Geithner speaks and intones like a 12 year old trying to be taken seriously. Maybe it is a napoleanic thing. Neverthless, we are getting a glimpse of the collective bankruptcy of Geithner and his "solutions" This retard stands at ground zero of this entire boondoggle along with hanky and Benji. That he was selected says more about Obama than any of his reverential rhetoric
honest n00b question:
why cant we create a 'good' bank, and when other banks fail, the good bank just ratchets up more monies and lends more to take the place of the bad bank?
this way, we can let banks fail and suffer the actual consequences of their actions.
But will that matter if we don't know how to value their assets? You have to admit that that is a huge problem according to those who claim it's impossible to value them. Because they're so intricate. Yet somehow they did it before when they were selling the damn things. It's the key conundrum of our age: How do we save bonuses with all the crap we're holding.
By Laura Mandaro, MarketWatch
Last update: 2:29 p.m. EST Feb. 4, 2009
SAN FRANCISCO (MarketWatch) -- The sharp improvement in Libor rates since late last year has stalled as anxiety about banks' health has crept back into this key lending market.
The London interbank offered rate, or Libor, rose to 1.235% Wednesday from 1.09% on Jan. 13. Over the same period, the spread between Libor and rates on overnight index swaps, another indicator of banks' ability to access funds, has stuck to about 0.99 of a point. That's far higher than it was before the start of the credit crunch.
Wider rates and spreads mean banks are more hesitant to lend to each other, keeping pressure on their funding costs, and indirectly, the rates they charge homeowners and corporate lenders.
"It's not really going down as fast as it should -- it's kind of hitting a limit," said Juan Valencia, credit strategist for Societe Generale in London, of Libor.
He called the recent trend "disappointing."
"It's one of the key things we need to see before we can see a flow of credit to consumers and banks to fund themselves at normal levels again," he said.
Nope. Create a National Banking System, run the the Government (the people), to take the private banking system's place. Do not bailout private banks. Let them fail. Let the shareholders absorb their rightful losses, and after they have decayed thoroughly, and been liquidated through BK, allow no more private banks and abolish the Federal Reserve.
Bloomberg reports the chart of the day offers an illustration of how taxpayers may be looking at $30B in losses on the Bear deal, with JPM footing $1.15B of the hhit. Cumberland Associates' Robert Eisenbeis says there is "no prospect" for profits. The chart shows losses since the June deal, via mark-to-market adjustments
ast fall the Federal Reserves New York office set-up Maiden Lane III, as part of a plan to enable AIG to terminate nearly $70 billion in credit default swaps it had written on subprime-backed CDOs. But so far, neither AIG nor the Fed will provide anything but a barebones outline of Maiden Lane III. And the SEC appears bent on protecting that veil of secrecy. In a Jan. 27 letter to BW, the SEC says the requested filing contains confidential commercial or financial information and releasing it would cause substantial competitive harm to AIG.
I have been floating this idea for a while and the consensus against it seems to be that too many vested interests will be harmed. Or, put another way, a few institutions with a lot of money shouldn't have to suffer if instead a lot of taxpayers each with little or no money can be made to suffer instead.
If you like, you can substitute the words "political influence" for money. They seem to be one and the same in this debate.
You can rest assured that once the government gets its hands on those assets, the underlying mortgages will be modified with a combination of lower interest rates, term extensions and principle reductions. The Fed is already doing this with the assets held by Maiden Lane LLC, the entity which now owns Bear Sterns book of rotten mortgages. The problem here is that thousands upon thousands of unqualified homeowners, including the many who lied on their applications for no-documentation Alt-A mortgages, are going to receive a gift at everyone elses expense and be rewarded for committing perjury.
Okay, no-one has stated the obvious, so I will: the reason they won't/"can't" nationalize is because that would set off all the cross-wired CDSs and take down god knows what as ancillary damage. It's the CDSs, not the toxic assets, at the core of the problem. The real problem is that these folks have wired themselves in a way to make BK too frightening to contemplate. The true task at hand is to defuse the bomb then let the bankruptcy system work its magic.
Are not these banks that are publically traded, under a requirement as a traded company, under an SEC/GAO requirement to the shareholders to aknowledge if they indeed are insolvent if they themselves no that fact?
Some of the assets on the Fed's balance sheet already have lost substantial value over the past six months. In the next several weeks, the Fed will provide an update on the value of assets in Maiden Lane LLC, a company it lent $29 billion last June to purchase $30 billion in assets formerly held by Bear Stearns. Those assets included securities backed by shaky Alt-A residential mortgages -- a category of loans between prime and subprime -- and commercial real-estate loans tied to companies, such as Hilton Hotels Corp., that are in slowing industries.
Maiden Lane was set up to facilitate last year's rescue of Bear Stearns by J.P. Morgan Chase & Co., which provided $1 billion to the newly formed firm.
Last fall, the Fed said the value of Maiden Lane's assets had declined to about $27 billion at the end of September. Analysts expect that value to have dropped further following a weak fourth quarter for the credit markets and declines in the values of many mortgage assets. Triple-A securities backed by commercial mortgages declined 11% during the quarter, while single-A securities lost 49%, according to Merrill Lynch indexes. Prices of Alt-A bonds, meanwhile, tanked late last year as loan defaults mounted.
Maiden Lane II LLC and Maiden Lane III LLC, created late last year to hold illiquid subprime-residential mortgage-backed securities previously owned by AIG, as well as collateralized debt obligations it insured, so far haven't reported substantial write-downs that would impair the loans of roughly $43 billion the Fed has provided to the two companies
Yves has had some great commentary the last couple of days.
Looks like MP was right (again). It is becoming clearer that Obama does not have a bank plan or an economic plan. He is supposed to be a fast learner, but I don't think he has time to come up with a plan from scratch at this point.
The root of the problem is not the banks, but the money itself.
The problems will continue to get worse as long as we continue to believe that we can save the current fiat system.
The government should abolish the fed, revalue gold to a very high dollar value and start buying gold with newly printed dollars until the price reaches a natural equilibrium. Then make dollars exchangeable for gold with a full 1 to 1 backing.
That allows revaluing the debt but puts a floor on the depreciation. Once that floor is reached, which will happen very quickly, the dollar will once again be a solid store of value.
Pass new banking regulation that is very simple. Banks only role is to hold deposits and process transactions. 100% reserves mean no bank risk unless there is criminal activity, which should be promptly prosecuted with harsh penalties.
Investment and lending will still take place but will be done through non-banking institutions.
With this system there will be no need for deposit insurance, besides the insurance payed by the banks themselves to protect from theft.
If the banks are insolvent, Nationalize Preprivatize them.
I think for this to be politically viable they have to specify a hard time limit for the period of government control.
The performance of our government in recent years along with the socialist experiments of last century make it very hard to argue that the people who think "nationalization" is a dirty word are somehow backward thinking or irrational.
The simple fact is that there's quite a bit of evidence to support the notion that centralization of economic and financial authority is very difficult and inefficient in a large complex economy.
We haven't demonstrated in any way that we've developed the knowledge or technology to cope with poor scalability of bureaucracy with respect to economic size/complexity.
The solution is easy, create a government agency, then another to oversee that one, then stick in the Systemic Risk Regulator, the Systemic Risk Czar, then a cabinet level department to advise the executive branch of the need for an oversight committee and finally......whewwww
Fudge. It all surrounds what the Bad Assets are worth. Nobody knows explicitly, although implicitly, I believe they think they are relatively worthless, hence they are more than willing to unload them (for much more than they are worth). But that's not a number, it's a qualitative intuition, and not empirical.
The only reason I can think that they are going down this path instead of nationalization is because of CDS.
I am guessing the CDS cost of change of control (which would trigger under a nationalization plan I would think) or default is greater than the toxic asset plan.
Or, most likely, this is all just a big charlie-foxtrot.
One would think that Volcker would be whispering something in Obamas ear regarding all of this. Which leads to believe there is an issue bigger than just the toxic assets themselves.
I think Geithner is the fall guy for the coming sea change in the Obama administration's approach to dealing with this political-economic crisis.
Daschle's demise was the tell.
The lack of any real action on the signature issue after two weeks indicates that there's too much division within the administration. Someone will need to be thrown under the bus. Geithner is damaged goods and the Wall Street approach has too long a track record of failure.
As for "preprivatize", why not drop the "p"?
Just re-privatize the banks. Reboot them!
New ownership, new leadership, new vision, and a mandate to clean house from top to bottom.
Let the stocks go to zero (they're nearly there anyway in most cases). Tie off the existing bondholders to their existing pile of toxic trash "assets", and let the stuff run itself off.
But keep the businesses open with fresh management and a fresh start on the capital structure.
The new ownership will need extra capital and that can be the government's role, in exchange for proportional ownership (to be phased out at 10%/year over the next 10 years), and specific deliverables in the "new leadership" and housecleaning areas without which the leadership gets flushed and the bank gets rebooted again.
My theory is basically that all the Bank and Brokerage CEOS and management are lying and the Federal Reserve, bank regulators and the SEC have given them the green light to do so.
n loud, angry exchanges, lawmakers threatened to issue subpoenas to SEC officials to compel their testimony in the case.
Pennsylvania Democrat Paul Kanjorski, the panel's chairman, vented frustration after the SEC's acting general counsel said the five officials appearing at the hearing couldn't answer lawmakers' questions about the Madoff case because it's under investigation. The five SEC commissioners voted earlier to assert a privilege in not having officials answer lawmakers' questions.
Kanjorski accused the agency of impeding the panel's investigation, calling it a "lack of cooperation" and an "abuse of authority."
Linda Thomsen, the agency's enforcement director, said the SEC takes the Madoff case very seriously, but asserted there were confidential areas related to the ongoing investigation that could not be publicly discussed.
The SEC officials said the agency is looking at possible changes in the wake of the scandal, including more frequent examinations of investment advisers and improving its process for assessing risk.
Because of the SEC's inaction, "I became fearful for the safety of my family," Markopolos said.
"The SEC is ... captive to the industry it regulates and is afraid" to bring big cases against prominent individuals, Markopolos said. The agency "roars like a lion and bites like a flea" and "is busy protecting the big financial predators from investors." Expired
Exactly. Get in there and find out what they are holding.
BTW, I don't think this is how it should be done.
The banks should receive no government support. If they can survive without declaring bankruptcy the government should stay out of their business. There should be no "getting in there" (unless the bank is only solvent because of government funds they've already received).
Otherwise, they can notify the government of impending bankruptcy at which point the government can step in.
It's easy to determine value of bad assets: buy statistically significant random sampling of assets, sell them on open market. Multiple average sales price times remaining assets and that's what they're worth.
Mr. T. writes:
It's almost as if he is trying to make his rhetoric and his policy actions be as opposite as humanly possible.
Mr. T. | 02.04.09 - 3:36 pm | #
It's almost as if he is not the one making the substantive decisions, as though he were a figurehead, just like Bush.
