Bits Bucket For March 27, 2009
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Rep. Ron Paul
Texas Straight Talk
Mar 27, 2009
The distraction on Capitol Hill this week has to do with the jackpot bonuses that executives at AIG recently received. The argument is over a relative drop in the bucket. The total amount of bonuses given out was $165 million. The government has put $170 billion into AIG so far. Many now are demanding we get this money back. We ought to be spending our time and effort doing something more worthwhile, like figuring out how the Federal Reserve is handling the trillions of dollars they are creating and pumping into the economy, and how that is affecting the purchasing power of dollars in your pocket.
The big mistake was appropriating the TARP funds in the first place. A Johnny-come-lately bill of attainder won’t stop the spending epidemic. This whole situation is a perfect demonstration of why “doing nothing” and letting failing companies fail would have been much better than sinking valuable money and resources into them.
When a company makes a profit, it is a signal that it is taking resources and increasing their value while controlling costs. When a company operates at a loss, it is a signal that it is decreasing the value of its resources or letting out-of-control costs outstrip any value it has created. A company operating at a loss is therefore an engine of wealth destruction. Bankruptcies are a net positive for the economy because more productive competitors are rewarded by opportunities to buy up remaining assets at bargain prices to strengthen their operations. In an economy that allows this kind of growth and change, any jobs lost by bankruptcy are soon replaced by new ones as the most efficiently managed businesses gain access to more assets and expand.
Bankruptcy was the stimulus that we needed in the case of AIG. More bankruptcies would clean out malinvested resources and enable economic growth again.
AIG, by losing money and maneuvering their operations to the brink of bankruptcy, was telling us that they were inefficient. So what did we do? We forced the taxpayer to assume the losses, and now we are supposed to be shocked that it is not working out. Had AIG gone bankrupt, it would have been impossible to hand out these bonuses. The taxpayer would have been fleeced for $170 billion less last year. Had they gone bankrupt, the world would not have come to an end, it would just continue on with one less engine of wealth destruction.
We should have learned from Japan. The 1990’s is referred to as Japan’s “lost decade” because of the zombie banks kept on life support by the Japanese government. Any productivity was redirected through these engines of wealth destruction, resulting in long term stagnation. We should and can avoid this outcome if we come to our senses.
A recession should be a time of strengthening and regrouping for an economy. But as long as the government insists on maintaining the status quo by propping up failed institutions, we will continue to dig a bigger hole for ourselves.
Rep. Ron Paul
This makes way too much sense. Get this man out of govt immediately, he’s going to give someone a headache with all these facts and well reasoned arguments. We need more frantic/non-logical people deciding how to run this economy. This well-reasoned, intelligent stuff has got to go.
Political offices attract the most crooked, lying, cheating people who claim they are doing good intentions. One exception only: Ron Paul. The oddest man out. The one and only living statesman.
I would add the independent senator Bernie Sanders. He don’t that shit from either party. He leans left but is OK in my book.
http://www.alternet.org/workplace/133474/stop_the_madness:_bernie_sanders_tries_to_block_appointment_of_latest_wall_street_insider/
The one and only living statesman.
The continued attempt to deify Mr. Paul grows tiresome.
True. We already have one political deity in the oval office as personified by His Highness Barack Hussein Obama. Dr. Paul’s services are not required at this time, nor is his common sense.
Not as tiresome as the amount of people who continue to insist he is a nutcase. I would personally worship logic and common sense, and realism. If your preference is panicked swigs of Kool-Aid, be my guest.
Why don’t you find the clip of Dear Mr. Paul where he says he fully supports the earmarks in the porkulus bill.
Mr. Libertarian who supports earmarks.
The problem is that AIG is “too big to fail.” It’s like having almost everyone covered by the same health insurance company. There’s only one company, then the company is stupid and doesn’t collect enough premium, and then a bunch of people drink poison koolaid and get sick at the same time. The insurance runs out of money fast and now can’t pay ANY claim. If you allow this one company to go bankrupt (what Ron Paul is suggesting), every single hospital and doctor’s office shuts down, and no one gets treated, even for a strep infection.
It was a three-pronged failure. Somebody allowed the company to be the only company around, somebody allowed the only company to take too much risk, and somebody didn’t tell the people that the koolaid was poison. This could have been avoided by going in sooner and preventing any one of these three. This is the power that Geithner was asking for yesterday on Capitol Hill.
Now that it’s blown up, there are now three choices. Paulson could either lend the company taxpayer billions so they could at least continue to treat the sick; ie lend money. (That’s why they ultimately did. Instead, the company paid their past due bills on dead poison victims). Or, Paulson/Geithner could use taxpayer billions to set up a brand-new company to treat the newly sick. That’s “nationalization” and “socialism” — perhaps Ron Paul would approve of that? Or maybe just do neither, and let people die in the streets. That’s what Ron Paul seems to want the most.
You saw how people reacted when Katrina hit. I can picture the same thing when people’s ATM/Check Cards are declined en mass.
Baby needs diapers now!
Bankrupt companies don’t immediatley stop all business. AIG failing would not be the end of the world.
Not all companies are the same. A lot depends on your customer base. Airlines do fine because their customers aren’t really affected. Financial companies are just the opposite in that customers don’t want their money to go down with the ship. That’s why you rarely read about financial companies filing chapter 11 & coming out of it. They usually just get sold off with their creditors taking a hit.
“Financial companies are just the opposite in that customers don’t want their money to go down with the ship.”
That doesn’t make much sense to me. The bankruptcy trustee should ensure that post-BK transactions are treated differently than pre-BK transactions. If anything, that should be the safest time to deal with a BK financial company.
AIG failing may indeed be the end of the world. The more we look at it, the worse it gets.
AIG’s situation has gone beyond economic and into geopolitical. This is very dangerous territory.
And finally, businesses may not fail immediately, but closing down within a few months is close enough. Seen the news lately?
How many people know that the Office of Thrift Supervision was the primarily regulatory body in charge of ING?
I knew that
I knew it, too.
I knew it, too.
Nah. I didn’t really. I just wanted to sound cool, like SanFranGal.
One day I shall stop lying.*
*That’s a lie, right there.
(falls off chair giggling)
No one is going to die in the streets if AIG goes under.
Exactly. WTF is with all these dire scenarios if some crappy firms go under? And mostly from the same people who didn’t want to hear about doomsday 3 years ago - hell even 1 year ago. If you laughed in the face of doom-and-gloomers yesterday, you lose the right to invoke that argument yourself today, morons.
The sad thing about this country is that it’s never about what’s being said. It’s about who is saying it.
The metaphor does break down a bit. Individuals having to qualify for loans under traditional lending standards and society having to live with greatly reduced lending (regulated lending, rather than securitized unregulated lending) isn’t quite the same as dying on the streets. I believe the economists think it is because it would inevitably lead to massive deflation in items purchased on credit, but all their arguments seem to be based on an assumption of long slow deflation, not quick and sudden.
By the way, when I worked on securitization transactions in NYC, we required the securitizer to hold at least 10% of the pool as the equity tranche. They had plenty of reason to be sure that the losses were minimized since they had to eat the first 10% of losses.
It is only a “failure” if the goal was NOT to achieve the “perfect business model” - getting endless Bailouts to transfer money directly from the taxpayers to the pockets of the insiders.
I think my position on RP is clear.
A true patriot who happens to be a politician.
You would find Noah’s ark before you found another like him.
Mike
Ron Paul still gets ear marks for his district included in spending bills. He may talk the talk, but he doesn’t always walk the walk.
He knows to be re-elected he has to bring home the pork like every other politician.
Of course you leave out the fact that when the bill comes up for a vote he votes no on it!!!
Ear marks only decide HOW money is spent, not HOW MUCH money is spent. If Ron Paul did nothing the same amount of money will be spent, just in different places.
Ear marks do not increase spending! The alternative is to let Obama decide how to spend the money…
I love that logic!
I think it applies as well to serial killers. After all, people are going to get murdered, serial killers just pick who gets murdered.
Skip, the money has already been stolen… it is not like you can convince government to “reduce taxes”. So, either Obama decides how the money is spent, or your cognressman decides, the murder in this case is those that are against ear marks.
Also, Ron Paul votes AGAINST those bills with his ear marks in them. The fact that they get passed is not his fault.
Ear marks are NOT pork, you will never see Ron Paul supporting pork spending.
One man’s PORK is another mans vital bridge, economic developement plan ect.
He may vote against them, but one can do just that when they know they have a snowballs chance in the low desert, or hell, and still get the funds so his constituency gets their goodies.
The REAL danger of earmarks is not their amount, it’s the fact that politicians can directly and without oversight, more easily funnel money to their patrons.
That’s what’s wrong with earmarks.
The other one from Minnesota? was killed in the plane crash.
Suspicious plane crash.
sorry, wish I could ‘member his name.
Paul Wellstone was his name.
RIP. He was quite a guy.
Was his plane crash suspicious? I thought it was bad weather for a small plane. Like Carnahan, Vaughn, Holly, etc.
Why is there no news whatsoever covering the plight of Iceland? I will tell you why. Here is an economy (and government) which has recently completely collapsed and the whole nation should be experinencing “armageddon” right now. Well, there obviously is no armageddon there or that would certainly make the news. The whole scenario in Iceland would blow the whole extortion-based scam of too-big-to-fail theory and ’systemic-risk’ assesments by banks and the whores who run our system. Life goes on - they just can’t have anybody believe that. BELIEVE!
If your interrested in the Icelandic situation…there is a site called newsfrettir-dot-com-slash-alive. It’s from an Icelandic woman. She tellst about her personal situation and translates the Iclandic news to enlish on another site.She tells a grim tale!
She tells a grim tale! No cannibalism?
I heard something on either All Things Considered or Marketplace in the last few days about Iceland. I was paying more attention to my cooking than to the piece, but as I recall, it was about the distress resulting from economic collapse and how - as you say - life goes on.
Fishing for a living looked good again. The lady gas station attendant was knitting socks. And the suggestion that the Icelandic PTB were considering what could boost the economy - somewhere between financial manic euphoria and prosaic fishing, sock-knitting.
How did the meal turn out? And what was it?
I’m not sure what evening I heard that story, but since my cooking was distracting me, it was probably the evening that I cooked some farmers’ market beef (from a ranch near Waco). I wasn’t making anything fancy, but I had a lot of pots and pans going at once.
Braised the meaty soup bones and stew meat with lots of onion (Texas sweet), garlic, and black pepper corns. W nice fresh garam masala, added cumin, salt and ground black pepper.
Sauteed beet tops in a little soy sauce and vinegar, sprinkled them with toasted sesame seeds, then put them on top of the steamed, peeled, sliced beets. Tossed slightly w a little more vinegar, olive oil, salt and pepper. Served at room temperature.
Made brown rice (Texmati) seasoned with black seed.
Soaked fenugreek powder and whipped it up as a condiment.
It was good.
Beverage was an inexpensive Spanish red and dessert was squares of a Godiva raspberry candy bar.
Thanks for reminding me. I don’t have beef too often and that was really good.
What they are really saying when they say “too big to fail” is “too complicated to understand to figure out to mitigate the impact of a failure”.
I see this everywhere in large corporations. Things move so fast, little accountability or understanding of who’s on first and what’s going on. It is a product of technology and companies with way too much money imo. Too much money and a matrixed-to-the-max operation is what loosens the control often.
We need to require large companies to account and structure themselves into decentralized, smaller discrete organizations with standard accounting so people can understand the operations and have better control of them.
US Gov is very much the same. Nobody has a clue. Heck, congress does not even read billion dollar spending bills due to their workload, exhausting backlog, huge scope of the bill’s landscape and complexity.
I say decentralize large companies into smaller, easy to understand operations and standardize reportings and control. SOX was a start - sort of.
Remove the liability protection of share holders and companies would shrink automatically to more accountable sizes. No one wants to be liable for something they cannot control.
Or don’t even know how to control.
“Too big to fail” = “Their bribes have been too big to ignore”.
Freshmen CONgress persons are told day one, they need to make over $90,000. per month for the next re-election 2 yrs down the road.
I am still for changing campaign funding sources. JustSixDollars.org or com.
With that money, we could have started up new factories. But no, we dump it into a black hole.
So last night on I-95 there was a guy with a bumper sticker that said “Corporations are people too!”
He was driving very aggressively, cutting people off and tailgating.
I saw the same when I was driving on I-95 last Fall. Only it was an Obama/Biden sticker. And another car followed suit. It was a McCain/Palin sticker.
What else is new?
You expect some angel with a “socialize America” sticker will be driving the speed limit and not tailgating?
BAHAHAHAHAHAHAHA!
My favorite bumper sticker was an Obama sticker in green letters with the earth intertwined between the letters.
The vehicle it was affixed to: A Mercedes g500 that gets about 12 MPG
Less common today: Those annoying stickers proclaiming, “He Who Dies WIth The Most Toys Wins.”
In my “angry 80s” I put the beatdown on one of those POSs.
Sixteen hours in Belmont lockup
$750 for my ex-cop lawyer.
Hearing that beeyatch scream through his bloody mouth, “I’ve got your license! You’ll be sorry” . . . P-R-I-C-E-L-E-S-S!!!
[He never showed up in court]
In my “angry 80s” I put the beatdown on one of those POSs.
you’re in your 90s now?
$750 for my ex-cop lawyer.
Those are the best kind. I love cops!
Obama Seeks JPMorgan, Goldman, Citigroup Support on Bank Plan…
March 27 (Bloomberg) — President Barack Obama will seek support today from executives of the nation’s largest banks for his plan to stabilize the financial system and try to get beyond the furor over bailouts and bonuses.
The White House meeting at noon Washington time is scheduled to include chief executive officers Vikram Pandit of Citigroup Inc., Jamie Dimon of JPMorgan Chase & Co. and Lloyd Blankfein of Goldman Sachs Group Inc., all headquartered in New York. They are among as many as 15 banking executives expected to attend.
Lawrence Summers, Obama’s top economic adviser, said the meeting was a measure of the ties between the government and banking industry at a time of economic crisis.
“This is about our duty to do everything we can to support a robust and sustained economic expansion and the reality that the country’s major financial institutions have a major role to play,” Summers said.
White House advisers said the meeting will focus on stabilizing financial markets, boosting lending to businesses and consumers, reducing foreclosures and imposing regulatory overhaul rather than specific issues at individual institutions.
