Posted on 09/15/2008 1:16:57 PM PDT by illiac
Bad day for Wall Street
(Excerpt) Read more at finance.google.com ...
Nice summary. I would add another villain, the credit rating companies, who conspired with Wall Street to create massive amounts of bogus AAA rated paper, which was collateral to loans and represented bogus capital on their balance sheets.
I totally agree that Washington was completely asleep at the switch while these totally unregulated derivatives markets grew into an enormous systemic risk.
Hubris on Wall Street, a culture of greed from people thinking they could “flip this house,” to Washington completely asleep at the switch.
We’ll be ok, but this one is going to be extremely painful, probably with more to come.
The basic thing to keep in mind is that huge pools of bonds were created, backed by mortgages on inflated real estate, with the expectation that the housing market would rise forever. There’s more, but many of those financial assets, bonds, are wiped out in value.
When real estate recovers, things will settle out. Not before. The problem now is that this thing has the possiblity of spreading.
McCain really needs to get someone who is up to speed on what Wall Street does (or used to do). We need sensible regulation.
Before someone flames me again for using the R word, I believe the free market needs to operate, but the government needs to set the rules of the financial game. Right now, its the wild, wild west.
Speed limits on the highways are regulations — I wouldn’t want to drive without rules of the road.....
The “masters of the universe” should be sent an overdue pay bill. They are nothing more than criminal scammers.
As I posted earlier you need to get the word out to MSN who has been carrying stories that that “bank” is in trouble.
If Hussein is elected, far more than the market will be falling..........for sure!
Great post.
One caveat about regulation: Wall st bankers want regulation in return for bailout promises by the Feds ie the taxpayers. The dems are willing to go there...that would be catastrophic.
It will be interesting to see how many people will still believe in the free market when this is over. Like seeing a pretty girl without her make-up.
Thank you. IMHO, the word “regulation” itself is meaningless. The details are what is important.
I’m just soooooooo happy I left that nasty, greedy, arrogant Wall Street/Manhattan crowd over ten years ago. Some are materially rich, but spiritually bankrupt. I prefer being with the folks like me who bitterly cling to their guns and religion.... ;-)
Congress passed the Smoot-Hawley tariff in an attempt to protect American industry. That led to other countries adopting protectionist tariffs, which ended up strangling international trade. This made the Great Depression worse because it shut companies out of international markets.
At best, government is useless when it comes to "fixing" the economy. At worst, it makes the problems bigger.
Actually expat_panama is not pushing free markets. He’s pushing “free trade” which is corporatist fascism. “free trade” is a false name meant to mislead the uninformed.
That's my fear- that people will succumb to fear and demand that the government "do something!"
Oh, I take what is happening in the entire investment community very seriously. If I had the ability to fix the situation I would do two things:
First, I would sanction All of the actors who created this situation in the first place. Right at the top of list would be the Fed Gov’t which—through MAC and MAE—started the ball rolling when it raised the requirement for low income mortgages from 20% to 50% of mortgage industries total mortgages a few years ago. Then I would prosecute all of the CEOs and senior management people in Bear Stearn, Lehman, AIG, Merrill Lynch etc. for criminal irresponsibility—not to mention fraud. These people get paid huge amounts of money because they are supposed to be smart. There is no way they did not know what the end game would be for loaning money to people with poor or worse credit history. Poor credit risks are poor credit risks for a reason. When the industry started giving out loans to people without income,or insifficient income, to cover a minimum monthly mortgage payment today’s situation was inevitable.
Second, government’s role is not to bail out businesses who fail—for whatever reason. That is not to say that if I were US president I would not take an active role in facilitating private sector solutions. But, let’s take a look at what history tells about gov’t (tax payer) bail outs. Crysler got one back in the 80s. True,it was essentially a bridge loan which—to Chrysler’s credit—was paid back early. But, what do we have today? Without a doubt Chrysler will be seeking another get out of jail free card soon—along with Ford and GM. So what did Chrysler and the other car companies learn? If they make bad business decisions gov’t (the taxpayer) will bail them out.
On top of that you would add all the failing financial companies that are going belly up. Well, where does it stop? If permitted, the market takes care of poorly managed companies. They go out of business. I’m curious, why would you want poorly managed companies to survive in the first place? And please, spare me the argument their failure will be devastating for the economy. In the short term, that may be true. But allowing them to survive only puts off the inevitable—remember Chrysler. Do you think propping up bad businesses encourages or discourages the behavior that got them where they are?
Impossible. The slobs wanting the loans they could not afford had ZERO authority to approve their own loans.
That authority was in the hands of the professionals in the lending industry.
Very simple.
Now if you can show me lending institutions that allow those wanting the loans to have the authority to approve their own loans, then I might agree with you.
But we both know this is not the case.
Thats why I gave you the cop/drunk scenario. The drunk has no say about going to jail. Just like the poor slob wanting money, he too has zero ability to approve and authorize his own loan.
Even Adam Smith thought there should be some controls on the “free market.” Gubmint controls add a measure of stability.
My fear isn’t that they’ll do “something,” it’s that they’ll do the “wrong thing.”
Aw hell, some women think that make-up is so important but I keep telling them that they look great with nothing on at all.
Look, free markets are good. Complainers hate it when say, home prices are high, then they turn right around and complain when the prices are too low. I like it when stock prices go low because then I can buy more of them. I like it when stock prices go back up because I get more money when I sell them --but that's me, I'm happy and successful. We seem to hear from too many unhappy and unsuccessful people these days I guess...
I never said they caused the GD- they just made it worse and caused the recovery to take longer.
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