When the previous administration kicked the can down the road, that was fine - the new admin should make the call and take the blame or credit however it pans out. Why the incoming administration hasn't nationalized by now makes me wonder. I don't want nationalization, but I don't want to relive Japan's lost decade. My conclusions as to why are either:
a. There is a large land mine they don't want to trip.
or:
b. They are owned by those that will benefit from the bad bank.
Either way, it seems a bad bank at best is a large transfer of funds but more likely just a gigantic sucking sound.
It's almost as if he is not the one making the substantive decisions, as though he were a figurehead, just like Bush.
Anonymous | 02.04.09 - 3:44 pm | #
The deal with Goldman also needs to be rescinded, because it was an obvious abuse of power to allow an investment bank to get into small banking! That is fraud at the very top and abuse of power! Take down Goldman now!
Re: On September 21, 2008, Goldman Sachs received Federal Reserve approval to transition from an investment bank to a bank holding company. [10]
On September 22, 2008, the last two major investment banks in the United States, Morgan Stanley and Goldman Sachs, both confirmed that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street. [11] The Federal Reserve's approval of their bid to become banks ended the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and capped weeks of chaos that sent Lehman Brothers Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp
THAT is Total BULLSHIT and that needs to be stopped and Goldman should be nationalized!
The advantage of defusing the CDSs and going through a BK is you don't have to value the assets. The current equity holders get wiped, the bond holders get a huge haircut, but get the new equity: effectively, they are the new owners of the toxic assets. Unless the assets are indeed worth zero, a significant enough haircut will leave the new equity with value.
Now, the feds can feel free to recapitalize the newly-solvent banks if they want, in return for preferred equity or whatever. But the underlying capital structure has been healed.
I think the life insurance companies are in almost as bad shape as the banks.
Think about what a life insurance company does. In various ways, they take money from people and promise then long-term steady rates of return of 3-6%.
How can you do that in this environment, especially when you have a book of bad loans and investments?
Is Obama gonna bring the insurance companies under Big TARP II? Or just leave them out in the cold? I don't think the market has a clue.
Regarding the CDS: If someone's still holding a toxic CDS after all this time, let them experience the bank reboot, and if they have issues with that, reboot them too. All the rot has to be cleaned up.
Even if you fixed the banks, along with the whole credit system, we've got massive overcapacity worldwide, demand destruction caused by job fears, and massive indebtedness. If no one is buying, everything else is peripheral. And I can't see that changing anytime soon. Therefore the depression is upon us, no matter what the governments do. So I'm not that worked up about the show in Washington, it's all pissing into the wind.
There is also the delaying of recognition of losses because of the group think that todays prices represent "fire sale" values instead of actual value.
The forcing of mark to market at these "fire sale" prices would bankrupt many. Yet the whole point of mark to market was to make it much clearer what a banks position was at any one point in time.
If you only let banks plan for when things are good and cover up for them when things go bad it isn't really helping engender confidence in the banking system or capitalism in general.
@ Gary...I hope your right....but I don't think this is all part of some master plan by the administration to "sell" nationalization.
I think the administration is in just confused over what to do......or in the fight of it's life against the bankers clear desire to get the bad bank going. And it is not at all clear to me at this point who is going to win this one.
And I'll say it again - bad bank ain't gonna happen. Gary | 02.04.09 - 3:40 pm | #
You mean Good bank/Bad bank. Because we got the bad banks in place, and it's not clear there will be good banks. How about we just do an inventory of the "good" assets. I'm starting to wonder if they have any of those.
The world's financial system is insolvent and needs to be recapitalized. Nationalization is by definition a confiscation of private wealth. In a fiat money system, the confiscation of private wealth occurs via inflation. Inflation, and lots of it, coming soon to a theatre near you, complete with 3-D glasses and lots of blood and gore.
ear Stearns offered this hypothetical example at its Las Vegas presentation: A pension fund wants to buy $100 of CDO equity. Instead of buying it directly, the fund buys a zero-coupon government bond for $46 that will be redeemed for $100 in 12 years. That bond is paired with a $54 investment in CDO equity.
Zero-coupon bonds pay no interest; the investor is paid the full face amount -- that's $100 in this hypothetical situation -- when the bond matures.
Principal Protection
Principal protection is guaranteed,'' Fleischhacker says.It's AAA since you're buying a U.S. Treasury.'' If there are no defaults, this method of investing in CDO equity would return 9.3 percent annually, she says.
The presence of the zero-coupon bond ensures the pension fund will recover its $100 investment even if the equity tranche becomes worthless. While the fund wouldn't lose any money if that happened, there would be no return on the investment for 12 years.
If a fund manager puts all of the same hypothetical $100 into zero-coupon bonds only, it would more than double its money in 12 years, Das says. I would have thought with pension fund money, they don't really want to lose principal,'' Das says of this equity tranche sales technique.And clearly here the principal is very much at risk. You've got a highly leveraged bet on no defaults, or very minimal defaults.''
Interesting that O was taunting the bankers a second time today.
Its like a freaking bullfight. \t Comrade Tech Sargent Chen | \t \t \t \t02.04.09 - 3:46 pm | #
Taunting you can drive a Mercedes through.
http://washingtonindependent.com/28954/executive-compensation-limits-the-loopholes First, the $500,000 pay limit doesn't apply to each executive â only to âsenior executives." And those senior executives will remain eligible for unlimited stock options as long as they don't cash in while the company still owes the government money, or âafter a specified period according to conditions that consider among other factors the degree a company has satisfied repayment obligations, protected taxpayer interests or met lending and stability standards." Second, the cap won't apply to all companies bailed out by taxpayers. Instead, the Treasury will distinguish between firms benefiting under the âstandard" TARP program and those receiving âexceptional assistance." Only the latter group is subject to the cap. Third, the ban on golden parachutes doesn't apply to each executive â only to the 10 highest paid executives. Again, only companies getting exceptional assistance are subject. Fourth, the new limits apply only to companies accepting TARP funds in the future. That is, an untold portion of the $350 billion or so that's already out the door might still wind up in the pockets of the same executives who ran the companies into failure. Fifth, a âclaw back" rule requiring executives to return bonuses and other compensation-based pay that was based on deceptively erroneous financial statements applies only to the top 20 executives of the company. So the 21st guy on the list who knowingly gave inaccurate figures, and was paid a bonus for the fib, gets to keep that bonus.
Interesting that O was taunting the bankers a second time today.
Comrade Tech Sargent Chen | 02.04.09 - 3:46 pm | # Taunting them? All he says is: defer you paychecks. Bonuses are bad PR right now. "There will be a time for bonuses, now is not the time." - the big O. Next set of bonuses to be paid in restricted stock. Big deal.
@mal: Geithner was handpicked to be from the same line of control as Paulson was. He was specifically chosen (perhaps not solely by Obama, but by Obama-under-other-pressure) to provide continuity of policy in order to prevent market panic during the transition period.
The sea change is that control of the Treasury Department has to be given to someone not recently employed by the affected sector on Wall Street. And remember that the Fed is a private organization owned by the large banks.
The various factions of the plutocracy/oligarchy have the long knives out. They are a bit desperate, and I imagine the infighting is vicious. Obama, is basically an incrementalist - the Chicago political scene is all backroom deals - so it doesn't play to his strength as a collaborator when few are interested in collaborating.
"Taunting them? All he says is: defer you paychecks. Bonuses are bad PR right now.
"There will be a time for bonuses, now is not the time." - the big O.
Next set of bonuses to be paid in restricted stock. Big deal."
If this picks up steam you can kiss high-end real-estate good-bye, especially in NYC.
"Wisdom Speaker writes:
Regarding the CDS: If someone's still holding a toxic CDS after all this time, let them experience the bank reboot, and if they have issues with that, reboot them too. All the rot has to be cleaned up."
Huh? For people betting on the "right" side of the CDS the trade is quite profitable, not toxic. Many people have bet against the banks using CDS, some as pure speculation, some as a hedge of counterparty risk.
To just wipe them out brings on a whole different set of issues. You could be wiping out the hedges against default. The CDS have in effect made the whole system an integrated circuit. You can just cut out one piece, the whole thing needs to be replaced if it can't be made to work on its own.
I think the life insurance companies are in almost as bad shape as the banks. rich | 02.04.09 - 3:48 pm | #
For what it's worth, the companies to go at this stage in the game in the Japan scenario were the life insurers. Mid-level, trusted insurers, like Taisho, Chiyoda, and Tokyo Life Insurance. It seems that in bubble scenarios, life insurers seek out better returns than regular fixed income, and get their hands burned.
"Confidence grows at the rate that a coconut tree grows, and it falls at the rate a coconut falls." -- Montek Ahluwalia, deputy chairman of India's planning commission, Davos 2009
"Confidence grows at the rate that a coconut tree grows, and it falls at the rate a coconut falls." -- Montek Ahluwalia, deputy chairman of India's planning commission, Davos 2009 Zero | 02.04.09 - 3:58 pm | #
New ownership, new leadership, new vision, and a mandate to clean house from top to bottom.
Let the stocks go to zero (they're nearly there anyway in most cases). Tie off the existing bondholders to their existing pile of toxic trash "assets", and let the stuff run itself off.
But keep the businesses open with fresh management and a fresh start on the capital structure.
The new ownership will need extra capital and that can be the government's role, in exchange for proportional ownership (to be phased out at 10%/year over the next 10 years), and specific deliverables in the "new leadership" and housecleaning areas without which the leadership gets flushed and the bank gets rebooted again.
Wisdom Speaker
Well, if I understand it correctly that's basically the point of nationalizing them.
Which is why I might grudgingly have to support it if there's a firm guarantee that the point of the nationalization is to turn out a new set of refurbished private banks.
BTW, maybe we should aim for having a more decentralized finance system where financial institutions are more in competition with each other. I.E. bust up Wall Street and redistribute their financial power. I'm all for any kind of regulation that creates competition, separation, and conflicting motives in finance. The problem with regulation stem from power monopolies that lead to regulatory capture and counterproductive regulation.
Furthermore I still believe it's the attempts to regulate the business cycle that caused this mess. I think the economy is more complex than the minds of our economists and politicians, and that you can't micromanage something more complex than you.
Insolvent banks need to die a deserved death. Delaying pain looking for a soft landing or containment creates more extreme risk. This system of patches and emergency measures isn't stabilizing anything; the entire system of financial trade is subjected to increased risk of catastrophic failure - and the patches make it less likely to predict when the whole will blow apart from increasing pressures. All the guages are broken from the pressure buildup. I'm torn between Titanic and Hindenburg metaphors.
The banks that are too big to fail should be broken up into little bits and pieces and sold. This is not as difficult as it would seem.
