Credit default Swaps. Biggest ponzi scheme in human history, took a manageable credit crises and magnified it 10 x. Insurance without reserves at 10x the underlying insurable interest is an out and out scam. The markets will continue to collapse until this is dealt with!
Paulson is a creep by the way, and he inspires zero confidence. He looks like Jeff Gannon and he as corrupt as dick Cheney. what a guy.
Well, we have more regulations and regulators. The fact is that you can't trust bureaucrats to do their job. They don't have a skin in the game and it's too difficult to be chicken little.
What we need is to abolish the FED and get and end to central planning and fractional reserve banking.
I keep pointing this out to righties who want to put it all on ACORN style lending. CRA was only 10% of the mortgage market in '99. It COULDN'T have caused the bubble. And the housing bubble was only the trigger. The real culprit was the over leveraged and un capitalized shadow banking system which ultimately collapsed because these "bets" had absolutely zero assets behind them.
Dan-in-PA writes:
I keep pointing this out to righties who want to put it all on ACORN style lending. CRA was only 10% of the mortgage market in '99. It COULDN'T have caused the bubble. And the housing bubble was only the trigger. The real culprit was the over leveraged and un capitalized shadow banking system which ultimately collapsed because these "bets" had absolutely zero assets behind them.
Oversight does not equate to regulation.
Dan-in-PA | 10.15.08 - 9:39 pm | #
You should change collapsed to "is collapsing", etc. They aren't all dead yet.
Cynical Yes is correct about CDS. Get ready for some real cliff diving.
Nr 1 culprit is the world's misconception of what money is. Money is a medium of exchange. Money itself is worthless. Stop tampering with the medium of exchange.
Stop government interference in the global division of labor economy. It is too complex.
One of those ten better be the average Joe citizen because this didn't occur without their greed in taking out 100% debt / interest only mortgages and drawing out any equity they attained with home equity loans and then just walking away when the trouble hit.
I have heard it said that keeping the rates low for so long fed the mania for developing new ways to reach for yield.
If interest rates had been positive in real terms (using un-cooked CPI), do you think that there would have been the incentive to us such massive leverage to get yield? Do you think that there would have been so much lobbyist pressure to relax leverage restrictions?
I'm not sure we'll ever know, but it's interesting to think about.
It centers on Greenspan's monetary policy and ignores Greenspan's far larger mistake; opposing oversight when many people were pointing out the extremely lax lending standards.
They almost amount to the same thing in my book. Both seemed to "work" at the time because the bubble gave the impression of prosperity. Both were about near-term gains rather than the sustainability of the financial system.
It's ok CR, relax. They are getting there. But remember, they are awfully slow learners, so this is a BIG step for them. In ten years, they will have it all figured out, and the statue of limitations will have passed. Yay!
MY top ten:
1. Fractional Reserve Lending
2. Everybody has the same plan.
3. Claims on money is money.
4. Krill are useless
5. Only whales matter.
6. Greed is good, if your right.
7. Transparency
8. Oil
9. Gold
10. Lucre.
This is going to happen every single week, I think. The Fed/Treasury is going to dole out some juicy perk to the market, stock market will rejoice, reality will set in about how massive the problem in the financial system is and how ugly the economy is, then the markets will expect some new juicy perk.
Tighter regulation of lending/borrowing standards is at odds with the goals of the easy monetary policies. We see this even today in that money is being pumped into the banks like never before in history, but that they don't want to lend to any but the most credit-worthy borrowers. This is a thing that almost everyone misses about what has occurred.
If they want the markets to rally, get rid of paulson, bernanke, cox, all the bank ceos,etc. Good for a 1000 pt rise guaranteed. bThe dickheads dont comprehend that they are the problem now, no confidence.
What I can't understand is how they let derivatives like CDS's and CDO's get done with NO regulatory body (insurance, banking, etc) keeping an eye out thanks to the legislation in 2004.
WTF!!! No wonder we have $60T in this toxic crap! All these "financial wizards" were doing was making money off selling "insurance" on loans they knew were bad but didn't care about since they were unregulated, not breaking any law, and didn't need to have any reserve requirments for to underpin their "insurance" policies.
I hope the guys on FastMoney continue to harp on this issue until people get the light shined on them to show what low lifes they are and then get sued to all hell and gone in civil court.
Anyone with me? F these Aholes who have put done this.
The problem with all this government intervention is that it makes markets unpredictable.
The free market does need rules, but which rules you have are far less important than that everybody knows what they are and that they are consistently enforced.
I am not sure a capitalist system can really function when gov't is changing the rules every week.
There is only The One Ring...The Fed...nothing else is necessary.
Those who think that bought off congangers and regulators can't be easily bought off are fools. All regulators get captured by the regulatees. All fiat currency regimes blow titanic bubbles.
They are designed to. By TPTB.
Enjoy trying to fix a system that is fundementally broken.
Let's not forget Reagan who fired Paul Volcker for easy money Greenspan and defined the deregulation, tax cut, and borrow and spend agenda which has destroyed the world economy (yes it is destroyed and must be redesigned worldwide). Add Cheney's vision of Empire and you have a good first draft of history.
They're right to focus on monetary policy. Oversight is a totally superficial issue. If the money hadn't ended up in housing it would have been somewhere else. Low interest rates cause monetary expansion, which will go somewhere, and eventually lead in malinvestment and a bust.
This is the Austrian Theory of the Business Cycle that has existed for a hundred years, and first predicted the depression after the loose money policies of the 1920s
What I can't understand is how they let derivatives like CDS's and CDO's get done with NO regulatory body (insurance, banking, etc) keeping an eye out thanks to the legislation in 2004.
Define "they". Part of the mess is that we don't know who exactly dropped which ball.
Under the McCarron-Ferguson Act, Congress explicitly left the regulation of insurance to the states. A CDS is not a security as defined by Congress. It is a private insurance contract not offered for sale to the public and thus would not fall under the purview of the SEC. If anyone had the authority to regulate CDS during the past thirty years, it would have been the individual states.
What I can't understand is how they let derivatives like CDS's and CDO's get done with NO regulatory body (insurance, banking, etc) keeping an eye out thanks to the legislation in 2004.
You did not drink the Kool-Aid back then like everyone else. No one could argue for regulation because derivatives were nearly universally recognized as a good thing (back then) - everyone suggested they distributed risk from firms that could not handle it to firms that could. Perhaps they could in theory.
In terms of the notional amount outstanding - you should check out the interest rate swap market. Many times larger.
"The free market does need rules, but which rules you have are far less important than that everybody knows what they are and that they are consistently enforced."
RIGHT! Here's the only rule in a fiat system. Whatever I say means what I say it means. No more no less. If I say that capital requirements are 0 then they are. If I say there is no bubble, then there isn't. If I say that bubbles can't be quantified they can't.
--
"The problem I have with this piece is it centers on Greenspan's monetary policy and ignores Greenspan's far larger mistake; opposing oversight when many people were pointing out the extremely lax lending standards."
Couldn't agree more. Keep up the great reporting, CR.
Um, no. Volcker was appointed Fed chair by Carter in 1979, served a four-year term, then was re-appointed by Reagan in 1983, and served another four year term.
I know that's a short list but think it through. If every lender were restricted to an honest 12:1 would any of this have happened?
You'd have to bar securitization for that to work. We could still have had a bubble even at 12:1 (with endruns like securitization barred) - we did have some big bubbles in CA even under similar rules - but they would be a lot smaller.
I'd agree the survival of the world financial system would not be in question.
regarding the Nikkei and it's stall out at -900 or so. Just as it is here they will not allow the breakers to trip over there. In Japan a gentleman's agreement is actually honored...we will soon see a breaker day here as the need for self-preservation will outweigh the promise of being allowed into to an ever shrinking club.
At some point someone here will go "off-message"......and sell it all.
What is J6P reaction to today's events. Based on my personal experience/conversations everyone thought the problem was over on Monday. Now there are no more pending government actions which to pin their hopes on. How do you think he/she will respond to being told there is no quick fix solution?
One thing I don't understand is everything tanking. If all stock markets sell off and rates are moving higher, what are people buying? I know a lot of money has moved into T-bills, and a lot of money was just leverage, but some proportion of money has to find a better home. I personally do not want to buy U.S. gov't obligations because to me that is just supporting their cause. So where is money going to go?
And what are the sovereign wealth funds doing? I can't imagine the sovereign funds sitting idly by for long. If the sovereign funds sell their dollar assets, it is only reasonable that foreign assets and commodities would rally vs. the dollar.
""The problem I have with this piece is it centers on Greenspan's monetary policy and ignores Greenspan's far larger mistake; opposing oversight when many people were pointing out the extremely lax lending standards."
Couldn't agree more. Keep up the great reporting, CR."
Good reporting yes. Fingering a solution, no. Oversight is not hte problem. Fiat is. TPTB will always deflect oversight when an asset bubbles a' bubbling. It's a win for them.
This bubble will not be reflated, and w're all going down.
We're all gonna experience The Writ...even the responsible.
I agree with you CR. His negligence at the helm is tantamount to a criminal offence.
If you left your child in a car in 100 degree weather - and the child died - you'd be arrested.
Even though you might claim in convoluted hard to understand English that - "it would have been really hard to predict what the sun might do to a child in 100 plus degree temperatures. And even if you had recognized the sun as a problem, its absolutely uncertain what the damage might have been if you'd broken the windows to let some air in." Of-course the thought of using your keys to open the door would never have occurred to the Maestro...
"Um, no. Volcker was appointed Fed chair by Carter in 1979, served a four-year term, then was re-appointed by Reagan in 1983, and served another four year term."
Oh yeah, forgot that piece of partisan shit. Thanks.
Oh yeah asshat...(not El Cliffo), your friggin hero Bill Clinton reappointed Greenslime twice. So go fking post your political horse poop at Daily Koss.
<a href="http://www.nikkei.co.jp/gifdata/nk_chart_L.gif>The Nikkei looks a lot like a 5 pole Tchebyshev step function
re: debate
Best moderated ones I've seen yet, I'm a little jealous as a non-American.
A few gaffes so far, but for the most part they are avoiding beating around the bush and not wasting time. I have a few other minor observations but they in aggregate line up against one party and they are inconsequential little things.
s0mebody writes:
One thing I don't understand is everything tanking. If all stock markets sell off and rates are moving higher, what are people buying? I know a lot of money has moved into T-bills, and a lot of money was just leverage, but some proportion of money has to find a better home. I personally do not want to buy U.S. gov't obligations because to me that is just supporting their cause. So where is money going to go?
I wish I could define "they" clearly, but at this point I/we can't. I think this is a key question to get answered, since it's at the root of our problems.
Just ask Buffet. Remember what he said about derivatives a few years back when Berkshire was getting spanked by them? That was small potatoes.
One thing I don't understand is everything tanking. If all stock markets sell off and rates are moving higher, what are people buying? I know a lot of money has moved into T-bills, and a lot of money was just leverage, but some proportion of money has to find a better home.
AllenM, are you capitulating? No more velvet fist?
I nominate Bill Clinton. If he hadn't insisted on China getting favored nation status and inclusion into the WTO, then this train wreck would have been delayed another several years.
What is the point of buying a 13 week T-bill at this point if I can just hold the cash instead?
Also, given what the PTB have done so far to keep the market from collapsing, what happens if a large holder of U.S. debt needs to sell to defend their own currency, for example? Will Ben just print them some money and take the obligations off their hands behind closed doors?
Wait 'til we see the next line of culprits, headed by BB and HP, when the Treasury is forced to default and the world economy goes into a very, very serious crisis. All because we continued to try to forstall recession.
but are you trying to argue that the mess the GSEs made was a good thing?
