, 08:25 PM

I think that overall the New Deal helped America. But there are pro and cons to everything. The New Deal wasn't perfect. Nothing ever is.

SDG

09-16-2008, 08:25 PM

If you remember Clinton championed himself as a New Democrat and signed various bills strongly supported by conservatives to the dismay of his more liberal constituency. NAFTA's another example.

He passed most of the Contract w/ America .... and to his fortune our economy boomed during his administration .... due mainly to technology ....

Koolaid drinkers here seem get drunk on Gin and Party ....:crazy

Clinton is the anti-christ ... right Jekyll ... Obama is the false prophet???

SDG

09-16-2008, 08:26 PM

Thank you OP Carl for at least looking at this objectively.

This has been a long time coming.

Aquila

09-16-2008, 08:27 PM

Oh well....I think that every last Republican should be hung on the capitol by the intestines of every last Democrat. ;)

SDG

09-16-2008, 08:29 PM

I think that overall the New Deal helped America. But there are pro and cons to everything. The New Deal wasn't perfect. Nothing ever is.

Overall it was a stop gap that changed our political landscape ... with Democrats and Republicans increasing the role of gov't in our lives.

Hoovie

09-16-2008, 08:31 PM

Of course it's all about abortions and same-sex marriage ... those two issues should carry the day and even make you a Christian voter.

Riiiiiiiiiiiiiiiiiiiiiigggggggggggggggggggggggght.

Not that I don't believe McCain is better equipped to recover the economy (he is) but I will gladly say the abortion issue has veto power in my voting decisions.

BHO voted to refuse medical care for live babies of botched abortions.

OP_Carl

09-16-2008, 08:52 PM

No they cannot. Somehow that seems to be a problem with libs. They have more faith than anyone....they will continue to believe in the Harry Reid crowd..and GWB is the evil antichrist with no facts at all. ???

The facts are the banking system began to go ary---hindsight is 20/20 under Clinton when traditional banks were seperated from investment banks. This fact was admitted by Reish (remember Clintons labor sec. and now Osama's econ. advisor) in a TV interview on MSNBC. But it cannot be laid on the Pres. It was the Fed and not so much degreg but the lack of new regs when now financial instruments were created to overleverage these firms. Greenspan and the FED was alseep at the wheel.

Speaking of no facts . . . .

This is the first time in my life I've been called a lib - by anyone, anywhere. You discredit yourself in your rash and exceedingly inaccurate labelling of me and knee-jerk defense of President Bush. I still support George W. Bush. He's kept us safe from terrorists lo, these many years. I just don't support his economic policies (http://en.wikipedia.org/wiki/Drunken_sailor).

Open up your eyes and you'll see that the era of small-government Republicans ended with Barry Goldwater (http://www.ronpaullibrary.org/document.php?id=313), with a brief coughing spasm, quickly medicated, during the Reagan years. Both of our two major parties work tirelessly to expand government and erode freedom.

I am a small-government constitutional purist. I am not a fascist, communist, socialist, empirialist, or big-government anything. Most of those 'isms' are implied in the term 'liberal' these days, even though in the strict definition being both liberal and conservative are good things.

For you to blithely clump me in with the 'libs,' in today's parlance, proves that you haven't been paying attention. The only place I'm not considered an ultra-conservative fundamentalist is here on AFF. :dunno

Ron Paul tells it like it is to Fed Chairman Ben Bernanke (http://www.ronpaullibrary.org/document.php?id=1053)

U376977

09-16-2008, 09:13 PM

Speaking of no facts . . . .

This is the first time in my life I've been called a lib - by anyone, anywhere. You discredit yourself in your rash and exceedingly inaccurate labelling of me and knee-jerk defense of President Bush. I still support George W. Bush. He's kept us safe from terrorists lo, these many years. I just don't support his economic policies (http://en.wikipedia.org/wiki/Drunken_sailor).

Open up your eyes and you'll see that the era of small-government Republicans ended with Barry Goldwater (http://www.ronpaullibrary.org/document.php?id=313), with a brief coughing spasm, quickly medicated, during the Reagan years. Both of our two major parties work tirelessly to expand government and erode freedom.

I am a small-government constitutional purist. I am not a fascist, communist, socialist, empirialist, or big-government anything. Most of those 'isms' are implied in the term 'liberal' these days, even though in the strict definition being both liberal and conservative are good things.

For you to blithely clump me in with the 'libs,' in today's parlance, proves that you haven't been paying attention. The only place I'm not considered an ultra-conservative fundamentalist is here on AFF. :dunno

Ron Paul tells it like it is to Fed Chairman Ben Bernanke (http://www.ronpaullibrary.org/document.php?id=1053)

Oh pleeezzz. You find attacks where there is none. My first sentence, "they cannot" applied to you, meaning that you cannot find where GWB's deregs caused the current banking crisis. He just did not do it. Then I went on to speak in general about libs.---that is clear. "If the shoe does not fit"....and, "If someone throws a bone into a pack of dogs calls you don't have to bark."

OP_Carl

09-16-2008, 09:37 PM

Oh pleeezzz. You find attacks where there is none. My first sentence, "they cannot" applied to you, meaning that you cannot find where GWB's deregs caused the current banking crisis. He just did not do it. Then I went on to speak in general about libs.---that is clear. "If the shoe does not fit"....and, "If someone throws a bone into a pack of dogs calls you don't have to bark."

Whahuh?

I think I can hear the fuses popping from here.

Pressing-On

09-16-2008, 09:42 PM

Speaking of no facts . . . .

This is the first time in my life I've been called a lib - by anyone, anywhere. You discredit yourself in your rash and exceedingly inaccurate labelling of me and knee-jerk defense of President Bush. I still support George W. Bush. He's kept us safe from terrorists lo, these many years. I just don't support his economic policies (http://en.wikipedia.org/wiki/Drunken_sailor).

Open up your eyes and you'll see that the era of small-government Republicans ended with Barry Goldwater (http://www.ronpaullibrary.org/document.php?id=313), with a brief coughing spasm, quickly medicated, during the Reagan years. Both of our two major parties work tirelessly to expand government and erode freedom.

I am a small-government constitutional purist. I am not a fascist, communist, socialist, empirialist, or big-government anything. Most of those 'isms' are implied in the term 'liberal' these days, even though in the strict definition being both liberal and conservative are good things.

For you to blithely clump me in with the 'libs,' in today's parlance, proves that you haven't been paying attention. The only place I'm not considered an ultra-conservative fundamentalist is here on AFF. :dunno

Ron Paul tells it like it is to Fed Chairman Ben Bernanke (http://www.ronpaullibrary.org/document.php?id=1053)

It is just a horrible mess and I believe it is both parties at fault. We need a President that can manage all of this and not just do what has always been done.

Somehow we have hopes that Palin will come in and do what she has done in Alaska, try to reform. I know it was a process. They cut their earmarks in half. You can't just totally quit them, without working out other factors, but it was a beginning.

It's just that Washington changes you.......

U376977

09-17-2008, 08:16 AM

Sure.
Here is where President Bush urged disastrous policy: Goerge Bush speech at HUD in 2002 (http://www.hud.gov/news/speeches/presremarks.cfm)

A speech about one small program hardly constitutes massive deregulation that led to the financial armagedden that the country faces.

Aquila furnished the data about the deregulation, sponsored by Gramm, that President Bush signed into law (not many vetos from this big-government "conservative," huh?)

Check this out, too:
Economics editor of UK Times explains how Treasury Secretary Paulson's moves will end foreign investment in U.S. banks (http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article4761265.ece)

Speculation from a UK newspaper editor? It was actually the foreign investors (the Asians) who made calls to Paulson to press him into putting fannie and freddie into conservatorship. The companies where going to implode--billions in debt---and even with govt guarantees they could not sustain themselves. His actions were all that could be done at that point.