In my neck of the woods Chase and it's predecessors bought and merged at least 10 good local banks in the three surrounding communities. They just ate them up and gave us 800 numbers to call with problems and provided poor service and pricing of services
1) In return for a capital injection the stock holders are wiped out. The investors could purchase 5 branches including real estate, 200 million in deposits and some rehabbed loans.
2) The questionable loans would be rewritten so that they could somehow become performing loans. If balances must be written down fine. If interest rates need to be fixed and lowered the regulators would do that before the sale.
3) The idea that a only a big bank can make big loans is not true. One holding company that was buying small banks left them semi-independent but allowed then to make large loans as part of a syndicate. That way they did not violate any capital requirements.
4) A Federal guarantee for loans that would allow people to refinance and keep their homes. I know more than a few folks who put the normal 20% down and used an adjustable loan hoping to refi before their rates adjusted. They are now underwater on the loans and cannot find any way to get a new loan. They can afford the current rates but have no way to protect themselves from higher rates in the future or get today's lower rates.
The loan holders would not be allowed to bankrupt out of the mortgage and would always be on the hook for the full amount as with a student loan.
Like Recalibrated Disk said but with more context...
Bush/Cheney ALREADY looted the banks and the treasury and created massive systemic damage so Obama is fucked for next 4 yrs. unless he Preprivatizes the Banks like CR says.
The lack of any real action on the signature issue after two weeks indicates that there's too much division within the administration. Someone will need to be thrown under the bus. Geithner is damaged goods and the Wall Street approach has too long a track record of failure.
The lack of "action" represents a time period of re-arranging the political terrain by giving time for all the bonus and bank party stories to come out, allowing Markoplus to testify, and allow time for the Bank CEOs to get hauled before Congress next week.
If you think this timing was an accident borne out of disagreements and not a political strategy, then I have a Hillary for President button to sell you.
Obama: Catastrophe coming if stimulus bill not passed- AP ...Barack "Dubya" Obama?
iirc, Dubya's pitch was the Dow being down because of the delay in passing TARP. Even the most unethical stock pusher would be more careful about that pitch.
If Davos highlighted anything it showed how much panic and confusion is happening behind the scenes.
I have little doubt the practically unchanged cast of financial players and decision makers are going to do nothing but try to squeeze out every penny they can for themselves and their friends until it all collapses. They seem to truly believe that they can get away with it. So far they are.
"iirc, Dubya's pitch was the Dow being down because of the delay in passing TARP. Even the most unethical stock pusher would be more careful about that pitch."
Are you telling me that the market's gonna crash if we don't pass this bill? Now where have I heard that one before (:
so I think we are slowly starting to see Obama's true nature.
He is a loud talker. He talks a lot, leashes out at bankers, stomps around with rhetoric... and then does exactly the things corrupt bankers would have him do.
Stocks fell as investors were concerned that unlimited amounts of money may not be flushed down the black hole of banks. eric in vegas | 02.04.09 - 4:08 pm | #
As always it is necessary to define the scope of the problem before attempting to solve it, so I think that the government really needs to know, in detail, each banks assets and liabilities before any more money is wasted.
eric in vegas writes:
Stocks fell as investors were concerned that unlimited amounts of money may not be flushed down the black hole of banks.
eric in vegas | 02.04.09 - 4:08 pm | #
@"R" - To carry the reboot analogy a little farther: I think you're saying that we can't swap out the motherboard and main RAM and then reboot the system, because there are too many CDS-linked "peripherals" that will blow up during the power outage. I haven't seen any hard evidence that triggering the CDS linkages would be that destructive (and would love to see some), so I think for now that may just be a bankers' bluff to try to extract more taxpayer funding.
But if in fact that problem is real and someone can prove it... if in fact the Gordian Knot of the CDS entanglements is too snarled to allow reprivatization of the near-death institutions as the first step ... Then we need to tackle the CDS mess as part of the reprivatization process in each case.
One idea would be to use an "Eminent Domain" type of authority to strip each reprivatized institution of its CDS portfolio, in exchange for some reasonable value (funds to be supplied by the Federal Reserve which would then hold the CDOs in Maiden Lane XXVIII etc.).
The reprivatizing might trigger side-bet CDSs, but those are the responsibility of the idiots who entered into the losing side. If the losers of those bets can't pay out, then reprivatize them too, dammit!
The fundamental issue is that the network of institutions has become too entangled, such that a failure of one might imply a faillure of all. A stable network needs to be created in which failure of a few junctions won't bring down the whole system. We have to break the entanglements through government action because the private-sector rules are broken.
My choice for Treasury's team of saviors would include someone from a place like Cisco, who understands network architecture theory and also corporate behavior and finance.
And now I'm gonna read the business section on yahoo to see what wasn't the reason for the sell-off today.
Pissed Off In California | 02.04.09 - 4:07 pm | #
I'll save you the trouble. It's the darn cold weather, again.
Seems like there's a cry for nationalizing the banks. I wonder how that would have flown a year ago.
Let the banks fail. If you want to nationalize, create The Bank of America, buy all the GOOD assets, and let the rest wither away. We could probably afford to buy all the good assets, because there are so few of them.
And mark them to market, obviously. This mark to fantasy is lunacy.
also:
how can we hope to come up with a comprehensive plan for dealing with the current depression when there is still no consensus on the last Great Depression, in terms of reasons and remedies???
Maybe this is the reason we dont have transparency for deals like maiden, is that if we even took one case study to value assets then we would/could have a benchmark and Wilie Coyote will have to look down pan to camea and wave goodbye
Two black rat snakes coiled to mate
On spring viburnum, copulate,
Round and round each other twist,
Tongues that flicker in a kiss,
Narrow heads with shining scales,
Knot of female with the male
Not a sound these partners make
Although they cause the shrub to shake
If they but shift a hanging coil -
Their leather helmets shine like oil -
Muscular though they may be
They bend with flexibility
Those who see this twisted skein
See a passion without pain,
But we have come so far from this
We stand upright and do not hiss,
Yet those who are the serpents kin
Can silent be and cast the skin
No. I think Obama has found out what was whispered to Bush. You don't roll out numbers like this, nor have this much difficulty in setting a policy, unless everyone has a clue of what the risk is.
My guess is there is some serious bad news that are not seeing or hearing about. These people are scared bad enough to spend trillions of dollars and still possibly blow us all up.
These are not all stupid people. There are a few I am sure, powerful ones, that understand if this goes really bad - there will be no where to run.
The day before the Feds rescue of Bear Stearns, Chanos says he was walking to the Post House restaurant in New York City, when, at 6:15 p.m., his cell phone rang. He saw the Bear Stearns exchange come up on his caller I.D. and took the call.
Jim, hi, its Alan Schwartz.
Hi, Alan.
Well, Jim, we really appreciate your business and your staying with us. Id like you to think about going on CNBC tomorrow morning, on Squawk Box, and telling everybody you still are a client, you have money on deposit, and everythings fine.
Alan, how do I know everythings fine? Is everything fine?
Jim, were going to report record earnings on Monday morning.
Alan, you just made me an insider. I didnt ask for that information, and I dont think thats going to be relevant anyway. Based on what I understand, people are reducing their margin balances with you, and thats resulting in a funding squeeze.
Well, yes, to some extent, but we should be fine.
This is now 6:15 on Thursday night, the night before the collapse, Chanos says. It was after a meeting with MolinaroBear Stearns C.F.O. Sam Molinarowho basically told him at that meeting, Were done. Were gone. We need money overnight we dont have. So here he is, calling one of his biggest clients to go on CNBC the next morning to say everythings fine when clearly its not. And he knew it wasnt.
Chanos refused to go on CNBC. By 6:30 the next morning, word was out that the Fed was engineering the rescue of Bear Stearns. Chanos realized that he could have been on CNBC while that was announced. I thought, That fucker was going to throw me under the bus no matter what.
There's a lot of "Obama doesn't have clue" gnashing going on. Maybe it's entirely true and deserved.
Just a thought, though.
Maybe our current darling situation is one of the most complicated problems ever confronted.
Think back to the start of the Great Depression. Imagine that you have to solve that problem in real time. It's easy to look back today and say, "Well, here's where they went wrong. They should have . . . ."
I think one can argue that today's situation is at least as daunting as 1929-1932.
We're you expecting Obama to resolve this in 16 days? Do you think there's some magic solution?
Sure, maybe he and his new administration are going about this all wrong. Maybe they're as bad or worse than the Bush crew. Maybe.
But maybe, just maybe, extricating ourselves from this mess is going to look like a long, drawn out, back and forth chess game.
It seems to me some of the commenters here, if they were running the Federal government, would have lost the game within the first day or two with their simplistic diagnosis and prescriptions.
Maybe Obama and his team, new and inexperienced as they are, have an appreciation that the way to work our way out of this is first to proceed with "no fast moves." You know, methodical, piece by piece.
Then again, maybe some of you are right. He should just announce that "the banks" are nationalized, and the react to whatever shit storm follows.
I think the economy is more complex than the minds of our economists and politicians, and that you can't micromanage something more complex than you.
ac
.
Hey, I can't even micromanage my cat, Schrodinger. And she's somewhat less complex than I am. Or maybe not.
It is really not that complicated. The current back and forth between the administration and the bankers is simply thier way of figuring out how to steal from the taxpayers without making it seem like that is what they are doing. IMO.
"do you think there is some magic solution?"
...well, actually yes. It is being applied and seems to be working quite well. It seems to be a sort of suspension of disbelieve. Everyone just goes on asking the government for money and the government supplies it. This could go on forever, no?
Who knows, ten years from now we could be on a monthly Stimulus plan.
@5 foot 3 Pablo Picasso: "We're you expecting Obama to resolve this in 16 days"
He's been a part of the government for several years and has had as much time as any of us here to figure out what to do. More, if you count all the people he's got working for him.
Yes, I expected prompt and immediate action other than Nancy Pelosi's shopping spree.
Also, no, I don't think the problem is that complicated. It's not impossible to take defunct banks apart and put them under new management; the FDIC does it every week. The reprivatization plan (which admittedly is a concept, not a detailed 300-page blueprint) is just to do whatever it takes to apply the same plan to the larger banks where the government has balked.
I think the hard part is that the people who created the mess are still in charge of the cleanup, they don't understand the problem fully because they created it. That is not simply unjust, it's a poor recipe for good policy. I've seen a number of cleanups, and IMHO they usually go better when a fresh perspective and strong personality is brought in to lay down the law and kick ass where needed.
I think the economy is more complex than the minds of our economists and politicians, and that you can't micromanage something more complex than you.
ac
.
Hey, I can't even micromanage my cat, Schrodinger. And she's somewhat less complex than I am. Or maybe not.
scone | 02.04.09 - 4:20 pm |
Seriously, micromanaging a business with 50 people is next to impossible.