No, but blaming the GSE problem primarily on Frank when Republicans had full control of the federal government from 2003-2006, a period in which FNM/FRE significantly increased their purchases of junk, is pretty damn lame.
The House bill, the 2005 Federal Housing Finance Reform Act, would have created a stronger regulator with new powers to increase capital at Fannie and Freddie, to limit their portfolios and to deal with the possibility of receivership.
Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration.
Adamant that the only solution to the problems posed by Fannie and Freddie was their privatization, the White House attacked the bill. Mr Greenspan also weighed in, saying that the House legislation was worse than no bill at all.</i>
You'd have to bar securitization for that to work.
Exactly.
We could still have had a bubble even at 12:1 (with endruns like securitization barred) - we did have some big bubbles in CA even under similar rules - but they would be a lot smaller.
Exactly. You cannot legislate away market behavior like bubbles. all you can do is recognize their existence and minimize their extent and impact.
I'd agree the survival of the world financial system would not be in question. - Fair Economist
See? Not so hard. Limit total exposure to 12x capitalization and don't bother with the details of how that leverage is distributed and market forces limit the danger.
sue,
If the debates are reliable there could be 2 bubbles that I might see:
- 'green' energy (clean coal to solar)
- charter school franchises
Overall I think the lack of some kind of bubble to focus the economy will help prolong the economic downturn.
I actually had a wakeup call with the market. It's fun right now because I'm one step ahead, and it's like a game -- but in the WSJ they had a chart of past bear markets and 1966 - 1982 is a long time.
I think the boom following WWII was due to American firms supplying the European market that were heavily debt-financed in part by the Marshall plan. Then 1966-1982 there was no big increases in debt internationally, lot of debt being paid off save for the resource rich developing countries with impossible loans. Then 1982 - present we've had all manner of securitization innovation and accommodative central bank policy which has enabled debt to grow significantly again.
I wish I had a chart of some investment market going back beyond a century because it's hard to say if stock markets need unsustainable debt growth to finance growth above inflation.
The problem I have with this piece is it centers on Greenspan's monetary policy and ignores Greenspan's far larger mistake; opposing oversight when many people were pointing out the extremely lax lending standards.
I would argue that the oversight would probably have not been necessary if we had a structure where those making the loans were exposed to losses if those loans went bad.
The combination of the hedge fund industry (the managers not being exposed to losses) and government insurance policies (the Chinese and Japanese not being exposed to losses on the mortgage bonds) takes away the incentive for those making the loans to use any sort of judgment.
I don't quite understand the logic of creating a system that removes the incentives for using good judgment and then saying that we need oversight to ensure good judgement.
It strikes me as arbitrary, convoluted, and inefficient.
Let people in finance who make bad decisions be held responsible for those decisions and I think you solve a lot of problems.
Basel II,
Just figuring the amount of damage the system can take without permanent damage to investor confidence.
As it is, this market will start scaring folks away for years. Even I was hedging with my old IRA by buying Japan and Asia. I think we will face a demographic barrier that will force us into a Japanese style long flop.
Otoh, if the systems fail, well, then welcome to Argentina, like I posited years ago was possible, and buckle up.
BTW, that kind of collapse also brings fascism, and I will no longer be posting should things head that way.
Personal survival is important to see to the end of the war.
Well, considering that if J6P placed sell orders on Thursday and buy orders on Monday (and that's what panic driven sheeple with only CNBC and only mutual funds will do), I don't think he has any money left to worry about.
I must say I loved the work of Ayn Rand in college. Infact parts of her philosophy and writing, I still do.
Rand used to rave about the "producers" and somewhere along the way...a young Alan Greenspan saw himself as one of her characters..
He decided to become a producer by removing regulations and allowing financial alchemists to run wild. The results of that are our future. Dont think Rand saw the strike of the producers quite this way...
Noble-
You misread Rand. It wasn't "Capitalism Run Wild", but initially GOVERNMENT MANDATED loans to unqualified buyers and later GOVERNMENT interest rates held below a prudent level and finally GOVERNMENT intentionally stifling any efforts to control obvious abuse of lending practices. Rand was perfectly correct...if the FREE market determined whether those loans were to be made, this mess would not have occurred. Lenders making bad loans who did not have the GSE's as an end would have quickly left the lending scene.
See? Not so hard. Limit total exposure to 12x capitalization and don't bother with the details of how that leverage is distributed and market forces limit the danger.
We did have a stock bubble mostly under the old regime - although I'm not sure to what extent the funny money instruments helped blow that bubble. Certainly limiting the extent of a credit bubble limits the consequences of asset bubble, and as a systemic approach it's much more reliable than counting on the Fed (or whoever) to pop an asset bubble in the face of serious political pressure. A cautious approach would call for taking the essential step first and then later deciding - under less pressure - whether "bubble management" is a good idea.
In your government diatribe, you see no roles for the unbridled greed of Wall Street? You see no role for how a very powerful man like Jester Gspan (a known follower of Rand) held back the interest rates and didnt do anything to burst the bubble? This man (not the government) was almost single handedly responsible for allowing this crisis to happen. He could have prevented it but he didnt. I mean CLEARLY - he was the person in charge of monetary policy. He was negligent to an extent that is hard to fathom. Those are the facts.
To blame the government is a red herring. And by the way - the free market did do its part in getting us here. It did exactly as it should - made the people who control the markets - a lot of money. A free market without prudent regulations is a fearsome monster.
No, but blaming the GSE problem primarily on Frank when Republicans had full control of the federal government from 2003-2006, a period in which FNM/FRE significantly increased their purchases of junk, is pretty damn lame.
Beyond lame.
Dems may get a shot to earn blame from 2009 on but the 'Ownership Society GOPers' could have squashed this insanity early on at any time during the period 2003-2006... the peak bubble years.
... GOVERNMENT intentionally stifling any efforts to control obvious abuse of lending practices.
Why is it hard to see that dependence on government oversight is fundamentally brittle?
I think the mistake people make is that they see that this works in private industry and say "Why not apply the same approach at the federal level?"
The problem with this thinking is subtle but has profound implications:
You have this sort of cellular Darwinism going on in corporate America. You have all these companies, some of them with bad oversight internally. These companies fail, the ones with good oversight go on and prosper and all is well. In the aggregate this dependence on oversight works great.
The problem is in the case of the economy this dynamic is not at work: We only have one country and a catastrophic failure of oversight at a high level can wipe out the entire economy. This isn't a problem when it costs you 2 out of every 100 businesses every year or so. But when it costs you 1 out of every 1 of your countries every 100 years that's a different matter.
I think CR makes a good point (probably unintentionally) - the failure of oversight and regulation at the highest level can lead to disaster.
So perhaps it's not wise to depend on that type of structure except when there's no other choice.
Dems may get a shot to earn blame from 2009 on but the 'Ownership Society GOPers' could have squashed this insanity early on at any time during the period 2003-2006... the peak bubble years.
It does not matter which side you are on. Neither side is going to squash a bubble that makes everyday Americans think they are richer (for the time being). Talk about political suicide.
"Can anyone pinpoint a single event that will stop this downward spiral?" Time and exhaustion. You can not DO anything. That was/is the problem. The government and the Federal Reserve keep trying to DO something rather than just get OUT OF THE _______ WAY!
Meltdown Man writes:
Noble-
You misread Rand. It wasn't "Capitalism Run Wild", but initially GOVERNMENT MANDATED loans to unqualified buyers and later GOVERNMENT interest rates held below a prudent level and finally GOVERNMENT intentionally stifling any efforts to control obvious abuse of lending practices. Rand was perfectly correct...if the FREE market determined whether those loans were to be made, this mess would not have occurred. Lenders making bad loans who did not have the GSE's as an end would have quickly left the lending scene.
Meltdown Man | 10.15.08 - 10:38 pm | #
Sounds like the tan man is posting here - they made me do it.
It does not matter which side you are on. Neither side is going to squash a bubble that makes everyday Americans think they are richer (for the time being). Talk about political suicide.
Bond Girl | 10.15.08 - 10:51 pm | #
The only hope is divided gov't where they expose each others sacred cows - and then proceed to make hamburger.
"If every lender were restricted to an honest 12:1 would any of this have happened?"
Yes. It would have taken alot longer. Maybe a hundred more years or even a few hundred more years, but eventually this will happen. A credit/debt based monetary system will eventually blow up. What government can resist printing money to make war and gain power?
One thing I haven't figured out yet...why only inject 125B when the total injections in Europe were somewhere in the 1T range? Are our banks in that much better shape? Or is it game theory at work? There is some weird stuff happening here that doesn't make much sense.
Does Paulson want the market to do its work for him? i.e take down these insolvent banks?
"Can anyone pinpoint a single event that will stop this downward spiral?"
You have two pills before you. If you take the blue pill, the banks will be completely nationalized on the backs of taxpayers. You will not have to worry about their solvency per se, but you will have other worries about your economy, currency, etc. If you take the red pill and do nothing, the system fails and you see just how deep the rabbit hole goes.
You have two pills before you. If you take the blue pill, the banks will be completely nationalized on the backs of taxpayers. You will not have to worry about their solvency per se, but you will have other worries about your economy, currency, etc. If you take the red pill and do nothing, the system fails and you see just how deep the rabbit hole goes. Bond Girl
Bond Girl - I agree. I think its idealogy (bush) that is stopping us from taking the blue pill - and its a mistake. I dont know that we can wait till February
Bond Girl - I agree. I think its idealogy (bush) that is stopping us from taking the blue pill - and its a mistake. I dont know that we can wait till February
Noble
I'm not suggesting we take the blue pill. I'm just saying those are our options at this point. All this quasi-nationalization crap won't accomplish anything, IMO.
Prescription to end the global financial crisis:
1. Give all players 24 hours to reveal CDS positions.
2. Declare force majeure as they are illegal insurance scams.
3. Jail and immediately torture everyone who bought, sold, oversaw, justified, provided a legal opinion for or benefitted in any way from this insidious Ponzi scheme.
4. Move on!
why folks do not think that Greenspan knew exactly what he was doing
I think Greenspan did know. I think he cut interest rates so radically to prevent a depression in 1991. Citibank was insolvent, along with some unknown number of banks.
Greenspan knew from history what was behind Door #1 so he chose Door #2.
Bernanke is doing the same thing, although he's probably receiving more political pressure than Greenspan ever did.
The root cause is central banking. Everything else is just collateral damage.
Did unregulated CDS make it worse? I suppose. But remember, they insured a bubble that wouldn't have been created without the Federal Reserve. Insurance works well in a true free market.
dryfly and noble-
If you think I'm a GOP apologist you're sadly mistaken. My point was that both parties have a hand in what has transpired. A TRULY free market would have punished those making poor decisions, but POLICYMAKERS took that hazard away.
PeakVT writes: No, but blaming the GSE problem primarily on Frank when Republicans had full control of the federal government from 2003-2006, a period in which FNM/FRE significantly increased their purchases of junk, is pretty damn lame.
....In the summer of 2005, a bill emerged from the Senate Banking Committee that considerably tightened regulations on Fannie and Freddie, including controls over their capital and their ability to hold portfolios of mortgages or mortgage-backed securities. All the Republicans voted for the bill in committee; all the Democrats voted against it. To get the bill to a vote in the Senate, a few Democratic votes were necessary to limit debate. This was a time for the leadership Sen. Obama says he can offer, but neither he nor any other Democrat stepped forward....
Bond Girl - I agree. I think its idealogy (bush) that is stopping us from taking the blue pill - and its a mistake. I dont know that we can wait till February
Well that simply transfers the risk to the public balance sheet and gives people like Bush more control over your life and mine.
Is that what you really want?
Personally I don't want to live in a world where one moron has more and more ways and means to wreck my life.
I've never understood why people who despise Bush want to give people like him more power.