Many of the agencies own policies caused their problems. They started to try to raise capital by building in a premimum on almost every loan by starting "risk based pricing" policy. Every with a credit score <720 and who borrrows more than 80% LTV on their home pays for it in an additional bump to their rate. Those with scores <620 2.75% bump. By doing this they lowered the number of borrowers willing to refi or purchase. Smaller number of qualified borrowers=more homes on the market=further price declines=less loans.

Ferd

09-17-2008, 08:27 AM

Sure.
Here is where President Bush urged disastrous policy: Goerge Bush speech at HUD in 2002 (http://www.hud.gov/news/speeches/presremarks.cfm)

Aquila furnished the data about the deregulation, sponsored by Gramm, that President Bush signed into law (not many vetos from this big-government "conservative," huh?)

Check this out, too:
Economics editor of UK Times explains how Treasury Secretary Paulson's moves will end foreign investment in U.S. banks (http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article4761265.ece)

well, OP, nice try but that's what you have? Looks to me like that is MORE REGULATION not less.....

Look, Im not here trying to defend GWB that wasnt my intent at all. the question is DEREGULATION being the cause. this isnt deregulation, it is more regulation.

seriously, someone please find me an example of current deregulation (hey I will even accept deregulation by Clinton).

Ferd

09-17-2008, 08:43 AM

Aquila

09-17-2008, 09:38 AM

Aquila

09-17-2008, 09:41 AM

And the NEW DEAL is a raw deal that we are still paying for..... and for those of us under 40, the bigest promise of the RAW DEAL will be one that is broken for us.

We will pay thru our noses but when we are old and need social security, it will be gone like yesterdays pie.

Ferd...SS would be secure if they'd agree not to touch it. The system would work...it's the robbers from both parties who broke it. Now one party wants it secured and untouchable (Democrats) and the other wants it handed over to the banks (Republicans).

DividedThigh

09-17-2008, 10:09 AM

you should stop talking aquila if you dont know about stuff like banks, the housing crisis and ss, just my opinion i tire of your rants that are boundlessly foolish and ill advised, dt

Aquila

09-17-2008, 10:16 AM

you should stop talking aquila if you dont know about stuff like banks, the housing crisis and ss, just my opinion i tire of your rants that are boundlessly foolish and ill advised, dt

You always meltdown and go personal. (edited by Admin) ;)

DividedThigh

09-17-2008, 10:26 AM

U376977

09-17-2008, 11:26 AM

aquila, since you are so young i will forgive you, but if you reference me in that way again, some day i might have to see if you can back up that big mouth, your ignorance amazes me about the subject at hand, i do this all day every day, there is no way you can know what is happening by listening to politicians, they are all at fault here, dont be so disrepectful in your responses, dt

Exactly, this is a finance subject. Can I let you in on a secret---I know for a fact that even Paulson--has had to have bankers sit with him to help educate him regarding aspects of this crisis and how to respond. And he has a finance background a very good understanding of economics. There is no way one can understand what is going on now without a lot of study and a knowledge base. That is why Frank and Dodd are so dangerous. One fear I have heard from major bankers is that of a complete change in administration in the congress..."because we will have to educate a whole new group" of lawmakers so that they will not enact laws that will make the country worse off and prolong the financial crisis. So someone here on the AFF without even basic finance education cannot understand the depth of the crisis.

I started this thread with the hopes that people could band together and pray for our country. The only hope for us is for God has mercy. Politics have little to do with this, I did write that I think McCain will be a better economic pres. but whoever is elected will have a HUGE mess to deal with. Prayer and faith is something that people here could be good at, that message could be carried to their churches, together they could help change the course of the nation.

Ferd

09-17-2008, 11:37 AM

Get used to it...if you don't agree with them you're considered liberal communist scum.

No OP is considered a very conservitive constitutionalist.

YOU are a liberal boarderline socialist.... but you arent pond scum...

as for communits, you arent a Stalinist. I mean you dont want to kill people, but a socalist is a marxist is a communist...in the strictest since of the word....

but being a marxist/commie doesnt mean you are a vile totalitarian who uses marxism to subjugate the people.... there is a difference...

Peace to you my brother!

Ferd

09-17-2008, 11:43 AM

Ferd...SS would be secure if they'd agree not to touch it. The system would work...it's the robbers from both parties who broke it. Now one party wants it secured and untouchable (Democrats) and the other wants it handed over to the banks (Republicans).

how acinine.

since the 1960's republicans have tried to reform social security to make it work like it should, and democrats have beat them back.

social security works now just like it was designed to. money flows in, the government spends it. the democrats use it as a scare tacktic to keep old people in line and voting for them!

PS, Germany has a privitized system and it works.

a SS system set up alike your average 401k system is the only thing that should be done. what the democrats want is a system that THEY control. period. because they know better.

on its best day, the SS system simply garentees that anyone relying on SS in retirement will retire poor. and democrats like it that way and it is sick.

Pressing-On

09-17-2008, 11:45 AM

There is no way one can understand what is going on now without a lot of study and a knowledge base.

I started this thread with the hopes that people could band together and pray for our country.

Amen and I am praying! :thumbsup

Ferd

09-17-2008, 11:46 AM

Exactly, this is a finance subject. Can I let you in on a secret---I know for a fact that even Paulson--has had to have bankers sit with him to help educate him regarding aspects of this crisis and how to respond. And he has a finance background a very good understanding of economics. There is no way one can understand what is going on now without a lot of study and a knowledge base. That is why Frank and Dodd are so dangerous. One fear I have heard from major bankers is that of a complete change in administration in the congress..."because we will have to educate a whole new group" of lawmakers so that they will not enact laws that will make the country worse off and prolong the financial crisis. So someone here on the AFF without even basic finance education cannot understand the depth of the crisis.

I started this thread with the hopes that people could band together and pray for our country. The only hope for us is for God has mercy. Politics have little to do with this, I did write that I think McCain will be a better economic pres. but whoever is elected will have a HUGE mess to deal with. Prayer and faith is something that people here could be good at, that message could be carried to their churches, together they could help change the course of the nation.

can you day derivatives? and anyone claiming to understand derivatives as they are used in financial terms is a liar. (i mean in detail)

DividedThigh

09-17-2008, 12:33 PM

good job u37 and ferd, somebody on here gets it, even if it is hard, lol

U376977

09-17-2008, 02:19 PM

What happens if WaMu fails? Are we set up for a run on the banks? Will the commercial banking system fail? See this article about the health of the FDIC.

