Posted on 02/02/2009 12:41:18 AM PST by Tempest
The basic story line so far is that we are all to blame, including homeowners who bit off more than they could chew, lenders who wrote absurd adjustable-rate mortgages, and greedy investment bankers.
Credit derivatives also figure heavily in the plot. Apologists say that these became so complicated that even Wall Street couldn't understand them and that they created "an unacceptable level of risk." Then these blowhards tell us that the bailout will pump hundreds of billions of dollars into the credit arteries and save the patient, which is the world's financial system. It will take time—maybe a year or so—but if everyone hangs in there, we'll be all right. No structural damage has been done, and all's well that ends well.
Sorry, but that's drivel. In fact, what we are living through is the worst financial scandal in history. It dwarfs 1929, Ponzi's scheme, Teapot Dome, the South Sea Bubble, tulip bulbs, you name it. Bernie Madoff? He's peanuts.
(Excerpt) Read more at villagevoice.com ...
From the comments section:
“The number of mistakes in this article, both factual and logical, is astonishing. The fact that this article made it past The Voice’s editors should be a source of embarrassment. For starters, the author clearly doesn’t know the difference between “credit derivatives” and other types of derivatives. Ponder that for a second: the author of an article blaming the financial crisis specifically on credit derivatives doesn’t actually know what is, and what is not, a credit derivative. Amazing. For example, Lieber repeatedly claims that there’s $600 trillion in credit derivatives outstanding. That’s 100% false. Lieber is referring to the gross value of OTC derivatives, the vast majority of which are interest rate swaps. Interest rate swaps are NOT credit derivatives. The vast majority of credit derivatives are credit default swaps (CDS). According to the DTCC, which warehouses over 90% of CDS contracts outstanding, the net notional amount of CDS outstanding (the number that actually reflects the total risk in a given market) is only $2.7 trillion. Also, credit derivatives were created in 1997, so Lieber’s claim that credit derivatives totaled $8 trillion in 1994 is pure fiction. Lieber’s truly bizzare suggestion that Bloomberg is possibly a monopoly is made even more hilarious by his claim that “[i]f it has a true competitor, I can’t find it.” Umm, how about Reuters? In fact, if you type in “Bloomberg L.P.” on Wikipedia, the introductory section of the Wikipedia article lists 4 of Bloomberg’s competitors. Apparently Lieber didn’t search too hard. But hey, you can’t let those pesky facts get in the way of a good conspiracy theory! Hardly a paragraph goes by without a jaw-dropping false statement. It’s hard to imagine how The Voice could have selected a LESS qualified author to write about credit derivatives. I’ve seen more coherent arguments in high school newspapers. It’s sad that people will read this article and think that it’s true. It is not.”
Thanks to the Crooks, we are all in for a long bumpy ride that hasn’t even started yet.
They tried that with Lehman, and it didn't help (lots of cascading defaults). They are damned if they do the bailout (a bottomless pit), and damned if they don't (financial system melts down rapidly and drags down the equity market). Basically the bailouts stretch out the meltdown and make it more orderly, or perhaps best case, they allow a painful recession without a meltdown. Regardless of the outcome though, taxpayers are on the hook.
Interesting. Clearly, Michael Bloomberg, current mayor and self-proclaimed king of New York, helped run the det cord and set the shaped charges that have now detonated and are collapsing Wall Street's big houses of cards. Nor does he (and the private company that still bears his name and which he still runs) care to talk about, it would seem. Presiding over such destruction, and knowing that he's responsible for much of it, must give him a real thrill...
As for Alan Greenspan, here is a man who spent his entire adult life making money for himself and consorting with men and women far richer than the dreams of avarice. And yet he appears to have believed that such men and women would ultimately act rationally and in the best interests of the markets and political stability. Even a third-grader knows that ravenous wolves don't make the best guardians of flocks of sheep. How smart is Greenspan, really, when viewed in this light?
So while the recession wasn't bad and the investment environment was ok outside of the banks, the transition from credit and consumption to savings and investment is difficult and the government is making it much worse (threatening to clobber savers and killing off financial and real estate investors). All we need is real, long term investment, not stimuli, not floods of credit, not anything else the government is creating.
AIG reinsures the whole industry. If AIG had been allowed to fail (well, OK, AIG has actually failed), most insurance payments in the US would have stopped within 30 days - life insurance, jury verdicts, storm damage, car repairs - and instead of an election we would have had mass executions.
Whether that would have been good or bad, of course, depends on your POV...
ping
ping
There is a business cycle that happens all the time. The DEMS have taken it and turned it into the end of the world.
They only moved up the timing. The only other possibility is that credit would grow to infinity and never collapse.
Uh no....
That's another problem, the vilification of investors.
First politicians fall all over each other complaining about 'predatory lenders' victimizing deadbeat borrowers, then they raise taxes on investors to clean up the mess the borrowers caused, and finally our politicians promise that not one dime of the tax money should go for compensating investors for regulatory distortions.
I'm tempted to shift my accounts to UK brokerages.
Unfortunately, the facts don’t support their ideology. So you will be flamed. So it goes.
Nobody has to square anything. All we need is for somebody to figure out the net, and the DTCC has already been doing that for months. You can start with this article and go to the DTCC website if you want to learn more.
What appears to be an undiluted defense of the Capitalist side of the equation is actually his defense of the American people. His attacks are on government meddling and selective rewards through redistribution.
I think what you're saying is that Rush's commentary on this issue tend to be an analysis of the political side of this situation, which I would agree with.
If you can stand Beck's drama-queen BS and stage performances, he does give some pretty good info on what is happening to the economy through an analysis of our monetary system.
Or, you can go to the source of Beck's understanding of our monetary system, which is, as far as I have deducted: The Creature from Jekyll Island.
Credit derivatives get the blame for everything people don’t understand. But the truth is a little more simple: Government intentionally funnelled vast amounts of money into the housing industry, grew a gargantuan housing bubble, and then pulled the rug out from under it when it became apparent that it could not be sustained. The collapse of the financial sector was not the cause of the problem. It was the result of the problem. Without the government’s efforts, there would have been no housing bubble to begin with, or in any event, it would have been a whole lot less significant.
Oh my God...many of us intuitively knew this...but what an article. The Wall Street bastards and assorted global investors knew exactly what they were doing and are still reaping the rewards while 20 % of Americans are unemployed...this number will get worse...I count all unemployment not the BS figures Washington would like us to believe.
Basically Wall Street traders and every president Dem or GOP colluded in this debacle and destroyed the world’s economy. We see the roll of free trade as well...it was the sure knowledge that this policy would hurt Americans, that allowed them to ‘bet against Joe Six Pack and our famous hockey Moms. I want heads to roll...and money to be repaid now. AIG, Citi and Goldmans should be put into receivership and treated like the bankrupt dangerous institutions they are. Wall Street was so greedy they couldn’t wait for the economy to prospers based on the usual way...America is successful-so they killed the economy deliberately in order to make their trillions with a little help from their buddies-Congress and every president (Dem or Repub).
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