With the U.S. economic recovery tethered to the health of the financial industry, Obama has proposed a public-private partnership to soak up the banks’ toxic assets and help unlock credit, as well as new regulations on banks, hedge funds, private-equity firms and derivatives markets.
“It’s terribly important that an environment of consensus replace the polarization of recent weeks,” said former U.S. Securities and Exchange Commission Chairman Arthur Levitt, now a senior adviser to The Carlyle Group based in Washington and a board member of Bloomberg LP, the parent of Bloomberg News. “It’s essential to the business community that they be very much part of this process.”
Continuing Engagement
The gathering is the latest in a continuing engagement with the business community, advisers said. Obama has held meetings with Dimon and Kenneth Chenault, the CEO of New York- based American Express Co., as well as Redmond, Washington- based Microsoft Corp. Chairman Bill Gates, over the last couple of months, they said.
Industry representatives said they will underscore the connection between the success of the financial-services industry and the broader economic recovery.
“For the economy to recover, for the stimulus to work, Main Street and Wall Street have to work hand in hand,” said Rob Nichols, a former Treasury official and now president of the Financial Services Forum in Washington.
‘Pick Their Brains’
After weeks in which the White House was often sharply critical of excesses at financial companies, the president wants to adopt a more collaborative approach.
“We’re reliant upon them to help rebuild our economy,” said senior adviser Valerie Jarrett. “It would be very unnatural if we didn’t engage them and have a direct opportunity to pick their brains and look to the future.”
“‘Pick Their Brains’
After weeks in which the White House was often sharply critical of excesses at financial companies, the president wants to adopt a more collaborative approach.
“We’re reliant upon them to help rebuild our economy,” said senior adviser Valerie Jarrett. “It would be very unnatural if we didn’t engage them and have a direct opportunity to pick their brains and look to the future.””
How does this “reverence” for the bankers still exist? I really don’t get it. My only explanation is that I guess most people don’t understand how banks work, and therefore, figure it must be very difficult to run a bank because it pays to well.
LORD, it’s not that hard at all. We don’t need to pick their brains, get them out of there and get someone else in. It’s not like all these guys are Oppenheimers, that they are the only one’s on earth to understand how you can borrow at .5%, multiply it by 10, lend it at 5% and make a profit. Good god people, when we will wake up from this reverence of people who have PROVEN that they didn’t have a clue as to what they were doing?
Washington (and many of the public) act as if it takes a 190IQ and 25 years of schooling to run a bank. It almost could not be more untrue, running a bank is so simple that, IMHO, having a high intelligent person in there is DANGEROUS because they will start to dream up things like derivatives and credit-default swaps because they are bored. It’s a simple, and INCREDIBLY profitable business model. We need moderately educated and competent people to run them, and we need to stop these people from getting such big payouts for good years that the moral hazard becomes overwhelming (which, IMHO, is much of what happened during the boom. These bank exec knew that they could make a few M dollars a year making garbage loans, and, that when the whole thing blew up, they would still be rich).
Man, you would think we are trying to replace a team of mathematicians working on the unification of quantum theory and the theory of relativity with the level of “skill” we are equating to these bankers (who, it must be mentioned again, are the same group who just destroyed the American banking system).
after you
but don’t make too much
Traditional banking doesn’t require geniuses, but it does require thundering hoardes of well-educated (accounting, business, science, etc.) people who can analyze business plans and patterns of growth to determine which loans are good and which aren’t.
New style banking requires many many fewer people - a couple of mathy types to come up with a new way to package the loans and write a paper to prove that despite the completely unknown risk in the underlying loans, the risk in the new packaging is 0%, a few lawyers and a few dozen sales guys. The geniuses are there to eliminate the good jobs that the loan underwriters used to have.
I don’t recall the need for thundering herds except in the past 20 years.
Marshall Dillon certainly never ran into any well-educated hoards at the local saloon.
Indeed!
Any idiot can run a bank these days with easy money from the Fed. Toss in a direct pipeline from the taxpayers’ wallets to your own, and it becomes so easy you can practically have a bank run itself - that way, it wouldn’t be possibly for it to make any stupid “creative” decisions.
Just like airlines that state, they need the bonuses to retain the quality execs to run the airlines.
Um now how is that working.
Oh, and when traveling, ever see mgmnt on wknds, holidays, night time?
Nope.
So, you don’t really need em.
Just need folks that actually Work, to fly you. You know, flight attendants, pilots, mechanics, baggage handlers, cabin svc, ATC, but not mgmnt.
Again, just consider they are threatened to not be creative when things go awry, threatened with their jobs.
Do what you are told to do, not what works.
I don’t ever want to be an apologist for bankers, but I think you miss the point here. In this country massive corporations have massive funding requirements. That means you need massive banks willing to accept various levels of risk.
You don’t have to be a genius to run a bank, but you have to be willing to take sometimes marginally reasonable risks with enormous amounts of money. You also have to be capable of convincing others to allow you to control their money and take those risks.
If those people aren’t there, corporations won’t get the needed funding (at least in an efficient, affordable manner) and massive downsizing has to occur.
In a global economy, massive size will occur and the massive size will win because any product can be subsidized by other products to control markets. If we don’t have the massive corporations and banks, someone else will, and we lose.
There is no requirement that corporations get all their funding from one source (one big bank). That is what bonds are for.
In this country massive corporations have massive funding requirements. Where in the Constitution does it say we must have massive corporations? Where does it say we must have corporations at all?
“In this country massive corporations have massive funding requirements. That means you need massive banks willing to accept various levels of risk.”
So this would be why companies that depended on debt and leverage to become “massive” are going out of business whilst firms that depended on a cash flow positive debt free state continue forward without a hitch?
If the givernment would just let these morons go BK there are plenty of solvent persons and concerns willing to pick up the pieces. I, for one, will not fight the fed.
I coined the term givernment(tm).
+1 ! Excellent!
Why do the too-big-to-fail banks need to support the plan in order for it to be up to snuff?
I wish my approval was required for bailout plans that involve my money.
You don’t understand VTD. You are a little person. Just have faith in the Candy Crappin’ Unicorn ™. Only he has power to save…
I wish the same thing for wars waged with my money.
+1 emphatically
“…boosting lending to businesses and consumers, reducing foreclosures… ”
…and all will be good and we shall borrow and spend like it is 2006 all over again. Whatever it takes to keep the Ponzi scheme going. YES WE CAN live beyond our means indefinitely!
The crisis will not end before top policymakers have even left the denial phase of the housing bubble stages of grief.
Johnson Controls to cut jobs, close 10 plants
Johnson Controls announces new restructuring, will cut jobs, close 10 manufacturing facilities
Friday March 27, 2009, 8:09 am EDT
MILWAUKEE (AP) — Johnson Controls Inc. said Friday it will cut jobs and close 10 manufacturing plants as part of a restructuring effort that it said will cost between $200 million and $215 million.
http://finance.yahoo.com/news/Johnson-Controls-to-cut-jobs-apf-14763886.html
“For the economy to recover, for the stimulus to work, Main Street and Wall Street have to work hand in hand,”
Who is representing Main Street ?
“Who is representing Main Street ?”
Why the politicians of course. They’re not doing it very well.
I LOVE Krugman’s column today. All about how the banking system model of the last 30 odd years has failed and can’t and shouldn’t come back.
Here’s the link (good bye post to spam filter purgatory): http://www.nytimes.com/2009/03/27/opinion/27krugman.html?em
And here is the money quote:
I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.
I don’t generally tend to agree with Krugman but he’s right and if you carefully observe he’s reading the “right” blogs, and he has absorbed their arguments and data.
What is surprising is that what he is saying directly contradicts his own “research” back in the day. He is intellectually curious, I’ll grant him that.
High praise, indeed.
Well, he IS absurdly smart. That was hardly ever in doubt.
What I find shocking is how he can’t seem to make these elementary connections that the average smart businessman would tell you in twenty seconds.
It’s like these intellectual blinders of not attacking the problem just headfirst from first principles.
It’s such a waste.
What I find shocking is how he can’t seem to make these elementary connections that the average smart businessman would tell you in twenty seconds. Those average smart businessmen don’t speak or write much publicly, do they?
No, they don’t have the skillset. So what?
Articulate communication is hardly a prerequisite for a firm grasp of finance and commerce.
But what I do find shocking is when a professional economist at the top of his profession with a Nobel Prize to boot can’t seem to grasp some basics of money and commerce.
“Those average smart businessmen don’t speak or write much publicly, do they?”
I disagree that they don’t have the skill set. I think that most of the smartest people in any room are busy working toward achieving the goals they think are important. For most that doesn’t include public adulation. We see right here on this blog commentary that is a far sight better than that given by TPTB in the MSM. Why aren’t those smart bloggers/business persons in charge? They are out following a dream.
How many industries are well represented on this blog alone? Do you think the president has access to that level of broad expertise?
Fine. This is not only a fair point but an excellent point, and I will defer to it.
Ultimately it just comes down to whether you want public adulation or private gain.
I’m guilty of it myself, and I’ve been in both camps to know the difference.
The other side of this problem of lack of basic insight is due to ivory tower syndrome.
If a person has never actually started, ran, and yes, had a business fail, they really have no clue when it comes to running one.
This is not to say people don’t know how to make money, just that they know nothing about running a basic business.
To digress…
What’s scary is that there are plenty of people out there who really don’t know how to run a business but sheer luck is filling in the cracks and smoothing the pitfalls. I know, I’ve seen it more than once. So this is a problem as well.
“What is surprising is that what he is saying directly contradicts his own “research” back in the day. He is intellectually curious, I’ll grant him that.”
Here’s hoping we continue to keep this in mind as we post on this site.
When I am wrong I change my mind. What do YOU do?
- J. M. Keynes (to a journalist)
Excellent.
You’ve a steel trap for a memory, Fasty. Either that, or you rank in the upper echelons of the World’s Best Bullshi**er scale.
Perhaps you’re blessed with both talents. If so, you’re among the luckiest alive.
Aside, we need some Ben Franklin quotes around here.
Hi. I read similar Krugman column earlier in the week. Thought hell had frozen. I actually agreed with what he wrote. That’s a first.
Boy, going to one of those goof-ball 20 meetings must be a hoot, with whack jobs like Brazils fearless leader there.
At least I’m not to blame, I have hazel eyes and an olive complexion. LOL!
Brazil’s leader blames white people for crisis!
By Jonathan Wheatley in São Paulo and agencies
Published: March 27 2009 00:27
Brazil’s President Luiz Inácio Lula da Silva on Thursday blamed the global economic crisis on “white people with blue eyes” and said it was wrong that black and indigenous people should pay for white people’s mistakes.
Speaking in Brasília at a joint press conference with Gordon Brown, the UK prime minister, Mr Lula da Silva told reporters: “This crisis was caused by the irrational behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing.”
EDITOR’S CHOICE
In depth: Americas - Mar-25
Argentina and Brazil push against protectionism - Mar-27
Mexico calls for boost to drugs war aid - Mar-26
US official says no danger of failed Mexican state - Mar-26
FT series: On the borderline - Sep-18
He added: “I do not know any black or indigenous bankers so I can only say [it is wrong] that this part of mankind which is victimised more than any other should pay for the crisis.”
Mr Brown appeared to distance himself from Mr Lula da Silva’s remarks. “I’m not going to attribute blame to any individuals,” he said.
Mr Brown was visiting Brazil as part of a five-day tour of Europe, the US and South America in preparation for the G20 summit to take place in London next Thursday. He made a joint appeal with Mr Lula da Silva for the world’s biggest economies to provide $100bn to boost global trade.
“I’m going to ask the G20 summit next week to support a global expansion of trade finance to reverse a slide in world trade,” Mr Brown said.
Mr Lula da Silva also spoke out strongly against raising trade barriers in response to the global crisis. “I compare protectionism to a drug,” he said. “Why do people use drugs? Because they are in crisis and they think the drug will help them. But its effects pass quickly.”
The two leaders’ remarks demonstrate the desire each will have to secure the other’s support during the G20 meeting.
Is it true?
“This crisis was caused by the irritional behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing.”
I’m not sure about the white people and blue eyes bit, but he is dead-on right about the rest of his statement.
Maybe “”white people with blue eyes” should be “the smartest people in the room”; that’d work for me.
Nobody in China or Japan had anything to do with the credit bubble? Hmmm that’s odd.
I seem to recall reading on this very blog that China was lending the US trillions of dollars that were used to buy houses. I guess those poor Chinese were just innocent pawns in the white man’s game huh?
And the Japanese investors snapping up houses in Las Vegas sight unseen circa 2004 were as well.
Oh and almost forgot the S. American “investors” buying up Miami condos. Well I guess they could be classified as “white” but I doubt many of them had blue eyes.
But why let facts get in the way of a good anti-American, anti-white man rant?
Unfortunately the people who created this mess acted quite rationally. Bankers made billion $ risky bets because they knew that if the bet won they would get millions of $ in bonuses and if the bets lost in the worst case they would just lose their jobs. In reality most have kept their jobs and many have kept their bonuses too.
The people who created this mess killed the Golden Goose. They relentlessly destroyed perfectly good companies, busted them out for short-term gains.
They could have easily took out billions more over the long-term if they had any sense.
But they could have been fired next year. Or some unforeseen event could have occurred that led them to leave. Or the company could have been acquired, and their bonus structure drastically altered.
Listen, I’m as mad as anyone at what they did to this country. But, I also am not unwilling to admit the truth, many of these people acted rationally when making the decision to run their companies into the ground. Yes, they could have made much MORE profit over the long term. But that’s not the issue, the issue is that once they’ve made themselves 5-15M dollars, they NEVER have to work again. They could make 1M a year for 10 years (and hope they keep that job for 10 years, which is quite unlikely), or shoot for the moon and try to make 10M this year, and never worry about it again.
That’s the thing I think many are missing when thinking about this crisis. These people acted rationally (and against the best long term interests of their companies) because of the way the financial structure was set up in these institutions. If you know you can make so much money in one year that you will never have to work again, or that you MIGHT be able to keep this job for 15 years and keep making really good money, what would you do? Of course they went for the first option, it was the RATIONAL choice. That’s the thing we always seem to forget/gloss over. Many of these bankers, no matter how you feel about them, made the RIGHT choice by running their company into the ground. They are incredibly wealthy, and will never have to work again.
The flip side is that the borrowers also acted ultra-rationally. They bet on the moonshot using the bank’s money, and if it didn’t work out, they handed it back to the bank. And they never had a pot to p*ss in to start with so it was like a free call option.