http://news.yahoo.com/s/ap/20080916/ap_on_bi_ge/bank_deposits_safety

WASHINGTON - Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort. The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.
Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.
Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.
Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.
"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.
Treasury Secretary Henry Paulson said Monday that the country's commercial banking system "is safe and sound" and that "the American people can be very, very confident about their accounts in our banking system." FDIC officials also have said 98 percent of U.S. banks still meet regulators' standards for adequate capital.
But fear is growing on Main Street as well as Wall Street about the likelihood of multiple bank failures and the strain that would put on the FDIC.
The fund, which is marking its 75th anniversary this year with a "Face Your Finances" campaign, is at $45.2 billion — the lowest level since 2003. At the same time, the number of troubled banks is at a five-year high.
FDIC Chairman Sheila Bair has not ruled out the possibility of going to the Treasury for a short-term loan at some point. But she has said she does not expect the FDIC to take the more drastic action of using a separate $30 billion credit line with Treasury — something that has never been done.
The FDIC's fund is currently below the minimum set by Congress in a 2006 law. The failure of IndyMac Bank in July cost $8.9 billion.
Next month, Bair plans to propose increasing the premiums paid by banks and thrifts to replenish the fund. That plan is likely to be approved by the FDIC board, which consists of her, Comptroller of the Currency John Dugan, Thrift Supervision Director John Reich and two other officials.
Bair also is considering a system in which banks with riskier portfolios would be charged higher premiums, raising the possibility those costs could be passed on to consumers.
A Washington Mutual failure would dwarf the largest bank collapse in U.S. history — Continental Illinois National Bank in 1984, with $33.6 billion in assets.
By comparison, WaMu and its subsidiaries had assets of $309.73 billion as of June 30 and IndyMac had $32 billion when it shut down.
Arthur Murton, director of the FDIC's insurance and research division, said that when large institutions have failed in recent years, the hit to the fund has been about 5 to 10 percent of the company's assets.
Standard & Poor's Ratings Service late Monday cut its counterparty credit rating on WaMu to junk, action that followed downgrades by both Moody's and Fitch last week. Concern about the Seattle-based thrift, which has significant exposure to risky mortgage securities and other assets, has grown in recent weeks, and the company's stock price has plummeted.
WaMu responded Monday by saying that it did not expect the S&P downgrade to have a material impact on its borrowings, collateral or margin requirements. The bank said its capital at the end of the third quarter on Sept. 30 is expected to be "significantly above" required levels and that its outlook for expected credit losses is unchanged.
Some analyst estimates put the cost of a WaMu failure to the FDIC at more than $20 billion, but other experts say it is very difficult to predict. Unknown, for example, is the amount of advances that institutions may have taken from one of the regional banks in the Federal Home Loan Bank system. Banks and thrifts have significantly increased their requests for advances, or loans, from the 12 regional home loan banks since the mortgage crisis began last year.
These amounts aren't publicly disclosed but must be repaid if a bank or thrift fails, notes Karen Shaw Petrou, managing partner of Federal Financial Analytics.
If the FDIC doesn't have enough cash to cover the initial costs of a bank or thrift failure, one option would be short-term loans from the Treasury. That last happened in 1991-92, during the last part of the savings and loan crisis, when the FDIC borrowed $15.1 billion from the Treasury and repaid it with interest about a year later.
Based on projections of possible scenarios of bank failures, "between the (insurance) fund that we have now and our ability to draw on the resources of the industry ... we do have the resources" needed, Murton said Tuesday.
Though short-term borrowing from Treasury for working capital may be possible, he said, tapping the long-term credit line is unlikely.
But Whalen said the Federal Reserve, the Treasury and Congress should "immediately devise" and announce a plan to backstop the FDIC with up to $500 billion in borrowing authority to meet cash needs for closing or selling failed banks.
"While the FDIC already has a credit line in place and this figure may seem excessive — and hopefully it is — the idea here is to overshoot the actual number to reinforce public confidence," Whalen wrote in a note to clients. "Simply having Treasury Secretary Hank Paulson or Ben Bernanke making hopeful statements is inadequate. Like it says in the movies: 'Show us the money.'"
Before Congress passed the law overhauling deposit insurance in 2006, about 90 percent of all insured banks and thrifts — considered to have adequate capital and to be well managed — paid no premiums to the FDIC. Today, all of them do.
There were 117 banks and thrifts considered to be in trouble in the second quarter, the highest level since 2003, according to FDIC data released last month. The agency doesn't disclose the names of institutions on its internal list of troubled banks. On average, 13 percent of banks that make the list fail. Total assets of troubled banks tripled in the second quarter to $78 billion, and $32 billion of that coming from IndyMac Bank.
Last month, Bair called those results "pretty dismal," but said they were not surprising given the housing slump, a worsening economy, and disruptions in financial and credit markets. "More banks will come on the (troubled) list as credit problems worsen," he said. "Assets of problem institutions also will continue to rise."

James Griffin

09-17-2008, 02:59 PM

can you day derivatives? and anyone claiming to understand derivatives as they are used in financial terms is a liar. (i mean in detail)

I would not go that far. I have a done fairly extensive study and understand the concepts.

I would say I would doubt the veracity of anyone who says that they can actually predict them.

Furthermore, once broken down they are simply insurance policies predicting the future movement of stocks and commodities. Personally, I think of it as educated gambling, which is probably the way the majority approach the stock market anyway.

A far cry from the original intent, namely to raise capital.

Derivatives end up serving the function of reducing the future ACTION of a financial instrument to a commodity in and of itself regardless of what is happening to the company or "goods" which were supposed to be its original basis of value.

Potential trillions involved, enough to wreck the economy world wide and utter folly. Only one of the several factors which will lead to our economic apocalypse.

mizpeh

09-17-2008, 03:03 PM

Potential trillions involved, enough to wreck the economy world wide and utter folly. Only one of the several factors which will lead to our economic apocalypse.I didn't expect this from you!

James Griffin

09-17-2008, 03:14 PM

I didn't expect this from you!

Why?? I have said it on other threads months ago.

There is a plethora of reasons why it is inevitable.

And the knowledge of its inevitability does not affect my walk with God.

None of us have the promise of tomorrow, much less what is coming in the next 20 years.

mizpeh

09-17-2008, 03:22 PM

Why?? I have said it on other threads months ago.

There is a plethora of reasons why it is inevitable.

And the knowledge of its inevitability does not affect my walk with God.

None of us have the promise of tomorrow, much less what is coming in the next 20 years.I usually don't read the political or economic threads so I may not have read what you wrote months ago. The last economic thread I read, CC1 was calling doom and gloom folks....alarmists.

Is this what your countdown is pointing to?

RevDWW

09-17-2008, 03:55 PM

-449.38 DOW.
Gold went up 90+ per ounce today, largest rise in a one day gold price in history. Not a good week for our economy.

rgcraig

09-17-2008, 03:56 PM

-449.38 DOW.
Gold went up 90+ per ounce today, largest rise in a one day gold price in history. Not a good week for our economy.

It's good if you have gold.

Ferd

09-17-2008, 03:56 PM

I would not go that far. I have a done fairly extensive study and understand the concepts.

I would say I would doubt the veracity of anyone who says that they can actually predict them.

Furthermore, once broken down they are simply insurance policies predicting the future movement of stocks and commodities. Personally, I think of it as educated gambling, which is probably the way the majority approach the stock market anyway.

A far cry from the original intent, namely to raise capital.

Derivatives end up serving the function of reducing the future ACTION of a financial instrument to a commodity in and of itself regardless of what is happening to the company or "goods" which were supposed to be its original basis of value.

Potential trillions involved, enough to wreck the economy world wide and utter folly. Only one of the several factors which will lead to our economic apocalypse.
LOL! well, you and I have a basic understanding of what they are.... but when you get to the nuts and bolts of the formulations being used, I think nobody really gets it.

I fully understand that a put on the futures market is a derivative. but now you drill down to exactly what formulas being used by the likes of Lehman brothers, and you will confuse a physicist!

RevDWW

09-17-2008, 04:03 PM

It's good if you have gold.

Wish I had some!

James Griffin

09-17-2008, 04:04 PM

I usually don't read the political or economic threads so I may not have read what you wrote months ago. The last economic thread I read, CC1 was calling doom and gloom folks....alarmists.

Is this what your countdown is pointing to?

No the countdown is for”it” lol.

I would agree with CC1, IF a person’s view of gloom were confined to the stock market correction. Months ago, I said that run to 14,000 was artificial and that stability was around 10,300-10,500 and that was before the current round of debacles.

Some believe the world revolves around the US stock market when in fact it is a tiny, and often disconnected part of the world economy.

China became the first nation in history to pass one trillion in foreign reserves last year, over $750,000,000,000 of that US dollars.

