Dear American:b,121b,121I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.b,121b,121I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.b,121b,121I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.b,121b,121This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.b,121b,121Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbail✧✧✧@treas✧✧✧.g✧✧ so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.b,121b,121Yours Faithfully Minister of Treasury Paulson
b,121I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
b,121
b,121I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
b,121
b,121I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.
b,121
b,121This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
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b,121Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbail✧✧✧@treas✧✧✧.g✧✧ so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.
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b,121Yours Faithfully Minister of Treasury Paulson
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font class="post"1b,121b,121No Nigerian forwarding address necessary.
b,121I hardly expect this to be limited to "schmucks". with the number of foreclosures, higher rate of umemployment (seriously, August was bad for the US) and the rise of commodity prices in food and oil, i fully expect that [i]very sane normal people
/i1 may have to draw down on retirement funds to pay for current expenditures.
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b,121i'll be curious to see when people start trying to pull out life insurance before they die. sounds absurd, but if this shit fails, i suspect it too will happen.
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b,121folks gotta feed their kids.
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font class="post"1b,121b,121I was using the term "poor schmucks" not in the literal but more in line with "poor bastards."b,121b,121Anyone that pulls from their investments during a down economy has my sympathy if they have no choice.
No private business should ever be "too big to let fail."b,121b,121This Financial PATRIOT Act would be the greatest fleecing of the taxpayer in the history of the Nation. Iraq is terrible, too - but this is simply taking money from the poor and giving it to the rich. If Barack Obama votes for this shit like he did on FISA ([i]i.e./i1 without very much of a fight), then I'll never forgive him.b,121b,121And Paulson and Bernanke really have NO SOLID PLAN. This isn't even a "blank check" towards a [i]shaky/i1 plan of attack, it's just a "blank check" for a pig in a poke. The problem, of course, is that the same wealthy private speculators that were in part responsible for this colossal disaster are more fully in control of the Nation's (and really, the world's) finances than the Government is. But if this baby gets whiny and throws a tantrum, the world markets go under [i]on purpose/i1. Money doesn't trickle downhill - shit does. And we're getting shitted on, pops.b,121b,121Even worse than all of this is the jaw-dropping clause that allows the Secretary of the Treasury COMPLETELY UNFETTERED controlling powers in this matter - no Governmental oversight committees, and not even a [i]Supreme Court challenge/i1 to his say. WHAT? This is the high opening bid - or the ARCHDD - of all Bush's propositions - shoot for the moon since you're allowed to do so, and if the bill passes even with several miniscule amendments or re-listings, then you've still made out like an evil thief.b,121b,121If Americans truly could understand what is at stake here, they'd be livid. For Obama to be on TV railing against "golden parachutes" is [i]so completely/i1 underselling the point. The trouble here is so much deeper than that. I want to see this man step up and give George W. Bush the biggest (and obviously the most sane, sober, and elequent) "Fusck YOU" that he's ever been given in or out of office. I'm talking Philadelphia-Speech big. This would win him the election, but more importantly, it'd win him the support of this country. John McCain has left the door wide open for him.b,121b,121Obama, Bomaye.
b,121If Americans truly could understand what is at stake here, they'd be livid. For Obama to be on TV railing against "golden parachutes" is [i]so completely
/i1 underselling the point. The trouble here is so much deeper than that. I want to see this man step up and give George W. Bush that biggest (and obviously the most sane, sober, and elequent) "Fusk YOU" that he's ever been given in or out of office. I'm talking Philadelphia-Speech big. This would win him the election, but more importantly, it'd win him the support of this country. John McCain has left the door wide open for him.
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b,121Obama, Bomaye.
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font class="post"1b,121b,121I feel you dude, but this shit is complicated for even people that [i]are/i1 interested and kinda know what's going on. It's not that I have no faith in the intelligence of the average US voter, but trying to explain capital leverage, CDO's undermined by 'juiced' ratings, and the global impact of this whole ordeal is going to take some time. No 'one speech' or debate is going to make this issue really clear to most people.b,121b,121Over the past 2 weeks I seriously have watched about 50 hrs of financial TV, read Econ blogs constantly, do the normal NYT/WSJ type stuff, plus got the 'education to boot', and I am just barely scratching the surface on understanding this stuff and trying to realize the deeper impact it could have. b,121b,121Again, I whole heatedly agree with you, but I fear this will be one of the worst situations of us "trusting" people and having this come back to really hurt us.b,121b,121That's why I am very reluctant to 'rush' this through. As I said a few posts ago, I think we should make commitments to help, so to hopefully keep up some levels of confidence, but I really am not about to give Paulson or anyone else for that matter the type of power/authority they initially asked for.
