Posted on 09/25/2008 9:52:47 PM PDT by BurbankKarl
Morgan Stanley lost close to a third of assets in its prime brokerage last week, amounting to hundreds of billions of dollars, as hedge funds fled after the collapse of Lehman Brothers and moved to rival banks.
The losses, confirmed by several people familiar with the business, will deal a big blow to Morgan Stanley as its prime brokerage is one of its most profitable and successful businesses.
The flight of cash and stock out of the division occurred as spreads in the credit default swap market ballooned, but has since slowed to a trickle, these people said. Morgan Stanley declined to comment.
Several of Morgan Stanley’s hedge fund clients said they were likely to return to the bank once markets stabilised. The prime brokerage, which provides hedge funds with custody and loans and assists short selling, is highly rated by many managers.
Many of the world’s biggest hedge funds moved their assets to commercial banks regarded as safer last week, as they and their investors worried that Morgan Stanley could follow Lehman into trouble.
(Excerpt) Read more at ft.com ...
The Crash of 2008, which is now wiping out trillions of dollars of our people’s wealth, is, like the Crash of 1929, likely to mark the end of one era and the onset of another.
The new era will see a more sober and much diminished America. The “Omnipower” and “Indispensable Nation” we heard about in all the hubris and braggadocio following our Cold War victory is history.
Seizing on the crisis, the left says we are witnessing the failure of market economics, a failure of conservatism.
This is nonsense. What we are witnessing is the collapse of Gordon Gecko (”Greed Is Good!”) capitalism. What we are witnessing is what happens to a prodigal nation that ignores history, and forgets and abandons the philosophy and principles that made it great.
A true conservative cherishes prudence and believes in fiscal responsibility, balanced budgets and a self-reliant republic. He believes in saving for retirement and a rainy day, in deferred gratification, in not buying on credit what you cannot afford, in living within your means.
Is that really what got Wall Street and us into this mess — that we followed too religiously the gospel of Robert Taft and Russell Kirk?
“Government must save us!” cries the left, as ever. Yet, who got us into this mess if not the government — the Fed with its easy money, Bush with his profligate spending, and Congress and the SEC by liberating Wall Street and failing to step in and stop the drunken orgy?
For years, we Americans have spent more than we earned. We save nothing. Credit card debt, consumer debt, auto debt, mortgage debt, corporate debt — all are at record levels. And with pensions and savings being wiped out, much of that debt will never be repaid.
Our standard of living is inevitably going to fall. For foreigners will not forever buy our bonds or lend us more money if they rightly fear that they will be paid back, if at all, in cheaper dollars.
We are going to have to learn to live again without our means.
The party’s over.
Up through World War II, we followed the Hamiltonian idea that America must remain economically independent of the world in order to remain politically independent.
But this generation decided that was yesterday’s bromide and we must march bravely forward into a Global Economy, where we all depend on one another. American companies morphed into “global companies” and moved plants and factories to Mexico, Asia, China and India, and we began buying more cheaply from abroad what we used to make at home: shoes, clothes, bikes, cars, radios, TVs, planes, computers.
As the trade deficits began inexorably to rise to 6 percent of GDP, we began vast borrowing from abroad to continue buying from abroad.
At home, propelled by tax cuts, war in Iraq and an explosion in social spending, surpluses vanished and deficits reappeared and began to rise. The dollar began to sink, and gold began to soar.
Yet, still, the promises of the politicians come. Barack Obama will give us national health insurance and tax cuts for all but that 2 percent of the nation that already carries 50 percent of the federal income tax load.
John McCain is going to cut taxes, expand the military, move NATO into Georgia and Ukraine, confront Russia and force Iran to stop enriching uranium or “bomb, bomb, bomb,” with Joe Lieberman as wartime consigliere.
Who are we kidding?
What we are witnessing today is how empires end.
The Last Superpower is unable to defend its borders, protect its currency, win its wars or balance its budget. Medicare and Social Security are headed for the cliff with unfunded liabilities in the tens of trillions of dollars.
What we are witnessing today is nothing less than a Katrina-like failure of government, of our political class, and of democracy itself, casting a cloud over the viability and longevity of the system.
