Posted on 09/30/2008 1:18:37 PM PDT by Salena Zito
Not everyone gets the Wall Street-Main Street connection.
But they should, because both streets intersect on every block in America.
“In the sense that if the credit market dries up on Wall Street, capital will be unavailable on Main Street,” said University of Arizona political science professor Robert Maranto. “So no car loans, house loans, business loans and the like.”
In the short run, Maranto explains, there is no reason to panic, but over two years it would lead to higher unemployment. Maranto also reminds that most of Middle America's savings are plowed into the stock markets, “so if the market loses value we all take a hit.”
University of Virginia political science professor Larry Sabato said he is not surprised the House of Representatives defeated the bailout bill Monday.
(Excerpt) Read more at pittsburghlive.com ...
That may be. But every Freeper, regardless of good intentions, who has been posting to the effect that "there will be BLOOD in the streets Thursday Friday Monday Tuesday!!" has not only been acting in a way that would encourage panic, but also ,by those repeated wrong predictions, helping to foster the equally wrong belief that everything is perfectly OK with the financial system.
Whose Main Street are they talking about?
Ths morning,I went to my local bank to renew or remove a CD.The manager gave me the same rate that another local bank was offering.
I asked her if they were involved in the sub-prime mess and she said “no way,we are a community bank”.
I asked if I could get a mortgage or car loan,and she said”certainly” if you qualified,and it appears that you do
The only time that I have ever agreed with Dennis Kocinich is the other day when he said that he was elected to Congress not the Board at Goldman-Sachs.
Government out of private finance, no matter the cost.
Better to take the hit now rather than true economic collapse later.
To those with 401K or other investments... I can only sympathize with you only so far...
Your money investment = Your responsibility
I’m a dumba$$ when it comes to this sort of stuff, but then again, I never invested a penny, in anything, so I’m allowed to be ignorant of nearly all things financial.
If some person that you mayhaps never met face to face with does things with your money as far as investments and funds, well I can only say sorry if you take a ‘hit’ due to this mess. Don’t get me wrong, I do not scoff, laugh, or not empathize with your loss.
But I pay taxes, and I’ll just go out on a limb and say everbody that can afford to invest in anything also pays taxes.
Now here’s the real gist, either cover the losses at taxpayers expense now and have to bail em out again in the future (most expexted), or take the hit now.
During Jimma Cattas catastrophy, the words of doom were written illegibly in crayola by liberal idiots, then during The Clintonian debacle, they were severly enforced by idiots with power, with no concern of the future consequences. That these idiots did not, and would never think of folks like us, should not have been a surprise.
Take the hit now or lose your freedom.
oops - good advice - i am suffering from burnout on this financial stuff and overdosed on wikipedia trying to understand derivatives, mark to market and such
makes me nostalgic for the good ole clinton days - it was easier to get my mind around the cigar thing - and the research was more fun
sigh
Have you noticed that every financial big shot interviewed on the msm is absolutely sure that there must be a bailout immediately or the very heavens will fall. I bet there is not even one of those ‘big shots’ who is not heavily invested in the very securities that have caused this recent financial debacle and who now desperately needs forced taxpayer money to save his bacon.
I agree.
This entire thing is not about out-of-whack mortgages. I’ve check on realty sites, and the national annual rate of foreclosure is not strikingly different than it’s ever been.
It is much worse in California, Nevada, and Florida. I suspect that what’s happened is that the banks made loans in a hyper-inflated market, and THOSE loans cannot be recovered because the house value bubble burst. The banks loaned 300 grand for a house worth 150 grand, but that the bubble had priced by appraisers for 300 grand.
The banks then sold these loans to Fannie & Freddie who bundled them for sale to fiancial institutions. Along come derivative speculators, and then at a MACRO level they paralleled the house-flippers at a smaller level. The house flippers would buy 4 or 5 of these inflated houses intending to flip them for a huge profit in that inflated market. The bubble burst and they got stuck with their 4 or 5 houses that were now worth about half of what they paid for them. They bankrupted.
At the macro level the bundle purchased was suddenly worth half what was paid, and no one wanted to speculate anymore. These folks were left holding worthless bundles, or in the case of derivative speculators, they were left on the short end of a bad bet.
So, in sum if we give money it HAS TO BE at the bundler and higher because the banks have already been paid for the houses by the freddies and fannies and are paid about 25points a year to service the loan. They no longer have interest in those mortgages.
The money, we’re told, is to put credit into the system, but it is money for the benefit of whom? Not the borrower, not the bank because they have been paid by Fannie/Freddie.
Someone up high ate a bunch of inflated house prices that they were gambling on, and now they need money to....????
If these guys are loaning money who isn't?
Please let us know the names of banks not willing to lend?
Sabato says Wall Street executives are lucky they haven’t been lined up against a barn door and shot, with the blindfolds cut from their golden parachutes.
Big Media spiked it but there was a pretty big demonstration on Wall Street in front of the exchange yesterday. One sign said “Jump you F-ers”.