there is a way to avoid this gov't bailout and still keep the markets intact, and, ironically, it relies on a basic idea of free-market economics.b,121b,121threatened banks could be recapitalized by private investment[/b] . you saw Goldman do it today, taking a few billion from Buffet to strengthen their books. all the Fed has to do is require that all undercapitalized banks issue rights to buy new shares at a steep discount. that's all the gov't needs to do (and build in some new regulations so these fuckers can't leverage so much in the future.b,121b,121it would result in massive bank shareholder dilution just like AIG shareholders endured, but it is a PRIVATE way out of this mess. the world is swimming in capital, and some of it would invest in bank equity offered on sufficiently attractive terms.b,121b,121 img src="/ubbthreads/images/graemlins/liljohn.gif" alt="" 21
rootlesscosmo,b,121b,121Only one minor problem with your plan, we don't have enough Buffets to do this. Further, if the write downs are allowed to continue they spiral because one company's write down causes another company to write down and so on and so on.b,121b,121Also, market forces will seek to maximize their Return on Investment (RoI) and whether saving one company or another is a "good" choice for the economy is not part of the equation. It doesn't address the regulatory aspects of the problem. b,121b,121The fact is, we (the American people) are going to pay for this mess one way or another. The question is, how do we pay for it and how much. The next question is how do we punish those that got us into this mess.
b,121Only one minor problem with your plan, we don't have enough Buffets to do this. Further, if the write downs are allowed to continue they spiral because one company's write down causes another company to write down and so on and so on.
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b,121Also, market forces will seek to maximize their Return on Investment (RoI) and whether saving one company or another is a "good" choice for the economy is not part of the equation. It doesn't address the regulatory aspects of the problem.
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b,121The fact is, we (the American people) are going to pay for this mess one way or another. The question is, how do we pay for it and how much. The next question is how do we punish those that got us into this mess.
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font class="post"1b,121b,121the WORLD has plenty of Buffets, meaning, there is MORE than enough capital in the world to recapitalize the banks sufficiently. don't believe otherwise.b,121b,121and ROI is ezactly why investors would seek those banks that offer the most favorable terms. these banks still have value. the gov't needs to step in and make them swallow the hard pill of ceding ownership interest to investors.b,121b,121there is no reason the taxpayers need to pay for all this. a gov't bailout is NOT inevtiable; don't believe the hype.
Here's a good blog post I found on the topic. They're opposed to the bailout.b,121b,121a href="http://americanfootprints.com/drupal/node/4161" target="_blank"1http://americanfootprints.com/drupal/node/4161/a1b,121b,121his Turkey Won't Flyb,121American Footprints Blogb,121nadezhda Sep 21 2008 - 1:40pm Economy US Elections b,121b,121The $700 billion Treasury proposal is a non-starter on a host of grounds. I'll leave it to others to spell out the awesome dreadfulness -- politically and even constitutionally -- of giving a lame-duck Bush Administration such a gargatuan blank-check. The proposal also flunks on basic "fairness" principles -- McCain's sketchy notion of a Mortgage and Investment Trust, though inadequate, would be preferable in that it at least places some cost to participation (warrants) on participating institutions.b,121b,121On purely mechanical grounds, others can better explain why the notion that Treasury will be able to use market mechanisms (e.g. reverse auctions) to price the junk transparently is laughable, given the extremely heterogenous nature of the instruments they'll be buying. Again, as a mechanical matter, I'm less concerned about objections that Treasury would hire outside firms to dispose of the assets that are purchased -- the use of Asset Management Companies to handle the cleanup of busted banking systems is a familiar solution in financial crises. The objection to AMCs isn't their structure but that they don't move us any further in promoting workouts of mortgages so that the downward spiral in asset values can be ended.b,121b,121But rather than objecting on political or technical grounds, I want to focus on what I see as the fundamental problem with the proposal. We don't know what this proposal is trying to accomplish. And under almost any scenario, it is highly unlikely to work. If this proposal had been made by an Asian government during the financial crisis of 1998, it would have been hooted down by international financial experts, led by the US Treasury, as wishful thinking and crony-protection on a gigantic scale.b,121b,121This proposal isn't simply a matter of removing some toxic sludge that's gumming up otherwise healthy financial plumbing. As a two-year roll-over facility of $700 billion, it's a much bigger deal than the government getting new