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Author Topic: the biggest proposed government intervention in financial markets since the Great Depression  (Read 7378 times)

John Ivan

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Hank raises a very important point about the opening of the discount window at the Fed. Read the link he has supplied. It is a frightening thing that so few people will have such control over the whole market..Any efforts at all to keep the average citizen in mind will be labeled as "Liberals playing politics with a serious issue facing our country"..

I don't like this deal one bit. Obama has been somewhat quiet about his specific ideas on this for a reason. He and his advisor's are working up serious policy as we speak. It will be interesting to hear what he has to say about all this as it develops.

Another thing that has only gotten worse in my opinion is the lack of quality in the individuals who end up in management and the position of CEO in so many of these companies.

Between the "who the hell are these clowns" problem, the Fed dumping huge sums of money in, and what amounts to really NO RULES in the market, it's a wonder this didn't all collapse long ago.

If things don't change on a very deep cultural level, it will collapse. Completely. IMHO.

Ivan....................
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John Ivan

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For what it's worth, I've been reading this guy a lot. He raises a point that others have as well.

http://krugman.blogs.nytimes.com/2008/09/20/no-deal/

Ivan.................
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"Transformation is no easy trick: It's what art promises and usually doesn't deliver." Garrison Keillor

 

jonathan jetter

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grant richard wrote on Sun, 21 September 2008 00:28

Quote:

things got as severe as they did because in 2004 the SEC exempted 5 firms from the normally required limits on debt-to-capital ratios, allowing these firms to leverage at much greater amounts than normally possible.

those 5 firms: Bear Stearns, Lehman, Merrill, Goldman, and Morgan.


After reading up on this quite a bit (I'm a financial market noob), this has struck me in a good way, and I'll tell you why...

If those are the only firms that were granted exemption, then we've neared rock bottom right?  It can only get better from here.


well no.  because the normal debt-to-capital ratio is about 12-to-1.  which can still screw you pretty good if a lot of your loan recipients start defaulting.
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Bill_Urick

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Steve Hudson wrote on Fri, 19 September 2008 18:03

PRobb wrote on Fri, 19 September 2008 16:44

Jay Kadis wrote on Fri, 19 September 2008 12:16

"We don't need no regulation,
We don't need no trade controls...
No dark protests in the boardroom
Hey! Congress! Leave Wall Street alone!"

I have to disagree with that. I think lack of regulation was a major cause of the current crisis. Too little regulation is just as dangerous as too much.


Methinks Jay was being sarcastic...


Also very funny....
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Good sense is, of all things among men, the most equally distributed; for everyone thinks himself so abundantly provided with it, that those even who are the most difficult to satisfy in everything else, do not usually desire a larger measure of this quality than they already possess.

RSettee

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jonathan jetter wrote on Sat, 20 September 2008 20:49

RSettee wrote on Sat, 20 September 2008 20:41

jonathan jetter wrote on Sat, 20 September 2008 18:03

this is robbery writ large.  communism under the guise of protection and security.

it boggles my mind that people are not out in the streets reclaiming their liberty by force.


Great point--ultimately, this sort of protection has more in common with Communism and Socialism. It's nice if you need it....but when a big majority of your biggest companies are losing money and need that sort of protection, you have to wonder what type of system the Capitalist society really runs. Really, it's Communism for the Capitalists that are in trouble....and if you think of it, if those companies go under, they can't pay back their loans anyways, and then there's many more jobs axed, as well.

Now THAT's what you call truly fucked.


yeah.  

i think it's important for everyone to realize that this bailout package is an extremely socialistic solution-  collective, public responsibility for the failures of private corporations.  that is an extremely dangerous road to go down.  it has NOTHING to do with principles of liberty, freedom, or capitalism.  

the scope of the problem is as huge as it is because of the LACK of competition, the public-private hybrid companies Fannie and Freddie, a market where some companies are coddled and favored while others are left to fend for themselves in a "free" market.  the problems we're seeing are born out of socialist origins.


Exactly. And you're right about the "coddling"....some companies will inevitably receive favourable treatment. I'm not sure at which ones--it could be the big 5 that you mention--but it may be extended much past that.