And yet the government claims it can somehow control the aggregate output of all the businesses and individuals in this country?
not much else to it.
bgates | 02.04.09 - 4:20 pm | #
There wasn't until someone had the bright idea of buying the fake paper with real money. Getting 80 cents on the dollar for phantom investments is a hell of a boondoggle. Somewhere Barnum is looking down and crying in joy.
Think of the economy as if it were the worlds biggest software program. Almost all the code in the last 6 years has no documentation, and some of it has been lost. The upgraded version we got these last 6 years looked pretty good until it actually had to deal with transactions.
Rebooting is not an option in this kind of production environment. You can't reboot a hospital. This software is a lifesupport system. So what do you do?
Maybe the government is not all powerful. Let them choose their action with great care, because if they fail they will have failed on a machiavellian course with no moral justification. If they succeed in saving only the bankers, there will be terrible price to pay. It will also destroy any community organization legitimacy the Obama administration has. Let's come together (so we can get everybody in one spot, which makes the pick pocketing so much easier).
The powers that be will just continue to meddle along until there is literal blood in the streets.
Take Madoff. He perpetrated the single costliest crime in the history of the world. The PTB says "We'll restrict him to his penthouse". Then they say they would do more but we are all innocent until proven guilty. Madoff should be in chains in a dungeon and enhanced interrogation should be used to extract the locations of his offshore accounts. His extended family should be in chains. His friends should be in chains.
This will end when there is enough frustration and hunger that the crowds in DC and on Wall Street scare the crap out of the PTB and they stop playing government playhouse and take appropriate action.
the main solution is to allow banks to capture fat spread with no investment and no risk.
wow
It seems to me some of the commenters here, if they were running the Federal government, would have lost the game within the first day or two with their simplistic diagnosis and prescriptions.
which ones? clawbacks?
BK's?
what constitutes losing the game? civil war?
No matter that Wall Street has already destroyed itself - if Obama nationalizes now, he will be destroyed by the right-wing media mavens.
He's doing exactly what they want and being destroyed by the right-wing media mavens. He's got a short clock to work with on the popularity timer. He should use it where it matters. I'm with Wisdom, the solutions need to be far more sweeping than the crap they are pulling right now. I'm all for stimulus infrastructure that pays out later, but TARP is worse than a joke.
Have a look at the Fed's balance sheet - the nationalization of the banking system has already happened. I wonder when they announce the +30% price level reset to formalize the recapitalization?
And now I'm gonna read the business section on yahoo to see what wasn't the reason for the sell-off today.
Pissed Off In California | 02.04.09 - 4:07 pm | #
LOL! Have they even changed their headline from earlier today when the market was up? "Stocks rally on Geithner's doritos fart"
And yet the government claims it can somehow control the aggregate output of all the businesses and individuals in this country?
You can see how well it's worked so far.
ac
.
That's why I don't buy the conspiracy theories. It implies more competence and mastery of the situation that is credible. Although I'm sure the banksters are hiding their screwups as fast as they can. I'm long on industrial strength paper shredders.
Obama sure talked a lot about the first days in office, but he's shot nothing but air-balls so far. Nominations have been an embarrassment, and the leadership on the biggest economic collapse in decades has been uninspiring.
mp was right, despite Obama's rhetoric, he came to office without a plan of action. We will all pay the price for this indecisiveness and ineffectual beginning.
"Obama is either going to be remembered as one of our greatest presidents or the last president."
Why are Americans turning into such teenage drama queens? Finland had a devastating banking crisis that lopped off 12% from GDP in two years. So fucking what. People deal and move on.
So many Americans are acting like a massive recession never happened anywhere.
@nova "Rebooting is not an option in this kind of production environment. You can't reboot a hospital. This software is a lifesupport system."
I'm not saying we should reboot the entire system en masse. I'm saying we should reboot individual components and backstop the ones that will take strain in the process.
You can reboot a hospital if you do it one wing at a time or have a failover backup system; ask any hospital how they handle electrical system upgrades/maintenance.
And you can reboot a life support system if you do it within a few heartbeats.
You can reboot a bank if you have a weekend to work with, the FDIC does it every week!
that's just silly. people let the mad max fantasies surrounding the tin-foil crew disturb their reality.
andrew jackson did the exact same thing as what needs to be done now. the constitution survived.
the difference is that no one in our country has 1/10 the testicular fortitude of andrew jackson. we never would have won the battle of new orleans with the crew we have running the country today. when he scowls at us out of the $20, he's doing it for a reason - we're soft, and unworthy of our liberty and democratic institutions.
Think of the economy as if it were the worlds biggest software program. Almost all the code in the last 6 years has no documentation, and some of it has been lost. The upgraded version we got these last 6 years looked pretty good until it actually had to deal with transactions.
Rebooting is not an option in this kind of production environment. You can't reboot a hospital. This software is a lifesupport system. So what do you do?
nova
.
Copy the code to a spare computer, read the whole thing, fix it, test it, test it again with live duplicate data, then upload.
"Why are Americans turning into such teenage drama queens? Finland had a devastating banking crisis that lopped off 12% from GDP in two years. So fucking what. People deal and move on."
Did anyone in your family live through the great depression? Ask them about it and get back to me
Gates told venture capitalists and investors gathered at the annual TED conference in California on Wednesday. "We're going through a period ... where a 50-year credit expansion has moved to contraction."
"You're going to have a number of years where aggregate demand is low," he said without elaborating.
"That's why I don't buy the conspiracy theories. It implies more competence and mastery of the situation that is credible. Although I'm sure the banksters are hiding their screwups as fast as they can. I'm long on industrial strength paper shredders."
It would also need to 'shred' this in particular: YouTube -
Politicians generally no longer have control. There is enough momentum on the current vector that any deviation from the present course and there will be an instant wreck. The one thing they have is better seats to watch from.
You might as well blame/praise a nobody.
The system is behaving exactly as expected. There is no contingency out there large enough to interrupt the system.
The one thing within our ability is to control how long (& the longer, the deeper), and how volatile the step shift is.
But as is the tragedy of the commons individual countries will pursue self-interests first, and there are many rounds of games to be played before everyone is tired of them.
He's tanned, rested and ready. He understands complex systems. He understands modern finance. He's a close friend of Warren Buffett.He understands the importance of putting the banking sector back in its place. He's got the balls (and, more importantly, the "my bank account is bigger than yours mojo") to kick Wall Street ass where needed.
"It seems to me some of the commenters here, if they were running the Federal government, would have lost the game within the first day or two with their simplistic diagnosis and prescriptions.
Maybe Obama and his team, new and inexperienced as they are, have an appreciation that the way to work our way out of this is first to proceed with "no fast moves." You know, methodical, piece by piece.
Then again, maybe some of you are right. He should just announce that "the banks" are nationalized, and the react to whatever shit storm follows.
5 Foot 3 Pablo Picasso | 02.04.09 - 4:18 pm | #
A reasoned and thoughtful post, thank you; it will be roundly attacked.
Karelian, you could nuke Iceland; wouldnt matter to the global economy. Admitting that the US banking sector is as a whole, insolvent, that spells trouble.
We missed our chance unfortunately, to announce this. Had anyone not been too intimately connected (read Paulson) to the problem, we could have nuked the banks then, and used all the money we wasted to capitalize new banks.
But that option is gone. We cant afford it now, and the problem has got much bigger since.
Snooze you lose. Big Os hands were tied as soon as he stuck with people like Geithner and others who were part of the problem, not the solution. Those people could never ever be the solution. And sorry to say , the big O blew it on that call. Im sure he regrets it now, but oh well. Sucks being wrong, especially when you probably knew better.
"Instead of decisive action to recapitalise banks, which must mean temporary public control of insolvent banks, the US may be returning to the immoral and ineffective policy of bailing out those who now hold the toxic assets."
Insipid. As if the gov't could even act in such a matter, let alone that the power centers would allow it to. And of course, we get another STOOPID either or, where one or both sides of the clause reference things that do not exist.
And yet the government claims it can somehow control the aggregate output of all the businesses and individuals in this country?
You can see how well it's worked so far.
ac
.
That's why I don't buy the conspiracy theories. It implies more competence and mastery of the situation that is credible. Although I'm sure the banksters are hiding their screwups as fast as they can. I'm long on industrial strength paper shredders.
scone
Also note that companies that are successful usually get that way by hiring talented motivated people and then delegating responsibility for accomplishing some goal.
Sadly, our government doesn't have the luxury of hiring and firing citizens - the best we can do is to provide the means and incentive for people to improve themselves. I think we've neglected that, and it's going to be impossible to fix that in the short-term.
I think creating the illusion that the Federal Reserve and our government can make the economy better removed some of the necessary incentives for our population to actually do the kind of things that make the economy better in a structurally viable way.
Businesses have been screaming for help from the government and the Federal Reserve in recent months. As if paper can fix the problems they have, or the government has access to some cache of wealth that doesn't come from the businesses themselves.
Our economy is being destroyed by these kinds of illusions of prosperity and power that don't exist.
We're continuing to promote them with all this talk of government rescues. The best they can do is move things around and provide goals and legal restrictions.
They have no magic economy juice to make things better like everybody seems to think.
"the difference is that no one in our country has 1/10 the testicular fortitude of andrew jackson. we never would have won the battle of new orleans with the crew we have running the country today. when he scowls at us out of the $20, he's doing it for a reason - we're soft, and unworthy of our liberty and democratic institutions."
Andrew Jackson was also, arguably, a maniac. Though possibly, as one of my political science profs said, the right maniac for his time and place. Except for that part about overruling the Supreme Court and dooming the Cherokees and other settled tribes in the southeast to exile.
I'm not sure how that applies to markets?
scone | 02.04.09 - 4:39 pm
Maybe we see things differently?
Each bank is a subroutine.
nova
.
Well, you can isolate subroutines, plugging the functions with fake variables... I'm just not happy with the analogy, is all. If you're looking for a complex 'systems and structure' analogy, I'd look in biology-- big open systems-- rather than cybernetics. Economics as, say, a big dumb dog.
karelian
I agree that life will go on, and it won't feel like the end of the world -- that's just what one can tell their grandchildren later.
However this is much larger than Finland's pain. You will see it spread throughout the world, and it will cut deep.
We're moving to a low risk-adjusted rate of return world. Which won't be so bad, infrastructure and R&D will become cheaper or rather their ability to attract sensible financing.
Germany's just seen the world tour land, wait until you see the knock on effects before dismissing the magnitude. It's not a 5 year subprime mortgage bubble, it's a 30 year global credit bubble. Even if you weren't participating, your clients were.
@EvilHenryPaulson - I hear you. In my darker moments I often wonder whether anything the world's governments do will really matter. 6 billion people are all going through the economic equivalent of a physical phase transition, from risk-accepting to risk-averse, credit-seeking to cash-seeking, and so on.
At least I wonder whether anyone in any government can see in advance what they can do that will matter.