authority to provide liquidity to the system. With hundreds of billions involved, it's more than simply being authorized to take risky assets of uncertain value in return for providing liquidity to otherwise healthy financial institutions (FIs) who don't have access to the interbank markets due to the uncertainty that has frozen the global markets.b,121b,121In very simple terms, there are two alternative possible objectives to this gargantuan proposal, but we haven't been told which one is the real purpose.b,121b,121 1. Treasury intends to pay a low price for toxic waste to desperate financial institutions (FIs), get the junk off the FIs' books, and allow the "system" to recognize the losses but stop further bleeding (any futher bleeding will take place in Treasury's hands at taxpayer expense), so the affected FIs can take further steps to delever their balance sheets and recapitalize.b,121 2. Treasury intends to pay a high price for toxic waste, which will serve to effectively recapitalize FIs who are allowed to sell their junk to the government.b,121b,121Scenario 1. If the government's purpose is to pay a low price merely to "stop the bleeding," there are two challenges. First, since FIs will not be eager to book losses that will leave their balance sheets exposed, only those FIs who find themselves in extremis are likely to take advantage of the facility. Second, stopping the bleeding is only the intial step. If an FI's core businesses is solid after the junk is removed, they'll still be left with repairing their balance sheets. They'll have to deleverage (selling off assets and engaging in less, not more, new lending) and recapitalize (finding new equity or highly subordinated debt from private investors). Most will be looking for a buyer. And if a buyer can't be found, it's liquidation time, most likely in the hands of a government agency like the FDIC. So a "low price" scenario will necessitate further government action, both to complete the clean-up process and to counter the credit crunch that will accompany deleveraging by surviving FIs. if Treasury is trying to smooth things over until the private sector or the FDIC or a future RTC can recapitalize/liquidate these firms, why not just do it straight away in a clean (and probably cheaper to the taxpayer in the long-run) fashion by setting up an RTC now.b,121b,121Scenario 2. If the government's purpose is backdoor recapitalization, we have a different set of problems. This would be a pure bail-out, with no apparent cost to the participating FIs. The core dilemma, then, is how to allocate this taxpayer largess. Toxic waste is littered across the entire global financial system, not simply in US-based banks and investment banks but in foreign FIs (which are inextricably linked with American FIs -- a major reason why both Fannie/Freddie and AIG had to be taken over) and in non-banking institutions, from hedge funds to pension, insurance and mutual funds.b,121b,121Objections to preferential deals will rise not only from those footing the bill -- US taxpayers -- but from other holders of US MBS, especially competing FIs. Treasury could allocate the goodies on the basis of need -- giving preference to FIs who needed recapitalization -- but that would reward the managers and shareholders who are most responsible for the current state of affairs. If I'm Citibank or BofA (or Deutschebank) and have managed to survive this long, how enthusiastic am I going to be if WaMu gets a bunch of junk taken off its hands at a price that allows it to stay in business? The "healthy" FIs benefit only to the extent that the system avoids a catastrophic meltdown or they escape rising liabilities or declining assets as parties to toxic Credit Default Swaps. These aren't minor benefits, but when the time comes for FIs to queue for freebies, how likely will it be that the healthier FIs won't scream bloody murder if they're forced to go to the back of the queue? Or as an individual investor, why should WaMu get a good deal on the junk it holds, when my own investment-grade bond fund, where I have my retirement funds, gets no benefit? (As an early indicator that eligibility for the toxic waste buy-up program may be highly prized, Calculated Risk notes that the Treasury Fact Sheet implies that foreign institutions may be eligible if they have substantial US operations. Not only fair but, since the crisis is truly global, probably necessary if the program is to have a chance at working.)b,121b,121The only scenario that makes any sense is a highly unlikely "Goldilocks" scenario -- Treasury is able to set a price that's just right. This is the condition that Williem Buiter at the FT says is critical.b,121b,121 Prices should be higher than what the banks that own these assets now can obtain in the market, but as far below their fundamental value as is consistent with the survival of these banks. This is both to protect the tax payer and to create the right incentives for future risk taking by the banks. Punitive pricing is therefore essential. If the banks and their shareholders don???t complain loudly about expropriation through under-pricing, then prices are too high.b,121b,121Buiter thinks a reverse auction would be able to find this just mean -- I and many others have my doubts given the characteristics of the instruments to be auctioned. But accepting for the sake of argument that a market mechanism could be devised to auction the toxic waste, it's a futher heroic assumtion that it will set a Goldilocks price. The prospects of the auction must hurt a little so sound FIs won't be encouraged to participate (they'd rather take the risk of further declines in asset values). But it can't hurt a lot, so wobbly FIs will be eager to participate. With a "Goldilocks p