The people on this blog behaved pretty rationally too because they knew that they were betting their own money so they had no incentive to join the boozers.
Everyone behaved quite rationally - the outcome is simply not one that we like. It’s how it is.
““… the low-inflation era of the past two decades has seen not only significant improvements in economic growth and productivity but also a marked reduction in economic volatility…, a phenomenon that has been dubbed “the Great Moderation”. Recessions have become less frequent and milder, and … volatility in output and employment has declined significantly… The sources of the Great Moderation remain somewhat controversial, but … there is evidence for the view that improved control of inflation has contributed in important measure to this welcome change in the economy …” (Bernanke, 2004)
___
“a marked reduction in economic volatility”
I thought that was pretty funny when I posted it yesterday.
I also get a laugh out of the “low inflation era of the past 2 decades.”
Hahaha… good old Bubbles Ben Bernanke! Yep, low inflation, if you don’t count: housing, food, energy, health care, education, etc.
What is irrational is to label a strategy that reaped billions in bonuses as “irrational.” The problem was the free too-big-to-fail financial risk insurance program which created the moral hazard incentives for companies to make heads-we-win, tails-we-collect-insurance-claims gambles.
Exactly my point, see my post above. These bankers did NOT act irrationally. They acted, in fact, perfectly as good actors in this system. They made billions, and the system failed. But, the overall objective for the individual was NOT to maintain the system, it was to make money. And, as such, they acted exactly as expected.
Hello Everyone,
Daily lurker just chiming in.
I agree that the bankers acted rationally. They pursued the option that was most beneficial for themselves at the expense of the shareholders and the public at large.
I think Greenspan was alluding to this reality when he acknowledged the flaw in his thinking as it relates to the expected behavior of executives at the various financial institutions that brought about this crisis.
He theory was that an executive would make decisions that would provide the maximum benefit to the institution, and thereby ensure the long-term viability of the institution and themselves by default. Human nature is typically such that we will typically pursue our own self interest before the interests of the larger population.
I didn’t think Greenspan or anyone really could be that naive.
I think a notable exception is the financial decisions of organizations where there is a reduction in the “incentive” to pursue personal interests. I have heard little to nothing of Credit Unions - who typically pursue more conservative investment strategies - because the executive compensation is structured to incent that behavior.
I think a huge step forward would be a re-structuring of financial rewards provided to executives at financial institutions - they should be motiviated to provide for the long term wellness of the institution instead of motivated to pursue short term excess.
Thoughts?
All this talk of rationality is fine but leaves out one important factor: the fraud that was occurring as well.
Keep in mind that the “dead hand” of economics is a fantasy and that the system is gamed a every level.
“This crisis was caused by the irritional behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing.”
Well, what about the behavior of white people with light green eyes? Who also know nothing, but often pretend we do.
How about us? Huh huh huh?
Don’t discriminate, my dear Brazilian guy, tell us what heinous atrocity WE done did…
Jeeze, man, that is appears to be what we ‘Merikans call ‘racist’. Does no one care about racism, except for, well, you know…a bunch of white people with blue and/or green eyes?
This Mr. Lula da Silva says: “I do not know any black or indigenous bankers so I can only say [it is wrong] that this part of mankind which is victimised more than any other should pay for the crisis.”
Now, if someone with light skin and light eyes had then grabbed the microphone and responded: ‘Well, maybe there’s no brown-skinned-brown-eyed-people bankers because you playful and high-spirited brown people are better at hewing wood and drawing water and making tourist trinkets rather than fiddling with tricky number thingies. Leave that to us whities.’
I mean, can you imagine?! Freak! Half of ALL the Americas would be in flames in about an hour.
This piss*es me off.
Aw, whatever. Look, I’m going to go out and deliberately oppress a dark-skinned person, and try to get their money by dazzling them with my tricky whitey ways. I’m just going to pick one at random.
Back in an hour or so.
and try to get their money by dazzling them with my tricky whitey ways.
But first I’d best learn those ways, I suppose, so’s I can do it right.
Say, is there a manual or something? Cliff Notes for would-be white oppressors?
He’s a person of color, so he can say whatever he wants and get away with it, unlike us white boys.
Greenspan has brown eyes.
Angelo R Mozilo
I gazed deeply into Greenspan’s eyes and I saw his soul.
Touche!
don’t greenspan me bro
Ok, maybe I can help.
“White people with blue eyes” is code in South America for North Americans.
Specifically, a United States citizens.
Do not say that US citizen are “Americans” and say something silly like, “Americans, under Bush….”
This is a grave insult as any National in South America, from any country, considers himself/herself an “American.”
Therefore they consider it pretentious and pompous that Americans refer to themselves as “Americans” to the exclusion of all other Nationalities.
Their logic is that there are EEUU (US citizens) Columbians, Brazilians, etc. and all are “American.”
So, in order to make fun of “Americans” (EEUU) they refer to them as “whites with blue eyes” which can be a putdown.
___
Yes, I know this is an oversimplification, but nevertheless it may give the reader a new perspective on his words.
Well that’s just plain stupid. This is the United States of AMERICA, therefore we are Americans. If it was instead called the United States of Kansas we’d be Kansans, but it isn’t so we aren’t. We certainly don’t live in the United States of White Blue Eyed Devils.
Why do Brazilians think of themselves as Americans instead of Brazilians anyway? Their stupidity should not result in grave insult when we refer to ourselves as who we are.
Hey, was just trying to explain the code words used.
He wasn’t going to say “Americans did this….”
He used the understood “white people with blue eyes did this….”
Notwithstanding the intention of my post being to clarify, there is logic to a lot of this.
Brazil’s guy just didnt’ have the balls to name W, Dick,Al, etc. So he named eye color. Where are his cojones?
Yawn.
Would someone please stick a fork in this old turd!
Greenspan says banks should not become too big…
LONDON (Reuters) - Former U.S. Federal Reserve Chairman Alan Greenspan recommends graduated capital requirements for banks to cut back their size.
“New regulatory challenges arise because of the recently proven fact that some financial institutions have become too big to fail as their failure would raise systemic concerns,” he writes in Friday’s Financial Times.
“The solution is to have graduated regulatory capital requirements to discourage them from becoming too big and to offset their competitive advantage.”
Greenspan is widely blamed for allowing financial firms to outgrow government oversight and in October last year he acknowledged that he was partly wrong to resist the regulation of some securities.
He said in Friday’s FT that while regulators could enforce collateral requirements, they could not fully forecast if, for example, sub-prime mortgages would turn toxic.
“Greenspan says banks should not become too big…”
He’s only 22 years too late with that observation.
Wasn’t it the late Uncle Milt who proclaimed that monopolies [or near-monopolies, e.g. Too Big To Fails] cannot exist in a free market?
So . . . how DID they get so big, hmmmmmmmmmm?
How could the regulators NOT forecast the subprime turning toxic when pretty much EVERY person on this board (none, or very few who are professional bankers) forecasted it with 100% accuracy?
How on earth could anyone EVER think that 100%, 10X income loans would become anything BUT toxic?
They were paid handsomely paid for such denial.
And “real estate only goes up!”
Hehehe…
Greenspan was an acolyte of a particular odorous religious practice.
“But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride, or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich—will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt—and of his life, as he deserves.”
___
Yes, Ayn Rand. You gotta love this part: “men who apologize for being rich—will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man…”
Am I the only one that sees the humor in this?
*Tin-foil hat conspiracy theory time*
Is it me or does it seem odd that Greenspan was an avid follower of Ayn Rand, that he distanced himself from her and her writings as he became entrenched within the inner-workings of the banking cartels, and that ultimately Greenspan’s actions at the height of his power as Chairman of the Federal Reserve could be viewed in similar light to those actions of Francisco d’Anconia in Atlas Shrugged… i.e. doing everything possible to set the system up for failure.
If his goal was to bring the our financial system to it’s knees, Greenspan couldn’t have done a better job. Seriously, the last decade could have been a chapter in an Ayn Rand novel… Intelligent financier distances himself from his true beliefs in order to attain the highest reaches of financial power, all the while planning for his opportunity to slowly destroy the Financial System from within. Who would believe that a lifetime spent amongst the elite in government and finance would be used to sabotage the underpinnings of the economic order of this country?
*Tin-foil hat conspiracy theory rant over*
Greenspent knew exactly what he was doing, though we’ll never know if it was simply out of personal greed and desire for attention or out of some insane philosphical viewpoint (thinking he’s John Galt, etc.)
Couldn’t disagree stronger, Northeastener .
Why is it so difficult for people here to believe that the Masters of the Universe were, really, that stupid.
I see this so clearly.
And I am not unknowing of the evil that men can inflict.
Men like him that are attracted to absolutes.
“Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity — myself especially — are in a state of shocked disbelief…I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact… You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”(Congressional testimony on October 23, 2008)
Really, you have to read it twice.
“Men like him that are attracted to absolutes.”
+1.
Men who are attracted to absolutes are men who don’t have the capacity to understand the depth of the complexities in any given situation.
I hold my beliefs strongly but recognize every single one of them is wrong in some scenario that I haven’t yet experienced.
Northeasterner,
I proposed the same thesis a few years ago here- and was promptly shot down. As time progresses, it seems more plausible.
“Would someone please stick a fork in this old turd!”
wmbz, is that a mixed metaphor? Make it pitchfork, and I’ll gladly do so.
Using a manure fork would produce a more correct metaphor.
more correct indeed
An rather benign Marketplace interview questioning the benefits of home ownership. Check out the comments. Home ownership has really become a cult in this country.
http://marketplace.publicradio.org/display/web/2009/03/26/pm_home_ownership/
Maybe my attitude has changed the last couple years, but boy, “owning” a house is like a drug with some of those posters.
You’ve been steadily deprogrammed. That’s the problem.
Many here were just as vehement when we first started.
Unfortunately, the deprogramming seems to put me at odds with those around me. Chicks included.
Only the wrong ones.
I hope you’re right.
Hope is not a strategy.
But in this case, I am right. Dead right.
I’d just say there is a massive difference between “f*ckable” and “dateable”.
And it works for guys, and gals, and everything in between.
C’mon, y’all, back me up! How about some support, huh???
Not debating you….I agree. It just weeds out everybody, at least around here it seems.
Only the wrong ones.
Testify.
Look, Blano, think of it as a litmus strip, so you can know who is worthy to spend time with. Same as I do, when I ask guys who try to chat me up, I narrow my eyes suspiciously and I say: ‘Do you adore wetlands and frogs and moss and bonfires in the woods, or are you an insensitive, brutal, evil f–cker?’
Like that.
I can’t help ya there, Cat. It seems most of the ones I meet these days are crazy and the ones that aren’t crazy are happily married. Though even those are far and few between.
“Look, Blano, think of it as a litmus strip, so you can know who is worthy to spend time with.”
Well said…..I wonder how that “brutal, evil f-cker line would work for me??
Other than trying to arrange a meeting in Las Vegas with a California girl, I’ve pretty much lost interest anyways.
Well said…..I wonder how that “brutal, evil f-cker line would work for me??
Well, it works great for me. Maybe you’re just not saying it right. Keep trying.
Oh, but what I was gonna say, Blano, in response to your: ‘It just weeds out everybody, at least around here it seems’.
Then you should move! To a place that fits you and you fit it, just right.
I’m going to move, Oly. I’m just waiting ’til my youngest goes off to college in two years, then my main Daddying is complete. ‘Til then, I just put up with my surroundings.
Blano,
You wrote: Other than trying to arrange a meeting in Las Vegas with a California girl, I’ve pretty much lost interest anyways.
Do we take that at face value, or is this the story of an unrequited HBB romance?
Hip,
It’s just a phone friend I’ve known for a few years where the conversation has recently turned to possibilities for more. Big maybe at this point. Nothing’s been set. She’s not an HBBer though.
Man, those comments are harsh. You’d think the professor just ran over their fav dog!
The MTG interest deduction is a bad idea, we’ve just seen what a bad idea it is as it certainly helped to fuel the housing bubble. It’s not a good idea to encourage people to go in hock up to their eyeballs, which, unfortunately, is exactly what we currently try to accomplish through tax policy. It’s great for the banks, terrible for the borrowers.
Listen, homeownership isn’t a bad thing. It’s just also not a good thing. There are times when it is better then renting, and times when it is worse. It’s simple math, takes about 30 seconds to figure it out, especially when we know that home prices increase ~2-3% YOY in a normal market. You can figure out, almost immediately, what period of time you need to stay somewhere, and if a rental deal is better then a purchase deal. It’s really not that hard.
However, I do agree with the professors one comment, homeownership does have the negative (to society) effect of “tying” people to certain areas. If the jobs are better somewhere else, and you rent, you just wait out your lease and leave. If you own, you may never be able to leave, or at least, not without a foreclosure/short sale. Owning certainly hampers the mobility of the workforce, which, for the country, is not a good thing (it’s a mis-allocation of resources).
I think all interest should be deductible just like for a business.
I disagree. Interest deductability encourages debt. Debt is not a good thing for our country, the less debt we have, the better we are able to function as a country, and the better we are able to react to changing situations.
I do, however, agree, that either ALL interest should be deductible, or NO interest should be deductible. The current situation is even worse, encouraging people to HELOC their homes to pay off CC/car loans is even dumber then having all interest deductible.
Debt is not a good thing, it’s not productive, and, in fact, it actually saps resources from this country. We should do nothing to encourage people (or companies) to go into debt of any kind.
Owning certainly hampers the mobility of the workforce, which, for the country, is not a good thing
Well then, why not just go and join the migrant work force of China, as that seems to be working out for all concerned…
A mobile work force benefits the corporations who arbirtrage tax incentives and lower wages via the relocation of factories and jobs to lower cost locales. It does nothing to help the workers, as they must uproot their families, take them away from the safety net of local family and community, and create distortions in terms of public policy, i.e. planning for schools, public transportation, housing development, etc, when the corporations, jobs and workers are migrant.
It is greed, pure and simple… it is yet another example of how capitalism has lost it’s way by abandoning the principles of responsibility to society. This may be an idealist perspective, but it is also the truth…
“It’s simple math, takes about 30 seconds to figure it out”
You’ve hit the nail on the head. Numeracy is a skill most Americans lack. Folks like those on this board could do the math. We either profited from our skills, or at least were able to avoid most of the carnage.
Folks that couldn’t do the math, well we know how that turned out.
“Man, those comments are harsh. You’d think the professor just ran over their fav dog!”