The interesting thing is that these bailouts are provided to the same people that will--had they made LOTS of money--it just would have went back into their own enterprises and private dividends. In other words, had they capitalized, it would have gone into a capitalistic, private scheme, instead of a communistic social public scheme. There's no rewards for the public if these private enterprises succeed. But that risk is what we are all paying for in taxes.

THAT is my biggest problem with this. At some point, if people have run their businesses improperly and are losing money, the capitalistic way is to let them go under and let someone else create a new enterprise to succeed from their failure (fire sales, auction, market share, etc).

Some of the capital--if businesses succeed-- may go to employees in the form of raises or some sort of trickle down effect, but let's face it--if a company does well, it pockets most of the money. If it's doing badly, then somehow it's someone else's jurisdiction and responsibility to save them.
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danickstr

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If you think you have figured out the financial system and how it is corrupt, then run for office.   Fix it for all of us and be the world's greatest hero.

I will take the viewpoint that the "fat cats" will continue to find ways to outsmart whatever regulations you put in their way.  I am not advocating that we do not even try.  Of course we should limit the leveraging based on what we know now.

But isn't it easier to just sit and blame the "corrupt government"  rather than to look at what actually happened and plan for it to happen again, in a new set of clothes?

If you look at the positive impact of what the RTC will do. (resolution trust corp) then this is a great save.  Letting big financial firms fail will HURT you more, whether you like it or not.

Letting them get this far ahead of the game is just politics as usual, when there are a bunch of smart wall-street guys and less smart government guys.
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Nick Dellos - MCPE  

Food for thought for the future:              http://http://www.kurzweilai.net/" target="_blank">http://www.kurzweilai.net/www.physorg.com

cerberus

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henry paulson on his knees.
oh please, stick it in
his bentelys.

danickstr wrote on Sun, 21 September 2008 13:14

resolution trust corp


congress is scheduled to recess in a week.  
who is feeling panicky? and why?

i feel more shadenfreuden.
(not every american is
leveraged x12 or
more).

the do nothing congress might
be best doing nothing.

jeff dinces

danickstr

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Jeff I agree that time would be nice, but the markets, believe it or not, were on the verge of collapse.  Too much bad debt leveraged to the point where every mutual fund was about to run for the exits, i.e. gold or treasuries.

Current money markets hold over 3 trillion dollars, managed by people who lose their job if they lose too much money.  They may have completely pulled out of all financial stocks, leaving us with about 2/3 of the banks that could open on the next morning.

 Deposits insured by the FDIC would have had to have been paid immediately to keep people from bouncing checks.  It would have cost more to the economy (and probably the govt) to let that happen.

This would have had catastrophic effects on our banking and credit system, not to mention it would have pissed off our biggest creditors, Japan & China.  They hold several trillion dollars of US debt, if you account for private and govt. debt.

We need them to continue extending us credit by buying our treasuries, whether we like it or not.
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Nick Dellos - MCPE  

Food for thought for the future:              http://http://www.kurzweilai.net/" target="_blank">http://www.kurzweilai.net/www.physorg.com

cerberus

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how about -> 700b into the fdic.
full stop. let it drop.

?

jeff dinces

neilio

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Steve Hudson wrote on Fri, 19 September 2008 17:03

PRobb wrote on Fri, 19 September 2008 16:44

Jay Kadis wrote on Fri, 19 September 2008 12:16

"We don't need no regulation,
We don't need no trade controls...
No dark protests in the boardroom
Hey! Congress! Leave Wall Street alone!"

I have to disagree with that. I think lack of regulation was a major cause of the current crisis. Too little regulation is just as dangerous as too much.


Methinks Jay was being sarcastic...


ummm, sung to the tune of another brick in the wall by pink floyd....

we are fucking dense these days, myself included.
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neilio

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Hank Alrich wrote on Sat, 20 September 2008 23:16

danickstr wrote on Fri, 19 September 2008 18:02

 I think I have made it abundantly clear that I am in the liberal camp, but this one is a good save by the government.