I have looked around and found a need.Where is a young couple without much money to go for a good Squirrel?ANNOUNCING the new concept restaurant "The Squirrel and Peach".We wll have two entrees "Squirrel A La Peche" and "Peche A La Squirrel'.Sides will be mashed turnips,boiled beets and creamed okra......Look for us soon in a former TGIF,Benningans,Ruby Tuesdays or almost everywhere.......Sorry,no credit cards accepted, but we will barter.
I'm not suggesting we take the blue pill. I'm just saying those are our options at this point. All this quasi-nationalization crap won't accomplish anything, IMO.
Bond Girl
I know you weren't. I, however, am strongly suggesting it. If we are not doing nationalizing now - I hope there is a good reason why (other than Milton F fans)
A "true free market" wouldn't have done crap. Free markets function on short-term time horizons which is exactly why we are here READING THIS FRICKING blog.
And if you STILL haven't figured that out after all this mess, you're just not capable of breaking out of your ideological Ice Age.
Well that simply transfers the risk to the public balance sheet and gives people like Bush more control over your life and mine.
Is that what you really want?
Personally I don't want to live in a world where one moron has more and more ways and means to wreck my life.
I've never understood why people who despise Bush want to give people like him more power.
ac
ac - What are the other options? Lets these banks fail and start new ones? Can an economy the size of the US wait for such new banks to start up? The often quoted Swedish examples is a good one. Banks have been nationalized previously not just in US history. And with decent leadership - we can come out of this with our underwear still on. I gave up on shirts since I began reading CR
Hmmmm, Nemo and Jas Jain both sign off at the same time. Alter egos?
And then Bond Girl, quietly waiting for that opening, steps in with a number of poignant observations.
Blue pill? Red pill? Time to reboot all our political and economic institutions, no? Can't fix them from within. Too bad our next president , who will be blessed with either a first-rate intellect or a top-gun mentality, is going to be saddled with systems stuck in a seemingly endless feedback loop. Glad I got all my money in . . . what is it this week? (It's easy to move petty cash around.)
a) earn $20 million per year for twenty years doing GS stuff or
b) earn eleventy-billion dollars in a couple of years by selling nuclear financial waste and blowing up the world.
What's best for me?
Oh, I chose B!
And the true proof of this is that the fanatical free marketeers among us are so greedy themselves that they can't imagine that free markets aren't a magical elixir of free manna from heaven.
Cynical Yes writes:
Prescription to end the global financial crisis:
1. Give all players 24 hours to reveal CDS positions.
2. Declare force majeure as they are illegal insurance scams.
3. Jail and immediately torture everyone who bought, sold, oversaw, justified, provided a legal opinion for or benefitted in any way from this insidious Ponzi scheme.
4. Move on!
MarketWatch.com
(RTC Contractors line up to make more big bucks)
Former Resolution Trust Corporation Experts Prepare for U.S. Financial Restructuring Effort
USA Recovery Group Prepares to assist the U.S. Department of the Treasury with the Implementation of Congress' $700 Billion Rescue Program
The folks on Marketplace (public radio money show) read CR. Today they were talking about the Baltic dry index...but we heard that some days ago here in the comments. Y'all really are getting listened to, folks!
A "true free market" wouldn't have done crap. Free markets function on short-term time horizons which is exactly why we are here READING THIS FRICKING blog.
And if you STILL haven't figured that out after all this mess, you're just not capable of breaking out of your ideological Ice Age.
Who doesn't function on a short-term time horizon then?
The problem is simply that we're all human and all have the same motives as these free market participants.
I don't see that Alan Greenspan, or George W. Bush, or Ben Bernanke, or the folks in congress are any better than the market participants.
It seems like there is the assumption of some benevolent divine actor here that will look out for our best interest.
Broward, regarding Mr. Paulson, he got to where he is by sucking the government tit. I think you're confusing laissez faire with facism/corparatism/statism.
i like the old greenspan of 66 and his first wife mitchell who introduced him to rand, not the second mitchell, andrea who came shortly after rand died. not that i agree with rand, just odd.
Well, since PeakVT went all partisan when I mentioned old Blarney, I guess he didn't get to the second sentence of my original post. Frank is simply the visible figurehead for the den of housing pimps in Congress, and he's only number 16 on the list of GSE contribution recipients, according the chart over at Tyrone's blog: Housing Bubble Hall of Shame®: Barney Frank
Plenty of bipartisan blame to go around. The point is that the congresscritters protected and encouraged F&F while they were manipulating the housing market over a period of many years. Some representative of that group should be on the list, and BF is the guy out in front. Any other names?
ac - What are the other options? Lets these banks fail and start new ones? Can an economy the size of the US wait for such new banks to start up? The often quoted Swedish examples is a good one. Banks have been nationalized previously not just in US history. And with decent leadership - we can come out of this with our underwear still on. I gave up on shirts since I began reading CR
I'm not totally against some kind of temporary nationalization if it staves off financial collapse. But long-term I don't know that there's a way we can guarantee decent leadership.
That's why I think we were fairly clever to try to create a country that was guided by a set of ideas more than a specific leader's whims.
When we can have a leader that's smarter than all the rest of this then I'll be happy to talk about dictatorships and such.
AC - you can argue your ideological purity with somebody else. There's two thousand years of history that says you are wrong.
Never has a society functioned without some sort of government.
The electricity market worked fine until free marketeers decided to "fix it". Population growth is predictable, energy use is predictable, and capital outlays are predictable. Injecting "free markets" into an efficient system fucked it up and it now costs more and is less dependable.
CLUE! Free market is not a god, just like your computer screen is not a god. it's a fricking COMMUNICATION METHODOLOGY.
Google "network 101" to learn more. Peer-to-peer sucks in anything that requires scalability or complexity.
My nomination would of course be former FDIC Chairman and Big Texan Bushie Donald Powell who instituted what came to be known inside the FDIC as 'drive-by' bank examinations. These 'drive-by' examinations have thankfully been fully eliminated never hopefully to be allowed again. May he rest in hell.
AC - you can argue your ideological purity with somebody else. There's two thousand years of history that says you are wrong.
Never has a society functioned without some sort of government.
I'm not arguing against government. I think government is absolutely essential to our existence.
The electricity market worked fine until free marketeers decided to "fix it". Population growth is predictable, energy use is predictable, and capital outlays are predictable. Injecting "free markets" into an efficient system fucked it up and it now costs more and is less dependable.
CLUE! Free market is not a god, just like your computer screen is not a god. it's a fricking COMMUNICATION METHODOLOGY.
Free markets are certainly no god. They're a mob with at best a loose set of ethics.
But I'd much rather have an unethical mob than an unethical dictator.
In other words, I'd rather have a free market than an Alan Greenspan simply because I think the free market is less dangerous.
aussie markets are now back to about midday on friday october the 10th. And this in a country with fully guaranteed bank deposits and lending, and strong bank balance sheets.
Self regulation of free markets is easily attainable. Take one of the AIG guys, Dick Fuld, any of them I don't care, and make them gone. Out a 40 story window, cement shoes, 6 pack them at the least, it doesn't matter. The other weasels would piss their pants and self-regulate overnight. If you're going to be a Banana Republic, be a Banana Republic
"The electricity market worked fine until free marketeers decided to "fix it". Population growth is predictable, energy use is predictable, and capital outlays are predictable. Injecting "free markets" into an efficient system fucked it up and it now costs more and is less dependable."
BH-
I'm sure it was the "free" market that decided not to build more coal fired, hydro or nuclear power plants. It now costs more and is less dependable BECAUSE OF GOVERNMENT REGULATION, namely your friendly EPA...so for those that live in the rolling blackouts, just thank your efficient overseers.
A little knowledge is a dangerous thing. Surprise time. I was one of flipping free marketeer types, too, umtil I asked myself one day the most foundational question of system analysis...
Why does the system work this way?
Why doesn't work in this "perfect theoretical way"?
And, of course, the answer is "x" or "y" or whatever it is because there is always a reason that YOU just don't know yet.
Fact - your free market theory requires equal and timely access to all information. That's ultimately a peer-to-peer system because all nodes must possess all knowledge.
Fact - the second most favorite fetish of free marketeers is "comparative advantage". What IS the definition of comparative advantage? Specialized knowledge.
In other words, an increasingly complex society needs nodes which not only don't all possess the same information, it MANDATES that each node possess different information in order to be efficient.
Ergo, it's impossible for a complex society to function as a free market because their information structures are diametrically opposed.
That's just one example. You can also disprove the myth of "free markets" through empirical measurement, through probability, through game theory.
Reading a few quotes by Adam Smith (who, by the way, considered his SECOND BOOK "The Theory of Moral Sentiments" to supercede "Wealth of Nations") does not quality you as knowledgeable enough to determine much about "free markets".
it's simplistic ego gratification because you WANT stuff to appear magically just like the government drones do. There's no magic here.
"Free markets are certainly no god. They're a mob with at best a loose set of ethics.
But I'd much rather have an unethical mob than an unethical dictator."
ac,
I agree completely. The best government is minimal. Here's a novel idea, limit yourself to what is in the constitution (the one that is written down, not the one you want to believe is there in some "hidden" meaning)
Inflation and asset bubbles can occur without a central bank and fractional lending, just takes a huge crap load of gold and silver to shock the system. Look what happened to Spain in the 16th century.
Julie L. Williams became Acting Comptroller on October 14, 2004, succeeding John D. Hawke, Jr. at the end of his term of office. Ms. Williams was initially appointed Chief Counsel of the Office of the Comptroller of the Currency in June 1994, with responsibility for all of the agencys legal activities, including legal advisory services to banks and examiners, enforcement and compliance activities, litigation, legislative initiatives, and regulation of securities and corporate practices of national banks. As the agencys statutory First Deputy, she previously served as Acting Comptroller from April 6, 1998 through December 8, 1998, before Mr. Hawke was sworn in as the 28th Comptroller of the Currency.
Ms. Williams joined the OCC in May 1993 as Deputy Chief Counsel with responsibility for special legislative and regulatory projects. Before joining the OCC, Ms. Williams served in a variety of positions at the Office of Thrift Supervision and its predecessor agency, the Federal Home Loan Bank Board, culminating in a position as Senior Deputy Chief Counsel at the OTS from 1991 to 1993.
It's a rare day on CNN when you see elites on Wanted Posters. Sputtering ad sales combined with rising populism is, I guess, a pretty good recipe for growing instant cojones.
This reporting is years too late, all the damage has already been done, and it's a fairly smelly fiction for CNN to pretend it can hand out Wanted Posters without naming itself a culprit.
From the lowliest silicone-filled Money Honey all the way up to chief boy scout Anderson Cooper, the network helped normalize the disaster by cheering on the "good times," touting the upside, downplaying the risks, never hinting there'd be hell to pay later.
Day after day, in other words, the MSM manufactured consent. Now it uses cute little rifle scope graphics to play to public rage. Some sheriff.
"I'm sure it was the 'free' market that decided not to build more coal fired, hydro or nuclear power plants. It now costs more and is less dependable BECAUSE OF GOVERNMENT REGULATION, namely your friendly EPA...so for those that live in the rolling blackouts, just thank your efficient overseers."
MM: Come on, striking the right balance between markets and regulation is the key. But, this is hard in a changing world and free elections. Let's face it, if we let the energy markets float free (as an example), there are too many externalities flowing from what they do that we all would bear terrible costs, as we have in the past. You don't have to be a enviro-terrorist, union guy, minimum-wage worker or other agenda-bearer to recognize this. The truth is, the answers are rarely simple - and latching on to simple solutions is what gets us into trouble every time.