“In the sense that if the credit market dries up on Wall Street, capital will be unavailable on Main Street,” said University of Arizona political science professor Robert Maranto. “So no car loans, house loans, business loans and the like.”
The “political science” professor is NOT an economist and Wall Street is not main street.
Notice who is being “bailed out” for the most part - “Wall Street” investment “banks” - not Citibank (just bought Wachovia), not Chase (just took over WaMu), not Bankamerica. Notice also that the last remaining “investment banks” - Goldman Sachs and J.P. Morgan will become full fledged commercial banks, as well.
It is revenue on “Wall Street” not revenue on main street that is drying up, or in a better sense, the ability for “Wall Street” investment banks to raise revenue (among all industries their stocks are the most in the tank).
Commercial banks have the millions of depositors and credit card customers that, by the nature of the normal economic activity, generate new revenue.
It is the credit market “to” Wall Street that is becoming illiquid, but outside “Wall Street” investment banks, in the commercial/residential banks and the rest of the businesses in main street (companies that actually produce something), revenue continues, and, if everyone does not get too excited, so will “credit” (based on that revenue).
It amazes me that the idea is accepted so easily that with Merrill et al gone companies cannot get their equities traded on stock exchanges. What, you think companies themselves cannot buy their own seat at an exchange and hire brokers at Schwab or E-Trade? They have to have a Merrill do it for them? Or, that they cannot themselves go to the private capital markets and provide warrants directly to investors instead of paying Goldman millions to borrow the money for them? The money, the capital is out there; it’s just not sitting so much in the companies that squandered it.
I (personally) know about a few billion in a few current deals that have no banks of any kind involved and I am not even in the business and my friends are small fries in it.
If commercial and community banks need operating capital,don’t they borrow from the Federal Reserve,at reduced rates,and then loan that capital at market rates.....or am I wrong in my thinking?
So if the Fed operates,where is the credit problem on Main Street?
“So if the Fed operates,where is the credit problem on Main Street?”
That is one source, but so is their own revenue.
And, the Fed may be a little less “giving” at the moment, because it is itself giving up capital to shore up (bail out) various pieces of the financial system.
For some institutions it is, altogether, a bit of a contest between obtaining capital to lend and obtaining capital to shore up book balances to meet regulatory requirements concerning the permitted spread between the value of assets and the value of liabilities (when underlying asset values have declined).
As long as the economy continues to perform reasonably well, revenue in the commercial bank sector will continue to help fund new capital, even if at a reduced rate. If the economy falls precipitously, the revenue fall to commercial banks will add another issue to the contest to raise capital. That contest is what now leads the weakest banks to fail - WaMu, Wachovia. Inside the bigger banks that acquired them, the larger revenue stream may be enough to support the liabilities they took on; particularly considering the fire-sale prices paid for them - little cash in one case, all stock in the other.
Not extortion at all. It is just the way capital markets work.
__________________________
They’re working?
“This entire thing is not about out-of-whack mortgages. I’ve check on realty sites, and the national annual rate of foreclosure is not strikingly different than it’s ever been.
It is much worse in California, Nevada, and Florida. I suspect that what’s happened is that the banks made loans in a hyper-inflated market, and THOSE loans cannot be recovered because the house value bubble burst. The banks loaned 300 grand for a house worth 150 grand, but that the bubble had priced by appraisers for 300 grand.”
Maybe what makes it much worse for the banks is that in prior foreclosures you never had the fall in house value as well. So you foreclose and resell at maybe 70% of original listed value. Now those numbers could be at 40% or even less if the house is trashed.
You are correct that foreclosure numbers are high but not huge (around 1-2% or ~1 million homes), and this is localized. At the same time, it is spilling over nationally in terms of home sales, new home building etc.
Wouldn’t lenders have some way of moderating their exposure in an inflating housing market? Surely there’s a way to differentiate between probable speculative price rises and probable real market price rises.
It is not a matter of who is lending, but of who is getting loans. People with Sterling credit and 800 FICO scores are being saturated with offers. The point is, the lenders are afraid to lend even to moderate risks anymore. You have to be a very low-risk borrower with impecable credit history to get a loan right now.
There are pleanty of stable companies out there, and stable banks. Those that did not operate with heavy debts are fine, the argument that everyone needs to borrow money is nonsense.
Those companies that operate heavily debt financed are going to have problems, and banks that heavily invested or loaned out questionable investments or loans will go under.
What is dying here is not america folks, but the crap idea that you can exist and prosper as a debt economy.
It will get ugly, make no doubt, and a lot of people who had nothing to do with this mess will get hurt, but in the end we will all be better off.
The reality is this Wall Street.. loaning money has moral imperatives just like borrowing money. ANyone who knowingly loans money to someone they know cannot afford the debt and cannot repay is no less immorral than the shyster who takes out a loan with no intent to repay. You loaned money irresponsibly, you deserve to go out of business. Taxpayers should not be loaning you money, or Buying out your bad debts, to bail out the same folks who made the mess in the first place.
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