Well, I saw a couple of them, but by the time I checked those comments a couple hours ago, the HBBers had already struck!
Instead of letting people tax-deduct the mortgage interest from their income, they should allow people to tax-deduct only the mortgage principal. If they want to encourage home “ownership,” then apply the tax break to what actually goes toward owning the home.
Wouldn’t THAT explode some heads at the NAR?
I 2nd that motion! All in favor say aye….
+1
Think about it. The higher your downpayment, the better your tax deduction in the first year. Wow.
Sellers could no longer factor the tax break into a buyer’s monthly payment, damping some of the house price inflation.
Older people who are close to paying off the house pay much more principal than interest. If they could tax deduct that, they would have more cash to save (invest!) for retirement, when they need it most.
It would encourage bottom feeders and investors to buy overhang inventory with precious cash. I think that’s much more economically sound than taking tax break for buying a flippin’ Hummer as a “business expense.”
And it would put a damper on all this interest-only nonsense. Why should FB’s get a tax break for paying what is essentially fancy rent? That would take another big chunk out of house price inflation.
Why is it not like this? Because in this country, you don’t give a sucker an even break… and we’re all being treated as suckers if not sheep.
Ron Paul is out of touch with the real world. AIG failure would have brought down the whole financial system witch includes the financial saftey of posters on this board.
The money they were in contract to hand to banks ect, helped keep the financial system in order. It was needed for tax money to keep the system going.
“AIG failure would have brought down the whole financial system which includes the financial safety of posters on this board.”
I agree, mainly because of what happened after the failure of Lehman.
Saving AIG hasn’t done much for my “Financial Safety”.
Troll!
The gold standard would have strong armed the financial system to keep it in order.
Out of touch? As someone who spent a good deal of time talking with the man, I say you are full of you-know-what.
I say you are full of you-know-what.
‘You-know-what’?!
Ben!
*appalled gasp *
Do you kiss your mamma with that mouth?! And she even posts on this board!
*clasps hand to heart in shock *
Jeeze, what a TOTAL potty mouth!
Hahahahaha! Hahahahah! hahahaha!
…Sorry, golly, I’m so sorry, Ben—I just couldn’t resist teasing you, just a teensy little tiny bit.
*falls off chair giggling *
Why would it? If AIG would have gone BK, those contracts that brought it to its knees would most of likely had to be renegotiated, or reneged in court. Those on the other side of the contract would have lost the rating that the junk bonds had in the first place, and would have been left with the REAL value of the garbage, and not the artificially propped up value because they were “insured”.
It would have made things get to where they need to be much quicker if you ask me… Now we are going to waddle through for a long time with these toxic assets whose underlying “value” is that of a 750K house sold to strawberry pickers in Manteca, Ca. at the height. Of course the POS house is probably worth 75K now, but lets not dwell on the real intrinsic value of all the paper written in the last 10 years… It might make you cry.
…AIG failure would have brought down the whole financial system…
Really? Show us some hard data that in fact if AIG failed such
an event would have occured.
Remember, it was lack of internal controls and transparency
that put AIG in peril in the first place.
So who and how did someone(s) in the U.S. government
industrial/banking complex become so instantly informed
and acquire such expertise to make such a judgement?
Not that these highly ethical people would ever
attempt to pull our legs. <:((
When Lehman was allowed to fail world commerce immediately began to freeze up because of counter party risks. That same would happen if AIG failed.
How many times can the world economy collapse before it really collapses?
Yes PB
How many more times?
I hear a led zeppelin song.
I wish the housing market would collapse so I can score a green house.
The world economy will collapse until the world runs out of printer ink. Then the economy will collapse exactly one more time.
A lot of what passes as “commerce” these days are self serving transactions by the likes of AIG, CITI and other useless financial institutions. So what if if freezes up. Some financial institutions go out of business, big deal. We have way too many of them anyway. What do you think will happen once we kick the printing presses into overdrive and the dollar devalues to a point that nobody is willing to trade goods for it any longer. What do you think that will do for commerce?
counter party risks ? AIG(FP) london ?
It’s Scam Insurance for Gamblers and Investors written by offshore AIG CONmen that would have been illegal to write in the US .
“that would have been illegal to write in the US”
You are going to have to provide a citation for that one. Plenty of CDSs are written in the US. Not in the slightest bit illegal. Not regulated either. The fact that AIG happened to have its office for this group of transactions in London does not mean they could not have written them here.
We can only wish they had been illegal.
“Show us some hard data that in fact if AIG failed such
an event would have occured.”
Would the Lehman Bros collapse qualify as an example of what could have happened?
“…brought down the whole financial system.”
what exactly does this mean?
And how many times can it happen before it really happens?
I personally don’t think I could go on without AIG. I miss the commercials so much. I would take my own life if AIG went BK.
“AIG failure would have brought down the whole financial system witch includes the financial saftey of posters on this board”.
That is one complete load of crap! Keep being spoon feed these scary scenarios coming out of D.C.
I remember watching MSNBC when the TARP bill failed to pass Congress and the DOW immediately went down 800 points. You could see the desperation in the faces of the traders on the floor. It was real.
“You could see the desperation in the faces of the traders on the floor. It was real”.
Traders wet their pants on any given day.
Does not change the fact that AIG or any company is to big to fail! There is a provision in our Constitution that allows for failure, it is called BANKRUPTCY!!
But that fact is consistently tossed aside.
Does not change the fact that AIG or any company is to big to fail!
Should read NOT to big to fail.
Despite all of Dr. BERNANKENSTEIN’s BERNANKY-PANKY, the fact remains that the US does not produce enough real value to service its debts. Adding to those debts will lead only to economic collapse.
As a nation we are facing BERNANKRUPTCY, and a long, slow decline in the standard of living to which we have become accustomed.
However, the only way to to produce enough to service our debts is to take a massive reduction in wages, which would be a very quick reduction in our standard of living. I prefer the long, slow way.
800 whole points? Whoopdy F’in Doo.
Yeah, no Bailout Bill = no bonus, and what a disaster that would have been. It’s not like they let the market drop to scare the simpering nitwits in Congress into giving them mountains of our money to line their own pockets or anything…
That’s my thought.
The story is that if the banks fail then no one will loan companies and consumers money even good companies and consumers. My thought is BS, gov could lend large sums to banks that didn’t get knee deep in this crap and have them loan the money.
I can see not letting AIG collapse all at once, but an organized dismantling makes complete sense to me.
Here is how it goes.
1. Look at assetts and begin selling them.
2. Look at liabilities
3. X = assets minus liabilities.
4. Oops it’s a negative number so those people who bought insurance contracts aren’t going to get everything they thought they were. Pay out a fraction of what we think can be paid out. Goldman gets 2 billion instead of the 12 billion it collected from FED loans. I’d be fine with a gov loan for the rest at a very low rate. If it turns out assetts are later sold for more then divy up the rest. Bond holders and Stock holders will likely end up with nothing. Moody’s S and P ect also get taken over with stock holders getting nothing for their roll. They are sold and money goes into the kitty.
“AIG failure would have brought down the whole financial system witch includes the financial saftey of posters on this board”.
I DON’T go down until I run out of Jack Daniels, Cheese-Whiz and 45 ammo. “Bring it on AIG !”
Testify! Except for the Cheeze-whiz. That’s icky stuff. Now, if you’d said ‘Cheetos’, that would be different. I love Cheetos.
Ahhhhh, vivid orange goodness….
Cadillac,
Smell the coffee brother. RP is spot on.
Mike
I heard that AIG insured 90 percent of the world’s airlines. They had their tentacles in a lot of things we don’t even know about. Had they failed, imagine what would have happened if 90 percent of the jets and airplanes couldn’t take off because they technically wouldn’t be insured.
Now I don’t know if this was true or not…but if it was true than AIG failing would have created huge problems worldwide.
AIG did fail.
The airlines would probably not have lost coverage over night, as a BK does not happen over night. They would of likely had time to wind down their contracts, and gotten new policies with new insurance companies. I am pretty sure that there are more insurance companies out there that would have insured the airlines.. Maybe not Namibia air, but certainly the big ones.
People are confusing the “normal” insurance policies, with the “we will insure against default and get AAA for this stinky pile of diaper poo” that AIG london dwelved in.
It WOULD not have been a disaster for the world. In fact new insurance companies would have been spawned in order to provide coverage for things like the airlines, but for goodness sakes let the bad apples fail!
“AIG did fail”.
Exactly! Then put on life support, when it should have filed BK. Now it’s one f’d up mess.
Bankrupting AIG would very suddenly put trillions of investments that used credit default swaps as insurance exposed. Risk premiums would way overshoot on the high side. Major Inter-bank lending would stop. A significant portion of lending to major corps and international trade would stop.
A lot of that lending and trading probably would never have happened in the first place without companies like AIG, and capital might have been put to better use. However, I don’t think that kind of sudden market collapse should be taken too lightly.
I’m hoping that the government is in the process of bankrupting AIG, just slow enough to allow the market to unwind the naughty bits over time. I don’t think their smart enough to do that however.
Thanks Jon. People seem to forget that large, sudden economic disruptions can and often do have very real and serious consequences like war and overthrow of governments. Real war. Were millions die. This is not fear mongering or hyperbole, but historical fact.
I hope as well that AIG is being wound down. To say there are no consequences of letting these TBTF companies, fail, is to ignore the millions of people who have been laid off and the millions more that are about to be along with the incredible and dramatic downturn in worldwide business.
I hate AIG and what it stands for along with the rest of the criminals who caused this damn mess, but the situation, as I’ve said over and over again, is now beyond economics and well in to the realm of the geopolitical.
To clarify, I completely agree that these companies should have never gotten this big and they need to be broken up. But it needs to done with deliberation and care and regulations put back in place to prevent this from happening again…
…of course until people forget again.
Again if gov took over and controlled BK, it could have offerred a portion of any insurance payout that was needed and then backed it up with a low interest loan. Like I said above.
GS instead of getting 12 billion gets 2 billion from AIG assetts that are to be sold. Then the US gov gives them a 10 billion dollar loan. Airlines and others get the same. That way there is not a suden cash crunch and the whole thing unwinds slowly. AIG executives get shafted on bunus, AIG stock holders get nothing, and bond holders likely get very little. Now MBS prices will fall as insurance is not what as advertised. That’s life.
AIG has not failed for executives they are still collecting massive salaries and bonus payments.
Oh no — firms like AIG, FNM and FRE did not fail — they are still alive and well, thanks to govt life support measures (I refer you to the Terry Schiavo case for a medical field analogy)…
Pinch-a-penny
Spot on observation! Life would have contined on and we wouldn’t be stuck with this superb “crisis management”.
This argument, that it the “if I don’t have insurance I can’t” really irks me.
One can drive without insurance, people do it all the time.
One can get medical care without insurance, visit any ER.
Surely one can fly a plane without insurance.
Insurance is insurance. It merely mitigates risk. I seriously doubt anyone has ever been stopped from doing anything, simply because they have no insurance.
Might have brought down YOUR world. The fake one.
Former IMF economist compares US financial crisis to those seen in emerging markets. And recommends that the only way to solve is to break the hold of financial oligarchy.
http://www.theatlantic.com/doc/200905/imf-advice
The “financial oligarchy” control the White House, the treasury and congress, so their hold is now a death grip.
This article is terrific!
Admit it — you are a depressing financial news junkie.
I have to be. How else does one make money?
Wow. Thanks for the link.
The author, Simon Johnson, did an interview with Bill Moyers a few weeks ago and one with Terry Gross a little more recently. He also had a part in This American Life’s Bad Bank program.
Someone here posted a link to his blog “Baseline Scenario” recently.
You would think that business’s outside the financial sector would try to put these guys down but I guess most business’s in this country were also cashing in on the free money.
midlandsconnect dot com
A local reverend and a Sumter school board member facing arson charges. 49-year-old Isaac Johnson is accused of setting two duplexes on fire. He’s been a district 17 school board member since last year and a probation officer for.
On February 23, Sumter police say they encountered thick black smoke coming from the attic at 608 Brockenton St. The next night they were back checking on the duplex’s other side. This time police say flames were shooting from the roof. Chief Patty Patterson says investigators suspected arson that point.
Isaac Johnson owns the duplexes. According to investigators just a couple days before the first blaze Johnson increased his insurance coverage on the building by more than $100,000. Police say he has a clean record and his job is to encourage young people to keep theirs clean. In 2006 Governor Mark Sanford appointed Johnson to the state board of juvenile probation and parole. Last year Sumter elected him to district 17’s board of trustees. But, Chief Patterson says the evidence points to Johnson so officers arrested him Wednesday.
Isaac Johnson is free on a $7,500 bond. His next court appearance is in May. If convicted he could spend up to 25-years in prison.
Sigh,
Leigh
Cant sue and collect on him while he is in jail…..that’s one way of never having to pay for those houses ever again
—————-
increased his insurance coverage on the building by more than $100,000.
You can sue someone that is in jail. You can also collect if you can find his assets.
“Be sure your sin will find you out.”
Sumter is home to Shaw AFB…should be a solid base for rentals of places like he had. Wonder what the real problem was.
The old joke….
“Cause of fire: excess of insurance.”
1974 was an interesting point in US stock market history. Though it may have had a huge rise over one month in 1974, the secular bear market underway continued through the end of 1982 or so, when price earnings ratios on the S&P 500 (by the Shiller calculation) finally bottomed out somewhere south of 10. Are we headed down the same drain now (around a decade or so more of bear market conditions to come), or is it different this time?
Financial Times
S&P 500 set for highest monthly rise since 1974
By Kiran Stacey in New York
Published: March 27 2009 12:57 | Last updated: March 27 2009 12:57
US stocks looked set to give up some of their gains on Friday after a third consecutive positive week put the benchmark S&P 500 index on course for its highest monthly rise since 1974.
The Nasdaq Composite index finished Thursday in positive territory after strong performance from the technology sector, but news from Intel and Accenture looked set to take it lower on Friday.
yep
w inflation the dow went nowhere from 1900 to 1950
What do these San Diego leading economic indicators portend for the future direction of the US housing bubble collapse? Remember that San Diego is the canary in the coal mine.
County’s economic indicators down again
February’s 2.7% drop is steepest on record
By Dean Calbreath (Contact) Union-Tribune Staff Writer
2:00 a.m. March 27, 2009
San Diego’s index of leading economic indicators plummeted by its largest amount ever last month, driven by sharp declines in building permits, consumer confidence and hiring.