I didn't read all the posts so if I am repeating other comments, apologies. Greenspan made mistakes but it is too easy to demonize him and say so there. His major mistake might not be easy money but a failure to force the derivatives market onto a centralized exchange after the Long Term Credit meltdown. That market may yet be the nuclear bomb that hasn't been detonated.
Milton Friedman should be at the top of the list. Too bad the original free marketeer, privatize the world champion is not around to see his work come to fruition.
The fact is, Bush has mortgaged America using a $11 Trillion pay-option ARM loan, and has allowed it to balloon every year. Bush is the perfect analogy of the biggest speculators of the housing bubble.
Bush's idea of financial responsibility is to run away from dinner at a restaurant so everyone else can pay. He can now say that he got a free dinner, just like he can say we all got tax cuts - thanks to our children who will pay it back plus interest.
Bush has essentially charged the nation's credit card by trillions, and the balance has already passed $10 trillion with $11.2 trillion budgeted in. This is so Bush can now say that we've cut taxes from 2000 to 2008, and we must blame anyone after him for using taxes to pay for Bush's unmitigated spending spree called Iraq. In other words, blame the bill payers, not Bush the deadbeat.
The problem in politics is there are two powerful extremes controlling the two major parties. There are the rob the middle and lower class Republicans, and the rob the middle and upper class Democrats. Notice they both agree on one thing - rob the middle class.
The Democrats do this by labeling the middle class as rich, and scapegoating them as lazy. Their real intent is theft, and justifying theft. The Republicans do this through innocent sounding tax schemes, cutting taxes for "everyone" but in actuality mainly for the rich. They use bad math, and the bottom line is they're deficit-loving big government spenders a la the military. Bush and Republicans actually claimed that tax cuts would "pay for themselves". Not going to happen as long as we spend beyond the budget and into debt.
"The transfer of the USD 49 billion of assets will take place over the coming months, during fourth quarter 2008 or first quarter 2009, but will be priced at valuations as of 30 September 2008. These prices will be verified by independent third parties and potential differences will be recorded in the bank's income statement."
"UBS will raise CHF 6 billion of new capital in the form of mandatory convertible notes (MCN). This will allow the bank to retain a strong Tier 1 capital ratio, even after providing the equity to the newly established entity. The MCN has been fully placed with the Swiss Confederation. The Swiss Confederation reserves the right to reduce part or all of its investment by transferring the MCN to third party investors."
The MCN issue is subject to approval by UBS shareholders who will vote on the creation of the required conditional capital underlying the MCN at an extraordinary general meeting (EGM) to be held in late November 2008. The MCN will count as Tier 1 capital for BIS capital adequacy purposes following EGM approval. Issuance of the MCN is expected to take place five business days after the EGM.
Was regulation really Greenspans job? Is it Bernankes?
Bernanke has, by actions, taken on far, far more responsibility than I think is given to the Fed, for better or for worse. My own opinion is that it is for the worse: it is unplanned, unapproved expansion of the role of government and it creates the perception (which soon becomes the expectation) that government is responsible for every sparrow that falls from the sky.
if you had an effective monetary policy that didnt flood banks with easy money you wouldnt need such regulations. those comments are intimately related
How about the commie front group Acorn which is Osama's commie front group. Franklin Raines an Osama advisor. Johnson who Osama had to fire. There are many more linked to Osama-Obama.
I thought it was all the Democrats' fault.
Third? Agreed on the "far larger mistake".
I thought it was all Bush?
Credit default Swaps. Biggest ponzi scheme in human history, took a manageable credit crises and magnified it 10 x. Insurance without reserves at 10x the underlying insurable interest is an out and out scam. The markets will continue to collapse until this is dealt with!
Paulson is a creep by the way, and he inspires zero confidence. He looks like Jeff Gannon and he as corrupt as dick Cheney. what a guy.
I thought it was all the fault of minorities. Those rich old white dudes who are in charge are actually the victims.
I sure hope Paulson will be in the top 5. I'm guessing Mozilo will be #1 or #2.
Actually, I thought the culprits were the same as always: Greed plus leverage.
Peter Schiff rubs me the wrong way.
Well, we have more regulations and regulators. The fact is that you can't trust bureaucrats to do their job. They don't have a skin in the game and it's too difficult to be chicken little.
What we need is to abolish the FED and get and end to central planning and fractional reserve banking.
I keep pointing this out to righties who want to put it all on ACORN style lending. CRA was only 10% of the mortgage market in '99. It COULDN'T have caused the bubble. And the housing bubble was only the trigger. The real culprit was the over leveraged and un capitalized shadow banking system which ultimately collapsed because these "bets" had absolutely zero assets behind them.
Oversight does not equate to regulation.
I blame Jas. If only he'd kept quiet.
Dang, LOLFed is brilliant sometimes.
Dan-in-PA writes:
I keep pointing this out to righties who want to put it all on ACORN style lending. CRA was only 10% of the mortgage market in '99. It COULDN'T have caused the bubble. And the housing bubble was only the trigger. The real culprit was the over leveraged and un capitalized shadow banking system which ultimately collapsed because these "bets" had absolutely zero assets behind them.
Oversight does not equate to regulation.
Dan-in-PA | 10.15.08 - 9:39 pm | #
You should change collapsed to "is collapsing", etc. They aren't all dead yet.
Cynical Yes is correct about CDS. Get ready for some real cliff diving.
Schiff looks like Schumer's lost twin..
Ciao
MS
Nr 1 culprit is the world's misconception of what money is. Money is a medium of exchange. Money itself is worthless. Stop tampering with the medium of exchange.
Stop government interference in the global division of labor economy. It is too complex.
One of those ten better be the average Joe citizen because this didn't occur without their greed in taking out 100% debt / interest only mortgages and drawing out any equity they attained with home equity loans and then just walking away when the trouble hit.
I have heard it said that keeping the rates low for so long fed the mania for developing new ways to reach for yield.
If interest rates had been positive in real terms (using un-cooked CPI), do you think that there would have been the incentive to us such massive leverage to get yield? Do you think that there would have been so much lobbyist pressure to relax leverage restrictions?
I'm not sure we'll ever know, but it's interesting to think about.
where's J6P?
My top 10:
It centers on Greenspan's monetary policy and ignores Greenspan's far larger mistake; opposing oversight when many people were pointing out the extremely lax lending standards.
They almost amount to the same thing in my book. Both seemed to "work" at the time because the bubble gave the impression of prosperity. Both were about near-term gains rather than the sustainability of the financial system.
I blame that rich dad poor dad guy and his gay escapade with Donald Trumps hair.
There is a blood bath in Asia and soon in Europe.
OK, uncle Ben, go ahead and make my day. Drop the rates again, unexpectedly. You are pussy if you do not drop at least 75 basis point.
CSC,
"At some reasonable age, we need to cut them off the public dole. I say 85. And that is damn old."
Dude, go all out Logan's Run. 30 man.
'Coarse the problem is that these programs exist. If they didn't such Modest Proposals wouldn't even be vetted.
Jonathan Swift - A Modest Proposal
Ya'll criticizing CSC need to know the man know his shite. And satire.
Nostrovia,
I just like seeing the bull market hero's revealed to be the worthless charlatans they are
Bond Girl --
Both were about near-term gains rather than the sustainability of the financial system.
And what about the actions our leaders are taking now?
Not sure I can imagine the word "sustainability" leaving any of their mouths.
PeakVT;
I thing Blarney Wank needs to be on that list someplace. And anyone else who was pushing F&F to buy bogus loans.
mortgage pimping congresscritters.
It's ok CR, relax. They are getting there. But remember, they are awfully slow learners, so this is a BIG step for them. In ten years, they will have it all figured out, and the statue of limitations will have passed. Yay!
MY top ten:
1. Fractional Reserve Lending
2. Everybody has the same plan.
3. Claims on money is money.
4. Krill are useless
5. Only whales matter.
6. Greed is good, if your right.
7. Transparency
8. Oil
9. Gold
10. Lucre.
This is going to happen every single week, I think. The Fed/Treasury is going to dole out some juicy perk to the market, stock market will rejoice, reality will set in about how massive the problem in the financial system is and how ugly the economy is, then the markets will expect some new juicy perk.
Over at themessthatgreenspanmade blog is a list of most viewed financial blogs since 10/6.
1- CR
2- Big Picture
3- Mike Shedlock (Mish)
Congratulations CR and Tanta!!
The Mess That Greenspan Made
Post "Realigning...." click "read more"
Jim
Not on this list
Bloggers and their shenanigans
Senior citizens trying to downsize in this tough economy and flooding the market with more houses
disclaimer,
I am long my top 10.
CR,
Tighter regulation of lending/borrowing standards is at odds with the goals of the easy monetary policies. We see this even today in that money is being pumped into the banks like never before in history, but that they don't want to lend to any but the most credit-worthy borrowers. This is a thing that almost everyone misses about what has occurred.
And what about the actions our leaders are taking now?
Not sure I can imagine the word "sustainability" leaving any of their mouths.
Nemo
It does not look like they are getting even near-term gains right now.
If they want the markets to rally, get rid of paulson, bernanke, cox, all the bank ceos,etc. Good for a 1000 pt rise guaranteed. bThe dickheads dont comprehend that they are the problem now, no confidence.
What I can't understand is how they let derivatives like CDS's and CDO's get done with NO regulatory body (insurance, banking, etc) keeping an eye out thanks to the legislation in 2004.
WTF!!! No wonder we have $60T in this toxic crap! All these "financial wizards" were doing was making money off selling "insurance" on loans they knew were bad but didn't care about since they were unregulated, not breaking any law, and didn't need to have any reserve requirments for to underpin their "insurance" policies.
I hope the guys on FastMoney continue to harp on this issue until people get the light shined on them to show what low lifes they are and then get sued to all hell and gone in civil court.
Anyone with me? F these Aholes who have put done this.
The problem with all this government intervention is that it makes markets unpredictable.
The free market does need rules, but which rules you have are far less important than that everybody knows what they are and that they are consistently enforced.
I am not sure a capitalist system can really function when gov't is changing the rules every week.
I thing Blarney Wank
Fascinating.
And you're wrong about the point you were trying to make as well.
You only need 3:
1) The Federal Reserve
2) fractional reserve banking
3) Congress
There is only The One Ring...The Fed...nothing else is necessary.
Those who think that bought off congangers and regulators can't be easily bought off are fools. All regulators get captured by the regulatees. All fiat currency regimes blow titanic bubbles.
They are designed to. By TPTB.
Enjoy trying to fix a system that is fundementally broken.
Nostrovia,
I am not sure a capitalist system can really function when gov't is changing the rules every week.
Bingo. The market finally realized that when they let Lehman fail and saved AIG.
It's going to take quite a while before the market realigns itself away from simply reacting to government intervention.
It's bull in the china shop time.
"I am not sure a capitalist system can really function when gov't is changing the rules every week."
Nemo, you nailed it. It can't.
Can you post the links to the prior culprits. I am not having any luck searching the CNN site.
Can anyone pinpoint a single event that will stop this downward spiral? The world governments have used up just about all ammo. What's left to do?
I questioned Roubini's DOW 7K call...now it looks like it could happen by the end of the week.
Let's not forget Reagan who fired Paul Volcker for easy money Greenspan and defined the deregulation, tax cut, and borrow and spend agenda which has destroyed the world economy (yes it is destroyed and must be redesigned worldwide). Add Cheney's vision of Empire and you have a good first draft of history.
2008 - the end of Reaganomics.
Jim
P.S. Of course I meant "...which rules you have is far less important..."
I actually do speak English, mostly.
With all due respect Max, Paulson and his friends had 20 billion reasons behind his actions re Lehman/AIG.
All the more reason he should step down or be forced out.
No confidence.