rice," only the toxic waste that's gumming up the system is removed. Under this unlikely scenario, once the dust settles and the "true" condition of everybody's balance sheets is clear, counterparties can once again deal with each other with confidence, and the regulators can determine which FIs are still in trouble and force their sale or shut them down.b,121b,121Even under the Goldilocks scenario, the financial system would remain in a precarious state. That's because the proposal doesn't deal with the underlying deterioration in asset values -- the mortgage crisis itself -- nor does it address the ever-increasing liabilities (bond insurance, Credit Default Swaps) that are linked, directly or indirectly, to declining asset values and eroding FI balance sheets. Because it doesn't take a sufficiently systemic approach -- the erosion of asset values and the disruption to the credit markets -- it also isn't set up to deal with contagion into other classes of financial assets such as asset-backed commercial paper (credit card receivables, etc). So even the best case Goldilocks scenario doesn't address the ongoing credit crunch because it doesn't recapitalize the financial system, it only keeps it from collapsing.b,121b,121The Treasury proposal is a gigantic exercise in temporizing. It's still treating the problem as a liquidity crisis, and as Dean Baker points out, Paulson's track record at temporizing hasn't been stellar -- he's consistently underestimated the scope and intensity of the crisis at each stage. And fundamentally, the proposal doesn't address the heart of the problem -- the continuing downward spiral in the value of US mortgage assets and the permanent damage that has been wrought on global financial institutions.b,121b,121For $700 billion we should make headway on the core problems. It's evident that we can't rely on voluntary participation by mortgage holders in cleaning up the housing market mess, but the experience of the FDIC with IndyMac suggests that progress can be made when "voluntarism" is removed. Any workable proposal must, at its heart, provide a system that will force underwater mortgages into workouts where feasible rather than continue to flood local housing markets with vacant foreclosures. "Equilibrium" in the housing markets can be found at several levels -- we shouldn't have to wait until we have a total bloodbath in housing to begin gaining traction at a bottom of the mortgage market. Addressing the housing crisis isn't a "Christmas tree" add-on as a sop to Democratic politicians. It should be a core part of any proposal.b,121b,121Any proposal should also openly undertake the process of recapitalizing or liquidating dodgy FIs at a cost to the managers and shareholders of those FIs. Backdoor recapitalization via generous prices for toxic waste isn't going to solve the crisis of confidence. First, it's non-transparent. It would reward the worst offenders. It would also privilege some FIs over others on arbitrary (regulatory discretion) grounds or by applying eligibility rules that leave out important classes of affected FIs. When combined with other recent regulatory forebearance (e.g. allowing the recognition of "goodwill", exemptions to net capital requirements that have permitted excessive leverage), non-transparent recapitalization will leave much of the financial system fragile and susceptible to further unpleasant surprises.b,121b,121We need a FDIC/RTC-type hybrid now that would temporarily take over problem FIs, engage in triage, supervise the purchase or recapitalization of those that can survive, and liquidate the others in an orderly fashion.b,121b,121The proposal should also outline a plan for bringing the Credit Default Swap market under control and for establishing a regulated market in credit derivatives going forward.b,121b,121If that costs $700 billion -- or even eventually carries a higher price tag -- so be it. But at least we would know where we were trying to get to and how we intend to get there. Which we certainly can't say about Treasury's proposal.b,121b,121But whatever we decide to spend our $700 billion on, it's important to recognize that we have choices. The real economy may not yet have taken a giant hit from our financial sector difficulties, but it's just a matter of time. We're not going to avoid a significant recession, but attention to the real economy should help us avoid a depression. While addressing the current financial crisis, we need to take real sector effects into account in any program going forward. Here are some thoughts on what our choices might be from Steve Randy Waldman at Interfluidity:b,121b,121 I think we'll only get one shot to set things right by throwing a ton of money at the problem, so we'd better think carefully before we throw it at symptoms rather than causes. Trying to figure this out in a week before Congress goes