While we have been busy consuming (leading to our unbelievable trade deficient) other have been purchasing our capital assets (means to generate Future wealth).

Shortly after 2000 the stock market lost one and half trillion in value, this was made up within a few years by the American consumer shifting into high gear, real estate prices artificially rising and individuals taking out home equity loans (I personally am aware of those with $75,000 revolving lines of credit with their homes for collateral, stupidity has no limits) In Texas until a few years ago it was actually illegal (against the constitution) to take out a home equity loan. Following a state constitutional amendment Billions were pumped into the consumer economy.

The banking industry gave out billions to those with shaky credit just to improve their bottom line, pay their CEOs obscene bonuses, and now that their house of cards is falling around them, they want a government bailout (taxpayer money)

The credit card industry has done the same thing. Even having the bankruptcy law changed so those who they extended thousands in credit, and who had dubious ability to repay could not have them discharged.

The major shift of corporate American from defined benefit plans to employee funded 401k plans over the past few decades, led to a great infusion to the stock market, what happens in 18 years or so when the peak of the boomer generation BY LAW must start withdrawing those funds (btw the first of the boomers hit retirement age last year so it will start soonerth). Note: those who retained defined benefit plans such as GMAC et al were not forced to collect the billions they should have, so either when the time comes they renege on their agreements with their retired employees, declare bankruptcy, or seek a government (taxpayer) bailout for their artificially inflated bottom line all these years.

The price of gas is not a reflection of drilling, exploration, or refining capacity. Most economists either won’t mention or have not figured out the true culprit is the fall of the US dollar. The majority of our oil is imported so that is where it is felt first. The sad truth is while our Dow was making its historic high climb the value of the dollar was falling to all time lows abroad. My Canadian friends can correct me but I believe it is the first time in history that the Canadian dollar is worth more than the American.

These are once again only a FEW things I have skimmed, all which will lead to the inevitable conflagration.

OP_Carl

09-17-2008, 08:38 PM

well, OP, nice try but that's what you have? Looks to me like that is MORE REGULATION not less.....

Look, Im not here trying to defend GWB that wasnt my intent at all. the question is DEREGULATION being the cause. this isnt deregulation, it is more regulation.

seriously, someone please find me an example of current deregulation (hey I will even accept deregulation by Clinton).

Ferd,

I found the bit that I was thinking of, but couldn't re-find at the time of my last post. I don't remember where I first found it.

The HUD speech was my example of an instance of the administration applying pressure and policy to banks, without going to the extent of an actual executive order, to make sub-prime loans to sub-standard borrowers. That isn't really regulation; it's more of a gentle nudge. You are also correct that the Gramm-Leach-Bliley Act mostly adds regulation. But the story did not end after President Clinton signed it into law.
De-regulation language that Phil Gramm wanted in the Gramm-Leach-Bliley Act, but could not successfully insert into the bill, was amended to an omnibus appropriations bill that President George W. Bush signed early in his presidency. It is this 262-page amendment titled Commodity Futures Modernization Act that de-regulated derivatives trading:

Securities exchange de-regulation, authored by a Republican from Texas, and executed by a Republican from Texas.

There you have it. De-regulation enacted by President George W. Bush, and by other prominent Republicans.

Don't feel too bad, even RWR made some boo-boos (amnesty for illegal immigrants).

Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act. It is likely that few senators read this bill, if any. The essence of the act was the deregulation of derivatives trading (financial instruments whose value changes in response to the changes in underlying variables; the main use of derivatives is to reduce risk for one party). The legislation contained a provision -- lobbied for by Enron, a major campaign contributor to Gramm -- that exempted energy trading from regulatory oversight. Basically, it gave way to the Enron debacle and ushered in the new era of unregulated securities. Interestingly enough, Gramm's wife, Wendy, had been part of the Enron board, and her salary and stock income brought in between $900,000 and $1.8 million to the Gramm household, prior to the passage of the Commodity Futures Modernization Act.

U376977

09-17-2008, 08:39 PM

No the countdown is for”it” lol.

I would agree with CC1, IF a person’s view of gloom were confined to the stock market correction. Months ago, I said that run to 14,000 was artificial and that stability was around 10,300-10,500 and that was before the current round of debacles.

I read an economist who said "stability" was around 9 but could go to 7500. Wow.

Personally, I will not aquire any new debt, (now is not the time to buy a new car as bad as I need one) pay off what debt I can. And sell what little stock I own and put it in short term t-bills.

RandyWayne

09-17-2008, 08:44 PM

mizpeh

09-17-2008, 09:05 PM

No the countdown is for”it” lol.It is a pronoun and has to stand for something else. Over 12 years is a long countdown for something as nebulous as an "it"!

My Canadian friends can correct me but I believe it is the first time in history that the Canadian dollar is worth more than the American.

These are once again only a FEW things I have skimmed, all which will lead to the inevitable conflagration.Bottom line, James, how long before the inevitable conflagration? Would you call this conflagration " The Great Conflagration?"

mizpeh

09-17-2008, 09:08 PM

We just bought a new car, and will buy another in about a year. In fact we just bought a house! A NICE one!

We refuse to "take part" in any recession..... Nor take part in all the endless conversations "doom and gloom" conversations or how they relate to the end times.

Sticking your head in the sand is not a comfortable position to be in.

James Griffin

09-17-2008, 09:12 PM

It is a pronoun and has to stand for something else. Over 12 years is a long countdown for something as nebulous as an "it"!

Bottom line, James, how long before the inevitable conflagration? Would you call this conflagration " The Great Conflagration?"

Honesty call it an economic apocalypse, at least for the US, and personally would put best case scenario 12-20 or so years. With some ups and downs in between.

mizpeh

09-17-2008, 09:16 PM

Honesty call it an economic apocalypse, at least for the US, and personally would put best case scenario 12-20 or so years. With some ups and downs in between.

That doesn't help me know when I should start buying extra toothpaste and soap! (I'm being serious.)

I was looking for a front page headline. "The Great Economic Apocalypse " doesn't sound good either. How about "The Great Tribulation". :)

If the US has a devastating economic fall don't you think the rest of the world will feel it and fall with us?

U376977

09-17-2008, 09:24 PM

Ferd,

I found the bit that I was thinking of, but couldn't re-find at the time of my last post. I don't remember where I first found it.

The HUD speech was my example of an instance of the administration applying pressure and policy to banks, without going to the extent of an actual executive order, to make sub-prime loans to sub-standard borrowers. That isn't really regulation; it's more of a gentle nudge. You are also correct that the Gramm-Leach-Bliley Act mostly adds regulation. But the story did not end after President Clinton signed it into law.
De-regulation language that Phil Gramm wanted in the Gramm-Leach-Bliley Act, but could not successfully insert into the bill, was amended to an omnibus appropriations bill that President George W. Bush signed early in his presidency. It is this 262-page amendment titled Commodity Futures Modernization Act that de-regulated derivatives trading:

Securities exchange de-regulation, authored by a Republican from Texas, and executed by a Republican from Texas.

There you have it. De-regulation enacted by President George W. Bush, and by other prominent Republicans.

Wrong

Don't feel too bad, even RWR made some boo-boos (amnesty for illegal immigrants).

Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act. It is likely that few senators read this bill, if any. The essence of the act was the deregulation of derivatives trading (financial instruments whose value changes in response to the changes in underlying variables; the main use of derivatives is to reduce risk for one party). The legislation contained a provision -- lobbied for by Enron, a major campaign contributor to Gramm -- that exempted energy trading from regulatory oversight. Basically, it gave way to the Enron debacle and ushered in the new era of unregulated securities. Interestingly enough, Gramm's wife, Wendy, had been part of the Enron board, and her salary and stock income brought in between $900,000 and $1.8 million to the Gramm household, prior to the passage of the Commodity Futures Modernization Act.