And...banks BETTER start loosening up soon, that is NOT their money they're hoarding.
failure is the trigger that stops this.
without failure. there is no wrong.
yoda.
CSI 300 down 4.7% on the open.
Just like last thursday night.
Ciao
MS
They're right to focus on monetary policy. Oversight is a totally superficial issue. If the money hadn't ended up in housing it would have been somewhere else. Low interest rates cause monetary expansion, which will go somewhere, and eventually lead in malinvestment and a bust.
This is the Austrian Theory of the Business Cycle that has existed for a hundred years, and first predicted the depression after the loose money policies of the 1920s
What I can't understand is how they let derivatives like CDS's and CDO's get done with NO regulatory body (insurance, banking, etc) keeping an eye out thanks to the legislation in 2004.
Define "they". Part of the mess is that we don't know who exactly dropped which ball.
Under the McCarron-Ferguson Act, Congress explicitly left the regulation of insurance to the states. A CDS is not a security as defined by Congress. It is a private insurance contract not offered for sale to the public and thus would not fall under the purview of the SEC. If anyone had the authority to regulate CDS during the past thirty years, it would have been the individual states.
realstates writes:
What I can't understand is how they let derivatives like CDS's and CDO's get done with NO regulatory body (insurance, banking, etc) keeping an eye out thanks to the legislation in 2004.
You did not drink the Kool-Aid back then like everyone else. No one could argue for regulation because derivatives were nearly universally recognized as a good thing (back then) - everyone suggested they distributed risk from firms that could not handle it to firms that could. Perhaps they could in theory.
In terms of the notional amount outstanding - you should check out the interest rate swap market. Many times larger.
Nemo,
"The free market does need rules, but which rules you have are far less important than that everybody knows what they are and that they are consistently enforced."
RIGHT! Here's the only rule in a fiat system. Whatever I say means what I say it means. No more no less. If I say that capital requirements are 0 then they are. If I say there is no bubble, then there isn't. If I say that bubbles can't be quantified they can't.
Simple, really.
Nostrovia,
My complete list:
1. Excessive fractional reserve ratios.
I know that's a short list but think it through. If every lender were restricted to an honest 12:1 would any of this have happened?
With all due respect Max, Paulson and his friends had 20 billion reasons behind his actions re Lehman/AIG.
Too bad he forgot to tell the market.
--
"The problem I have with this piece is it centers on Greenspan's monetary policy and ignores Greenspan's far larger mistake; opposing oversight when many people were pointing out the extremely lax lending standards."
Couldn't agree more. Keep up the great reporting, CR.
Jas
PeakVT writes:
"And you're wrong about the point you were trying to make as well."
Sorry about the typo, but are you trying to argue that the mess the GSEs made was a good thing?
Nice to see so many "regulars" here in the evenings. Much better than during the day...
Unfortunately I have to take off. 'night all.
Reagan who fired Paul Volcker
Um, no. Volcker was appointed Fed chair by Carter in 1979, served a four-year term, then was re-appointed by Reagan in 1983, and served another four year term.
I know that's a short list but think it through. If every lender were restricted to an honest 12:1 would any of this have happened?
You'd have to bar securitization for that to work. We could still have had a bubble even at 12:1 (with endruns like securitization barred) - we did have some big bubbles in CA even under similar rules - but they would be a lot smaller.
I'd agree the survival of the world financial system would not be in question.
the end of supply side, means the resurgence of supply side.
circles of pain in sovereign debt.
Providing for onesself IS providing for others....make it be choice, and not mandate..
must do - mandate
should do, and wont do - choice.
To solve the problem:
once the regulars weren't regulars...let's not be to high brow...
--
Perpetual fiscal and monetary stimuli since 2001! Perpetual economic emergency!!
The patient is going to die, ER or no ER. No depression? Then why are markets behaving like 1930s?
Jas
regarding the Nikkei and it's stall out at -900 or so. Just as it is here they will not allow the breakers to trip over there. In Japan a gentleman's agreement is actually honored...we will soon see a breaker day here as the need for self-preservation will outweigh the promise of being allowed into to an ever shrinking club.
At some point someone here will go "off-message"......and sell it all.
Ciao
MS
I'm kind of loving the way Bloomberg shows giant graphs of Asian bourses crashing and shrinks the debaters into a micro window.
What is J6P reaction to today's events. Based on my personal experience/conversations everyone thought the problem was over on Monday. Now there are no more pending government actions which to pin their hopes on. How do you think he/she will respond to being told there is no quick fix solution?
Yea it's too cute isn't it....
Ciao
MS
One thing I don't understand is everything tanking. If all stock markets sell off and rates are moving higher, what are people buying? I know a lot of money has moved into T-bills, and a lot of money was just leverage, but some proportion of money has to find a better home. I personally do not want to buy U.S. gov't obligations because to me that is just supporting their cause. So where is money going to go?
And what are the sovereign wealth funds doing? I can't imagine the sovereign funds sitting idly by for long. If the sovereign funds sell their dollar assets, it is only reasonable that foreign assets and commodities would rally vs. the dollar.
Jas,
""The problem I have with this piece is it centers on Greenspan's monetary policy and ignores Greenspan's far larger mistake; opposing oversight when many people were pointing out the extremely lax lending standards."
Couldn't agree more. Keep up the great reporting, CR."
Good reporting yes. Fingering a solution, no. Oversight is not hte problem. Fiat is. TPTB will always deflect oversight when an asset bubbles a' bubbling. It's a win for them.
This bubble will not be reflated, and w're all going down.
We're all gonna experience The Writ...even the responsible.
YouTube -
Nostrovia,
I agree with you CR. His negligence at the helm is tantamount to a criminal offence.
If you left your child in a car in 100 degree weather - and the child died - you'd be arrested.
Even though you might claim in convoluted hard to understand English that - "it would have been really hard to predict what the sun might do to a child in 100 plus degree temperatures. And even if you had recognized the sun as a problem, its absolutely uncertain what the damage might have been if you'd broken the windows to let some air in." Of-course the thought of using your keys to open the door would never have occurred to the Maestro...
--
"I blame Jas. If only he'd kept quiet.
Brian in New Orleans"
Brian in New Orleans,
Guilty a charged.
Good night, folks.
Jas
El Cliffo,
"Um, no. Volcker was appointed Fed chair by Carter in 1979, served a four-year term, then was re-appointed by Reagan in 1983, and served another four year term."
Oh yeah, forgot that piece of partisan shit. Thanks.
Oh yeah asshat...(not El Cliffo), your friggin hero Bill Clinton reappointed Greenslime twice. So go fking post your political horse poop at Daily Koss.
Nostrovia,
<a href="http://www.nikkei.co.jp/gifdata/nk_chart_L.gif>The Nikkei looks a lot like a 5 pole Tchebyshev step function
re: debate
Best moderated ones I've seen yet, I'm a little jealous as a non-American.
A few gaffes so far, but for the most part they are avoiding beating around the bush and not wasting time. I have a few other minor observations but they in aggregate line up against one party and they are inconsequential little things.
Well, the hanky panky hedge fund appears to not doing anything.
Either we get a real rally back up by Friday, or a significant portion of the options market community is toast.
I think at that point I am going long cheaperthandirt.com and mountainhouse.com
So either Ben and Hanky grow a big pair and break this panic or we shrink into GDII at lightspeed.
I am checking the limit on my credit cards right now.
Someday this war's gonna end...
s0mebody writes:
One thing I don't understand is everything tanking. If all stock markets sell off and rates are moving higher, what are people buying? I know a lot of money has moved into T-bills, and a lot of money was just leverage, but some proportion of money has to find a better home. I personally do not want to buy U.S. gov't obligations because to me that is just supporting their cause. So where is money going to go?
13 week T-Bill?
Basel Too:
I wish I could define "they" clearly, but at this point I/we can't. I think this is a key question to get answered, since it's at the root of our problems.
Just ask Buffet. Remember what he said about derivatives a few years back when Berkshire was getting spanked by them? That was small potatoes.
Venture Capital - Next bubble
I'll be bidding long stupid in the AM
lets just hope the trades are "disallowed"
I buy pain, I buy panic, I buy stupid.
that Google at 25 really pissed me off.
Bond Girl, can you enlighten me?
Not sure I want to know, but I can always get another glass of single malt!
"Irrational exuberance?"
I guess that doesn't matter much anymore.
The only thing that matters is that CR agrees he WAS a culprit in the collapse.
Slap him up there with Fuld, Cox, and the other guys.
Greenspan was put up on Tuesday night.
Who's up for Wednesday? Or was Anderson Cooper 360 pre-empted for the Presidential Debate?
Thanks for your work, CR.
EK in OR
One thing I don't understand is everything tanking. If all stock markets sell off and rates are moving higher, what are people buying? I know a lot of money has moved into T-bills, and a lot of money was just leverage, but some proportion of money has to find a better home.
cash
AllenM, are you capitulating? No more velvet fist?
I nominate Bill Clinton. If he hadn't insisted on China getting favored nation status and inclusion into the WTO, then this train wreck would have been delayed another several years.
13 week T-Bill?
What is the point of buying a 13 week T-bill at this point if I can just hold the cash instead?
Also, given what the PTB have done so far to keep the market from collapsing, what happens if a large holder of U.S. debt needs to sell to defend their own currency, for example? Will Ben just print them some money and take the obligations off their hands behind closed doors?
I blame obama.
I thought I would get ahead of the game.
sue,
"Venture Capital - Next bubble"
You meant Vulture...Right?
Nostrovia,
I hope the number one culprit turns out to be non-euclidean geometry.
1) Georg Friedrich Bernhard Riema
What is the point of buying a 13 week T-bill at this point if I can just hold the cash instead?
Are you sure that the cash is going to be in the bank?
cracker
joe6pack thinks whats being lost on the stock market is not Real money.And i have no idea what they think it is.
And what about the actions our leaders are taking now?
I'd say their time frame to achieve "success" is considerable shorter than Greenspan's was.
Yuk yuk yuk.
Blame the credit cycle. There's a reason that Arabs (and other cultures) banned interest.
Wait 'til we see the next line of culprits, headed by BB and HP, when the Treasury is forced to default and the world economy goes into a very, very serious crisis. All because we continued to try to forstall recession.
Are you sure that the cash is going to be in the bank?
Not all my cash is in the bank.
s0mebody writes:
it dont matter what you wrote.
the world is swimming in dollars...
throw another life-line and drown the victim.
Kind of like the joke
What do you do when your lead guitarist falls in the pool?
Throw him his amp
but are you trying to argue that the mess the GSEs made was a good thing?
No, but blaming the GSE problem primarily on Frank when Republicans had full control of the federal government from 2003-2006, a period in which FNM/FRE significantly increased their purchases of junk, is pretty damn lame.
To wit: How the World Works - Salon.com
The House bill, the 2005 Federal Housing Finance Reform Act, would have created a stronger regulator with new powers to increase capital at Fannie and Freddie, to limit their portfolios and to deal with the possibility of receivership.
Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration.
Adamant that the only solution to the problems posed by Fannie and Freddie was their privatization, the White House attacked the bill. Mr Greenspan also weighed in, saying that the House legislation was worse than no bill at all.</i>
You'd have to bar securitization for that to work.
Exactly.
We could still have had a bubble even at 12:1 (with endruns like securitization barred) - we did have some big bubbles in CA even under similar rules - but they would be a lot smaller.
Exactly. You cannot legislate away market behavior like bubbles. all you can do is recognize their existence and minimize their extent and impact.
I'd agree the survival of the world financial system would not be in question. - Fair Economist
See? Not so hard. Limit total exposure to 12x capitalization and don't bother with the details of how that leverage is distributed and market forces limit the danger.
sue,
If the debates are reliable there could be 2 bubbles that I might see:
- 'green' energy (clean coal to solar)
- charter school franchises
Overall I think the lack of some kind of bubble to focus the economy will help prolong the economic downturn.