off to reelect itself strikes me as ambitious. Broadly, my view is that if we are going to legislate, Congress should empower regulators to declare systemically important firms insolvent, write off existing common and preferred, fire incumbent management and unilaterally convert debt to equity as far up the capital structure as they need to go until the firms are unambiguously well-capitalized, with little or no public money involved. Going forward, investors should understand that firms that are too big to fail are too big to be debt-financed, and government enforcement of debt claims against such firms will be limited. If economies of scale are real, equityholders should be glad to reap them. Otherwise markets function better anyway when populated by small actors who compete rather than by behemoths who dominate. The government should not subsidize the many negative externalities of scale. Members of the Pigou Club might suggest that bigness should be taxed and diversity subsidized.b,121b,121 As far as the money is concerned, throw it at infrastructure. Increase worker bargaining power by offering Federally funded retraining sabbaticals for any worker over thirty who decides they want to retool. I'd rather see a new WPA than a new RTC. If it is true that during a debt deflation, the government can spend freely without fear of inflation, let's spend in a way that balances the economy, not in a manner that tries to ratify the imbalances that brought us here in the first place.b,121b,121 There's no such thing as a choice-free bailout. The government's largesse will go to some and not to others, and we have to decide. Don't believe self-styled technocrats who claim that science or the market tells them who deserves the tax- (or inflation-) payers' dollar. In a bail-out, there are winners and losers, and we get to pick. I think we should focus on a simple goal: Restructuring the economy so that the vast majority of Americans can afford a middle-class lifestyle with very little leverage on household or government balance sheets. That may be a radical suggestion in 2008, but our grandparents would have considered it only common sense.b,121b,121Recommended reading:b,121b,121 Doublas Emendorf, Brookings: Concerns About the Treasury Rescue Plan -- good technical analysis; includes pros/cons of optional approach of Treasury buying equity in troubled firmsb,121b,121 Paul Krugman: Doubts about the rescueb,121 No Dealb,121 Authorization for use of financial forceb,121b,121 Henry Blodgett, ClusterStock: The critical question about Paulson's rescue planb,121b,121 Naked Capitalism: Why you should hate the Treasury bailout proposalb,121b,121 Calculated Risk: Some thoughts on the bailoutb,121b,121 Interfluidity: Truth and Reconciliation -- on why transparency in pricing and participation is essential to a bailout proposalb,121b,121 David Merkel: Oppose the Treasury's Bailout Plan -- and bring back a true RTCb,121b,121 Robert Reich: The Coming Bailout of All Bailouts Bill -- A Better Alternativeb,121 What Wall Street should be required to do, to get a blank check from taxpayersb,121b,121 Mary Kane, The Washington Independent: AIG raises bar for action on mortgages
: Activists push for mortgage crisis interventionb,121b,121 NYT Graphic: Paulson's Timeline
Rootless,b,121b,121By enough Buffets, I am talkin' about people willing to invest their capital in this mess. Just because people got mad loot doesn't mean they will invest it. Further while you are waiting for the market to sort this shit out, what happens when credit drys up and business outside finance start faltering.b,121b,121I believe that at some point the Government will be the only actor of will and size that will be able to save this situation. I just don't want the government to give away the loot without extracting hard concessions from the private sector. If the government takes on the risk, there better be a share in the rewards like we had with the S&L bail out or when Clinton bailed out Mexico.b,121b,121I have little faith in the free market to "correct" this disaster without significant collateral damage (meaning me and my own).b,121b,121Its time to put a bullet in the head of Friedman economics and come up with something new. Its what happens when an economic theory fails. It happened with before it will happen again.
Schumer asked the $700 billion question today at the hearings. You can literally see the wizard behind the curtain in Paulson's repsonse. "This is about market confidence". What Paulson is saying is that once wall street knows that we have completely covered them without adding new regulation or penalizing those who overstepped then they will begin reinvesting their capital in the markets. What a bunch of fusking crap. Schumer just grabs his head at the end. Sheer disbelief.b,121b,121 object width="425" height="344"1param name="movie" value=""1/param1param name="allowFullScreen" value="true"1/param1embed src="" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"1/embed1/object1
b,121By enough Buffets, I am talkin' about people willing to invest their capital in this mess. Just because people got mad loot doesn't mean they will invest it. Further while you are waiting for the market to sort this shit out, what happens when credit drys up and business outside finance start faltering.