The index, released yesterday by the Burnham-Moores Center for Real Estate at the University of San Diego, has declined in 34 out of the past 35 months.
But February’s drop was particularly severe and implies a rough road ahead for the economy. USD economist Alan Gin said the data suggest that the local economy is likely to remain in a downturn for the rest of this year, with heavy year-over-year job losses and a double-digit unemployment rate.
“What’s been stunning to me is how rapidly the index has fallen,” Gin said. “Some of the indicators have just fallen off a cliff, such as building permits, consumer confidence and the labor market.”
“Hiring. San Diego County-based help-wanted ads, as measured by a running average of Monster Employment Index of online advertising, dropped sharply in February. Some of the largest declines came for computer specialists, mathematicians, architects and engineers. On the other hand, hiring continues to be relatively strong for security guards and community or social services.”
That’s quite a future.
For most of this country’s population, it’s been like that for 20 years.
Can’t wait for this moonbat to be calling the shots on health care! She doesn’t even know how ‘governments’ pay for anything.
March 26 (Bloomberg) — House Speaker Nancy Pelosi said the House this year will consider health-care legislation including an option for a government-run program that would compete with insurers.
“This is a big agenda, and I believe it should have a public option in it for it to be really substantial,” Pelosi told reporters at her weekly news conference in the U.S. Capitol.
President Barack Obama has said he wants Congress to produce legislation that would expand health-care coverage for the country’s 46 million uninsured and reduce medical costs. Republicans and some insurers have opposed the creation of a new program modeled on Medicare as part of the effort. The top Republican on the Senate Finance Committee, Senator Charles Grassley of Iowa, last week called the idea a “deal-breaker.”
Pelosi said the Democratic-controlled House will be “aggressive” in its approach to a health-care overhaul, which is a centerpiece of Obama’s agenda. She said a government role in health care will help U.S. companies be more competitive.
“This is not only about the health of individuals in our country, which will be justification enough,” said Pelosi, a California Democrat. “It’s about the competitiveness of our businesses to make them globally competitive because they are competing with companies and countries where the federal government — “their governments” — pay for health care. They don’t have to bear those health care costs.”
“This is not only about the health of individuals in our country, which will be justification enough,”…….
Total BS. Your (and anybody else’s) health insurance is not my problem.
“their governments” — pay for health care. They don’t have to bear those health care costs.”
No, but the rest of us will. What’s the matter with California these days??
U.S. healthcare delivery is broken, and premiums are unaffordable (especially individual coverage), but does anyone in govt. even have a clue how to fix it?
According to the PBS documentary “Sick Around The World” (Frontline online), Taiwan has the #1 healthcare system in the world. They studied all the ones in place, before designing universal healthcare for their citizens.
[gasp!] Insurance??? How dare you!!!! We can’t have that!!!!!! Down with risk pools I say!!!!
I had to go to the ER the other night with a post-procedure infection. Rode an ambulance. This was per MDs instructions about fevers at 101 and above. Smooth ride down. Vitals improve. But can’t get past the triage nurse. The ER is packed, the rooms in the back are bustling. I spend five (five) hours there. So I call a cab, go home.
I gather you need to be bleeding from gunshot or knife wounds to be seen after hours. That, or giving birth.
Moral of story around here is: Don’t get sick after dark.
Wow, what an ordeal getting to, being in, and leaving ER. Did you get some medical attention the next morning? How are you doing today? Where do you live?
Even in the burbs close to L A, the illegals have turned ER into clinics. We had an eye emergency (could have caused blindness), and the wait was 3 hours, and only because I was an *itchy nag. btw, we have medical insurance.
Wipeout…
Thanks for asking. This is Fresno. Yes, the antibiotics apparently beat the fever down. It is unnerving to call 911 on yourself. FWIW, i was using my favorite phrase “By whose authority?” (bellowing probably) to gain access. Didn’t get me anywhere.
Triage gal just probably trying to do her job. If INS, Border Patrol, Homeland Security and Congress would do theirs, the ER wouldn’t be stretched so thin.
I could have been seen quicker at a Beijing hoispital.
Trust your family eyeball problem has faded away.
milkcrate-
Glad to hear you’re doing better. That must have been one scary situation. A 5 hour wait in ER is criminal. You could have taken a turn for the worse.
My husband had Glaucoma surgery (filtering-real surgery, not laser), and a sand storm sanded his cornea, while he was healing. He could have gone blind in that eye. I was livid with the triage nurse, who was a filipino. He’s doing better.
I am not impressed with filipino nurses. I heard they challenge the boards, so a lot of them aren’t degreed. If that’s true, that isn’t good.
Living in So Ca, the epicenter of the invasion, I am so sick of the illegals. If you want to know why Mexico (and other so of the border countries) are a mess, just study the culture. Scum, imho.
I could have been seen quicker at a Beijing hoispital.</em. Especially if they want organ donors .
Been there, have you?
Maybe my attitude has changed the last couple years, but boy, “owning” a house is like a drug with some of those posters.
Just a take off from Blano’s comment above…
Have any of you caught CNBC’s “On the Money” ’sitcom’;) with that chick Carmen what’s her name? If you want to hear RE-drugged FB’s and believers desperately holding onto the housing lie, even in the face of all the evidence that it is housing that will burying them, just tune in to this show. Make sure you have a puke pan close by.
CNBC a.k.a. Bubblevision. I hear ya.
I’ve caught it a few times lately, and you are dead spot on with the RE guests and callers.
Everytime I tune in to it, all the typical verbage used by these whiners tells me we’re still a long way from the bottom. You know what I mean…. “it’s the american dream”, calling a house a “home”, realtard worship(but ‘my’ realtard sezzz ____), banking system worship and the entire drama talk associated with the “crisis”. Given the level of squealin’ from these people, clearly they want to be enslaved to the housing/banking crime syndicate.
On the other hand, I was listening last week when she and the others on the show tried to steer one guy away from walking from his house, one that was underwater but one that he also claimed that he could easily make the payments on.
I was wondering, however, if she’d do the same if it was her house.
“The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time”.
You do realize that most Oligarchies only die of sudden and bloody deaths, right?
Oligarchs in general are rather reticent about foregoing their wealth in order to help others, unless they can get something back. I think that the ways to break the oligarchy are rather limited, and all of them lead to slippery slopes. Think France in the 1770’s were at first it was the Royalty, then the Oligarchs, and it ended being everybody that was thought of as different, or not part of the “group”, that got their heads separated from their bodies…
“You do realize that most Oligarchies only die of sudden and bloody deaths, right”?
“says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs”
You do realize that that I didn’t write that opinion, right?
Oh yes… I realized it. After posting, I saw the “”.
Sorry, we’re already past that stage.
The derivatives market has pretty much baked a depression into the cake.
Yep. I read the notional amt. of the Derivatives was $681T. Deleveraging is going to be painful.
You do realize that notionals are not terribly illustrative for derivatives, don’t you?
If I wrote you a put contract for $1B that the S&P500 will never go below 10, I’d sell it to you for a candy bar.
The notional would be $1B but I’m pretty sure you would be overpaying for it with the candy bar.
That having been said, such absurd contracts don’t exist. So there is some relationship between the notional and the true worth. And notionals do track exposure but not really (as explained above.)
Thanks for the explanation. I did realize the disconnect somewhat. I just finished a Structured Finance class. Any books I should read on derivatives?
NPR interviewed a former Stanley Morgan guy, who is an Attorney, Law Professor, and a late 1990’s Derivatives trader.
Frank Partnoy: Derivative Dangers
http://www.npr.org/templates/story/story.php?storyId=102325715&ps=cprs
From that same article:
The second scenario begins more bleakly, and might end that way too. But it does provide at least some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy “stress scenario” that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.
Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more
concentrated.
“The derivatives market has pretty much baked a depression into the cake.”
Darn, Cat, you “read” very cheerful when you write that.
You want a cheery consensus? Hit the MSM.
You want facts, analysis and thoughts on investing/trading your money? Talk to me.
Sorry, polly, I find it almost impossible to maintain these surface conventions of polite society. And I’m a cheerful gregarious person by nature so this level of cynicism, etc. goes against my grain.
But the facts are what they are, and they will not change for me or for you.
“Darn, Cat, you “read” very cheerful…”
Yeah, Polly, baking and cakes make us happy.
How about “The derivatives market has pretty much drizzled a depression into the gruel.”
Cakes for you.; bread for me (no sweet-tooth here.)
We need a new metaphor.
Yum! Gruel!
You know it can be well-made, don’t you? The Chinese congee is nothing more than a variant of gruel.
And I bet you I could name you at least ten functional equivalents from all across the globe within three minutes off the top of my head.
I guess Oliver Twist left me with the impression that gruel is watery and thin. My dictionary suggests that gruel is thin, while wiki has it as porridge, giving congee as an example (a nice thick porridge in the photo).
Some of my favorite foods in the ME and Africa are basically thick porridges - preferably served (or in some cases, cooked) with broth, broth and meat, ghee and honey, ghee and date paste, or simply a little ghee.
Never thought of them as in the same category as gruel, as I envisioned it in my metaphor making effort.
It all boils down to the thickness, doesn’t it?
Well, as a textural thing, yes.
But the taste boils down to technique, daah-link!
I assure you that your tastebuds are the same as the poorest of poor folk in the world and they really really like tasty food too.
So there’s a learning curve for you.
Yar. I think of ‘gruel’ as icky, something you eat while locked up in a dungeon, with manacles, spooned feebly into your mouth with your quivering pale hand. Whereas I think of ‘porridge’ as something simple yet pleasing, to be eaten out of a wooden bowl by happy and robust peasants, and they’re wearing colorful neck-kerchiefs, and after the porridge they go out to the wheat-fields to make picturesque sheaves of golden wheat, shining in the sun.
Like that.
“the finance industry has effectively captured our government”
= plutocracy, or is it kleptocracy?
Corporate Communist Capitalism©®™
I think the term is Facism. Communism has nothing to do with it.
Of course it is, but I just like the way it sounds.
“Pure communism” in the Marxian sense refers to a classless, stateless and oppression-free society where decisions on what to produce and what policies to pursue are made democratically, allowing every member of society to participate in the decision-making process in both the political and economic spheres of life.”
For large corporations, this is a very close description, is it not?
Here’s a minor re-write:
Corporate Communist Capitalism©®™ in the American sense refers to a classless, stateless and regulation-free corporations where decisions on what to produce and what policies to pursue are made by lobbying, allowing every corporate business member of society to participate in the decision-making process in both the political and economic spheres of life.
All in fun, mind you.
Does anyone have any data on money coming out of bonds or Treasuries and into the Stock Market?
Freddie Mac’s Duel With Regulator: Does It Report Government’s Role in Its Losses?
In its annual 10-K financial disclosure this month, Freddie Mac executives reported that carrying out the Obama administration’s housing plan would cost $30 billion this year.
In its annual 10-K financial disclosure this month, Freddie Mac executives reported that carrying out the Obama administration’s housing plan would cost $30 billion this year.
Half a year after the government seized Freddie Mac, confusion about its role is stoking tensions between the company and its regulator, including a dispute this month over how much the mortgage giant should reveal to private investors about its financial troubles.
Federal officials who took over Freddie Mac stopped short of nationalizing the company, leaving it partly in private hands. This means Freddie still has to answer to investors and file financial disclosures.
But when Freddie Mac’s executives concluded a few weeks ago that they had to disclose that the government’s management of the McLean company was undermining its profitability and would cost it tens of billions of dollars, the firm’s regulator urged it not to do so, according to several sources familiar with the matter.
Freddie Mac executives refused to bend. The clash grew so severe that they threatened to go to the Securities and Exchange Commission, which oversees corporate disclosures, to secure a ruling that the regulator’s request was out of line. The company’s regulator backed down, the sources said.
When the government seized Freddie Mac and its larger sister, District-based Fannie Mae in September, it was responding to a financial meltdown that arose in part because of their unusual, hybrid nature: private companies set up by Congress to promote the public good by supporting homeownership. That extraordinary takeover has only fueled disagreement between federal officials and company executives over the firms’ status.
On the one hand, the Federal Housing Finance Agency, led by Bush administration appointee James B. Lockhart III, has full authority to direct the companies’ affairs. They have been called on by the Obama administration to carry out its public policy objective of reviving the housing market by restructuring mortgages, cutting prices on home loans and taking steps to avoid foreclosure.
But the government doesn’t want to nationalize the companies, which would end their pursuit of profits and the requirement that they make regulatory disclosures for the benefit of private investors.
This ambiguity over Freddie’s status has at times also made it difficult for the company to reduce mortgage interest rates and to hire and hold on to top executives. The requirement that Freddie pay dividends to the government also increases its debt load, reducing the chances it can ever reemerge as a profitable company.
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Now these unresolved questions about Freddie Mac’s status are driving the dispute about what it should disclose as a publicly traded company listed on the New York Stock Exchange.
“Freddie Mac executives refused to bend. The clash grew so severe that they threatened to go to the Securities and Exchange Commission, which oversees corporate disclosures, to secure a ruling that the regulator’s request was out of line. The company’s regulator backed down, the sources said.”
OMG, I didn’t think I would ever type something like this, but good for the Freddie Mac executives. It took some guts, but that was the right thing to do. I think it would be a good idea to get the SEC ruling anyway, but that is just me.
Polly:
Where were these “executives” 100 Billion dollars ago? Oh well better late then never…i guess
“There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard.” ~Alan Greenspan
“There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard.” ~Alan Greenspan
My comment above may have been eaten as it hasn’t shown yet, but basically I said it certainly seemed odd that Greenspan would do a complete 180 from his earlier beliefs regarding the Gold Standard and Ayn Rand, only to set the entire system up for failure at the peak of his power… seems a bit “Francisco d’Anconia” to me.
sure looks like Greenie made a Faustian deal. I hope it will haunt him and his friend for the rest of their lives …
Who’d a thunk it…
Goldman Sachs’s Cohen Predicts More Bad News on Banks (Update1)
By Ken Prewitt and Gareth Gore
March 27 (Bloomberg) — There may be more bad news on banks even as the U.S. economy improves in the second half of 2009, Goldman Sachs Group Inc.’s Abby Joseph Cohen said.
“We’re certainly not yet in the clear — whether in the U.S. or around the world,” the 57-year-old strategist said in a Bloomberg Radio interview in New York today. “Whilst we have had a great deal of bad news on banks, we think there is still more to come.”