It does seem like cleaning up the obvious messes and then reprogramming the system to prevent a similar crisis in the future might not be complete wastes of time. On the other hand, we rewrote the system 80 years ago and then over the next 80 years dismantled all the protections that had been installed.
novawrites: \t"Think of the economy as if it were the worlds biggest software program . . . "
Good analogy. Anyone who has worked in a production IT environment knows how difficult it is to upgrade a piece of the system. You have to methodically plan, coordinate change control, do the work in off-hours (if possible). Even with all thos precautions, shit still happens.
What's worse is when something bad happens during production hours. People in different departments start making changes all at once, so even if you do locate the problem, someone else may have made a change that screws up something else.
So, imagine you're in charge of a global corporation's IT systems. Stuff starts breaking: The phone system in Asia, internet access in Europe. You can't even log on to your own system in New York. There are several problems going on at once, and more start cropping up.
So, what do you do?
How 'bout this one: replace all the servers!
Rewire the data centers!
Stop using phones!
Or . . .
Organize. Identify each problem. Formulate a plan, etc., etc. (You know the drill.)
Even when you manage the problem correctly, it can be an awful mess.
Fixing the global economy while it's still operating (albeit at reduced capacity) strikes me a tad more difficult.
Does not mean that democracy is over or that End of Times is nigh. We have been living inside a dream for a couple of decades and now it's over.
karelian
for good or ill, he created the nation as we know it, and he was the people's champion. that's the job, and dissolving a corrupt, non-functioning fed was one of the many dirty jobs he did on behalf of the people he lived amongst and took pride in representing. that's called being a democrat, in the full sense.
The only way people wouldn't criticize cabinet selections is if there was only one. And that was Secretary of Golf. And Tiger Woods was nominated. Even then, Phil Mickelson and definitely Sergio Garcia would complain.
Our economy is being destroyed by these kinds of illusions of prosperity and power that don't exist.
We're continuing to promote them with all this talk of government rescues. The best they can do is move things around and provide goals and legal restrictions.
They have no magic economy juice to make things better like everybody seems to think.
ac
.
Concur. It would be best for the rank and file, however, to get their enlightenment slowly. People like my hairdresser still think "Obama will fix it." They aren't ready for "it's broken and time to move on."
A number of metaphors come to mind to describe how the largest banks rigged the system to prevent nationalization as an option, one of which Buffett long ago suggested:
Buffet's "weapons of mass financial destruction" (the cds and related derivatives) were intentionally planted in the banks' vaults. If the government opens the vault doors to take a peak inside, BOOM!
So the banksters tell the government cops: give us a TARP "loan" or "investment" or we blow the whole thing up! The cops don't really know if a bomb exists or not because they can't get a look at it without risking a massive explosion. The local politicians, not wanting to be blamed for a wrong decision that destroys the entire financial district, suggest a "deal" with the banksters.
Hollywood probably already has several scripts in the works with production soon underway. I'd like to see a buddy film with Bruce Willis and Matt Damon as the good guys who figure out how to defuse the cds bomb just before they nationalize all the insolvent banks and throw banksters in jail...
But every era has to end - Belle Epoque, Jazz Age, Weimar, Swinging Sixties, Cold War.
This Bubble Age had to end - and it had to end ugly. Our grandparents went through incredibly painful economic and social upheavals. And we see that as a given.
I think the problem here is that in America people did not suffer much from WW1 or WW2. America has lost is sense of proportion - this idea of avoiding serious crisis indefinitely is an entitlement.
I know this is horribly off-topic but wtf is up with SRS after hours? Bid/Ask is oscillating between 61/61.05ish to 58.11/58.12ish. Data issue? It was about 61.2 at close or so.
Dang, I hate being this off-topic but it just looks weird.
Drama queens? Yeah, judging from the hysterical reaction to weather reports recently. Even in chicago it's like every 2 inch snow prompts news flashes about stock-piling beans, blankets and black-powder. Others probably have more emotional energy invested in their theories of economic reality being proved eternally and universally valid than in their nation, especially a nation governed by "the dreaded other team". My gosh, everythings not been solved in minutes so panic panic panic panic panic! It's not like it takes weeks to get food to NO or anything. give up on 99.8% of the comments anymore.
They have no magic economy juice to make things better like everybody seems to think.
ac | 02.04.09 - 4:45 pm | #
They do, actually, it's called Justice. If the system even appears inherently unfair all of those independent citizen actors will pull back on doing their part.
Perp walks and show trials would go a long way toward improving the general mood as well as distracting the press who have delusionally decided they know what journalism is and believe the country is best served by insisting at 120 decibels that two poorly vetted cabinet appointments are 10x worse than illegal wars, torture and eight years of breaking the law. Throw them some bones to chew on, preferably mercury-laced ones.
"Perp walks and show trials would go a long way toward improving the general mood as well as distracting the press who have delusionally decided they know what journalism is and believe the country is best served by insisting at 120 decibels that two poorly vetted cabinet appointments are 10x worse than illegal wars, torture and eight years of breaking the law. Throw them some bones to chew on, preferably mercury-laced ones."
It's too bad the press never treated bush this way.. 100s of thousands of people might still be alive.. including thousands of americans
I got to go with what I know - which means I show up empty handed sometimes...
nova
.
Oh, I don't know. Anyway, this economy reminds me of a dog that's been alternately petted and whipped: scared and confused. It the "emotional reactions" of the markets that interest me right now, it's so animal-like, so irrational.
ObP - I do agree that others have picked very poorly, but I dont think the stakes have ever been this high to pick well, especially things related to the economy. It's all establishment, as if somehow O forgot that the election was about getting rid of the establishment. Just...plain...stupid.
Our economy is being destroyed by these kinds of illusions of prosperity and power that don't exist.
The productive capacity and know-how is still there. It just needs to be liberated from all the un-payable debt. TPTB want to prevent that at all costs it seems. The rich want to preserve their false wealth and rentier lifestyles.
We really need a new system. The debt money system is untenable in my mind if you don't allow periodic busts. Beyond that, inflation is immoral - thou shall not steal.
You got it Angry Saver - As RATM would say, we gotta fight TPTB. We thought we did with the election, but instead, we've been hoodwinked, bamboozled, etc.
You are right.. it's important.. unfortunately as much as I think Obama has a lot of potential.. I've worried all along that it's just too late to change the status quo.....
Obama needs to do a 180 degreee turn with an aircraft carrier.. and has little space to do it
It's too bad the press never treated bush this way.. 100s of thousands of people might still be alive.. including thousands of americans
Osama bin Paulson | 02.04.09 - 4:56 pm | #
And they are currently frantically trying to rewrite their own little part in our recent history.
Rebooting is not an option in this kind of production environment. You can't reboot a hospital. This software is a lifesupport system. So what do you do?
nova
.
Copy the code to a spare computer, read the whole thing, fix it, test it, test it again with live duplicate data, then upload.
I'm not sure how that applies to markets?
scone
That's the problem with economics in general:
We don't have spare economies and markets available to do this kind of stuff.
That's one of the real problems with having something like having a global economy - with singular monolithic systems, failure can become a cultural catastrophe. There are no backups to revert to.
This isn't a limitation of many other types of sciences, and is the reason that claims of economic "cures" have to be viewed with such skepticism.
We simply don't have a laboratory that allows us to repeatedly test and experiment with these economic therapies in different scenarios the way we do in other fields.
And if one of these therapies fails, it could roll a society's progress back years or decades.
" the problem here is that in America people did not suffer "
it isn't coincidental that the year the depression survivors/WW2/korea vets began to hand over the economy to the boomers (circa 1993) is just when the leveraging, securitizing, etc, began to get way out of control.
"The productive capacity and know-how is still there. It just needs to be liberated from all the un-payable debt. TPTB want to prevent that at all costs it seems. The rich want to preserve their false wealth and rentier lifestyles. "
As I've said -- this time America wouldn't tolerate a 30's era shutdown, when distribution of vital goods including food just shut down in large areas. If it's good life vs. preserving the economic system, guess which one they'll choose?
In this case, I think "entitlement" is the right thing to feel.
@scone: agree with bio metaphor. The big dog has, say, a blood cancer, and the red cells are no longer transmitting the life-giving oxygen (credit) to the body?
Except, does the dog's body really need the same oxygen supply it had before? Or has it perhaps hyperventilated and passed out, and it just needs a bit of a rest?
It could be that the whole focus on the banking sector's problems is just Washington/New York narcissism at work.
Perhaps it's the metastasized cancer in the dogs vital organs (the real, physical goods-and-services economy) that needs the medical attention? The cancer stole most of the oxygen that was being supplied anyway.
"it isn't coincidental that the year the depression survivors/WW2/korea vets began to hand over the economy to the boomers (circa 1993) is just when the leveraging, securitizing, etc, began to get way out of control."
You are way too late.. this all starting with Ronnie Raygun's voodoo economics back in the 80s... That's when it became ok to run massive deficits
Sweeping generalization? Major cities in countries like Germany and Austria were destroyed nearly completely. Loss of life per capita was ten times higher than in America.
So yeah, it is a sweeping generalization. USA did not lose manufacturing base or lives anywhere near the levels of the UK or Russia.
it really started with the FHA and sense of entitlement that came out of the GI bill... both sides of the aisle played their part in creating the worst-of-both-worlds that a public FRE and FNM inevitably became - the liberal side in the 'homeownership for everyone' fantasy, the conservative side in the 'markets are rational' 'debt is cheaper than equity' and 'deficitis don't matter' horseshit.
we used to have real conservatives and real liberals... then the 1980s came along and we got the neo-liberal republicans and the neo-liberal lite democrats.
The american people decided that they wanted to cut taxes and maintain or even increase government spending... the consequences of that decision were somehow postponed for almost 30 years.. but now they are here
The problem is not just that TPTB want to hog all the wealth.
The bottom line for many of them and most everyone else is that IF we forgive all debts, or at least, let some of these banks and companies go bust, we will speed ourselves to the Greatest Depression anyway.
While I am not sticking up for TPTB, it is my contention that their is soooooooooooooooooooo much debt, even among the so-called wealthy, that there is no longer an easy way out.
So much corruption, manipulation, indebtedness, etc. means we are gonna suffer.
Okay, maybe some like Buffett and Gates and Microsoft (no debt), escape, but everyone else is gonna have one heckuva time before this is over.
You see, once this thing really starts in earnest, it is going to get ugly! Just wait until the food trucks don't arrive for 2 weeks. Oh that is going to sit well in the major cities.
As Robocop would say, "The market fairies will fix it. They fix everything."
So come on market fairies, do your work. You did a bang up job the past several years.
Actually, if you spend time in these markets you realize that the past several years the market fairies were just sitting around waiting to see where the central banks would shift the flow of credit next.
The central banks were the ones that gave the market fairies the means, protection, and incentives to take as much risk as possible without regard to consequences.
How this kind of centralized monopoly on credit constitutes a "free market" I'll never know.