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b,121I believe that at some point the Government will be the only actor of will and size that will be able to save this situation. I just don't want the government to give away the loot without extracting hard concessions from the private sector. If the government takes on the risk, there better be a share in the rewards like we had with the S&L bail out or when Clinton bailed out Mexico.
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b,121I have little faith in the free market to "correct" this disaster without significant collateral damage (meaning me and my own).
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b,121Its time to put a bullet in the head of Friedman economics and come up with something new. Its what happens when an economic theory fails. It happened with before it will happen again.
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font class="post"1b,121b,121with all due respect, you sound hysterical with this "put a bullet in the head of Friedman economics" thing. there is no reason to throw the baby out with the bathwather.b,121b,121the bottom line is: this mess is largely caused by the banks allowing themselves to get waist deep in credit default swaps without revealing nearly the level of liability that they should have on their books. credit default swaps need to be outlawed or at the least heavily regulated; new accounting standards for banks would go a long, long way in preventing this type of shit in the future.b,121b,121no need to do away with our entire banking system (much less the economic principles on which it was [partly] based).
b,121No need to do away with our entire banking system (much less the economic principles on which it was [partly] based).
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font class="post"1b,121b,121Yup - It generally works. They just got stupid greedy (well, I guess they always were) to the extent that that laws that goverened them were being dangerously circumvented.b,121b,121They were in effect shifting an ever growing grendade of bad debt around like a suicidal game of pass-the-parcel, without ever worrying what would happen if they had hold of it when the music stopped - until it got so big that everyone was touching it in some way.b,121b,121It serves them right for playing the game, but then, there is always the "Don't hate the player" argument to consider. If the banks can't exercise common sense and cover dey asses, then the law has to make them.
b,121 credit default swaps need to be outlawed or at the least heavily regulated;
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b,121CDS are a sensible method for allowing bond holders to get insurance against their bonds defaulting. To outlaw CDS would be a retrograde step.
b,121Regulation of these products will achieve nothing; no-one engaged in the trading of them has done anything legally or ethically wrong. The whole problem is that the underlying bonds were pieces of junk. People were insuring terd as if it were gold.
b,121For the most part, all the big US players in the game are more heavily regulated than they were even last week (GS amd MS under Fed jurisdiction-related).
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b,121This kind of crash happens every single generation. Older heads in the financial world get grey hair, get moved toward the exit door, then get canned. The younger bucks take over, they didn't experience the last disaster, they have arrogance and hubris, it will never happen to them.....BOOM. Cue the entry of the next generation.
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b,121No need to bring economic theory into it, this is all about south sea bubbles and sheer naked greed.
b,121with all due respect, you sound hysterical with this "put a bullet in the head of Friedman economics" thing. there is no reason to throw the baby out with the bathwather.
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b,121the bottom line is: this mess is largely caused by the banks allowing themselves to get waist deep in credit default swaps without revealing nearly the level of liability that they should have on their books. credit default swaps need to be outlawed or at the least heavily regulated; new accounting standards for banks would go a long, long way in preventing this type of shit in the future.
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b,121no need to do away with our entire banking system (much less the economic principles on which it was [partly] based).
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font class="post"1b,121b,121With all due respect, the white way of saying "bless his heart", I am not being hysterical. Nor am I calling for the end of banking system, for Friedman economics does not equal (!=) banking. b,121b,121Economic theory is a soft science in which you constantly hear the term "ceteris paribus," a Latin phrase meaning ???other things equal??? or ???all else constant.??? You hear this phrase because the economy is such a complex engine that to study it economists eliminate all other variables (making them constant) except the few variables of their specific area of study.b,121b,121The true test of a theory is when the rubber hits the road and it is implemented as public policy by government. And that brings us to a href="http://en.wikipedia.org/wiki/Milton_Friedman" target="_blank"1Milton Freidman/a1 who theorized that "free markets" and "less government" is the road to stability and prosperity as outlined in the book ???A Monetary History of the United States, 1867-1960???. And Monetarism was born. It sees government as evil and was encapsulated in the quote by Ronald Regan, "The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'???b,121b,121Prior to this we had a href="http://en.wikipedia.org/wiki/Keynesian_economics" target="_blank"1Keynesian economics/a1 which postulated that a mix of private and public sectors plays a role in our economy. It had replaced classic economic theory in the 1930???s when lassie-fair capitalism imploded. Keynesian economic theory went out of vogue when it failed to deal with the Oil crisis in 1973-1974. Our banking system still existed during these periods.b,121b,121Back to present day. If the ultimate goal of Friedman economics is the least amount of government involved in markets because the market will take care of everything (its raining money, let it trickle on you), then the current crisis is a big negative result and means that as a principle theory it has been found wanting. Your basic assumption is this is bankers fault because they got out of control. It presupposes that they will self regulate (an assumption I find laughable at best).b,121b,121One thing we agree on, we don???t throw everything away, there are perfectly good portions of monetary policy that helps keep our economy humming. However pure unadulterated Friedman economics is not answer.