I don't know where you got this quote, you did not source it. But your facts are not correct. The bill was signed on 12/21/2000 by Bill Clinton. The bipartisen bill was introduced by the following senators; Sen. Richard Lugar (R-IN) and cosponsored by Sen. Peter Fitzgerald (R-IL) Sen. Phil Gramm (R-TX) Sen. Charles Hagel (R-NE) Sen. Thomas Harkin (D-IA) Sen. Tim Johnson (D-SD). What has been called the "enron loophole" has came into the news in the last few months because of suspected oil speculation. Several attempts were made to close the "loophole" to end the speculation, Osama (I suspect his campaign is the source of your quote?) being one senator who wrote a politically motivated proposal---he did not care about the loophole for the years he was on the hill--not until he hit the campaign trail and the price of gas became an issue.

However, in the last month the SEC passed restrictions on reserve requirements on futures oil trading speculation. So we did not need Osama to be messiah.

"There you have it. De-regulation enacted by (CLINTON) and by other prominent Republicans" (INCLUDING DEMS HARKIN AND JOHNSON).

U376977

09-17-2008, 09:27 PM

We just bought a new car, and will buy another in about a year. In fact we just bought a house! A NICE one!

We refuse to "take part" in any recession..... Nor take part in all the endless conversations "doom and gloom" conversations or how they relate to the end times.

I hope you don't lose your job. I am sure a lot of good postive thinking folks at Lehman, Merrill and thousands of others who are beating the streets now thought the same way.

James Griffin

09-17-2008, 09:28 PM

LOL! well, you and I have a basic understanding of what they are.... but when you get to the nuts and bolts of the formulations being used, I think nobody really gets it.

I fully understand that a put on the futures market is a derivative. but now you drill down to exactly what formulas being used by the likes of Lehman brothers, and you will confuse a physicist!

I appreciate what you are saying. Around 2005 with my wife's blessing I took a year and a half off to study nothing but accounting and economics full time. IT was the first time in my life I was a full time student without also working full time (including law school). I had actually completed the equivalent of four years of accounting in the first nine months with a 4.0 GPA and am eligible for sitting for the CPA, CFE, and CFP which was my goal until I felt God changing my direction.

Options derivatives are primarily based on the Black-Scholes model and most people with a good grasp of economics and a year or so of calculus can follow. HOWEVER, they were originally intended to be miniature insurance policies for things like crops. Then they involved into vehicles to leverage stock speculation. Now you can even buy EFTs for the foreign currency exchange which trades in the trillions per day and leverage your money hundreds of times.

Derivatives do not have the mystic that many economists try to attribute, but as has been pointed out in some of the articles posted here, they are dangerous because they are not regulated the way stocks are. We simply cannot have a stock crash of the same ilk as 1929 due to safeguards which were not in place then. BUT foolishness in the derivatives market could actually lead to things worse.

Sorry when it comes to economics I sometimes get carried away, actually a very interesting topic....

James Griffin

09-17-2008, 09:30 PM

That doesn't help me know when I should start buying extra toothpaste and soap! (I'm being serious.)

I was looking for a front page headline. "The Great Economic Apocalypse " doesn't sound good either. How about "The Great Tribulation". :)

If the US has a devastating economic fall don't you think the rest of the world will feel it and fall with us?

Perhaps if it happened now, within 20 years we will not be the only economic super power

James Griffin

09-17-2008, 09:41 PM

Hey boys, you're gonna think I am looney, but my opinion about all of this was based on a "feeling." I know that sounds corny, but I really have felt in my spirit man that something economically catastrophic was about to occur.

Plus, before my 92 year old grandma died last year, she warned all of us that this was coming. She said the overall spiritual atmosphere was the same as that of the Great Depression.

And now back to your regularly scheduled mocking.:snapout

I don't think you are looney at all. I also don't think what is happening right now is economically catastrophic, but I DO believe it to be a precursor.

There are a couple nationally known men who are now my good friends that it was originally conversations on this topic which bonded us. They were amazed that although they do not talk about it in public they have been feeling the exact same things as you described in your "spirit man". I unfortunately approach most things, including the gospel as a rationalist. But after speaking with them, they told me I had been the first one to explain to them the how, when and why. They have told me there is also a prophetic gift of seeing the big picture and movement of nations as opposed to speaking to individuals. Personally I don't know about all that, what I do know is I can see clearly see patterns and "handwriting on the wall" if you will, that other economists are either too blind to see or are afraid to discuss.

Aquila

09-17-2008, 09:53 PM

ManOfWord

09-18-2008, 07:47 AM

I'll leave ya with this thought. We don't need Republicans or Democrats. We need a revolution.

http://www.codeodor.com/images/dont_tread_on_me.gif

Being an Independent, myself, I couldn't agree with this more! :D

U376977

09-18-2008, 07:50 AM

dt, you know I love you. lol

Hey, all I know is that the way things have been run for the past 8 years doesn't look so hot.

Hey, maybe someday we can hook up and have a playful tangle. I'm pretty confident. ;) Right now I'm either talking from my military pride...or margaritaville. I've been out with the Mrs. and I'm feeling purdy goood. lol I'm going to retire and get some sleep. See y'all tomorrow.

I'll leave ya with this thought. We don't need Republicans or Democrats. We need a revolution.

http://www.codeodor.com/images/dont_tread_on_me.gif

Govts have fallen with hyper inflation. Do you think that is possible. Do you think we really need revolution--a change in the American govt?

DividedThigh

09-18-2008, 09:10 AM

aquila you need a good whoopin, that is all, dt

Ron

09-18-2008, 10:11 AM

dt, you know I love you. lol

Hey, all I know is that the way things have been run for the past 8 years doesn't look so hot.

Hey, maybe someday we can hook up and have a playful tangle. I'm pretty confident. ;) Right now I'm either talking from my military pride...or margaritaville. I've been out with the Mrs. and I'm feeling purdy goood. lol I'm going to retire and get some sleep. See y'all tomorrow.

I'll leave ya with this thought. We don't need Republicans or Democrats. We need a revolution.

http://www.codeodor.com/images/dont_tread_on_me.gif

Ahhh, an enlightened American!

Yup, your good country is being hijacked by special interests!

You all need a Revolution!

DividedThigh

09-18-2008, 10:40 AM

give it a rest, ron, as if canada isnt a slave to special interest, lol puhleeze, dt

Ron

09-18-2008, 11:15 AM

give it a rest, ron, as if canada isnt a slave to special interest, lol puhleeze, dt

Canada is too, I never said it wasn't, that doesn't hide the fact that the US is as well.

A person can look at a situation and see what they want to see.
The American Economy is hooped!

It is going down the tubes and the rest of the world's economies will be headed there too!

You can quote me on that too!:whistle

Ferd

09-18-2008, 11:21 AM

Canada is too, I never said it wasn't, that doesn't hide the fact that the US is as well.

A person can look at a situation and see what they want to see.
The American Economy is hooped!

It is going down the tubes and the rest of the world's economies will be headed there too!

You can quote me on that too!:whistle

So that begs a question. If the rest of the world economies are going down the tubes, is it Americas fault?

or are there world wide economic forces (meaning the eb and flow of economies) at play here instead of some "speical interests" wreaking havoc?

DividedThigh

09-18-2008, 11:21 AM

thanks for the pessemism bro it makes things so much better, dt

Aquila

09-18-2008, 11:28 AM

America is the largest market on earth. Nearly every growing economy is tied to the American economy in some way or another. If we fall down, we drag them right along with us. And the most powerful special interests on the planet are in the United States.