Notice who is managing the crisis. Not our elected leaders. Nancy Pelosi says she had nothing to do with it. Congress is paralyzed and heading home. President Bush is nowhere to be seen.
Hank Paulson of Goldman Sachs and Ben Bernanke of the Fed chose to bail out Bear Sterns but let Lehman go under. They decided to nationalize Fannie and Freddie at a cost to taxpayers of hundreds of billions, putting the U.S. government behind $5 trillion in mortgages. They decided to buy AIG with $85 billion rather than see the insurance giant sink beneath the waves.
An unelected financial elite is now entrusted with the assignment of getting us out of a disaster into which an unelected financial elite plunged the nation. We are just spectators.
What the Greatest Generation handed down to us — the richest, most powerful, most self-sufficient republic in history, with the highest standard of living any nation had ever achieved — the baby boomers, oblivious and self-indulgent to the end, have frittered away.
financial diarrhea
Yep. Soon they will be unstoppable if they aren’t now. Dow will lose another 300 tomorrow...
Very simplistic and not accurate descriptions of what was actually done.
If only Obama would help us!!!
If it's a good day.
I'm of the opinion that Bernanke is going to let the market free-fall without any prop-ups tomorrow in order to put pressure on the House Republicans to vote for a bailout.
Remember Ronald Reagan's chastisement of Carters "tighten your belt" mentality?
The man would be appalled at your attitude toward America.
Over the years, Freepers have had major discussions on the upside and downside of the international fiat currency system which supports globalist trade and economic interdependence. We are now seeing the downside and it is rolling like a freight train. If this doesn’t sober everyone up and force the unlimited-debt-first free traders to put their pom-poms up and start thinking more rationally, nothing will.
It is time to start earning money the old fashion way, produce something of value that the market wants. You will know we have succeeded when everyone in society gets ahead vs. a select group of financial mover and shakers and worthless CEO’s with golden parachutes. The shadow banking system has reached the end of the road, another victim of our infinite capacity for greed and stupidity.
what did really happen?
They are not planning to keep it forever.
What they have done is what Reagan's guy (name slips my mind) who handled the S&L thing suggested.
They have taken charge of FNM/FRE for a time until markets stabilize and until Congress can re-charter them. The way it was set up before (having one foot in the Gov't and one in the private sector) was destroying the housing markets. The Gov't has done the correct thing. The plan is to split it up and sell it into the private sector.
AIG...they are doing a deal whereby if AIG doesn't pay back the $85M they have loaned them the Gov't will take stock warrants. This means they could take stock up in the company up to the portion AIG doesn't pay.
However, most accept that AIG will be able to sell of some of its very valuable assets soon and begin to pay the Gov't back. AIG is already working on selling their airline leasing division so they can take back full possession of their company.
There is unprecedented amount of bad information coursing thru the airwaves and it seems that conservatives are eager to grab onto every piece of bad news and howl with glee. I see people cheering every bank failing on this forum. It's disgusting.
Repeatedly cutting and pasting the same long post tends to clutter up threads.
Yea, sure, and the checks in the mail.
What they are planning, or telling us they are planning, and what they actually do, are usually two different things.
When have government bureaucrats given up power? Think the "war on poverty". That's worked out real well, hasn't it.
” Remember Ronald Reagan’s chastisement of Carters “tighten your belt” mentality?
The man would be appalled at your attitude toward America.
8 posted on Friday, September 26, 2008 1:13:09 AM by what’s up “
I do and that is precisely why I voted for the man - even though we were struggling with a very modest income and 3 young children.
To be precise, I think that Paulson is top dog in that wolf pack, not Benanke.
“AIG...they are doing a deal whereby if AIG doesn’t pay back the $85M they have loaned them the Gov’t will take stock warrants”
What I have read on this is that, in order to avoid a shareholder vote, they in fact issued convertible preferred stock to the fed, and that it is *done*
I was going to say 500 pts. but hedged. We’re only going down from here. Next support on the DOW is 1078, but we could cut right through that support the way the FIRE economy is going.
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