I actually had a wakeup call with the market. It's fun right now because I'm one step ahead, and it's like a game -- but in the WSJ they had a chart of past bear markets and 1966 - 1982 is a long time.
I think the boom following WWII was due to American firms supplying the European market that were heavily debt-financed in part by the Marshall plan. Then 1966-1982 there was no big increases in debt internationally, lot of debt being paid off save for the resource rich developing countries with impossible loans. Then 1982 - present we've had all manner of securitization innovation and accommodative central bank policy which has enabled debt to grow significantly again.
I wish I had a chart of some investment market going back beyond a century because it's hard to say if stock markets need unsustainable debt growth to finance growth above inflation.
WSJ 100yr chart
Evil-
Bob Scheaffer is the shit....
He's around still simply because he still gets it and understands people.
Ciao
MS
The problem I have with this piece is it centers on Greenspan's monetary policy and ignores Greenspan's far larger mistake; opposing oversight when many people were pointing out the extremely lax lending standards.
I would argue that the oversight would probably have not been necessary if we had a structure where those making the loans were exposed to losses if those loans went bad.
The combination of the hedge fund industry (the managers not being exposed to losses) and government insurance policies (the Chinese and Japanese not being exposed to losses on the mortgage bonds) takes away the incentive for those making the loans to use any sort of judgment.
I don't quite understand the logic of creating a system that removes the incentives for using good judgment and then saying that we need oversight to ensure good judgement.
It strikes me as arbitrary, convoluted, and inefficient.
Let people in finance who make bad decisions be held responsible for those decisions and I think you solve a lot of problems.
If all stock markets sell off and rates are moving higher, what are people buying? I know a lot of money has moved into T-bills
You're confusing stock price with money. It only takes a small change in money to leverage into big stock price changes.
Actually, I thought the culprits were the same as always: Greed plus leverage.
Greed is never going away. Leverage we can do something about.
Basel II,
Just figuring the amount of damage the system can take without permanent damage to investor confidence.
As it is, this market will start scaring folks away for years. Even I was hedging with my old IRA by buying Japan and Asia. I think we will face a demographic barrier that will force us into a Japanese style long flop.
Otoh, if the systems fail, well, then welcome to Argentina, like I posited years ago was possible, and buckle up.
BTW, that kind of collapse also brings fascism, and I will no longer be posting should things head that way.
Personal survival is important to see to the end of the war.
Someday this war's gonna end...
What is J6P reaction to today's events.?
Well, considering that if J6P placed sell orders on Thursday and buy orders on Monday (and that's what panic driven sheeple with only CNBC and only mutual funds will do), I don't think he has any money left to worry about.
I must say I loved the work of Ayn Rand in college. Infact parts of her philosophy and writing, I still do.
Rand used to rave about the "producers" and somewhere along the way...a young Alan Greenspan saw himself as one of her characters..
He decided to become a producer by removing regulations and allowing financial alchemists to run wild. The results of that are our future. Dont think Rand saw the strike of the producers quite this way...
Culprits of Collapse?! These whores are trying to steal my thunder...
Housing Bubble Hall of Shame®
The blame game was started a long, long time ago.
How are the other Markets since the Dow busted a nut
And, Bush's orders to become more aggressive in lending in home ownership
Also, I'd like to nominate "the Jones," without whom I wouldn't be able to rack up this ridiculous consumer debt.
/Travis Birkenstock off
If Obama paused a teeny bit more between his groups of words, he would sound like Christopher Walke
I feel like I've already endured four years of these candidates and I'm ready for a new set.
can you pick me up?
just try, I will leave you're naked ass hangin out, along with the tide...
tides ging out....
Rubin, Gramm, Leach, Greenspan, Clinton, Bush, Bernanke, Paulson, Cox, Sarah Pali
Yet, bailout plan guarantees banking CEO 70M salary!
MarketWarnings: Bail out plans and CEO salaries (Lloyd Blankfein is Goldman Sachs CEO, Paulson is from Goldman Sachs)
NIKKEI is down 911. Coincidence? I think not.
NIKKEI is down 911.
Yikes I hear a call for help
Cheney dead yet or did they shock his heart back?
Serf Mike,
Nikkei: 8,635.56 - 911.91 (I see 2 palindromes within those, and 911 is a creepy number)
Hong Kong, Indonesia, Pakistan, Thailand are all closed for today.
Sri Lanka is up 2%, probably related to the civil war.
Everything else is down 5-10%
This is hilarious:
Paulson spent $100m on WEBVAN..
1440 Wall Street
Ciao
MS
EvilHenry
WOW I wonder how the DOW will open Thursday to this news. Probably will go rocket back up for no reason at all...
1913 - The charter of the Federal Reserve, fractional reserve banking, and a fiat currency.
** Hang Seng/ Hong Kong not closed, just a glitch with Dow Jones
Noble-
You misread Rand. It wasn't "Capitalism Run Wild", but initially GOVERNMENT MANDATED loans to unqualified buyers and later GOVERNMENT interest rates held below a prudent level and finally GOVERNMENT intentionally stifling any efforts to control obvious abuse of lending practices. Rand was perfectly correct...if the FREE market determined whether those loans were to be made, this mess would not have occurred. Lenders making bad loans who did not have the GSE's as an end would have quickly left the lending scene.
Paulson spent $100m on WEBVAN
OMG.
Is THAT what this is all about?
Paulson getting even with some dotcome geeks that conned him out of some cash?
He's wrecking the ENTIRE GLOBE for that? Holy cow!
Be careful what you wish for, Hank!
Major World Indices - Yahoo! Finance
CR should put some of these basic data links in the sidebar.
CNBC
PeakVT,
No, he's correct. Plenty of blame for Lefties of all sorts.
See? Not so hard. Limit total exposure to 12x capitalization and don't bother with the details of how that leverage is distributed and market forces limit the danger.
We did have a stock bubble mostly under the old regime - although I'm not sure to what extent the funny money instruments helped blow that bubble. Certainly limiting the extent of a credit bubble limits the consequences of asset bubble, and as a systemic approach it's much more reliable than counting on the Fed (or whoever) to pop an asset bubble in the face of serious political pressure. A cautious approach would call for taking the essential step first and then later deciding - under less pressure - whether "bubble management" is a good idea.
Meltdown Man,
In your government diatribe, you see no roles for the unbridled greed of Wall Street? You see no role for how a very powerful man like Jester Gspan (a known follower of Rand) held back the interest rates and didnt do anything to burst the bubble? This man (not the government) was almost single handedly responsible for allowing this crisis to happen. He could have prevented it but he didnt. I mean CLEARLY - he was the person in charge of monetary policy. He was negligent to an extent that is hard to fathom. Those are the facts.
To blame the government is a red herring. And by the way - the free market did do its part in getting us here. It did exactly as it should - made the people who control the markets - a lot of money. A free market without prudent regulations is a fearsome monster.
No, but blaming the GSE problem primarily on Frank when Republicans had full control of the federal government from 2003-2006, a period in which FNM/FRE significantly increased their purchases of junk, is pretty damn lame.
Beyond lame.
Dems may get a shot to earn blame from 2009 on but the 'Ownership Society GOPers' could have squashed this insanity early on at any time during the period 2003-2006... the peak bubble years.
... GOVERNMENT intentionally stifling any efforts to control obvious abuse of lending practices.
Why is it hard to see that dependence on government oversight is fundamentally brittle?
I think the mistake people make is that they see that this works in private industry and say "Why not apply the same approach at the federal level?"
The problem with this thinking is subtle but has profound implications:
You have this sort of cellular Darwinism going on in corporate America. You have all these companies, some of them with bad oversight internally. These companies fail, the ones with good oversight go on and prosper and all is well. In the aggregate this dependence on oversight works great.
The problem is in the case of the economy this dynamic is not at work: We only have one country and a catastrophic failure of oversight at a high level can wipe out the entire economy. This isn't a problem when it costs you 2 out of every 100 businesses every year or so. But when it costs you 1 out of every 1 of your countries every 100 years that's a different matter.
I think CR makes a good point (probably unintentionally) - the failure of oversight and regulation at the highest level can lead to disaster.
So perhaps it's not wise to depend on that type of structure except when there's no other choice.
I don't think that's the case here.
Dems may get a shot to earn blame from 2009 on but the 'Ownership Society GOPers' could have squashed this insanity early on at any time during the period 2003-2006... the peak bubble years.
It does not matter which side you are on. Neither side is going to squash a bubble that makes everyday Americans think they are richer (for the time being). Talk about political suicide.
"Can anyone pinpoint a single event that will stop this downward spiral?" Time and exhaustion. You can not DO anything. That was/is the problem. The government and the Federal Reserve keep trying to DO something rather than just get OUT OF THE _______ WAY!
Meltdown Man writes:
Noble-
You misread Rand. It wasn't "Capitalism Run Wild", but initially GOVERNMENT MANDATED loans to unqualified buyers and later GOVERNMENT interest rates held below a prudent level and finally GOVERNMENT intentionally stifling any efforts to control obvious abuse of lending practices. Rand was perfectly correct...if the FREE market determined whether those loans were to be made, this mess would not have occurred. Lenders making bad loans who did not have the GSE's as an end would have quickly left the lending scene.
Meltdown Man | 10.15.08 - 10:38 pm | #
Sounds like the tan man is posting here - they made me do it.
Sorry tan man did w/ or w/out Fannie.
Bond Girl gets it..
Can't kill the goose on your watch..
Ciao
MS
No, he's correct. Plenty of blame for Lefties of all sorts.
I see wingnut amnesia is spreading. This time I'll simply refer to this handy visual aid: Party In Power - Congress and Presidency - A Visual Guide To The Balance of Power In Congress, 1945-2008
It does not matter which side you are on. Neither side is going to squash a bubble that makes everyday Americans think they are richer (for the time being). Talk about political suicide.
Bond Girl | 10.15.08 - 10:51 pm | #
The only hope is divided gov't where they expose each others sacred cows - and then proceed to make hamburger.
Ah Runch Time....
Oh to be a fly on the wall in Tokyo Sake bars about now...
Ciao
MS
"If every lender were restricted to an honest 12:1 would any of this have happened?"
Yes. It would have taken alot longer. Maybe a hundred more years or even a few hundred more years, but eventually this will happen. A credit/debt based monetary system will eventually blow up. What government can resist printing money to make war and gain power?
Getting rid of usury laws didn't help.
One thing I haven't figured out yet...why only inject 125B when the total injections in Europe were somewhere in the 1T range? Are our banks in that much better shape? Or is it game theory at work? There is some weird stuff happening here that doesn't make much sense.
Does Paulson want the market to do its work for him? i.e take down these insolvent banks?
"Can anyone pinpoint a single event that will stop this downward spiral?"
You have two pills before you. If you take the blue pill, the banks will be completely nationalized on the backs of taxpayers. You will not have to worry about their solvency per se, but you will have other worries about your economy, currency, etc. If you take the red pill and do nothing, the system fails and you see just how deep the rabbit hole goes.
down is the new up.
hedged yet? or is money disapearing?
I do not understand why folks do not think that Greenspan knew exactly what he was doing? Hasn't anybody read Atlas Shrugged?
Id give a dollar if an organized crime group that lost a fortune in this mess would take out the guilty parties.
I despise these idiots, and would just as soon see3 them dead.
Greenspan jumps out the window then the market will stop crashing or 2011 . Whichever comes first ..
Now this disaster is getting worse by the minute:
Hellenic Shipping News Worldwide - Online Daily Newspaper on Hellenic and International Shipping
Absolutely huge problems coming if this persists.
Now, about that advice of what to do, well, it is a bit of a panic.