The U.S. economy is looking “less bad” and may post positive growth by the end of the year as the government’s efforts to stimulate the world’s largest economy feed through, Cohen said. “The situation in Europe is of concern to us and economic activity in many countries is still lackluster.”
The Standard & Poor’s 500 Index has clawed back 23 percent since reaching a 12-year low on March 9 as banks from Citigroup Inc. to JPMorgan Chase & Co. said they made money in the first two months of 2009 and U.S. Treasury Secretary Timothy Geithner unveiled plans to rid financial firms of toxic assets.
Stock prices got “too cheap” about a month ago, according to Cohen. “Recessions are difficult and uncomfortable when you are going through them, but they do end.”
Cohen was replaced in March last year by Goldman Sachs as the bank’s chief forecaster for the U.S. stock market. She is known for her bullish predictions during the 1990s stock-market rally. Her year-end forecast of 1,675 for the S&P 500 at the beginning of 2008 was second only to the prediction of 1,700 from Bear Stearns Cos.’s Jonathan Golub, HSBC Holdings Plc’s Kevin Gardiner and UBS AG’s David Bianco.
Did the NBBers that went to Vagas go by this place?
NEW YORK (Reuters) - CityCenter, an $8 billion Las Vegas project owned by MGM Mirage (NYSE:MGM - News) and Dubai World (DBWLD.UL), is considering filing for bankruptcy, two sources familiar with the matter said on Friday.
Shares of MGM Mirage, a casino operator controlled by billionaire Kirk Kerkorian, sank 17 percent in morning trading.
MGM and state-owned investor Dubai World are likely to struggle to pay $220 million in debt due Friday on CityCenter, said one source.
A bankruptcy filing could come as soon as Friday, said the second source.
CityCenter has hired the law firm Dewey & LeBoeuf to prepare for a possible filing, the sources said.
A spokeswoman for MGM Mirage declined to comment when contacted Thursday night after the Wall Street Journal first reported the potential bankruptcy filing.
Goodbye Dubai, Goodbye
Heard on NPR on the way in to work today: Personal consumption expenditures were up in the most recent period (February?). But I also read this past week that aggregate US hh savings so far this year already exceed those for all of 2008, and further we get the news that layoffs are increasing and incomes are falling. There is something very incongruous in this picture.
UMichigan consumer sentiment rises to 57.3 in March
CAPITOL REPORT
Worst quarter for the economy since the 1930s
In terms of lost wealth, lost jobs, falling output, the fourth quarter stands out
By Rex Nutting, MarketWatch
Last update: 4:58 p.m. EDT March 26, 2009
WASHINGTON (MarketWatch) — Now that the books are closed on the fourth quarter’s performance, it’s fair to say that the final three months of 2008 will go down as the worst quarter for the U.S. economy since the 1930s.
In terms of the things that matter most — output, income, wealth, profits, foreclosures and job growth — the fourth quarter was a disaster.
If you look at each of those categories in isolation, we may have seen worse on rare occasions, but when you examine the big picture, it was the worst since the Depression.
Aside from the creative destruction that will ultimately lead to a growing economy, just about the only positive development was the rapid decline in energy and commodity prices.
The Commerce Department reported Thursday that output fell at a 6.3% annualized rate in the fourth quarter, the biggest drop since 1982 and the third worst gross domestic product figure in the past 50 years. See full story.
The decline in real GDP wasn’t due to just one factor. Every major sector of the economy contracted during the quarter, except the federal government. Consumer spending, business investment, residential investment and exports all fell at shocking pace.
Real gross domestic income fell even faster than GDP, sinking at a 7.6% annual pace in the quarter. That’s the worst since 1980 and the second worst in the past 50 years.
Corporate profits from current operations plunged by a record $250 billion, or 16.6% at a quarterly rate, the largest percentage drop since 1953. The drop in profits doesn’t even include the massive write-downs by the financial corporations on their bad debts.
Individual disposable incomes dropped at a 2.3% annual pace, also one of the biggest declines in the past 50 years. Luckily, however, falling prices boosted people’s purchasing power.
probably the explanation is in how they define aggregate savings …
Toxic assets nearly sank U.S. banks, until taxpayers bailed them out. Soon, some taxpayers can buy some of those toxic assets themselves.
At least three mutual-fund providers are aiming to launch closed-end funds to take advantage of various parts of the Obama administration’s toxic-asset program — BlackRock Inc., Allianz SE’s Pacific Investment Management Co. and Legg Mason Inc.
Soak ‘em boys! Soak ‘em again!!!
LOVIN’ IT!!!
I love this country. Main St. gets soaked and it comes back for more?!?
BWAHAHAHAHHAHAHAHHAHAHAHAHAHHAAHHHHHHHHHHHHHH!!!
“Main St. gets soaked and it comes back for more?!?”
This is a government-sponsored soaking (but for that matter, I suppose you could say the same about the “401(K) revolution”…).
You don’t have to invest in the mutual fund if you don’t want to. You have a clear choice.
And yet they will invest. And they will get soaked.
And we will laugh the laughter of the damned.
FPSS…both your mind and your laugh is… deliciously Pure Evil!
You have no idea how deliciously evil that plan is. Let’s run through the details:
hefty management fees
leverage to buy already levered instruments (!!!!!!)
closed-end
The latter is the nastiest piece. How do you redeem these hard-to-value investments? Well, you can’t unless somebody plays market-maker. And what if there’s no market-maker. Then the funds will do it for a fee. And what is the current market value? Whatever they say it is!
Freakin’ brilliant!!!
And yet, the sheeple voluntarily line up to give these people their money.
UNBELIEVABLE!!!!!!!
“How do you redeem these hard-to-value investments? Well, you can’t unless somebody plays market-maker.”
If they were liquid, they would not be toxic.
You like all your professional ilk seem to think that “liquidity” works via some form of magic.
At the right price everything is liquid. At the wrong price everything is illiquid.
And people who are betting their own money (”the market-makers”) are the ones who make the decision of whether or not to bet their own money.
At the right price everything is liquid. At the wrong price everything is illiquid.
Sounds simple, now how do we educate the US on this simple fact. Maybe the US should simply buy up a bunch of this stuff at fantasy prices, then sell it in the open market for what ever people will pay for it. Then they can determine the true value of this stuff and determine which banks should be laid to rest. I guess the FED plan does this you just have to adjust the price for all of the gov support. If I was an optomist I’d say that was their plan, price discovery without actually telling the world that these toxic pieces of paper are worth far less than the banks are telling us. The pecimist in me says the whole plan is just another way to send massive amounts of cash to the banks hedge funds ect. without the tax payers figuring out what’s going on.
“And yet, the sheeple voluntarily line up to give these people their money.”
They may have been lured in by advertised subsidies and guarantees.
Dumb is as dumb does.
Interesting that Legg Mason is one of the mutual fund providers. It was bought by Citibank a couple of years back.
Legg Mason was a fairly well respected brokerage firm back in the day. Bill Miller was its star. I made some nice coin with Miller. Ever since Citibank got a hold of it, it’s been downhill ever since.
I got out when I could no longer decipher their monstrously long and confusing monthly statements. Also, Miller seemed to have wandered off the reservation. Sad. I liked his writing.
Barry, like Bush,like Clinton,like Bush and on and on, don’t understand what the ‘job’ of the president is.
Obama says automakers need ‘drastic changes’
WASHINGTON (AP) — President Barack Obama plans to announce a new aid package for General Motors and Chrysler in the coming days and says the carmakers must make “pretty drastic changes” to save their industry.
Obama gave a preview of his administration’s approach to fixing the struggling U.S. auto industry during an online town hall meeting Thursday, promising additional aid only if the Detroit change its ways and receives concessions from stakeholders.
“We will provide them some help,” Obama said. “I know that it is not popular to provide help to auto workers — or to auto companies. “But my job” is to measure the costs of allowing these auto companies just to collapse versus us figuring out — can they come up with a viable plan?”
He added: “If they’re not willing to make the changes and the restructurings that are necessary, then I’m not willing to have taxpayer money chase after bad money.”
General Motors Corp. and Chrysler LLC have received $17.4 billion in federal loans since December and are seeking billions more to stay afloat. A task force created by Obama has been meeting with industry officials and studying restructuring plans submitted by the companies, which employ thousands in Ohio, to put them on the path to long-term profitability through tough concessions.
“Everybody is going to have to give a little bit — shareholders, workers, creditors, suppliers, dealers — everybody is going to have to recognize that the current model, economic model, of the U.S. auto industry is unsustainable,” Obama said.
The president said he agreed with a questioner at the town hall — a Maryland woman with family members who work for GM and Ford Motor Co. — that “there’s been a lot of mismanagement of the auto industry over the last several years.”
Obama stressed that the industry must be preserved, not only symbolically but because of the large number of jobs connected to the companies and suppliers. Obama said his job was to protect U.S. taxpayers and he wouldn’t spend federal dollars on “a model that doesn’t work.”
I heard the president use the word terrorist today!
They want to keep some of their most loyal foot soldiers employed and happy, that’s all.
Who’s gonna work the phones next election - not Toyota workers from MS, that’s for sure. This is patronage - Chicago style. The marketplace is saying their autos aren’t needed - but the pols think they are.
Is this what makes for a successful T-bond auction?
Fed bought $7.5 billion in Treasurys
By Deborah Levine
Last update: 11:07 a.m. EDT March 27, 2009
NEW YORK (MarketWatch) — The Federal Reserve Bank of New York bought $7.5 billion in Treasurys on Friday, the second such operation to help improve conditions in private credit markets and spur lending.
Does did move money over to equities?
Does the threat of Quantitative easing and subsequent inflation serve to scare money out of Ts?
There’s a lot of flows into EM stocks.
I’m looking to short this flow. I’m generally too early.
I can’t find the data. I’m not normally this scatter-brained.
I’m generally too early.
Hmmm…? Well. ‘Timing is everything’, you know.
I’m not normally this scatter-brained.
Are you in love? Maybe you’re in love. I become measurably more stupid when I’m in love. And I’m in love a lot.
*starts to sing ‘Love on My Mind’. And,yes, sings it stupidly *
Hey! Or maybe it’s just springtime! That’ll make you distracted, sure! Relax, then, Fasty—it’ll fade soon and you can find stuff once again.
*resumes singing, stupidly *
LOL. Well the article that I read this morning titled “Wall St. drifts into bull territory” seems to suggest so.
It says:
“Strong demand for government debt at the Treasury Dept’s latest auction also lifted stocks by helping investors set aside recent nervousness about the government’s ability to fund its economic stimulus and financial bailout programs.”
Umm, who was it that bought at the auction again?
tulipomania 2.0:
about 5 years ago Dutch investors lost over 100 million in a tulip bulb investment fraud. Of course, you have to be a bit stupid to invest in a Dutch tulip bulb (bubble …) fund, but anyway.
After the courts were working on the case for some years, all the suspects have now been released from custody because they were ‘treated unfairly’ (the justice department was eavesdropping on their lawyers). Without a doubt the tulip bubble criminals will demand and receive millions in compensation from the Dutch government for ‘violating their rights ‘.
It seems to be very difficult to nail such ponzi criminals in Netherlands; there were several of these cases recently and none of them has ended with convictions (most of these involved real estate in Turkey, Dubai etc.).
They are always looking for the backdoor to gain entry!
THE INFLUENCE GAME: Obama limits stimulus lobbying
http://www.google.com/hostednews/ap/article/ALeqM5gSMcF3k0JizQCxPJGNA85l-PnboAD97682O00
Whatever.
Like this has ever worked in the history of mankind!
This is the easiest stuff to bypass. You just host a private party at your house and invite the spouse as well. Wine, dine, and lobby it away.
This is just some pabulum to make the believers of Obamatopia™ all self-smug while reality proceeds uninterrupted.
Doesn’t work. Dinner parties have witnesses and executive branch employees aren’t allowed to accept gifts worth more than $20 at a time ($50 total for the year). So you had better get that dinner catered by Mickey D’s if you want to invite the spouses as well.
And yes, it applies to dinners in people’s houses. A bunch of us were once invited to a retirement party hosted by a DC lawyer. We were all invited to private meeting with a manager and told that they couldn’t forbid us from attending, but we shouldn’t eat or drink much as the value would get over $20 very quickly. I was told stopping by for a few minutes and drinking only a soda would be acceptable. In the end, I just skipped it. Not worth the bother.
Not that it couldn’t happen. People do break the law. But you are asking someone to risk getting fired to do it. If they aren’t inclined to take that risk, they are likely to report you.
It is amazing how savings can increase, incomes (and jobs) can decrease, and consumer spending can increase at the same time. What gives?
Financial Times
US consumer spending rises in February
By Alan Rappeport in New York
Published: March 27 2009 13:21 | Last updated: March 27 2009 14:41
US consumers upped their spending for the second month running in February as prices rose, but concerns over falling incomes left the savings rate near last month’s 14-year high.
Personal consumption expenditure rose by 0.2 per cent, in line with economists’ expectations, according to commerce department figures released on Friday. The February rise followed a revised 1 per cent increase in January, which broke a record streak of six consecutive declines.
It is amazing how savings can increase, incomes (and jobs) can decrease, and consumer spending can increase at the same time. What gives?
Sorry, it was me… I couldn’t stop myself from binge spending. Purchased in Feb: Blackberry Bold to replace old broken cell phone. Bunk beds for the kids. New Fisher FIS compliant race-stock skis, 2008 model year on sale for 65 percent off, replacing my 9 year-old Rossignol skis with broken bindings. Also took a weekend ski trip to Mt Snow.
I received my annual bonus late Feb so my cash savings increased even as I was spending like a drunken sailor. March should see a nice rise in the national savings rate as I paid off all the Feb purchases in full…
Now for the darker side of my spending binge… I’m completely addicted to my crackberry, and especially to playing poker on my crackberry. Also, my daughter refuses to sleep on the top bunk because she’s afraid of spiders. There are no spiders up there, but who knows what goes on in a five-year-old’s mind?
Deflation!
The price must have gotten you… to buy FIS-compliant race skis. 27 meter radius - are you entering FIS races?
No matter, I’m sure you’ll have fun on ‘em!
Exactly sf jack, deflation. Regular 1000, on sale for 350… replaced my Rossi 9x cut boards. If I find another bargain like that for slalom skis, I’ll bite.
Every year I say I’m going to enter USSA Masters, but never have the time to train/travel. Maybe next season…
There are spiders there… you’re just not looking hard enough
The dollar is rallying strongly today against many of its major rivals. What’s up with that — stock investors pulling a little money off the table today?