Ferd

09-18-2008, 11:30 AM

I appreciate what you are saying. Around 2005 with my wife's blessing I took a year and a half off to study nothing but accounting and economics full time. IT was the first time in my life I was a full time student without also working full time (including law school). I had actually completed the equivalent of four years of accounting in the first nine months with a 4.0 GPA and am eligible for sitting for the CPA, CFE, and CFP which was my goal until I felt God changing my direction.

Options derivatives are primarily based on the Black-Scholes model and most people with a good grasp of economics and a year or so of calculus can follow. HOWEVER, they were originally intended to be miniature insurance policies for things like crops. Then they involved into vehicles to leverage stock speculation. Now you can even buy EFTs for the foreign currency exchange which trades in the trillions per day and leverage your money hundreds of times.

Derivatives do not have the mystic that many economists try to attribute, but as has been pointed out in some of the articles posted here, they are dangerous because they are not regulated the way stocks are. We simply cannot have a stock crash of the same ilk as 1929 due to safeguards which were not in place then. BUT foolishness in the derivatives market could actually lead to things worse.

Sorry when it comes to economics I sometimes get carried away, actually a very interesting topic....

Keep talking. We may be the only two... well U3457348905790235 also seems quite interested in economics.

I have heard recently that either Lehman Brothers or another one of these firms, CEO said he had no clue what was in these derivitives his company owned.... and he laughed about it.

They have certainly become dangerious.

I dont however think the entire economy is about to go south for 20 years....

but time will tell, in about 22 months, D4T is either going to have to buy me dinner, or we will both be starving.... we shall see...

Ron

09-18-2008, 11:35 AM

thanks for the pessemism bro it makes things so much better, dt

Pessimism?
I call it realism myself.

I wish it weren't so, I wish Ferd & others who think this is a minor blip were right. I take no satisfaction in my American Brothers & Sisters suffering through this economic hardship especially when so many are just trying to make a living like everyone else in the world.

I just don't see it as being that way.

I mean, look at this past week, one of the major companies in the States being bailed out by the Government!!!!
That smacks of Socialism, but is there an alternative???

We are in a lot worse trouble than we realize.

Good thing is God is coming soon & our hope and home should be in Heaven!

Ron

09-18-2008, 11:36 AM

Ron

09-18-2008, 11:39 AM

So that begs a question. If the rest of the world economies are going down the tubes, is it Americas fault?

or are there world wide economic forces (meaning the eb and flow of economies) at play here instead of some "speical interests" wreaking havoc?

America, with the largest Economy on Earth & a consumer market of 300 Million people is a force to be reckoned with.

That kind of market is a demand for goods & services, both here and overseas.

That demand goes away or shrivels up it will have a ripple effect.

Just the fact.

DividedThigh

09-18-2008, 12:11 PM

i sure hope the pessismists are wrong too, i personally am a pragmatist, have to show me, should have been born in mo, instead of tenn, but nonetheless, here i is, lol

Ferd

09-18-2008, 12:21 PM

Once again the blame America first crowd sound off.

Gentlemen you konw I do love you dearly. But I am not buying that America is the evil in this world.

DividedThigh

09-18-2008, 12:22 PM

i aint buying either ferd, enough, they should just go to there blessed russia and see how good it is there, lol

Ferd

09-18-2008, 12:41 PM

i aint buying either ferd, enough, they should just go to there blessed russia and see how good it is there, lol

bad Americans!

Barny Frank is a bad American. but most of us arent!

DividedThigh

09-18-2008, 12:45 PM

amen to that, i mean i dont recall a congressman that wasnt gay running a brothel out of his home and getting away with it till frank came along, lol

Ferd

09-18-2008, 12:48 PM

amen to that, i mean i dont recall a congressman that wasnt gay running a brothel out of his home and getting away with it till frank came along, lol

ahh yes.... and here we have the duplicitious nature of American politics.

When a republican sends a text message that is sexually explicit homo erotic to a 17 year old boy, the Republicans kick him out of congress.

When a democrate runs an underage brothel out of his homo house, the democrats put him in charge of one of the most powerful committees in congress.

DividedThigh

09-18-2008, 12:50 PM

that is so sad ferd, you cant make this stuff up, dt

RevDWW

09-18-2008, 03:59 PM

ToDa......the economy is now fixed....the sun is shining....the market has risen...alomst as much as it lost yesterday......all is well.......you my now continue to go about your everyday lives.......... Babylon the great has not fallen.........yet...........:aaa

RevDWW

09-18-2008, 04:07 PM

ahh yes.... and here we have the duplicitious nature of American politics.

When a republican sends a text message that is sexually explicit homo erotic to a 17 year old boy, the Republicans kick him out of congress.

When a democrate runs an underage brothel out of his homo house, the democrats put him in charge of one of the most powerful committees in congress.

You don't understand......if it's a Democrat it's just a celebration of sexual/gender diversity and toleration is the word of the day.......:eeeew

U376977

09-18-2008, 04:20 PM

OP_Carl

09-18-2008, 07:40 PM

Wrong

I don't know where you got this quote, you did not source it. But your facts are not correct. The bill was signed on 12/21/2000 by Bill Clinton. The bipartisen bill was introduced by the following senators; Sen. Richard Lugar (R-IN) and cosponsored by Sen. Peter Fitzgerald (R-IL) Sen. Phil Gramm (R-TX) Sen. Charles Hagel (R-NE) Sen. Thomas Harkin (D-IA) Sen. Tim Johnson (D-SD). What has been called the "enron loophole" has came into the news in the last few months because of suspected oil speculation. Several attempts were made to close the "loophole" to end the speculation, Osama (I suspect his campaign is the source of your quote?) being one senator who wrote a politically motivated proposal---he did not care about the loophole for the years he was on the hill--not until he hit the campaign trail and the price of gas became an issue.

However, in the last month the SEC passed restrictions on reserve requirements on futures oil trading speculation. So we did not need Osama to be messiah.

"There you have it. De-regulation enacted by (CLINTON) and by other prominent Republicans" (INCLUDING DEMS HARKIN AND JOHNSON).

I stand corrected. Thank you sir.

Upon more careful reading of that quote, I see that it says "after Bush was elected, Clinton and congress were working on . . . "

It was after the election, but before the inauguration.

I originally heard snippets of this being read on talk radio, and then set out to find it, and then re-find it, using only my memory of some key words and phrases.

Republicans and Democrats now BOTH seem to be the party of big government. Where is the constitutional 'RESET' button?

My hope is that this economic crisis will force government to curb spending. But if it's like most places, they'll fire all the wrong people . . . :nah

Aquila says it's time for revolution. It's nice to say that and all, but we couldn't foment a tax revolt if we wanted to. Aside from the primary obstacle of a severe societal apathy, income tax withholding means that the only way to starve out the government is to quit our jobs. Most of us would put the bitter clingers of Pennsylvania to shame if somebody asked us to contemplate turning loose of our steady stream of paychecks.

Freedom's just another word for nothing left to lose.

Ferd

09-18-2008, 11:15 PM

I stand corrected. Thank you sir.

Upon more careful reading of that quote, I see that it says "after Bush was elected, Clinton and congress were working on . . . "

It was after the election, but before the inauguration.

I originally heard snippets of this being read on talk radio, and then set out to find it, and then re-find it, using only my memory of some key words and phrases.

Republicans and Democrats now BOTH seem to be the party of big government. Where is the constitutional 'RESET' button?

My hope is that this economic crisis will force government to curb spending. But if it's like most places, they'll fire all the wrong people . . . :nah

Aquila says it's time for revolution. It's nice to say that and all, but we couldn't foment a tax revolt if we wanted to. Aside from the primary obstacle of a severe societal apathy, income tax withholding means that the only way to starve out the government is to quit our jobs. Most of us would put the bitter clingers of Pennsylvania to shame if somebody asked us to contemplate turning loose of our steady stream of paychecks.