b,121Schumer asked the $700 billion question today at the hearings. You can literally see the wizard behind the curtain in Paulson's repsonse. "This is about market confidence". What Paulson is saying is that once wall street knows that we have completely covered them without adding new regulation or penalizing those who overstepped then they will begin reinvesting their capital in the markets. What a bunch of fusking crap. Schumer just grabs his head at the end. Sheer disbelief.
font class="post"1b,121b,121b,121There was some guy on Hardball last night who - in response to Chris Matthews question as to 'if these assetts aren't worthless, why aren't they being purchased' - responded that the "markets are irrational" and the government had to step in and take responsiblity, and after a while the assetts would be bought up privately.b,121My question is, how much responsibility are private citizens supposed to take for the insane behavior of other private citizens, i.e. bankers, stockbrokers, traders etc? No one's waiting to bail me out if I make a series of crazy financial decisions.
b,121 credit default swaps need to be outlawed or at the least heavily regulated;
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b,121CDS are a sensible method for allowing bond holders to get insurance against their bonds defaulting. To outlaw CDS would be a retrograde step.
b,121Regulation of these products will achieve nothing; no-one engaged in the trading of them has done anything legally or ethically wrong. The whole problem is that the underlying bonds were pieces of junk. People were insuring terd as if it were gold.
b,121For the most part, all the big US players in the game are more heavily regulated than they were even last week (GS amd MS under Fed jurisdiction-related).
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b,121This kind of crash happens every single generation. Older heads in the financial world get grey hair, get moved toward the exit door, then get canned. The younger bucks take over, they didn't experience the last disaster, they have arrogance and hubris, it will never happen to them.....BOOM. Cue the entry of the next generation.
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b,121No need to bring economic theory into it, this is all about south sea bubbles and sheer naked greed.
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font class="post"1b,121b,121This said then, where you do sit on the bailout?
b,121This said then, where you do sit on the bailout?1
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font class="post"1b,121b,121I'm not neutral, I work in banking and my company yesterday bought 2/3 of the Lehmans operation (but not the terd 'assets' img src="/ubbthreads/images/graemlins/smile.gif" alt="" 21 )b,121b,121What's happened has been good for my business, potentially good for my personal income and career, but bad for the wider economy.b,121Organised banking has been with us for upwards of 500 years and it's not going away. It makes money whatever the conditions, bail out or no.b,121So I say NO NO NO! Let the scoundrels who perpetrated the idiocy go to the wall, and let the next generation of bankers and investors learn from that pain. It's evolutionarily sound and feels organically right.
b,121 It's evolutionarily sound and feels organically right.1
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font class="post"1b,121b,121thats what i'm saying.b,121lets ride this free market thing out for a couple more minutes and us the $7oobillion to help out folks on the lower rungs who have a tough time with the fallout making ends meet.
One thing I have not heard mentioned much is the idea that Congress should pretty much forget about going into recess, and begin working practically around the clock until further notice. b,121b,121Fusk Friday as a "deadline" for a "bailout." Shit done got too complicated.
b,121 credit default swaps need to be outlawed or at the least heavily regulated;1
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b,121Regulation of these products will achieve nothing; no-one engaged in the trading of them has done anything legally or ethically wrong.1
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font class="post"1b,121b,121RIF dude.b,121b,121they SHOULD be regulated to the point that the CDS activity that got us into this mess [i]would be/i1 illegal, and, hence, avoided.
