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 ...
Read the article...this is certainly not enough to bring down the world economy...the precious ‘free marketeers’ who were not really free market at all. Stop trying to excuse these bastids because we don’t buy it. It was market manipulation all the way. The Wall Street crooks did this with the help of our government...and now they are crying about just let the free market work...when hell freezes over I say. We should assume these guys to be criminals and regulate accordingly.
I remember thinking several years ago the problem was actually one of too much money. As if that could ever be a problem! The old faithful investments that had kept the old money families for generations were suddenly not paying enough to keep these people in manner to which they had become accustomed. As the money level went up, interest rates went down. So they started looking around for other places to put their money. One of the areas that got their attention was credit cards. Credit cards where they could demand, and get, rates that would have been usurious, if not obscene, a generation ago. But the only way to write enough of this stuff to really make money was to market the cards to people who had previously been unable to have a Master Card, Visa, etc. They had been denied bank cards in the past for the simple reason their credit history and/or income were not compatible with the standards the banks had learned from decades of experience were needed to avoid default. For the first time in history it became possible for the average person to load up on credit cards and run up $30,000 or more in balances in a very short period. All was fine for a while, especially for the people who made and sold all the neat things that were suddenly within the reach of all those credit card holders. But then reality set in and the trouble started. They could no longer make the payments, either because no one had limited the debt they were taking on, or they lost their job and the defaults started. Add to that the loads that were being taken on by home buyers, then the collapse of the home market and you have what we have now.
I know it’s a whole lot more complicated than this, and there’s a whole lot more to it than just this part. IMHO, we simply started spending money we didn’t have and couldn’t hope to repay.
You are right Mm62. IIRC the Lehman CDS issue, trumpeted loudly in the media essentially netted out - maybe a billion or so was uncovered.
What is at issue here is fractional reserve banking. The bank cannot afford to lose $200m to fraud and there is a ton of fraud (caused by FNM/Fmac’s 40% position in the 2ndary market). It causes a major drawdown of capital to cover the loss and dries up lending as their reserves are destroyed. That is what is happening to banks. That is why a small loss hurts - banks use leverage as well.
I’d worry more about the government response. Rewarding failure, keeping the politically connected afloat w/taxpayer monies, and Obama’s Democratic Party Entrenchment Bill will simply exacerbate the problem. Of course, Bush started it by ignorning his free market instincts.
Obama could solve the mess by eliminating cap gains, corp income taxes - watch capital flood the American market -, eliminate mark to market accouting (stupid idea sorry Barry R.), and kill the most onerous aspects of SOX. If any money is parsed out, give it to solvent banks who must use it to acquire bad banks or for lending - give it a prime +18% interest rate if used for any other purpose.
You want to excuse Bush I, Clinton and George Bush...I don’t. Two out of the three presidents were GOP and when the bucket laws were thrown out, the GOP controlled Congress...this is not a partisan issue...All our elected official-Dem or GOP- played their role and destroyed our economy and possibly the world’s economy.
An exponential increase. Weapon of mass destruction indeed.
Reward the bastids that caused this-no way. Not one dime should go to them until we figure out how to regulate them effectively...no tax relief for these criminals.
Great post - too bad the vast majority of people - including those that think they know politics don’t read this story and see who and what is at the core of our social and economic probelms. If 5% read this sotry there would be marchs in the street and the RATS would be exposed. By the way the same people behind the Models for Hedge funds wrote the same Climate models. I don’t mean the same exact people I mean “the smart” people. Who will expose them and their silly connections to the RAT and socialists?
Savvy investors knew Madoff was cooking the books. Greedy ones took the bait. That is the market. Losers pay (except when you can get a govt. bailout).
People need to attend more carnivals and get exposed to the huckster's pitch. We are becoming a nation of protect-me sheep.
What if there was no SEC who would we blame then? How about ourselves.
You are a very wise man. I love your about page.
Again...you are talking about individuals...the whole point of the argument is that individuals did not cause this...you think the traders in London were issuing bad credit cards? I think not...blame those who did it...not the average American.
bump for later reading
We could hope that our government while not protecting us would at least not actively work against us...the bucket law repealed under a GOP congress seems to be the mechanism that allowed this to happen...They hid the truth from us...the usual market warnings were absent.
Please read my post - 88.
bump for later read
The facts do not support the globalist and have not for a long time...it was globalization that allowed these losers to set up shot in London...and in other places. Some freepers will be standing in breadlines soon...pontificating about the so called free market.
In early 2006, late 2005 I knew the RE market was parabolically skewed. I adjusted my investing accordingly. No government agency gave me a “market warning”. If I go under who should I blame? How about looking in the mirror and taking responsibility? Isn't that what liberty is all about?
Stop trusting government to do your job. That is the heart of liberalism - nannyism.
OK...sure...and how do you do that when the government in collusion with the street has destroyed the economy...look around you, massive job losses underway...pretty hard to deleverage when you are unemployed.
I missed this one. What do you mean by so-called free market?
If this is true, then the federal government is not only complicit in the trashing of the US economy, it was and still IS deliberately continuing to steal from US taxpayers by forcing these endless unconstitutional and worthless “bailouts” upon US citizens, which amounts to stealing the barn after the horses have already been stolen.
It’s evil, criminal and these idiots should ALL be behind bars. Instead they are continuing in their efforts re: running/ruining the country. I always knew they, leftists, would ruin the country but I had no idea to what extent and how rapidly it would occur. It’s stunning.
Good point, well taken. That’s why I took the time to write it out to that extent. I have little financial background and look to people with more expertise to help me figure things out from time to time.
A question though, are those individuals the foundation for all the cards and houses, etc. that were used to issue the new found arrangements that eventually failed? I’m just curious.
A million thanks!
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