But hey, panic seems to be winning in the world markets right now.
Someday this war's gonna end...
"If every lender were restricted to an honest 12:1 would any of this have happened?"
As long as you have any kind of credit you can put together a ponzi finance scheme.
You have two pills before you. If you take the blue pill, the banks will be completely nationalized on the backs of taxpayers. You will not have to worry about their solvency per se, but you will have other worries about your economy, currency, etc. If you take the red pill and do nothing, the system fails and you see just how deep the rabbit hole goes. Bond Girl
Bond Girl - I agree. I think its idealogy (bush) that is stopping us from taking the blue pill - and its a mistake. I dont know that we can wait till February
How big does CokeBlow think this magical "investor class" really is? Good grief...
Bond Girl - I agree. I think its idealogy (bush) that is stopping us from taking the blue pill - and its a mistake. I dont know that we can wait till February
Noble
I'm not suggesting we take the blue pill. I'm just saying those are our options at this point. All this quasi-nationalization crap won't accomplish anything, IMO.
The list is not large enough. It needs to be "Top 127"
Prescription to end the global financial crisis:
1. Give all players 24 hours to reveal CDS positions.
2. Declare force majeure as they are illegal insurance scams.
3. Jail and immediately torture everyone who bought, sold, oversaw, justified, provided a legal opinion for or benefitted in any way from this insidious Ponzi scheme.
4. Move on!
Dryfly:
I humbly disagree with your divided government thesis. It only results in gridlock and allows for more inertia and deferring reality.
why folks do not think that Greenspan knew exactly what he was doing
I think Greenspan did know. I think he cut interest rates so radically to prevent a depression in 1991. Citibank was insolvent, along with some unknown number of banks.
Greenspan knew from history what was behind Door #1 so he chose Door #2.
Bernanke is doing the same thing, although he's probably receiving more political pressure than Greenspan ever did.
The root cause is central banking. Everything else is just collateral damage.
Did unregulated CDS make it worse? I suppose. But remember, they insured a bubble that wouldn't have been created without the Federal Reserve. Insurance works well in a true free market.
dryfly and noble-
If you think I'm a GOP apologist you're sadly mistaken. My point was that both parties have a hand in what has transpired. A TRULY free market would have punished those making poor decisions, but POLICYMAKERS took that hazard away.
PeakVT writes: No, but blaming the GSE problem primarily on Frank when Republicans had full control of the federal government from 2003-2006, a period in which FNM/FRE significantly increased their purchases of junk, is pretty damn lame.
At no time does either party have FULL CONTROL.
From Obama Voted 'Present' on Mortgage Reform
Obama Voted 'Present' on Mortgage Reform - WSJ.com
....In the summer of 2005, a bill emerged from the Senate Banking Committee that considerably tightened regulations on Fannie and Freddie, including controls over their capital and their ability to hold portfolios of mortgages or mortgage-backed securities. All the Republicans voted for the bill in committee; all the Democrats voted against it. To get the bill to a vote in the Senate, a few Democratic votes were necessary to limit debate. This was a time for the leadership Sen. Obama says he can offer, but neither he nor any other Democrat stepped forward....
don't forget 500 subscribers of peak stupidity up thier on capitol hill...
It's Joe the plumber's fault.
Bond Girl - I agree. I think its idealogy (bush) that is stopping us from taking the blue pill - and its a mistake. I dont know that we can wait till February
Well that simply transfers the risk to the public balance sheet and gives people like Bush more control over your life and mine.
Is that what you really want?
Personally I don't want to live in a world where one moron has more and more ways and means to wreck my life.
I've never understood why people who despise Bush want to give people like him more power.
I have looked around and found a need.Where is a young couple without much money to go for a good Squirrel?ANNOUNCING the new concept restaurant "The Squirrel and Peach".We wll have two entrees "Squirrel A La Peche" and "Peche A La Squirrel'.Sides will be mashed turnips,boiled beets and creamed okra......Look for us soon in a former TGIF,Benningans,Ruby Tuesdays or almost everywhere.......Sorry,no credit cards accepted, but we will barter.
AllenM,
So I guess the cratering Baltic means we all become Iceland. Well, minus the fish....
Still think tomorrow + Friday will be big up days. Otherwise, throwing my silver in my Honda Civic and hitting the road...
Again, not suggesting we nationalize the banks. Just saying those are our options.
Nominating: Frank Raines, Barney Frank, Chris Dodd & Angie Molzilo
I'm not suggesting we take the blue pill. I'm just saying those are our options at this point. All this quasi-nationalization crap won't accomplish anything, IMO.
Bond Girl
I know you weren't. I, however, am strongly suggesting it. If we are not doing nationalizing now - I hope there is a good reason why (other than Milton F fans)
A "true free market" wouldn't have done crap. Free markets function on short-term time horizons which is exactly why we are here READING THIS FRICKING blog.
And if you STILL haven't figured that out after all this mess, you're just not capable of breaking out of your ideological Ice Age.
Topix\t883.21\t-72.30\t-7.57
Hang Seng 14,988.73 -1,009.57\t-6.31
Singapore S T 1,940.33\t-119.06\t-5.78
S&P/ASX\t4,025.30 -274.70\t-6.39
So how many more advanced measures / "tools at our disposal" can be announced to keep the markets from fading.
My guess is none. The market is now accepting a global recession.
But surely finger pointing will help. Right? Or just make someone feel better. Cheaper than drinking but does not help one sleep at night.
Tools are exhausted
Finger pointing and law suits time this.
what a clusterf**k, you get the government you deserve. KICK ALL THE BUMS OUT, regardless of party! Lets have a revolution at the voting booth.
Obama smoked him
A "true free market" wouldn't have done crap.
Correct. Because nobody would have interfered with market forces and created this mess.
Well that simply transfers the risk to the public balance sheet and gives people like Bush more control over your life and mine.
Is that what you really want?
Personally I don't want to live in a world where one moron has more and more ways and means to wreck my life.
I've never understood why people who despise Bush want to give people like him more power.
ac
ac - What are the other options? Lets these banks fail and start new ones? Can an economy the size of the US wait for such new banks to start up? The often quoted Swedish examples is a good one. Banks have been nationalized previously not just in US history. And with decent leadership - we can come out of this with our underwear still on. I gave up on shirts since I began reading CR
Free markets function on short-term time horizons which is exactly why we are here READING THIS FRICKING blog.
I disagree. Free markets maximize utility, but that is not necessarily short-term.
I would argue that our politicians have incredibly short-term time horizons, however.
YOU"RE RICH JOE! YOUR RICH!
so now with the big banks given more capital, they seem to have a first mover disadvantage or a last to move advantage. what to do, what to do...
Hmmmm, Nemo and Jas Jain both sign off at the same time. Alter egos?
And then Bond Girl, quietly waiting for that opening, steps in with a number of poignant observations.
Blue pill? Red pill? Time to reboot all our political and economic institutions, no? Can't fix them from within. Too bad our next president , who will be blessed with either a first-rate intellect or a top-gun mentality, is going to be saddled with systems stuck in a seemingly endless feedback loop. Glad I got all my money in . . . what is it this week? (It's easy to move petty cash around.)
"Free Market" in action -
I'm Hank Paulson. I can
a) earn $20 million per year for twenty years doing GS stuff or
b) earn eleventy-billion dollars in a couple of years by selling nuclear financial waste and blowing up the world.
What's best for me?
Oh, I chose B!
And the true proof of this is that the fanatical free marketeers among us are so greedy themselves that they can't imagine that free markets aren't a magical elixir of free manna from heaven.
Cynical Yes writes:
Prescription to end the global financial crisis:
1. Give all players 24 hours to reveal CDS positions.
2. Declare force majeure as they are illegal insurance scams.
3. Jail and immediately torture everyone who bought, sold, oversaw, justified, provided a legal opinion for or benefitted in any way from this insidious Ponzi scheme.
4. Move on!
Sheehish you forget the most important Beheading!
MarketWatch.com
(RTC Contractors line up to make more big bucks)
Former Resolution Trust Corporation Experts Prepare for U.S. Financial Restructuring Effort
USA Recovery Group Prepares to assist the U.S. Department of the Treasury with the Implementation of Congress' $700 Billion Rescue Program
The folks on Marketplace (public radio money show) read CR. Today they were talking about the Baltic dry index...but we heard that some days ago here in the comments. Y'all really are getting listened to, folks!
I would argue that our politicians have incredibly short-term time horizons, however.
Bond Girl | 10.15.08 - 11:17 pm | #
Yes. 2 years or 4 years, depending on term lenght of office. Senate is in the 4 year group since voters can't remember things for 6 years.
Stupidest comment from a pundit this evening?
"talk to the Joe"
Night all
Ciao
MS
A "true free market" wouldn't have done crap. Free markets function on short-term time horizons which is exactly why we are here READING THIS FRICKING blog.
And if you STILL haven't figured that out after all this mess, you're just not capable of breaking out of your ideological Ice Age.
Who doesn't function on a short-term time horizon then?
The problem is simply that we're all human and all have the same motives as these free market participants.
I don't see that Alan Greenspan, or George W. Bush, or Ben Bernanke, or the folks in congress are any better than the market participants.
It seems like there is the assumption of some benevolent divine actor here that will look out for our best interest.
Who is that?
Broward, regarding Mr. Paulson, he got to where he is by sucking the government tit. I think you're confusing laissez faire with facism/corparatism/statism.
gosh, so much greenspan hating.
i like the old greenspan of 66 and his first wife mitchell who introduced him to rand, not the second mitchell, andrea who came shortly after rand died. not that i agree with rand, just odd.
Alan Greenspan Timeline
"Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth." ag
clearly kidnapped by aliens in the 80's...
Well, since PeakVT went all partisan when I mentioned old Blarney, I guess he didn't get to the second sentence of my original post. Frank is simply the visible figurehead for the den of housing pimps in Congress, and he's only number 16 on the list of GSE contribution recipients, according the chart over at Tyrone's blog:
Housing Bubble Hall of Shame®: Barney Frank
Plenty of bipartisan blame to go around. The point is that the congresscritters protected and encouraged F&F while they were manipulating the housing market over a period of many years. Some representative of that group should be on the list, and BF is the guy out in front. Any other names?
Anonymous writes:
Cheney dead yet or did they shock his heart back?
No, they called in the Pantone color consultants to give their second diagnosis as to the correct shade of black.
ac - What are the other options? Lets these banks fail and start new ones? Can an economy the size of the US wait for such new banks to start up? The often quoted Swedish examples is a good one. Banks have been nationalized previously not just in US history. And with decent leadership - we can come out of this with our underwear still on. I gave up on shirts since I began reading CR
I'm not totally against some kind of temporary nationalization if it staves off financial collapse. But long-term I don't know that there's a way we can guarantee decent leadership.
That's why I think we were fairly clever to try to create a country that was guided by a set of ideas more than a specific leader's whims.
When we can have a leader that's smarter than all the rest of this then I'll be happy to talk about dictatorships and such.
Does HP has cancer or something ?
Why are BB and Sheila looking at him so pathetically ?
- NY Times
AC - you can argue your ideological purity with somebody else. There's two thousand years of history that says you are wrong.
Never has a society functioned without some sort of government.
The electricity market worked fine until free marketeers decided to "fix it". Population growth is predictable, energy use is predictable, and capital outlays are predictable. Injecting "free markets" into an efficient system fucked it up and it now costs more and is less dependable.
CLUE! Free market is not a god, just like your computer screen is not a god. it's a fricking COMMUNICATION METHODOLOGY.
Google "network 101" to learn more. Peer-to-peer sucks in anything that requires scalability or complexity.
It's not that hard to figure out.