This just in:b,121b,121"John McCain's campaign manager and Freddie Mac essentially had what amounts to a secret half a million dollar lay-a-way plan. For almost three years and as late as last month, Freddie Mac made secret, monthly payments of $15,000 to Rick Davis's firm, apparently in exchange for providing special access to a future McCain White House. If McCain knew about this, his presidential campaign should be in serious trouble. If he didn't know about it, he ought to fire Rick Davis immediately," said David Donnelly, Director of Campaign Money Watch.
b,121One thing I have not heard mentioned much is the idea that Congress should pretty much forget about going into recess, and begin working practically around the clock until further notice.1
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font class="post"1b,121b,121b,121there's actually been a LOT of talk about slowing the process down, holding hearings, maybe recessing, etc.b,121b,121the fear is that market confidence would be irreparably lost in the meantime. the conventional wisdom is that we have to act FAST to restore confidence.
b,121"John McCain's campaign manager and Freddie Mac essentially had what amounts to a secret half a million dollar lay-a-way plan. For almost three years and as late as last month, Freddie Mac made secret, monthly payments of $15,000 to Rick Davis's firm, apparently in exchange for providing special access to a future McCain White House. If McCain knew about this, his presidential campaign should be in serious trouble. If he didn't know about it, he ought to fire Rick Davis immediately," said David Donnelly, Director of Campaign Money Watch.1
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font class="post"1b,121b,121b,121I think McCain himself can dodge this. 1I heard, from a coworker albeit, that McCain was like "He hasn't been on their payroll for two years, anyone who wants to check his record is welcome to!" 1So they did, and it turns out dude got a payment like two months ago. b,121b,121I don't know the tiny details, but McCain could probably claim ignorance on this one, the same way he didn't know how many houses he owns. 1Hopefully someone who knows more about it could prove me wrong.1 Either way, it's bad look city, population: McCain and his staff.
b,121with all due respect, you sound hysterical with this "put a bullet in the head of Friedman economics" thing.1 there is no reason to throw the baby out with the bathwather.
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b,121the bottom line is: this mess is largely caused by the banks allowing themselves to get waist deep in credit default swaps without revealing nearly the level of liability that they should have on their books. 1credit default swaps need to be outlawed or at the least heavily regulated;1new accounting standards for banks would go a long, long way in preventing this type of shit in the future.
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b,121no need to do away with our entire banking system (much less the economic principles on which it was [partly] based).1
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b,121With all due respect, the white way of saying "bless his heart", I am not being hysterical. Nor am I calling for the end of banking system, for Friedman economics does not equal (!=) banking.1
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font class="post"1b,121b,121RIF dude.b,121b,121I put "partly" in brackets because our banking system represents a mix of economic principles. 1and it's heavily influenced by Friedman; surely you recognize this.
b,121"John McCain's campaign manager and Freddie Mac essentially had what amounts to a secret half a million dollar lay-a-way plan. For almost three years and as late as last month, Freddie Mac made secret, monthly payments of $15,000 to Rick Davis's firm, apparently in exchange for providing special access to a future McCain White House. If McCain knew about this, his presidential campaign should be in serious trouble. If he didn't know about it, he ought to fire Rick Davis immediately," said David Donnelly, Director of Campaign Money Watch.1
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b,121I think McCain himself can dodge this. 1I heard, from a coworker albeit, that McCain was like "He hasn't been on their payroll for two years, anyone who wants to check his record is welcome to!" 1So they did, and it turns out dude got a payment like two months ago.
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b,121I don't know the tiny details, but McCain could probably claim ignorance on this one, the same way he didn't know how many houses he owns. 1Hopefully someone who knows more about it could prove me wrong.1 Either way, it's bad look city, population: McCain and his staff.1
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font class="post"1b,121b,121Well he'll have to and will most likely be given a pass (on the knowledge of his role).b,121However, this feeds into the narratives that a) McCain has surrounded himself with lobbyists and b) McCain's campaign has been hijacked and he is no longer in control (this 2nd point has been widely discussed as the campaign's tactics increasingly contrast with McCain's "code" and "honor").
font class="post"1b,121b,121This is the price to pay for the Greed. Goldman Sachs said it ten years ago. Greenspan didn't do shit and helped investors and creditors to reach the current situation. And Lord knows WHO would rot if nothing is done to save their ass. Domino, Mafocka...
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sck YOU" that he's ever been given in or out of office. I'm talking Philadelphia-Speech big. This would win him the election, but more importantly, it'd win him the support of this country. John McCain has left the door wide open for him.b,121b,121Obama, Bomaye.