The alternative is not knowing if the bank will have your money tomorrow.  This crisis was on par with the great depression, as far as real dollar values.

The events that lead to this collapse of financial confidence are the classic ones:

People much smarter than the regulators find a way to "exploit" the system, using decietful practices.

You cannot out-regulate these people, because they are smarter than the regulators, and infinitely creative.

What you have to do is punish them as much as possible, which is what Bernanke did, to a degree.  He picked three, Lehman Brothers, AIG and Merrill, and handed them their asses in varying degrees.

That is all he can do without risking your and my banks failing on a domino scale.

Then you clean up the mess and curse the smart people for dicking with us.

And you wait for them to do it again.

It is kind of like ants.

You try to keep ants out of your house, and eventually they find a way in.

That is how the minds of these slick-haired 25-65 year-old money masters are always working the system.  Looking for that new way to outsmart the government employee-created rules.

They succeed and they make 50 million dollar bonuses.  Their scheme succeeds for them and the rest of us fail, and they may lose their jobs, and destroy millions of people's investments, but they don't care.

Blame them.  Not Ben Bernanke and Hank Paulson.

Not even GW Bush,  Those guys are not smart enough to stop these money speed freaks.

Not even close.





Oh,yeah? Much of this mess is directly attributable to Fed Reserve manipulation of the money supply to put way too much of it in circulation, to keep the good times a' rollin'. Paulson was an aide to Erlichman in the Nixon admin. I'm not willing to think he's grown a lot on integrity since then.

This isn't about saving your money in the bank. It's about saving the asses of the fat cats. And in the long run, the gov coughing up a trillion-plus bucks to "save the world economy" is going to devalue your money plenty. Further, there is nothing in this "rescue" that addresses the sickness of greed and deceit that has run us rampantly into this morass of "investments" at the monster banks and the rest of their Wallstreet hog buddies.

You might want to check out a little something that's up with this rescue bill...

http://blog.kirchhof.com/?p=119


you are both right...i think.
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cerberus

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danickstr wrote on Sun, 21 September 2008 13:55

They hold several trillion dollars of US debt, if you account for private and govt. debt.

We need them to continue extending us credit by buying our treasuries, whether we like it or not.

i am not sure why we need to live way beyond our
means. that part was never explained to me.

jeff dinces

jonathan jetter

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danickstr wrote on Sun, 21 September 2008 13:14

If you think you have figured out the financial system and how it is corrupt, then run for office.   Fix it for all of us and be the world's greatest hero.

But isn't it easier to just sit and blame the "corrupt government"  rather than to look at what actually happened and plan for it to happen again, in a new set of clothes?

If you look at the positive impact of what the RTC will do. (resolution trust corp) then this is a great save.  Letting big financial firms fail will HURT you more, whether you like it or not.

Letting them get this far ahead of the game is just politics as usual, when there are a bunch of smart wall-street guys and less smart government guys.



the way to keep this from happening again is to let these companies go broke.  that's the only real consequence that will have a lasting impact in the market.

and yeah, the initial bankruptcy of these firms would hurt probably more than the immediate cost from the bailouts.  in the same way that amputating your arm hurts more than the immediate effects of gangrene on your fingers.  

we DID see this happen before.  remember the S+L scandal from 20 years back?  we had the same solution then.  bail out criminal enterprise with taxpayer money.  how well did that stop the same situation from happening again?

if we don't hold people accountable for running what is essentially a massive ponzi scheme, then they're going to do it again.

if that fucks up wall street then maybe this country can't afford a wall street.

if that fucks up our standard of living then maybe we need to get used to not having SUV's, 60'' plasma televisions, and $12 martinis 4 times a week.

by refusing to deal with the problem now, you are condemning future generations to the increased strain from a massive national debt, and you'll be holding your children responsible for a gordian knot of an economic mess that is simply not their fault.
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cerberus

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YZ

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cerberus wrote on Sun, 21 September 2008 16:30

bill moyers journal


Why is it that such news only reach the media when it is already too late?

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regards,

YZ
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