Bond Girl writes:
"I would argue that our politicians have incredibly short-term time horizons, however."
Not as short as CEO time horizons. Most pols serve at least four years, but CEOs seldom seem to look past the end of the next quarter.
My nomination would of course be former FDIC Chairman and Big Texan Bushie Donald Powell who instituted what came to be known inside the FDIC as 'drive-by' bank examinations. These 'drive-by' examinations have thankfully been fully eliminated never hopefully to be allowed again. May he rest in hell.
Street view. Florida 2002.
Bi1lboard - 1.9% - Take a vacation!
Consolidate your loans! Increase the value of your home - HGTV.
Home Equity Line of Credit!
Come on in - we'll show ya the way to riches.
Gawd, lies, lies, and more lies.
Mania.
How much of America lost her collective mind? (Yeah, the definition of a mania).
Maybe 6-10 months to shore up the homestead.
Fasten your seatbelt!
A view from the bottom.
Never has a society functioned without some sort of government.
Actually, Somalia is doing just fine, thank you.
AC - you can argue your ideological purity with somebody else. There's two thousand years of history that says you are wrong.
Never has a society functioned without some sort of government.
I'm not arguing against government. I think government is absolutely essential to our existence.
The electricity market worked fine until free marketeers decided to "fix it". Population growth is predictable, energy use is predictable, and capital outlays are predictable. Injecting "free markets" into an efficient system fucked it up and it now costs more and is less dependable.
CLUE! Free market is not a god, just like your computer screen is not a god. it's a fricking COMMUNICATION METHODOLOGY.
Free markets are certainly no god. They're a mob with at best a loose set of ethics.
But I'd much rather have an unethical mob than an unethical dictator.
In other words, I'd rather have a free market than an Alan Greenspan simply because I think the free market is less dangerous.
aussie markets are now back to about midday on friday october the 10th. And this in a country with fully guaranteed bank deposits and lending, and strong bank balance sheets.
Self regulation of free markets is easily attainable. Take one of the AIG guys, Dick Fuld, any of them I don't care, and make them gone. Out a 40 story window, cement shoes, 6 pack them at the least, it doesn't matter. The other weasels would piss their pants and self-regulate overnight. If you're going to be a Banana Republic, be a Banana Republic
"Who doesn't function on a short-term time horizon then?"
Men whose testicals have decended.
this thing isn't going to find a bottom until grasso hands back his winnings, and apologizes to spitzer on tv.
I think Barney makes the list, along with Dodd, Greenspend, and Cox - W is a given. Do you want to be the thing that Barney Frank gets behind?
Go Phils!
dd
"The electricity market worked fine until free marketeers decided to "fix it". Population growth is predictable, energy use is predictable, and capital outlays are predictable. Injecting "free markets" into an efficient system fucked it up and it now costs more and is less dependable."
BH-
I'm sure it was the "free" market that decided not to build more coal fired, hydro or nuclear power plants. It now costs more and is less dependable BECAUSE OF GOVERNMENT REGULATION, namely your friendly EPA...so for those that live in the rolling blackouts, just thank your efficient overseers.
BH-
You care to argue that this housing bubble would have happened without a central bank?
Go Phils!
One cannot really speak of "Culprits of the Collapse" without mentioning Gene Mauch.
A little knowledge is a dangerous thing. Surprise time. I was one of flipping free marketeer types, too, umtil I asked myself one day the most foundational question of system analysis...
Why does the system work this way?
Why doesn't work in this "perfect theoretical way"?
And, of course, the answer is "x" or "y" or whatever it is because there is always a reason that YOU just don't know yet.
Fact - your free market theory requires equal and timely access to all information. That's ultimately a peer-to-peer system because all nodes must possess all knowledge.
Fact - the second most favorite fetish of free marketeers is "comparative advantage". What IS the definition of comparative advantage? Specialized knowledge.
In other words, an increasingly complex society needs nodes which not only don't all possess the same information, it MANDATES that each node possess different information in order to be efficient.
Ergo, it's impossible for a complex society to function as a free market because their information structures are diametrically opposed.
That's just one example. You can also disprove the myth of "free markets" through empirical measurement, through probability, through game theory.
Reading a few quotes by Adam Smith (who, by the way, considered his SECOND BOOK "The Theory of Moral Sentiments" to supercede "Wealth of Nations") does not quality you as knowledgeable enough to determine much about "free markets".
it's simplistic ego gratification because you WANT stuff to appear magically just like the government drones do. There's no magic here.
Who was the chief counsel to the office of comptroller of the currency during the last 8 years?
I would nominate him or her for the top ten list.
"Free markets are certainly no god. They're a mob with at best a loose set of ethics.
But I'd much rather have an unethical mob than an unethical dictator."
ac,
I agree completely. The best government is minimal. Here's a novel idea, limit yourself to what is in the constitution (the one that is written down, not the one you want to believe is there in some "hidden" meaning)
Inflation and asset bubbles can occur without a central bank and fractional lending, just takes a huge crap load of gold and silver to shock the system. Look what happened to Spain in the 16th century.
Julie L. Williams
Julie L. Williams became Acting Comptroller on October 14, 2004, succeeding John D. Hawke, Jr. at the end of his term of office. Ms. Williams was initially appointed Chief Counsel of the Office of the Comptroller of the Currency in June 1994, with responsibility for all of the agencys legal activities, including legal advisory services to banks and examiners, enforcement and compliance activities, litigation, legislative initiatives, and regulation of securities and corporate practices of national banks. As the agencys statutory First Deputy, she previously served as Acting Comptroller from April 6, 1998 through December 8, 1998, before Mr. Hawke was sworn in as the 28th Comptroller of the Currency.
Ms. Williams joined the OCC in May 1993 as Deputy Chief Counsel with responsibility for special legislative and regulatory projects. Before joining the OCC, Ms. Williams served in a variety of positions at the Office of Thrift Supervision and its predecessor agency, the Federal Home Loan Bank Board, culminating in a position as Senior Deputy Chief Counsel at the OTS from 1991 to 1993.
badger boy writes:
Otherwise, throwing my silver in my Honda Civic and hitting the road...
I miss FC.
It's a rare day on CNN when you see elites on Wanted Posters. Sputtering ad sales combined with rising populism is, I guess, a pretty good recipe for growing instant cojones.
This reporting is years too late, all the damage has already been done, and it's a fairly smelly fiction for CNN to pretend it can hand out Wanted Posters without naming itself a culprit.
From the lowliest silicone-filled Money Honey all the way up to chief boy scout Anderson Cooper, the network helped normalize the disaster by cheering on the "good times," touting the upside, downplaying the risks, never hinting there'd be hell to pay later.
Day after day, in other words, the MSM manufactured consent. Now it uses cute little rifle scope graphics to play to public rage. Some sheriff.
Meltdown Man:
"I'm sure it was the 'free' market that decided not to build more coal fired, hydro or nuclear power plants. It now costs more and is less dependable BECAUSE OF GOVERNMENT REGULATION, namely your friendly EPA...so for those that live in the rolling blackouts, just thank your efficient overseers."
MM: Come on, striking the right balance between markets and regulation is the key. But, this is hard in a changing world and free elections. Let's face it, if we let the energy markets float free (as an example), there are too many externalities flowing from what they do that we all would bear terrible costs, as we have in the past. You don't have to be a enviro-terrorist, union guy, minimum-wage worker or other agenda-bearer to recognize this. The truth is, the answers are rarely simple - and latching on to simple solutions is what gets us into trouble every time.
I didn't read all the posts so if I am repeating other comments, apologies. Greenspan made mistakes but it is too easy to demonize him and say so there. His major mistake might not be easy money but a failure to force the derivatives market onto a centralized exchange after the Long Term Credit meltdown. That market may yet be the nuclear bomb that hasn't been detonated.
Yo Yo Yo
My prediction for CNN's #1:
The top perpetrators of the cataclysm - ALL OF US.
Meaning, the cheerleader media and the dumbass public watching the idiot box. Buncha' damn foos
Everyone except CR readers, checkit.
Milton Friedman should be at the top of the list. Too bad the original free marketeer, privatize the world champion is not around to see his work come to fruition.
The fact is, Bush has mortgaged America using a $11 Trillion pay-option ARM loan, and has allowed it to balloon every year. Bush is the perfect analogy of the biggest speculators of the housing bubble.
Bush's idea of financial responsibility is to run away from dinner at a restaurant so everyone else can pay. He can now say that he got a free dinner, just like he can say we all got tax cuts - thanks to our children who will pay it back plus interest.
Bush has essentially charged the nation's credit card by trillions, and the balance has already passed $10 trillion with $11.2 trillion budgeted in. This is so Bush can now say that we've cut taxes from 2000 to 2008, and we must blame anyone after him for using taxes to pay for Bush's unmitigated spending spree called Iraq. In other words, blame the bill payers, not Bush the deadbeat.
The problem in politics is there are two powerful extremes controlling the two major parties. There are the rob the middle and lower class Republicans, and the rob the middle and upper class Democrats. Notice they both agree on one thing - rob the middle class.
The Democrats do this by labeling the middle class as rich, and scapegoating them as lazy. Their real intent is theft, and justifying theft. The Republicans do this through innocent sounding tax schemes, cutting taxes for "everyone" but in actuality mainly for the rich. They use bad math, and the bottom line is they're deficit-loving big government spenders a la the military. Bush and Republicans actually claimed that tax cuts would "pay for themselves". Not going to happen as long as we spend beyond the budget and into debt.
OK found it:
"The transfer of the USD 49 billion of assets will take place over the coming months, during fourth quarter 2008 or first quarter 2009, but will be priced at valuations as of 30 September 2008. These prices will be verified by independent third parties and potential differences will be recorded in the bank's income statement."
"UBS will raise CHF 6 billion of new capital in the form of mandatory convertible notes (MCN). This will allow the bank to retain a strong Tier 1 capital ratio, even after providing the equity to the newly established entity. The MCN has been fully placed with the Swiss Confederation. The Swiss Confederation reserves the right to reduce part or all of its investment by transferring the MCN to third party investors."
The MCN issue is subject to approval by UBS shareholders who will vote on the creation of the required conditional capital underlying the MCN at an extraordinary general meeting (EGM) to be held in late November 2008. The MCN will count as Tier 1 capital for BIS capital adequacy purposes following EGM approval. Issuance of the MCN is expected to take place five business days after the EGM.
Some sacrificial heads gotta roll.
Anything to avoid systemic analysis and fundamental change.
~
Greenspan betrayed Rand.
Greenspan knows very well that this kind of money policy will go broke.
The Tan Man has got to be on this list somewhere
Was regulation really Greenspans job? Is it Bernankes?
Bernanke has, by actions, taken on far, far more responsibility than I think is given to the Fed, for better or for worse. My own opinion is that it is for the worse: it is unplanned, unapproved expansion of the role of government and it creates the perception (which soon becomes the expectation) that government is responsible for every sparrow that falls from the sky.
The money supply can never be managed by any attempt to control the cost of credit (interest rates).
Second thoughts:
Secure debt caused by politicians would be a strange thing. Those extremely lax lending standards are the essence for keynesian monetary policy.
if you had an effective monetary policy that didnt flood banks with easy money you wouldnt need such regulations. those comments are intimately related
How about the commie front group Acorn which is Osama's commie front group. Franklin Raines an Osama advisor. Johnson who Osama had to fire. There are many more linked to Osama-Obama.
old news, but relevant:
Notaries Arrested in California Mortgage Fraud Scheme | United States Notary Blog
Don't forget to add Barney frank and Franklin Raines to this list...why is Phil Gramm on it?
greenspan's rate cuts were not the issue. his unwillingness to put even slight regulations on derivatives was the major problem.
oh, and add greed to fierce deregulation and you have a collapse.