Freedom's just another word for nothing left to lose.

All right Bobby McGee, now we have some basis for walking along beside ourselves! Republicans and Democrats have created this mess.... by not regulating what they ought and over regulating what they oughtnt. (hows that for bad spelling and word creation?)

dont get your hopes up on the gubberment not spending money. as we speak the powers that be are formulating a plan to buy up all this bad paper that is choking the perverbial ox we got laying crosswise in the ditch.

Is it called a "Receiver Trust Company?" something like that.

I still say we have been in this kind of fix at least a dozen times since the great depression and it hasnt led to the end..... but no matter who gets elected ( and I still say it will be Obama) we are in for bigger government..... McCains bigger government is just more likely to not be as big a bigger government as B. Hussains....

im back to being a cynic that is still postiive on the US Economic outlook. peace

RevDWW

09-19-2008, 07:28 AM

I hope you dont really believe that all is fixed. It is a huge mess.

That was posted with a heavy dose of sarcasm! :whistle

James Griffin

09-19-2008, 07:37 AM

Keep talking. We may be the only two... well U3457348905790235 also seems quite interested in economics.

I have heard recently that either Lehman Brothers or another one of these firms, CEO said he had no clue what was in these derivitives his company owned.... and he laughed about it.

They have certainly become dangerious.

I dont however think the entire economy is about to go south for 20 years....

but time will tell, in about 22 months, D4T is either going to have to buy me dinner, or we will both be starving.... we shall see...

Friend Ferd, I believe you may have misread the thrust of the post. The economy is not going down FOR 20 years but rather IN 12-20 years, and the change will be permanent.

In the meantime there will be many bounce backs in the DOW. The problem once again is somehow too many believe the DOW IS the economy. More often than not it is NOT an accurate gauge, especially when referencing the over all economy and how it relates to the world economy.

For example as the DOW made its last historic climb to record highs the value of the dollar was falling to all time lows.

DividedThigh

09-19-2008, 08:51 AM

that may be true bro griffin, sometimes all i have is hope, but it maketh not ashamed, lol

Pressing-On

09-19-2008, 08:54 AM

DividedThigh

09-19-2008, 09:32 AM

press i was in gb last night and heard sarah and john speak, it was good, the place was crammed, loved it

U376977

09-19-2008, 09:49 AM

For Ferd!

Neal Boortz - The Rest of the Meltdown Story

Enter, stage left, the “subprime” mortgage. These lenders knew that a very high percentage of these loans would turn to garbage – but it was a price that had to be paid if the bank was to expand and grow. We should note that among the community groups browbeating banks into making these bad loans was an outfit called ACORN. There is one certain presidential candidate that did a lot of community organizing for ACORN. I won’t mention his name so as to avoid politicizing this column.

So … why aren’t you reading the whole story in the mainstream media? Come on, are you kidding me? Do you really expect the media to blame this mess on deadbeat borrowers and political interference in the free market when it is so easy to put the blame on greedy lenders and evil capitalists? Remember … there’s an election going on. One candidate is decidedly anti-capitalist. Do the math.

http://townhall.com/columnists/NealB...meltdown_story

You will find many quotes like this. But there is little truth in them. The stories are written just to sell papers or attract viewers.

Fact is that no banker would knowingly lend to a borrower that they knew would default. That is just a dumb statement made by this writer. EVERY wholesale company terminates relationships with mortgage brokers after they reach a certain threshold for defaults. Similar thing in a retail setting. The program will go away if defaults occur. HERE IS WHAT HAPPENED. OVER THE COURSE OF SEVERAL YEARS, bankers had increasingly greater mortgage products that included a larger bucket of borrowers. So if you are a Wells Fargo, and you find out that Countrywide has a mortgage product that will allow a credit score of 600 or greater and 100% financing and you are requiring a 620 or greater for 100%, then you are at competitive disadvantage. In any business, competition can be a product driver. To compete you have to offer similar products. Back then, there was not a problem with defaults on these mortgages. Everyone moved slowly and they were performing and everyone was happpy. So what happened--real estate investor speculation--especially in CA, NV, FL. Homes were being sold way over value. In CA they were even selling the right to bid on homes BEFORE they went on the market. Homes could be held for short time and flipped for great profit. The problem with that is that it eventually has to burst. The bubble popped. The price became so high that not enough people could afford them to sustain the number of homes on the market. So forclosures began. Then, as with any product with greater supply than demand, the price began to drop...and drop...and drop.

But here is something NOT BEING WRITTEN ABOUT. It is estimated that 60% of the people who let their home go in a foreclosure, CAN AFFORD TO MAKE THE PAYMENTS. They choose not to because of evaporating equity. They do not want to be upside down on a mortgage they know will take 5-10 years just to gain the equity they have lost. So they walk away, compounding the problem for everyone else. That means that at least 60% of the defaults ARE NOT THE "EVIL" "GREEDY" BANKERS FAULT. They made credit worthy loans. But borrowers are acting in unprecedented ways. Historically, they made the mortgage payment before anything else---now the CAR PAYMENT is their number one priority. Unbelievable!

Pressing-On

09-19-2008, 09:52 AM

You will find many quotes like this. But there is little truth in them. The stories are written just to sell papers or attract viewers.

Fact is that no banker would knowingly lend to a borrower that they knew would default. That is just a dumb statement made by this writer. EVERY wholesale company terminates relationships with mortgage brokers after they reach a certain threshold for defaults. Similar thing in a retail setting. The program will go away if defaults occur. HERE IS WHAT HAPPENED. OVER THE COURSE OF SEVERAL YEARS, bankers had increasingly greater mortgage products that included a larger bucket of borrowers. So if you are a Wells Fargo, and you find out that Countrywide has a mortgage product that will allow a credit score of 600 or greater and 100% financing and you are requiring a 620 or greater for 100%, then you are at competitive disadvantage. In any business, competition can be a product driver. To compete you have to offer similar products. Back then, there was not a problem with defaults on these mortgages. Everyone moved slowly and they were performing and everyone was happpy. So what happened--real estate investor speculation--especially in CA, NV, FL. Homes were being sold way over value. In CA they were even selling the right to bid on homes BEFORE they went on the market. Homes could be held for short time and flipped for great profit. The problem with that is that it eventually has to burst. The bubble popped. The price became so high that not enough people could afford them to sustain the number of homes on the market. So forclosures began. Then, as with any product with greater supply than demand, the price began to drop...and drop...and drop.

But here is something NOT BEING WRITTEN ABOUT. It is estimated that 60% of the people who let their home go in a foreclosure, CAN AFFORD TO MAKE THE PAYMENTS. They choose not to because of evaporating equity. They do not want to be upside down on a mortgage they know will take 5-10 years just to gain the equity they have lost. So they walk away, compounding the problem for everyone else. That means that at least 60% of the defaults ARE NOT THE "EVIL" "GREEDY" BANKERS FAULT. They made credit worthy loans, borrowers are acting in unprecedented ways. Historically, they made the mortgage payment before anything else---now the CAR PAYMENT is their number one priority. Unbelievable!