EUR-USD 1.3293 -0.0234 -1.7262% 11:38
GBP-USD 1.4329 -0.0124 -0.8566% 11:38
USD-CHF 1.1446 0.0174 1.5437% 11:38
USD-SEK 8.1657 0.1428 1.7805% 11:38
USD-DKK 5.6014 0.0946 1.7188% 11:38
USD-NOK 6.6466 0.1366 2.0983% 11:38
USD-CZK 20.5330 0.4880 2.4346% 11:38
USD-SKK 22.6640 0.3874 1.7389% 11:38
USD-PLN 3.4878 0.1185 3.5170% 11:38
USD-HUF 228.3650 5.3700 2.4081% 11:37
Citation: Those numbers are off bloomberg dot com
more central bank manipulation to prepare for the G20 top (next week)?
FPSS, thanks much for the tax reporting tips yesterday! I’ll give that a shot…
Yeah, it’s a coherent scheme that works for me.
And it has all the column and row totals, etc. so you can quickly find errors via checking that the same set of numbers must add up the same way, etc.
Basically, there’s a raw data set of numbers and a IRS set of numbers and they all have to add up the same way.
And one sheet per security is crucial.
You could use a true statistical package (R, etc.) but then you wouldn’t be able to bunch trades to minimize taxes because that’s a legal concept not a mathematical concept.
OG,
I appreciated your comments yesterday about heirloom seeds and the wheat. It reminded me of the following anecdote:
One of the farmers near my house growing up told us a story about cleaning out his grandparents house in the 90s when they passed away. They were LDS so they had a year’s supply of food in their basement, some of it dated in the 1930s. Well, he was an inquisitive farmer so he did a scientific experiment with some of the 60ish year old hard red winter wheat from storage and some fresh seed intended for his next crop. He ended up with 95% germination of the old seed and just a touch better for the new. Wheat is a miraculous crop.
I’ve got a field growing wild in white wheat on “the ranch”. I harvest a big gulp cup worth every year and make flour with it so I can lay claim to the whole supply chain. Threshing is really easy, so the wheat you harvested must not have been golden and dry on the stalk yet. The easiest way to thresh small quantities is to take a hand full of tops and put them between your palms like you are praying, only sideways. Then rub you palms back and forth like you are saying “oh goody I get fresh wheat”. Within seconds you’ll have wheat and chaff separated in your hands a little blowing on your palm helps the separation.
If you want to thresh a bit more you can use a five gallon bucket. Put your supply of tops in it with a lid on and shake it up. You’ll end up with grain in the bottom and can separate out the chaff with your hands and/or a blow dryer. My $.02…
BTW, the best way I’ve seen to describe heirloom is “non-hybrid”. I don’t know if that’s scientifically accurate but if you consider that a donkey and a horse make a mule (hybrid), and mules are sterile then you can see that the same thing pretty much happens with plants. Anybody who depends on Burpee hybrids for their post-apocalyptic garden will be sorely disappointed the second season when the seeds they save from the previous year won’t germinate.
BTW, the best way I’ve seen to describe heirloom is “non-hybrid”.
“Non-hybrid” is certainly one term to describe heirloom varieties but not the only one. Anyone can hybridize a variety with a little time an effort; the problem is the way agribusiness develops the varieties and tries to institute monocultures.
Heirlooms carry genetic diversity. They carry the history and knowledge of particular regions or schools of agricultural/horticultural thought. They can be openly pollinated (To be capable of being saved and used again, all heirloom seeds must be open pollinated). They often carry characteristics that enable them to withstand environmental extremes more readily than pesticide-dependent modern hybrids. And heirlooms are often more beautiful, more delicious, more efficient, and more interesting than anything than agribusiness can dream up.
Thanks for the additional info ET. I’m just a poor dirt farmer turned engineer, not a botanist.
“And heirlooms are often more beautiful, more delicious, more efficient, and more interesting than anything than agribusiness can dream up.”
The heirloom tomatoes that we get in summer at the farmer’s market or local farm market day are AWESOME - the ones that are big and purplish-red, tend to be green at the top, and cracked (and expensive). They don’t look beautiful until you’ve eaten a few and Pavlovian conditioning works its magic.
I’ve planted a couple in my raised beds - here’s hoping for some good production.
Wow, good info, thanks. I guess I missed the aforementioned discussion about seeds. I’ll have to look back at it.
Great story, dude!
I think it’s tremendous that you end up with some flour from your wild white wheat. That was my plan. And you must be right, and it wasn’t fully ripe, because those dumb kernels could be squirted out laboriously, but didn’t just pop out easily. Next time I grow some I’ll wait longer, and also ‘pray sideways’. Or if I have enough I’ll do the bucket thing.
Hahahaha! I had to laugh about the food storage from the 1930’s. Most of my family is LSD. My gran is 93 and my grumpaw is 90 and they have a basement full of wonderments and oddities, including, of course, a years supply of food. Or two years. Or 20 years, because they never throw anything away and grumpaw loves to garden and gran feels compelled to can it all. When I was a wee lass my sisters and I would tiptoe into the dank basement pantry and gaze in wonder at the ranked rows and rows of apricots and vegetables swimming murkily in glaucous fluid, like scientific specimens. All of it older than we were, some of it probably older than my MOM was, festooned with cobwebs. Adding to the scientific air were tubes and vials and beakers and powders and stuff, because grumpaw is/was an organic chemist and liked to take his work home with him, and he just put stuff here and there on shelves. Exciting!
And it’s gonna be even more exciting when the time comes for someone to clean all that out, because at several points grumpaw was working on things that go boom, and the labels are faded away by age or nibbled by mice. Why, you can barely read his handwriting on some of them. You have to wipe away the cobwebs and peer closely to read the ‘Keep away from damp! Explosive!’
Hahahahaha!
(Hmmm. Now, why is that funny to me? I don’t know. Probably because I don’t live in Utarr, and the blast likely won’t reach this far.)
Nice story about Gramps. They are in Provo if I’m not mistaken? Make sure you don’t suggest anyone do any cleaning this weekend because I’m in Orem right now. The toxic cloud could easily reach me. LOL!
Another really good wild edible I’ve discovered in the last few years is stinging nettle. You probably have oodles of it up there. You can boil it or steam it well to deactivate the sting (a complex protein) and it tastes a bit like bland spinach with a hint of almond.
If you know what to do, this is a classic Italian green!!!
It’s bloody freakin’ delicious as long as you actually know how to extract taste out of it, you f*ck*n Yank with no concept of gastronomic transformation.
Oly, stop me before I send my death rays against the man who doesn’t know what do with nettle.
I’m the ultimate urbanite and yet, I would rip his guts out faster than that of a banker!!!!!!!!!!!!!!!!!!!!!!!
I’m the ultimate urbanite and yet, I would rip his guts out faster than that of a banker!!!!!!!!!!!!!!!!!!!!!!!
Wow. Twenty-three (23) exclamation points.
You’re a man who seriously loves his nettles, huh huh?
Anyway: Stop, Fasty! No death rays! Por favor!
*flings hand out dramatically, as if to ward off death-rays from pouring into Orem, Utarr and devastating the entire Wasatch Front *
(dude, you owe me
)
FPSS, I humbly apologize for my yankishness. Please enlighten me, I’m always willing to learn a new preparation.
(retreats scraping and bowing)
OG,
Thanks for the save!
Bland spinach with a hint of almond doesn’t sound that bad to me, especially if it’s a hint of toasted almond.
Nice story about Gramps. They are in Provo if I’m not mistaken?
1. I call him ‘Grumps’. And I laugh in my heart when I do it. It’s a small joy, but a real one. He’s not very attentive to linguistic nuance, which is why I dare.
2. Well, you’re a freaky mutant, arencha. Only IIIIII can remember that sort of casually sorted random detail. Except, of course, I’M not a freaky mutant, YOU are.
(Now, don’t blast me with your angry mind-rays. I spared you earlier from Fasty, and you owe me.)
“arencha”
It’s a blessing and a curse that I have a hard time forgetting anything I read. I imagine my brain will spontaneously combust sometime before my 50th birthday.
Don’t worry though, I’ve installed a halon fire suppressant system. It fits nicely under my turban.
It’s a blessing and a curse that I have a hard time forgetting anything I read.
Really?! Nohow! Same with me! For example, do you want to know what my locker combination was in junior high? No? Well, ME NEITHER.
*frowny, frowny face *
That’s why I drink a lot of beer. Is what I say to myself, when I drink a lot of beer.
(hiccup)
Sayyyy….does your turban have a big red ruby ornament pinning down an ostrich feather on the front of it? It seems to me that the turbans of all mutants have to have one of those. And do you have midget henchmen?
That’s what IIIII am going to have, when I do it.
I have 5 midget henchmen that my wife calls “daughters”.
I was unable to keep them midgets, though, only the youngest still fits that description.
“When I was a wee lass my sisters and I would tiptoe into the dank basement pantry and gaze in wonder at the ranked rows and rows of apricots and vegetables swimming murkily in glaucous fluid, like scientific specimens.”
Awesome images you evoke, OG!
Thanks, Primey.
I could see it all in my head once again, when I thought about it. Right down to us little girls in home-made pinafores and bowl hair-cuts and respectful whispers.
Hahahahaha!
(Hmmm. Now, why is that funny to me? I don’t know. Probably because I don’t live in Utarr, and the blast likely won’t reach this far.)
…and the Prophets fail us once more Olygal
Ahhh…? Whatchoo mean?
And anyway, I think you mean ‘Profits’.
*bows head respectfully *
Okygal, if I can drag myelf out of bed I might speak to a congress critter tomorrow.
Do you have any profound questions you’d like me to ask him that won’t get my butt sent on a un-marked midnight flight to Gitmo ?
Do you have any profound questions you’d like me to ask him that won’t get my butt sent on a un-marked midnight flight to Gitmo ?
Well, which one, obviously. You’ve been very delicate about mentioning where you live.
And anyhow, don’t tell me that thatparticular flight is unfamiliar to you, in the first place.
(Just teasin’. I know’s you’s patriotic and all.)
True, Uncle Sam’s Midnight Flights-to destinations unknown upon the C-130/C-141’s, were always a thrill to me as a child and a True Believer. I was a bad boy !
mikey is “Always the American Patriot”, just not one of the “gang”…anymore;)
I’m from a burb near the Milwaukee area and was thinking about asking (their local) congress critter about were the hell have they’ve been on Banking and Finance regulations and enforcements as I point up the street to our un-wanted $1.7 Billion taxpayer investment
I would much perfer to cane him but I guess that would upset the natives and wreck havoc on my neurological system as they tazed me to death
Seven states see jobless rate top 10 percent…
Growing number of states see double-digit unemployment in February
Jeannine Aversa, AP Economics Writer
Friday March 27, 2009, 12:49 pm EDT
WASHINGTON (AP) — More states logged double-digit unemployment rates in February, with North Carolina and Rhode Island seeing their rates hit record highs.
In thiis March 6, 2009 file photo, Austin Boe, 26, holds a piece of paper with job information at the Nevada Jobconnect Career Center in Las Vegas.
AP - In thiis March 6, 2009 file photo, Austin Boe, 26, holds a piece of paper with job information …
The U.S. Labor Department’s report, released Friday, showed the terrible toll the recession, now in its second year, is having on workers and companies alike.
Seven states have unemployment rates that topped 10 percent last month. That’s up from four states in January.
The U.S. unemployment rate, released earlier this month, rose to 8.1 percent in February, the highest in more than 25 years. Economists predict the national jobless rate will hit 10 percent by year end even if the recession were to end later this year as some hope.
Michigan’s jobless rate climbed to 12 percent, the highest in the country. South Carolina registered the second-highest at 11 percent and Oregon came in third at 10.8 percent.
North Carolina came in fourth with an unemployment rate of 10.7 percent, the highest there on records dating back to 1976. California and Rhode Island tied for fifth place at 10.5 percent each. That was an all-time high for Rhode Island. The seventh state with a jobless rate above 10 percent was Nevada at 10.1 percent.
Georgia’s unemployment rate rose sharply to 9.3 percent, also an all-time high.
Layoffs in manufacturing and construction — two sectors hard hit by the housing collapse — are common threads running through the higher unemployment. Another thread: difficulties faced by states, such as South Carolina, Michigan and Rhode Island, to lure new types of companies to help cushion the loss of manufacturing jobs and retrain laid-off factory workers for other kinds of employment.
All told, 49 states and the District of Columbia saw their unemployment rates move higher in February from the previous month. Only Nebraska recorded a slight drop. Its jobless rate dipped to 4.2 percent.
And those are the U3 numbers. I magine what their U6 numbers are (shudder!).
From the Fresno fishwrap…
Gottschalks Inc. said it has three bids for the department-store chain — including one from a government-controlled retail conglomerate in China that hopes to keep the business running.
Shandong Commercial Group General Corp., one of China’s largest retail companies, was named along with the other two bidders in a filing Thursday with the U.S. District Bankruptcy Court in Delaware. It is the only suitor proposing to buy Gottschalks — which filed for bankruptcy protection in mid-January — as a “going concern.”
The other two bids are from companies that would dispose of the merchandise through going-out-of-business sales and close the stores.
Signs of Stress, Fraud on Roadside
by Douglas Belkin
Thursday, March 26, 2009
WSJ
More Vehicles Burned, Ditched in Apparent Schemes by Owners to Get Insurance Payout
Police detective Mark Menzie drove 55 miles into the desert Sunday to inspect the charred remains of a formerly silver Ford Expedition.
Later, he sat in a kitchen on the city’s south side where a 19-year-old man confessed to torching his girlfriend’s Chrysler PT Cruiser.
At noon Monday, Mr. Menzie was picking through the smashed windshield of a 2008 Land Rover in a desert canyon. His police radio crackled as he worked; another car was spotted burning southwest of the city.
Years of no-money-down car loans followed by sinking home values and rising unemployment has made many people desperate over car payments they can no longer afford. For some, the answer is to ditch the car, report it stolen and collect the insurance money to pay it off without hurting their credit.
Authorities report a growing number of cars dumped in the Great Lakes, burned along remote New Jersey roadsides and driven into canals in California. The phenomenon is acute in Las Vegas, where sharp declines in tourism and construction have left thousands of workers unemployed and broke.
Mr. Menzie, a burly 38-year-old detective wearing jeans, dusty work boots and a two-day stubble, toted up a day’s work. Four cars burned or wrecked in 24 hours: “Insurance fraud,” he concluded. “Lots of desperate people out there.”