"Meanwhile management is arguing about what colors the UI should have."
Yeah, but that's the way it always is. As the Marines say, "Improvise, adapt, overcome."
You know Congress is going to be assholes. You know the Chinese are going to scream bloody murder if their Agencies fall. You know the bankers are going to fight for their slice of pie.
So, how do you take those factors -- and thousands of others -- into consideration and still reach your objective?
My simple plea is this: it ain't easy, man. This particular shit sandwich was decades in the making. Gonna take some time. No easy fix. Much pain.
If Obama's as bad as some make him out to be, patients may notice acute swelling, bloody discharge, prolonged anxiety . . . .
Osama bin Paulson writes:
"Perp walks and show trials would go a long way toward improving the general mood....
You mean like this
Defendants in the dock at the Anglo-American War Crimes Trial of 2010, held at The Hague under the jurisdiction of the International Criminal Court.. The Nowtopian: Thanks Billmon!!
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You see, once this thing really starts in earnest, it is going to get ugly! Just wait until the food trucks don't arrive for 2 weeks. Oh that is going to sit well in the major cities.
OCDan | 02.04.09 - 5:05 p
I am hoping the French get assigned my area for food drops.
This isn't a limitation of many other types of sciences, and is the reason that claims of economic "cures" have to be viewed with such skepticism.
We simply don't have a laboratory that allows us to repeatedly test and experiment with these economic therapies in different scenarios the way we do in other fields.
And if one of these therapies fails, it could roll a society's progress back years or decades.
ac
.
(Forgive me for repeating myself, I said this a few threads ago.) Economists seem to be pretty isolated from the mainstream of intellectual life. I don't see a lot of evidence in their writings that they are keeping up with post-structuralism, post-modernism, information theory, etc. The seem to live in a separate universe, about 40 years behind the leading edge. Did you read Greenspan's auto? The guy is just so out of it. I mean, Ayn Rand? Nobody takes that shit seriously anymore.
this all starting with Ronnie Raygun's voodoo economics back in the 80s... That's when it became ok to run massive deficits
Osama bin Paulson | 02.04.09 - 5:01 pm | #
Anyway, this economy reminds me of a dog that's been alternately petted and whipped
Yeah, by my dream girl!
Speaking animal themes, perhaps we're watching a "pre-cat bounce". an intial spike of awareness which fades out from denial, and then reasserts itself into the major trend line.
.
Another thing 'mercans have lost with their/our two-party system of tweedledee and tweedledum is the art of real compromise, political or otherwise. that's another major difference between the lot on this side of the atlantic vs. the other side. The EU is far from perfect but it has kept alive the practice of not expecting every single thing to go your own way.
Economists seem to be pretty isolated from the mainstream of intellectual life.
My complaint about economists is that they seem to be isolated from real world experience.
I get the sense that they haven't had the experience of being supremely confident about a genuinely brilliant theory, only to see it fail completely when applied to a real world system due to some infinitesimal divergence or oversight.
I usually say something relevant.
Now.
Here is relevant
Censeo Bank Shareholders esse delendam
Race comment-free thread please. Give it a try.
Why does it feel like the bottom is about to fall out?
i commented re this end of previous thread
Pre-semi-pseudo-nationalize. Call it what you want, but make sure the villains [read: executives] get paid what they deserve = not very much.
maybe they will create some kind of re-pre-sub-psuedo-privatization?
ps - that's a 87 score in scrabble.
Europe.. great minds!
Geithner speaks and intones like a 12 year old trying to be taken seriously. Maybe it is a napoleanic thing. Neverthless, we are getting a glimpse of the collective bankruptcy of Geithner and his "solutions" This retard stands at ground zero of this entire boondoggle along with hanky and Benji. That he was selected says more about Obama than any of his reverential rhetoric
"preprivatize" I like it. And wholeheartedly agree.
The plan they are proposing is just a giant wealth transfer.
honest n00b question:
why cant we create a 'good' bank, and when other banks fail, the good bank just ratchets up more monies and lends more to take the place of the bad bank?
this way, we can let banks fail and suffer the actual consequences of their actions.
The banks, auto industry and housing market will have to be nationalized. Look at the future EPS, it's simple!
Get in there and find out what they are holding.
But will that matter if we don't know how to value their assets? You have to admit that that is a huge problem according to those who claim it's impossible to value them. Because they're so intricate. Yet somehow they did it before when they were selling the damn things. It's the key conundrum of our age: How do we save bonuses with all the crap we're holding.
Ken Lewis might be more despised than even Madoff. He ripped off more people and for more money.
Aggressive triage is the only thing that will work. Until we rid the system of the cancers there will be an overhanging uncertainty.
THE PRAGMATIC CAPITALIST » » THE “AGGREGATOR BANK” WILL FAIL
So far we are doing a lot of the same things Japan did and that will only prolong the inevitable....
Gubbmint cheese....they think alike. They really do. Beat you by like 15 secs.
OT: Credit Indicator
Libor hits a wall
By Laura Mandaro, MarketWatch
Last update: 2:29 p.m. EST Feb. 4, 2009
SAN FRANCISCO (MarketWatch) -- The sharp improvement in Libor rates since late last year has stalled as anxiety about banks' health has crept back into this key lending market.
The London interbank offered rate, or Libor, rose to 1.235% Wednesday from 1.09% on Jan. 13. Over the same period, the spread between Libor and rates on overnight index swaps, another indicator of banks' ability to access funds, has stuck to about 0.99 of a point. That's far higher than it was before the start of the credit crunch.
Wider rates and spreads mean banks are more hesitant to lend to each other, keeping pressure on their funding costs, and indirectly, the rates they charge homeowners and corporate lenders.
"It's not really going down as fast as it should -- it's kind of hitting a limit," said Juan Valencia, credit strategist for Societe Generale in London, of Libor.
He called the recent trend "disappointing."
"It's one of the key things we need to see before we can see a flow of credit to consumers and banks to fund themselves at normal levels again," he said.
Ken Lewis might be more despised than even Madoff. He ripped off more people and for more money.
bearly | 02.04.09 - 3:30 pm | #
Ken Lewis needs to go. He made, quite possibly, the two worst acquisitions of all time with CFC and MER....
US Sen Dodd eyes financial systemic risk regulator
| Reuters
OooooooooooKay!
Isn't BAC only on the hook for $20B of Merrill losses, then we taxpayers get to eat the rest?
Nope. Create a National Banking System, run the the Government (the people), to take the private banking system's place. Do not bailout private banks. Let them fail. Let the shareholders absorb their rightful losses, and after they have decayed thoroughly, and been liquidated through BK, allow no more private banks and abolish the Federal Reserve.
Dafox,he who pays the piper...
Obama's policy right now is no better than Bushie's and - gasp - arguably worse ($900B of mostly pork).
Go look at this chart and then explain why banks should not be nationalized ASAP:
Bond Ticker - Bonds Center - Yahoo! Finance
Bloomberg reports the chart of the day offers an illustration of how taxpayers may be looking at $30B in losses on the Bear deal, with JPM footing $1.15B of the hhit. Cumberland Associates' Robert Eisenbeis says there is "no prospect" for profits. The chart shows losses since the June deal, via mark-to-market adjustments
Bailout Secrecy Has Got to Go
Bailout Secrecy Has Got to Go - BusinessWeek
ast fall the Federal Reserves New York office set-up Maiden Lane III, as part of a plan to enable AIG to terminate nearly $70 billion in credit default swaps it had written on subprime-backed CDOs. But so far, neither AIG nor the Fed will provide anything but a barebones outline of Maiden Lane III. And the SEC appears bent on protecting that veil of secrecy. In a Jan. 27 letter to BW, the SEC says the requested filing contains confidential commercial or financial information and releasing it would cause substantial competitive harm to AIG.
@dafox | 02.04.09 - 3:29 pm
I have been floating this idea for a while and the consensus against it seems to be that too many vested interests will be harmed. Or, put another way, a few institutions with a lot of money shouldn't have to suffer if instead a lot of taxpayers each with little or no money can be made to suffer instead.
If you like, you can substitute the words "political influence" for money. They seem to be one and the same in this debate.
Bad Bank' Model Is Disastrous - This Approach Is Needed
'Bad Bank' Model Is Disastrous - This Approach Is Needed -- Seeking Alpha
You can rest assured that once the government gets its hands on those assets, the underlying mortgages will be modified with a combination of lower interest rates, term extensions and principle reductions. The Fed is already doing this with the assets held by Maiden Lane LLC, the entity which now owns Bear Sterns book of rotten mortgages. The problem here is that thousands upon thousands of unqualified homeowners, including the many who lied on their applications for no-documentation Alt-A mortgages, are going to receive a gift at everyone elses expense and be rewarded for committing perjury.
I am anything but a political ideologue but I think Obama is off to a terrible start.
It's almost as if he is trying to make his rhetoric and his policy actions be as opposite as humanly possible.
And this is coming from someone who believes that the Bush administration was the worst in American history.
Okay, no-one has stated the obvious, so I will: the reason they won't/"can't" nationalize is because that would set off all the cross-wired CDSs and take down god knows what as ancillary damage. It's the CDSs, not the toxic assets, at the core of the problem. The real problem is that these folks have wired themselves in a way to make BK too frightening to contemplate. The true task at hand is to defuse the bomb then let the bankruptcy system work its magic.
Question for the more intelligent than I....
Are not these banks that are publically traded, under a requirement as a traded company, under an SEC/GAO requirement to the shareholders to aknowledge if they indeed are insolvent if they themselves no that fact?
Fed Grapples With a New Risk Reality
Balance Sheet Swells From the Assets Accumulated on a Rescue Tour
Fed Grapples With a New Risk Reality - WSJ.com
Some of the assets on the Fed's balance sheet already have lost substantial value over the past six months. In the next several weeks, the Fed will provide an update on the value of assets in Maiden Lane LLC, a company it lent $29 billion last June to purchase $30 billion in assets formerly held by Bear Stearns. Those assets included securities backed by shaky Alt-A residential mortgages -- a category of loans between prime and subprime -- and commercial real-estate loans tied to companies, such as Hilton Hotels Corp., that are in slowing industries.
Maiden Lane was set up to facilitate last year's rescue of Bear Stearns by J.P. Morgan Chase & Co., which provided $1 billion to the newly formed firm.
Last fall, the Fed said the value of Maiden Lane's assets had declined to about $27 billion at the end of September. Analysts expect that value to have dropped further following a weak fourth quarter for the credit markets and declines in the values of many mortgage assets. Triple-A securities backed by commercial mortgages declined 11% during the quarter, while single-A securities lost 49%, according to Merrill Lynch indexes. Prices of Alt-A bonds, meanwhile, tanked late last year as loan defaults mounted.