I have a sister, in Colorado, that works in the mortgage industry. She said she is furious that these loans were given to people who could not pay! Out of the horse's mouth. :D

U376977

09-19-2008, 10:08 AM

I have a sister, in Colorado, that works in the mortgage industry. She said she is furious that these loans were given to people who could not pay! Out of the horse's mouth. :D

Hey, there are alot of us in the mortgage industry. Ok. There were some ............ products that were not designed for every borrower and some loan officers put people into products they could not afford. That is undeniable. And I am not arguing against that point. I just don't like these "news" stories and "blogs" that blame it all on a "greedy" CEO banker. It is just not true.
I did not want to get to technical...but....
For example, the Option Arm mortgage. It was a great product for a small number of borrowers---Investors who did not intend to hold the property for a long time and where HPA was rapidly increasing. Perfect example, an investor buying a condo at the beach--condo prices were increasing and maybe they are only going to hold the property a couple of years and rent it out during two or three summers. The Option Arm was a perfect product. IF they sold the property or refi before adjustment. The problem was that it was marketed to, for example, some guy in KY who wanted to buy a single family home that he wants to live in the rest of his life...That is a dumb product for him. BUT, for the most part, these loans were still performing until the real estate bubble burst. Countrywide was the largest seller of this product. Some banks NEVER put the product in their portfolio. What is scary about this is that most of CW option arms do not adjust until 2011, and it is an industry stat that 35% of all borrowers DO NOT know what type of mortgage they have.

Pressing-On

09-19-2008, 10:13 AM

Hey, there are alot of us in the mortgage industry. Ok. There were some ............ products that were not designed for every borrower and some loan officers put people into products they could not afford. That is undeniable. And I am not arguing against that point. I just don't like these "news" stories and "blogs" that blame it all on a "greedy" CEO banker. It is just not true.
I did not want to get to technical...but....
For example, the Option Arm mortgage. It was a great product for a small number of borrowers---Investors who did not intend to hold the property for a long time and where HPA was rapidly increasing. Perfect example, an investor buying a condo at the beach--condo prices were increasing and maybe they are only going to hold the property a couple of years and rent it out during two or three summers. The Option Arm was a perfect product. IF they sold the property or refi before adjustment. The problem was that it was marketed to, for example, some guy in KY who wanted to buy a single family home that he wants to live in the rest of his life...That is a dumb product for him. BUT, for the most part, these loans were still performing until the real estate bubble burst. Countrywide was the largest seller of this product. Some banks NEVER put the product in their portfolio. What is scary about this is that most of CW option arms do not adjust until 2011, and it is an industry stat that 35% of all borrowers DO NOT know what type of mortgage they have.
My sister worked with Countrywide. I understand what you are saying. There are other causes as well, we all know that. I'm putting out the information that disgusts me the most.

Pressing-On

09-19-2008, 02:05 PM

OP_Carl

09-19-2008, 09:38 PM

Any comments on this?

"McCain offered a six- point plan for reforming Wall Street -- including consolidating the alphabet soup of regulatory agencies, promoting greater transparency, and creating a new oversight body called the Mortgage and Financial Institutions Trust or MFI. "This trust will work with the private sector and regulators to identify institutions that are weak and fix them before they become insolvent," McCain said."
http://abcnews.go.com/Politics/Vote2008/story?id=5839771&page=1

It's sad and ironic and I don't know what else that this nationalization of financial institutions is coming from the party of Goldwater and Reagan. It is starting to really look like the limited government movement is dead. The concept of property rights will come under assault next.

This is what happens when a nation loses its moral compass, when an entire nation is incessantly preoccupied with sticking the bill to the other guy.

Now that the U.S. government is the underwriter for 50% of the mortgages in this country, the other half is going to clamour in jealousy until the government is the underwriter for all of them. Otherwise, it's justnotfair! :foottap:girlytantrum

It also remains to be seen how the government handles its newly acquired corner of the insurance business.

Let's see, the government monitors banking transactions in excess of $5000, income of various descriptions via a byzantine tax code, professional licensure, and now mortgage loans and insurance. Paychecks and corporate dividends are all garnished immediately upon issue. What do all of these have in common? They are things that are foreign to the poor and insignificant to the rich.

That's right, the government is quite enviably positioned to put the screws to the meat-and-potatoes middle class like it's never been done before. :club

And I don't like it one bit.:grumpy

The good news is, as with most things, the government has no idea what it is doing. Their plans will backfire on them, but will bring explosive (endtime?) revival

:nuke :shockamoo

Pressing-On

09-21-2008, 12:58 PM

It's sad and ironic and I don't know what else that this nationalization of financial institutions is coming from the party of Goldwater and Reagan. It is starting to really look like the limited government movement is dead. The concept of property rights will come under assault next.

This is what happens when a nation loses its moral compass, when an entire nation is incessantly preoccupied with sticking the bill to the other guy.

Now that the U.S. government is the underwriter for 50% of the mortgages in this country, the other half is going to clamour in jealousy until the government is the underwriter for all of them. Otherwise, it's justnotfair! :foottap:girlytantrum

It also remains to be seen how the government handles its newly acquired corner of the insurance business.

Let's see, the government monitors banking transactions in excess of $5000, income of various descriptions via a byzantine tax code, professional licensure, and now mortgage loans and insurance. Paychecks and corporate dividends are all garnished immediately upon issue. What do all of these have in common? They are things that are foreign to the poor and insignificant to the rich.

That's right, the government is quite enviably positioned to put the screws to the meat-and-potatoes middle class like it's never been done before. :club

And I don't like it one bit.:grumpy

The good news is, as with most things, the government has no idea what it is doing. Their plans will backfire on them, but will bring explosive (endtime?) revival

:nuke :shockamoo

I just received this e-mail from one of my sisters who is in the mortgage industry.

Oh yes, it infuriates me, one step closer to socialism. It's crazy now that 70% or more of the loans I process are government loans. It really ticks me off. It is right in my face everyday. And if Osama Obama gets voted in - we are done for sure.

Pressing-On

09-23-2008, 12:04 PM

Interesting!

McCain's specific comments, on May 25, 2006:

Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

GovTrack: Senate Record: FEDERAL HOUSING ENTERPRISE REGULATORY REFORM... (109-s20060525-16)

If this bail-out is a must, I'd like to see it limited to the troubled loans of ONLY owner occupied homes. By that I mean that I can't see buying the bad paperwork on homes purchased by speculators/investors.

Pressing-On

09-23-2008, 12:36 PM

Interesting! Obama is complaining that McCain stole his idea on the Golden Parachutes - looks like it was McCain's idea.

Text of S. 190 [109th]: Federal Housing Enterprise Regulatory Reform Act of 2005

Section 11 Limit on Golden Parachutes

http://www.govtrack.us/congress/billtext.xpd?bill=s109-190

DividedThigh

09-23-2008, 12:36 PM

understandable that he would have had grave concerns being that fanie and freddie were protected by sens and congs that were on the take politically, mostly dems, unreal, dt

Pressing-On

09-23-2008, 01:16 PM

I was looking for something along these lines. Hoping to see it. I heard that Mitt Romney is working with McCain on the bailout.

I don't know why the fourth sentence dropped off. lol

Dodd spoke as Paulson, Bernanke and other top officials listened from a few feet away, ready to publicly plead for swift action.

Meanwhile, the Republican Study Committee has crafted some possible "fixes" to the plan drawn up over the weekend by Paulson.

Among them are a "pay-to-play fee" for institutions involved in the bailout; an on-budget item in annual appropriations bills and an exit strategy so companies won't pin their losses on the Treasury.

The RSC issued a top 10 list late Monday of problems they see with the $700 billion plan aimed to add liquidity to the market so that investment firms don't

Among the problems cited were the additional burden on the national debt, the failure to penalize shareholders and debt holders who "should bear the risk of loss" and the socialization of the formerly free-market system.

"In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted and may actually cause the government to revert to an inadequate strategy of ad hoc bailouts," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee. Shelby called the emerging plan "neither workable nor comprehensive."

http://www.foxnews.com/story/0,2933,426232,00.html