As a member of the Las Vegas department’s auto-theft unit, Mr. Menzie is on the front lines of a phenomenon that police departments and insurance companies worry could be burning out of control.
“The economy is stretching people to the breaking point and some of them are willing to risk criminal conviction,” said James Quiggle, a spokesman for the Coalition Against Insurance Fraud, an industry-backed group. “They look at this as their own personal stimulus package.”
Tow yards in Las Vegas are filled with the blackened hulls of Mercedes sedans and Cadillac Escalades. The wrecks were pulled from desert hills and city streets by the department’s eight-member auto-theft unit, which responds to calls around the clock. Over one weekend this month, Mr. Menzie investigated eight car fires in 36 hours.
“This is a money town,” says Lt. Robert Duvall, who reorganized the auto-theft unit to include insurance arson fraud. “Where else can you lose a paycheck in a night?”
Ah, you just gotta love the efficient allocation of capital inspired by our no-money-down/infinite-leverage economic model. Not.
I freakin hate waste. All of that productive potential that _could_ have done something useful in the world—it makes me kinda sick to think about.
I freakin hate waste. All of that productive potential that _could_ have done something useful in the world—it makes me kinda sick to think about.
Testify! TEST.I.FY!!!!!!!
We must be twins separated at birth, or something.
Sis, is that you???
Oh wait, I hope not—cause that would make some of my past images of you prancing and twirling by moonlight in your mossy forest glen somewhat…. let’s just say ‘inappropriate’.
, you just gotta love the efficient allocation of capital inspired by our no-money-down/infinite-leverage economic model. Not.
In your model we would make our country more efficient and improve the quality of life for all. Wealth would be accumulated by those that were productive and or innovative. Tell me how those CEO and hedge fund managers would get their bonus. I’m telling you they would have packed up their cars and moved overseas. Then where would we be?
TAIPEI (Reuters) - Bond giant Pacific Investment Management Co said the Federal Reserve needs to double its balance sheet up to $6 trillion to replace the amount of wealth destroyed in the United States, an executive said on Thursday.
Liabilities on the Fed’s balance sheet should rise to between $5 trillion and $6 trillion later this year amid the financial crisis that roiled global markets, said Brian Baker, chief executive Pimco Asia Ltd.
“Right now, the Fed has spent about $3 trillion. We believe there has to be further stimulus policies put in place,” Baker told Reuters.
The central bank’s aggressive unconventional policy measures to revive dormant credit markets have pushed its balance sheet above $2 trillion in mid-March, according to data released by the Federal Reserve.
Central banks across the United States, Asia and Europe have lowered their interest rates aggressively since late 2008 as part of broader efforts to bolster the global economy, fanning hopes rates will continue to stay low for years.
“In developed markets, interest rate policy is pretty much as low as it can go,” he said. “We believe short-term rates in developed markets are going to be near zero for several years.”
Pimco is a unit of Allianz Global Investors, which managed about $970 billion in client assets at the end of 2008 and says it is the world’s biggest fund house.
Pimco’s chief investment officer Bill Gross is one of the industry’s most widely watched figures.
Pimco is buying high-yield bonds in some U.S. banks that have received government support.
“The Federal Reserve wants to debase the U.S. dollar,” writes Puru Saxena in the latest Daily Reckoning. “The total debt in the United States now exceeds $60 trillion, and its economy is around $14 trillion. So the United States is already bankrupt, and the only way it can ever hope to repay this gigantic sum is through monetary inflation and debasement.
“Allow me to explain:
“Suppose your grandparents borrowed $100,000 from their friends roughly 50 years ago. Back then, $100,000 was a lot of money, and the chances of your grandparents ever repaying this loan were slim at best. However, thanks to monetary inflation and the debasement of the U.S. dollar, today, $100,000 isn’t a very large sum of money. Therefore, your grandparents would find it much easier to repay their debt.
“Turning to the present situation, the United States owes its creditors a gigantic amount of money and a debt so large that it can never hope to repay it in today’s dollars. So the United States has two options:
a. Default or bankruptcy
b. Monetary inflation
“Given the fact that the United States is still the world’s largest economy, owns the world’s reserve currency and has a democratically elected government, I think we can pretty much rule out the possibility of sovereign default. Therefore, you can bet your bottom dollar that the United States will try its best to inflate its way out of trouble. Remember, politicians borrow money when it buys them a loaf of bread and they repay it when the same money is worth only a slice of bread!”
Commercial banks rack up $9.2 billion in derivatives trading losses in the.
Friday March 27, 2009, 1:42 pm EDT
NEW YORK (AP) — Commercial banks lost $9.2 billion trading derivatives during the fourth quarter as the credit crisis intensified, according to a report released Friday by the Office of the Comptroller of the Currency.
Losses mounted as commercial banks had to take additional write-downs on the value of investments they held, offsetting gains from actual trades.
The collapse of Lehman Brothers Holdings Inc. and the near-failure of American International Group Inc. in September touched off one of the worst parts of the credit crisis, which carried over into the final three months of the year. Credit markets froze up, further pressuring the value of many types of investments.
Derivatives contracts include interest rate and foreign exchange contracts as well as credit default swaps — a product that is essentially a bet against the performance of other types of investments. Credit default swaps have been at the heart of the credit crisis and a main reason for problems at Lehman and AIG.
The total value of derivatives at commercial banks jumped 14 percent to $200.4 trillion as financial firms changed their operating status to commercial banks after the collapse of Lehman in an effort to stay in business. Among those changing their status were investment banking giants Goldman Sachs Group Inc. and Morgan Stanley.
For the full year, commercial banks recorded their first-ever industrywide loss on derivatives trading, losing $836 million in 2008, compared with revenues of $5.49 billion in 2007, according to the OCC
So who made 9.2 trillion on the other side of those derivative contracts?
err.. billion.. I guess I am getting to use to throwing around the T’s.
Virtually anyone who had brains and capital.
Could be the smarter insurance firms - they do exist, you know? - or hedge funds, or even private individuals and companies.
It’s being reported that hedge funds were the majority buyers.
(google news)
Bank Executives Pleased With Tone Of Meeting With Obama
By Henry J. Pulizzi and Jessica Holzer
DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)–Chief executives of the nation’s biggest financial institutions emerged from a meeting with U.S. President Barack Obama pledging to cooperate with the administration’s effort to steer the economy out of its mess.
Executives said the tone of the more-than-90-minute session was cordial, with little discussion of the the controversy over executive compensation.
“We’re just in this together. There’s still some hard work to do, but a pleasant meeting,” said Bank of America Corp. (BAC) CEO Ken Lewis.
The CEOs agreed they had to make clear that they understood the public’s concern over taxpayer-funded bailouts, according Freddie Mac (FRE) CEO John Koskinen. The executives, however, said government programs need firm rules that do not change with the political winds.
“Whatever the rules are going to be, we need to know them sooner rather than later because we are prepared to play by the new requirements but we need to know what they’re going to be,” he said.
The bankers said they support the administration’s proposal to cleanse their balance sheets of toxic assets, though they are waiting for more specifics of the plan.
“We don’t know all the details … but we think it’s a really encouraging first step to get the plan out there,” said Robert Kelly, CEO of Bank of New York Mellon Corp. (BK). “We need to hear the details. I think there’s going to be a lot of interest in it.”
Richard Davis, CEO of U.S. Bancorp (USB), said a proposal to tax at firms that accept government aid wasn’t discussed at the meeting, despite widespread public outrage - and administration rhetoric - over the bonuses doled out to executives at American International Group Inc. (AIG).
“We understand there have been some optics that have been very negative. We apologize for that because it’s not something that this industry supports or wants,” Davis said.
““We’re just in this together. There’s still some hard work to do, but a pleasant meeting,” said Bank of America Corp. (BAC) CEO Ken Lewis.”
Hey Ken, since we’re in this together, would you mind spotting me a couple million?
Still Searching for a Recovery
by Bill Bonner
Paris, France
The mobs are forming…
Give the sans-culottes a chance…and they’ll turn violent. So far, two bosses have been held hostage in France. Employees wanted something the bosses either couldn’t or wouldn’t give.
In England, the yahoos attacked poor Sir Fred Goodwin’s house. Fred ran the Royal Bank of Scotland into the ground; you’d think the rabble would be delighted.
In America, meanwhile, they organize bus tours to gawk at AIG executives’ houses…and howl for blood. Apologize, resign…or commit suicide, suggested Senator Grassley.
“The corporate security business is booming,” says the International Herald Tribune.
Until now, the whole bonus/executive pay/bailout spectacle was just an amusing diversion - diverting the public’s attention with a trifling few million dollars, while the feds picked their pickets for trillions. But now, it’s turning ugly.
Our guess is that the blood will flow…but later. It’s still fairly early in the correction. Investors have lost money - lots of it. Homeowners have lost their homes. Working stiffs and Wall Street sharpies have both lost their jobs. But the violence-prone yahoos still expect something for nothing. The bailout plans will work, they believe. The government will step in and save them. They haven’t figured out that the government’s bailouts are just making their situation worse.
Today’s International Herald Tribune tells that “shanty-towns” are beginning to appear throughout the United States. People are setting up tent communities…shacks…and Rio-style favelas - in America. The paper shows a photo of a group of tents under a California freeway. It’s not hard to understand why. Many families live paycheck to paycheck…just one week ahead of the rent payments. If the paychecks stop - even for a short time - they’re in trouble.
When credit is expanding, jobs are plentiful and credit is willing. Lose a job and you can always get another. And you can fill in the gap in your budget with credit cards. But that was then…this is now. Advertise a job opening now and you’re likely to get hundreds of applicants. And not only is it harder to get a job…it’s harder to get a line of credit too. And even people who still have credit are more reluctant to use it. They know where that leads; many would prefer to live under a highway than to run up more debt.
A big change in attitude has taken place. People used to think that whatever they needed, they could get it ‘just in time.’ That’s why we have 24-7 liquor stores, all-night convenience shops and cash machines on every street corner. But something has gone wrong with the ‘just in time’ system. The cash machines aren’t as yielding as they used to be. Neither is the housing market. Or the job market. Sometimes, they just say no.
Now, people want a little cash in their pocket…just in case.
But what do we know? We missed the whole credit cycle. When we were young and in need of credit, the banks were still smart enough not to lend to us. When we got older, we were smart enough not to borrow.
But pity people about 20 years younger than we are. They were just starting out…having children…buying houses…at a time when the banks had lost their minds. Credit was as easy to get as a social disease. Now, the debt is even harder to get rid of. Old people…and young people…tend to have little debt. It’s the people in between who are hurting.
Hey all you rich New Yorkers get ready to bend over a little farther…
New York Income Tax Rise Hinted as Budget Gap Grows (Update1)
By Michael Quint
March 27 (Bloomberg) — New York Governor David Paterson said next year’s record budget gap may be $3 billion greater than the $16.2 billion he announced earlier this week and hinted a tax increase on higher incomes is possible.
The newly estimated gap for the year beginning April 1 was 25 percent more than projections six weeks ago, he said.
“We are right now on the verge of cuts and service reductions that I would have to describe as life threatening,” Paterson said. “With situations like that, everything is on the table,” he said in response to a question about increasing the state’s income tax for high earners.
Paterson and legislative leaders said earlier this week that the deficit continues growing because of falling tax collections in a shrinking economy with rising unemployment. If next year’s deficit exceeds the $16.2 billion estimate, the spending plan would be amended, as lawmakers did twice in the current year.
The state Labor Department said yesterday that New York’s unemployment rate rose by a record 0.7 percentage point in February to 7.7 percent, the highest since 1993. In New York City, the jobless rate rose 1.2 percentage points to 8.1 percent in February.
Paterson said he continues to press leaders of the Senate and Assembly for spending cuts in addition to the “record” cuts already agreed upon. He didn’t identify the kind or amount of the reductions.
Near-term Action
Lawmakers expect agreements on parts of the budget soon enough for bills to be printed this weekend and ready for voting before the midnight, March 31 deadline, said Austin Shafran, a spokesman for Senate Majority Leader Malcolm Smith.
On March 24, Paterson said he may have to drop 8,900 jobs from a state payroll estimated at 199,400, after unions rejected his proposal to eliminate a previously negotiated 3 percent pay increase. The budget presented by Paterson in December totaled $120.1 billion, including federal assistance and capital spending.
Labor unions and advocates for education spending have urged lawmakers to increasing income taxes as a way to avoid cutting jobs or state aid to local schools.
$16 BILLION deficit?! Seriously, is it something in the water up there?
God forbid anybody ever actually consider cutting spending.
http://www.foxnews.com/politics/first100days/2009/03/27/obama-seeks-input-bank-ceos-recovery/
AIG has received several infusions of federal bailout money, more than $170 billion in all, because administration officials say its failure would have far-reaching and devastating consequences around the world.
Yes, the mortgage business went haywire with greed on many, many participants. The house prices bubbled because of this uncontrolled greed. But, But, But, to let the entire financial system tank would mean uncontrolled pain for all. I was alive in the great depression. You don’t know the feeling until your have been there.
AIG was loaned tax payer money for a good reason. No one likes the idea. The bonus given to those that caused the mess in their boosting toxic swaps is terrible. But, but, what else could be done.
Those posters on this board would be financially broke if AIG was not loaned the money. So. Be. It.
So are you trying to tell me that if they wound up insolvent banks by backing FDIC that I’d be broke? It seems to me that that plan would have cost us a lot less, even if we insured ALL deposits, but GS, JPM, BAC, WFC, etc. would be no more, and we can’t have that, can we?
“But pity people about 20 years younger than we are. They were just starting out…having children…buying houses…at a time when the banks had lost their minds. Credit was as easy to get as a social disease. Now, the debt is even harder to get rid of. Old people…and young people…tend to have little debt. It’s the people in between who are hurting”
Part of the demographic is that there are many
25-45 year olds who for most of their lives did not see anything except:
Jobs were easy to get.
Credit was easy to get.
Real estate always went up.
Home equity loans were the way to go.
Now, financial catastrophe buzzes around them as if they were punching a hornet’s nest with their bare hands. And the older folks have seen the equity they thought they had 5 years ago deflate like a flat tire. And the younger folks are looking at $8 an hour, if they can find a job.
All of which feeds the Depression mentality.
Which becomes reality for more of us every day.
Obviously, we need government jobs for all undocumented guests and minorities first, then job training, low interest rate mortgages, free medical care and legalized pot for the rest of us!
(snark off)
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