Maiden Lane II LLC and Maiden Lane III LLC, created late last year to hold illiquid subprime-residential mortgage-backed securities previously owned by AIG, as well as collateralized debt obligations it insured, so far haven't reported substantial write-downs that would impair the loans of roughly $43 billion the Fed has provided to the two companies
Didnt Sorbains Oxley require as much from the CFO's?
Yves has had some great commentary the last couple of days.
Looks like MP was right (again). It is becoming clearer that Obama does not have a bank plan or an economic plan. He is supposed to be a fast learner, but I don't think he has time to come up with a plan from scratch at this point.
Fasten seat belts and prepare for impact.
The root of the problem is not the banks, but the money itself.
The problems will continue to get worse as long as we continue to believe that we can save the current fiat system.
The government should abolish the fed, revalue gold to a very high dollar value and start buying gold with newly printed dollars until the price reaches a natural equilibrium. Then make dollars exchangeable for gold with a full 1 to 1 backing.
That allows revaluing the debt but puts a floor on the depreciation. Once that floor is reached, which will happen very quickly, the dollar will once again be a solid store of value.
Pass new banking regulation that is very simple. Banks only role is to hold deposits and process transactions. 100% reserves mean no bank risk unless there is criminal activity, which should be promptly prosecuted with harsh penalties.
Investment and lending will still take place but will be done through non-banking institutions.
With this system there will be no need for deposit insurance, besides the insurance payed by the banks themselves to protect from theft.
If the banks are insolvent, Nationalize Preprivatize them.
I think for this to be politically viable they have to specify a hard time limit for the period of government control.
The performance of our government in recent years along with the socialist experiments of last century make it very hard to argue that the people who think "nationalization" is a dirty word are somehow backward thinking or irrational.
The simple fact is that there's quite a bit of evidence to support the notion that centralization of economic and financial authority is very difficult and inefficient in a large complex economy.
We haven't demonstrated in any way that we've developed the knowledge or technology to cope with poor scalability of bureaucracy with respect to economic size/complexity.
i mean if Citi is truly 3TT in debt (most off sheet) then they are insolvent to a degree that no plan can make them solvent. IMHO
The solution is easy, create a government agency, then another to oversee that one, then stick in the Systemic Risk Regulator, the Systemic Risk Czar, then a cabinet level department to advise the executive branch of the need for an oversight committee and finally......whewwww
We're saved!!!
Beautiful spin, CR. I suppose it should be pre-re-privatizing, since we have a President who can enunciate.
Fudge. It all surrounds what the Bad Assets are worth. Nobody knows explicitly, although implicitly, I believe they think they are relatively worthless, hence they are more than willing to unload them (for much more than they are worth). But that's not a number, it's a qualitative intuition, and not empirical.
Bankruptcy = punishment.
BadBank = reward.
We rewarded them 18 years ago in S&L crisis but they did not learn.
Chuck the carrot and whip out the stick.
Right on CR.
And I'll say it again - bad bank ain't gonna happen.
But we all need to continue raising a ruckus. I am reminded of this immortal quote:
"I agree with you, I want to do it, now make me do it." - Franklin Roosevelt
The only reason I can think that they are going down this path instead of nationalization is because of CDS.
I am guessing the CDS cost of change of control (which would trigger under a nationalization plan I would think) or default is greater than the toxic asset plan.
Or, most likely, this is all just a big charlie-foxtrot.
One would think that Volcker would be whispering something in Obamas ear regarding all of this. Which leads to believe there is an issue bigger than just the toxic assets themselves.
I think Geithner is the fall guy for the coming sea change in the Obama administration's approach to dealing with this political-economic crisis.
Daschle's demise was the tell.
The lack of any real action on the signature issue after two weeks indicates that there's too much division within the administration. Someone will need to be thrown under the bus. Geithner is damaged goods and the Wall Street approach has too long a track record of failure.
As for "preprivatize", why not drop the "p"?
Just re-privatize the banks. Reboot them!
New ownership, new leadership, new vision, and a mandate to clean house from top to bottom.
Let the stocks go to zero (they're nearly there anyway in most cases). Tie off the existing bondholders to their existing pile of toxic trash "assets", and let the stuff run itself off.
But keep the businesses open with fresh management and a fresh start on the capital structure.
The new ownership will need extra capital and that can be the government's role, in exchange for proportional ownership (to be phased out at 10%/year over the next 10 years), and specific deliverables in the "new leadership" and housecleaning areas without which the leadership gets flushed and the bank gets rebooted again.
Why Financial C.E.Os are allowed to Lie?
ForexHound.com the Forex Trading Portal: Why Financial C.E.O’s are allowed to Lie?
My theory is basically that all the Bank and Brokerage CEOS and management are lying and the Federal Reserve, bank regulators and the SEC have given them the green light to do so.
Pennsylvania Democrat Paul Kanjorski, the panel's chairman, vented frustration after the SEC's acting general counsel said the five officials appearing at the hearing couldn't answer lawmakers' questions about the Madoff case because it's under investigation. The five SEC commissioners voted earlier to assert a privilege in not having officials answer lawmakers' questions.
Kanjorski accused the agency of impeding the panel's investigation, calling it a "lack of cooperation" and an "abuse of authority."
Linda Thomsen, the agency's enforcement director, said the SEC takes the Madoff case very seriously, but asserted there were confidential areas related to the ongoing investigation that could not be publicly discussed.
The SEC officials said the agency is looking at possible changes in the wake of the scandal, including more frequent examinations of investment advisers and improving its process for assessing risk.
Because of the SEC's inaction, "I became fearful for the safety of my family," Markopolos said.
"The SEC is ... captive to the industry it regulates and is afraid" to bring big cases against prominent individuals, Markopolos said. The agency "roars like a lion and bites like a flea" and "is busy protecting the big financial predators from investors."
Expired
Exactly. Get in there and find out what they are holding.
BTW, I don't think this is how it should be done.
The banks should receive no government support. If they can survive without declaring bankruptcy the government should stay out of their business. There should be no "getting in there" (unless the bank is only solvent because of government funds they've already received).
Otherwise, they can notify the government of impending bankruptcy at which point the government can step in.
for the coming sea change in the Obama administration's approach
"Sea change" is an expression that usually connotes a big change after a long period of doing it differently.
The dude has been in office, what, 2 weeks now?
That's not a "sea change"... that's just "doesn't know what the f--- he's doing."
Comrade Byzantine_Ruins
Thanks for the answer.
It's easy to determine value of bad assets: buy statistically significant random sampling of assets, sell them on open market. Multiple average sales price times remaining assets and that's what they're worth.
i.e. 38 cents on the dollar.
Mr. T. writes:
It's almost as if he is trying to make his rhetoric and his policy actions be as opposite as humanly possible.
Mr. T. | 02.04.09 - 3:36 pm | #
It's almost as if he is not the one making the substantive decisions, as though he were a figurehead, just like Bush.
When the previous administration kicked the can down the road, that was fine - the new admin should make the call and take the blame or credit however it pans out. Why the incoming administration hasn't nationalized by now makes me wonder. I don't want nationalization, but I don't want to relive Japan's lost decade. My conclusions as to why are either:
a. There is a large land mine they don't want to trip.
or:
b. They are owned by those that will benefit from the bad bank.
Either way, it seems a bad bank at best is a large transfer of funds but more likely just a gigantic sucking sound.
It's almost as if he is not the one making the substantive decisions, as though he were a figurehead, just like Bush.
Anonymous | 02.04.09 - 3:44 pm | #
Presto.
Gary writes:
Right on CR.
And I'll say it again - bad bank ain't gonna happen.
But we all need to continue raising a ruckus. I am reminded of this immortal quote:
"I agree with you, I want to do it, now make me do it." - Franklin Roosevelt
Gary | 02.04.09 - 3:40 pm |
Interesting that O was taunting the bankers a second time today.
Its like a freaking bullfight.
Alt-A mortgages
Anonymous | 02.04.09 - 3:35 pm | #
Get with the program, Anonymous. Those are 'All-Day' mortgages!
The deal with Goldman also needs to be rescinded, because it was an obvious abuse of power to allow an investment bank to get into small banking! That is fraud at the very top and abuse of power! Take down Goldman now!
THAT is Total BULLSHIT and that needs to be stopped and Goldman should be nationalized!
Well, there are already privatized, so I vote for "Re-privatize". Like we used to "Re-possess" things.
The advantage of defusing the CDSs and going through a BK is you don't have to value the assets. The current equity holders get wiped, the bond holders get a huge haircut, but get the new equity: effectively, they are the new owners of the toxic assets. Unless the assets are indeed worth zero, a significant enough haircut will leave the new equity with value.
Now, the feds can feel free to recapitalize the newly-solvent banks if they want, in return for preferred equity or whatever. But the underlying capital structure has been healed.
I think the life insurance companies are in almost as bad shape as the banks.
Think about what a life insurance company does. In various ways, they take money from people and promise then long-term steady rates of return of 3-6%.
How can you do that in this environment, especially when you have a book of bad loans and investments?
Is Obama gonna bring the insurance companies under Big TARP II? Or just leave them out in the cold? I don't think the market has a clue.
Ug. Re-spelling is in order:
\tThey are already privatized, so I vote for "Re-privatize". Like we used to "Re-possess" things.
Regarding the CDS: If someone's still holding a toxic CDS after all this time, let them experience the bank reboot, and if they have issues with that, reboot them too. All the rot has to be cleaned up.
Even if you fixed the banks, along with the whole credit system, we've got massive overcapacity worldwide, demand destruction caused by job fears, and massive indebtedness. If no one is buying, everything else is peripheral. And I can't see that changing anytime soon. Therefore the depression is upon us, no matter what the governments do. So I'm not that worked up about the show in Washington, it's all pissing into the wind.
Bush looted the banks and the treasury and now that the big spending Dems are in power they're getting miffed that the money's gone.
# Obama: Catastrophe coming if stimulus bill not passed- AP
We heard that before. So much for "change".
There is also the delaying of recognition of losses because of the group think that todays prices represent "fire sale" values instead of actual value.
The forcing of mark to market at these "fire sale" prices would bankrupt many. Yet the whole point of mark to market was to make it much clearer what a banks position was at any one point in time.
If you only let banks plan for when things are good and cover up for them when things go bad it isn't really helping engender confidence in the banking system or capitalism in general.
Much better thread. Yea, team.
@ Gary...I hope your right....but I don't think this is all part of some master plan by the administration to "sell" nationalization.
I think the administration is in just confused over what to do......or in the fight of it's life against the bankers clear desire to get the bad bank going. And it is not at all clear to me at this point who is going to win this one.
How can you be so sure?
And I'll say it again - bad bank ain't gonna happen.
Gary | 02.04.09 - 3:40 pm | #
You mean Good bank/Bad bank. Because we got the bad banks in place, and it's not clear there will be good banks. How about we just do an inventory of the "good" assets. I'm starting to wonder if they have any of those.
The world's financial system is insolvent and needs to be recapitalized. Nationalization is by definition a confiscation of private wealth. In a fiat money system, the confiscation of private wealth occurs via inflation. Inflation, and lots of it, coming soon to a theatre near you, complete with 3-D glasses and lots of blood and gore.
Banks Sell 'Toxic Waste' CDOs to Calpers, Texas Teachers Fund
Banks Sell 'Toxic Waste' CDOs to Calpers, Texas Teachers Fund - Bloomberg.com
ear Stearns offered this hypothetical example at its Las Vegas presentation: A pension fund wants to buy $100 of CDO equity. Instead of buying it directly, the fund buys a zero-coupon government bond for $46 that will be redeemed for $100 in 12 years. That bond is paired with a $54 investment in CDO equity.
Zero-coupon bonds pay no interest; the investor is paid the full face amount -- that's $100 in this hypothetical situation -- when the bond matures.
Principal Protection
Principal protection is guaranteed,'' Fleischhacker says.It's AAA since you're buying a U.S. Treasury.'' If there are no defaults, this method of investing in CDO equity would return 9.3 percent annually, she says.
The presence of the zero-coupon bond ensures the pension fund will recover its $100 investment even if the equity tranche becomes worthless. While the fund wouldn't lose any money if that happened, there would be no return on the investment for 12 years.
If a fund manager puts all of the same hypothetical $100 into zero-coupon bonds only, it would more than double its money in 12 years, Das says. I would have thought with pension fund money, they don't really want to lose principal,'' Das says of this equity tranche sales technique.And clearly here the principal is very much at risk. You've got a highly leveraged bet on no defaults, or very minimal defaults.''
Hugs, kisses,
scotty_at_the_helm
Interesting that O was taunting the bankers a second time today.
Its like a freaking bullfight.
\t Comrade Tech Sargent Chen | \t \t \t \t02.04.09 - 3:46 pm | #
Taunting you can drive a Mercedes through.
http://washingtonindependent.com/28954/executive-compensation-limits-the-loopholes
First, the $500,000 pay limit doesn't apply to each executive â only to âsenior executives." And those senior executives will remain eligible for unlimited stock options as long as they don't cash in while the company still owes the government money, or âafter a specified period according to conditions that consider among other factors the degree a company has satisfied repayment obligations, protected taxpayer interests or met lending and stability standards." Second, the cap won't apply to all companies bailed out by taxpayers. Instead, the Treasury will distinguish between firms benefiting under the âstandard" TARP program and those receiving âexceptional assistance." Only the latter group is subject to the cap. Third, the ban on golden parachutes doesn't apply to each executive â only to the 10 highest paid executives. Again, only companies getting exceptional assistance are subject. Fourth, the new limits apply only to companies accepting TARP funds in the future. That is, an untold portion of the $350 billion or so that's already out the door might still wind up in the pockets of the same executives who ran the companies into failure. Fifth, a âclaw back" rule requiring executives to return bonuses and other compensation-based pay that was based on deceptively erroneous financial statements applies only to the top 20 executives of the company. So the 21st guy on the list who knowingly gave inaccurate figures, and was paid a bonus for the fib, gets to keep that bonus.
Re-pirate-ize? what? Buckaneers?
I think the administration is in just confused over what to do......or in the fight of it's life against the bankers
fight is occurring within the administration and party, as well...
Interesting that O was taunting the bankers a second time today.
Its like a freaking bullfight.
Comrade Tech Sargent Chen | 02.04.09 - 3:46 pm | #
Except that he wasn't. The bankers were jizzing all over themselves at that toothless proposal.
Interesting that O was taunting the bankers a second time today.
Comrade Tech Sargent Chen | 02.04.09 - 3:46 pm | #
Taunting them? All he says is: defer you paychecks. Bonuses are bad PR right now.
"There will be a time for bonuses, now is not the time." - the big O.
Next set of bonuses to be paid in restricted stock. Big deal.
@mal: Geithner was handpicked to be from the same line of control as Paulson was. He was specifically chosen (perhaps not solely by Obama, but by Obama-under-other-pressure) to provide continuity of policy in order to prevent market panic during the transition period.
The sea change is that control of the Treasury Department has to be given to someone not recently employed by the affected sector on Wall Street. And remember that the Fed is a private organization owned by the large banks.
\tI am anything but a political ideologue but I think Obama is off to a terrible start.
Mr. T. | 02.04.09 - 3:36 pm | #
I think it's the nature of when promise meets reality.
Or as Patton (?) said: No battle plan survives contact with the enemy.
The various factions of the plutocracy/oligarchy have the long knives out. They are a bit desperate, and I imagine the infighting is vicious. Obama, is basically an incrementalist - the Chicago political scene is all backroom deals - so it doesn't play to his strength as a collaborator when few are interested in collaborating.
"Taunting them? All he says is: defer you paychecks. Bonuses are bad PR right now.
"There will be a time for bonuses, now is not the time." - the big O.
Next set of bonuses to be paid in restricted stock. Big deal."
If this picks up steam you can kiss high-end real-estate good-bye, especially in NYC.
seem to be gettin our 7 handle on here in Feb 2009
"Wisdom Speaker writes:
Regarding the CDS: If someone's still holding a toxic CDS after all this time, let them experience the bank reboot, and if they have issues with that, reboot them too. All the rot has to be cleaned up."
Huh? For people betting on the "right" side of the CDS the trade is quite profitable, not toxic. Many people have bet against the banks using CDS, some as pure speculation, some as a hedge of counterparty risk.
To just wipe them out brings on a whole different set of issues. You could be wiping out the hedges against default. The CDS have in effect made the whole system an integrated circuit. You can just cut out one piece, the whole thing needs to be replaced if it can't be made to work on its own.
I think the life insurance companies are in almost as bad shape as the banks.
rich | 02.04.09 - 3:48 pm | #
For what it's worth, the companies to go at this stage in the game in the Japan scenario were the life insurers. Mid-level, trusted insurers, like Taisho, Chiyoda, and Tokyo Life Insurance. It seems that in bubble scenarios, life insurers seek out better returns than regular fixed income, and get their hands burned.
RE:
scone | 02.04.09 - 3:48 pm | #
Yep.
It only takes seconds to turn greed into fear.
It can take years or generations to displace the fear.
"seem to be gettin our 7 handle on here in Feb 2009
elmer fudd | 02.04.09 - 3:55 pm | # "
Please wait till 4:01pm to make these pronouncements. My short-etfs beseech you (:
"Confidence grows at the rate that a coconut tree grows, and it falls at the rate a coconut falls."
-- Montek Ahluwalia, deputy chairman of India's planning commission, Davos 2009
A reminder for the Day Time Crew (tm):
FFDIC made the following call:
3 bank failures on Friday which 1 bank being in Atlanta.
500K a year will buy a lot of beer. My future's so bright, you just got played.
"Confidence grows at the rate that a coconut tree grows, and it falls at the rate a coconut falls."
-- Montek Ahluwalia, deputy chairman of India's planning commission, Davos 2009
Zero | 02.04.09 - 3:58 pm | #
Good god, that is wise beyond words!
As for "preprivatize", why not drop the "p"?
Just re-privatize the banks. Reboot them!
New ownership, new leadership, new vision, and a mandate to clean house from top to bottom.
Let the stocks go to zero (they're nearly there anyway in most cases). Tie off the existing bondholders to their existing pile of toxic trash "assets", and let the stuff run itself off.
But keep the businesses open with fresh management and a fresh start on the capital structure.
The new ownership will need extra capital and that can be the government's role, in exchange for proportional ownership (to be phased out at 10%/year over the next 10 years), and specific deliverables in the "new leadership" and housecleaning areas without which the leadership gets flushed and the bank gets rebooted again.
Wisdom Speaker
Well, if I understand it correctly that's basically the point of nationalizing them.
Which is why I might grudgingly have to support it if there's a firm guarantee that the point of the nationalization is to turn out a new set of refurbished private banks.
BTW, maybe we should aim for having a more decentralized finance system where financial institutions are more in competition with each other. I.E. bust up Wall Street and redistribute their financial power. I'm all for any kind of regulation that creates competition, separation, and conflicting motives in finance. The problem with regulation stem from power monopolies that lead to regulatory capture and counterproductive regulation.
Furthermore I still believe it's the attempts to regulate the business cycle that caused this mess. I think the economy is more complex than the minds of our economists and politicians, and that you can't micromanage something more complex than you.
Insolvent banks need to die a deserved death. Delaying pain looking for a soft landing or containment creates more extreme risk. This system of patches and emergency measures isn't stabilizing anything; the entire system of financial trade is subjected to increased risk of catastrophic failure - and the patches make it less likely to predict when the whole will blow apart from increasing pressures. All the guages are broken from the pressure buildup. I'm torn between Titanic and Hindenburg metaphors.
The 500k think is pretty funny. You can almost picture an Onion headline: "Obama to limit CEOs to only three houses each."
# Obama: Catastrophe coming if stimulus bill not passed- AP
We heard that before. So much for "change".
dUCKdUCKgOOSE
Barack "Dubya" Obama?
Top of the day!
Lets try this for a solution.
The banks that are too big to fail should be broken up into little bits and pieces and sold. This is not as difficult as it would seem.
In my neck of the woods Chase and it's predecessors bought and merged at least 10 good local banks in the three surrounding communities. They just ate them up and gave us 800 numbers to call with problems and provided poor service and pricing of services
1) In return for a capital injection the stock holders are wiped out. The investors could purchase 5 branches including real estate, 200 million in deposits and some rehabbed loans.
2) The questionable loans would be rewritten so that they could somehow become performing loans. If balances must be written down fine. If interest rates need to be fixed and lowered the regulators would do that before the sale.
3) The idea that a only a big bank can make big loans is not true. One holding company that was buying small banks left them semi-independent but allowed then to make large loans as part of a syndicate. That way they did not violate any capital requirements.
4) A Federal guarantee for loans that would allow people to refinance and keep their homes. I know more than a few folks who put the normal 20% down and used an adjustable loan hoping to refi before their rates adjusted. They are now underwater on the loans and cannot find any way to get a new loan. They can afford the current rates but have no way to protect themselves from higher rates in the future or get today's lower rates.
The loan holders would not be allowed to bankrupt out of the mortgage and would always be on the hook for the full amount as with a student loan.
I respectfully disagree about the need to nationalize banks to socialize the losses.
If banks made bad decisions, let them go under. Just like the rest of us.
Like Recalibrated Disk said but with more context...
Bush/Cheney ALREADY looted the banks and the treasury and created massive systemic damage so Obama is fucked for next 4 yrs. unless he Preprivatizes the Banks like CR says.
Now that's change we can believe in.
Hope the big "O" is listening !
Volkswagon U.S. was only down 11.6% in January.
FFDIC made the following call:
3 bank failures on Friday which 1 bank being in Atlanta.
yagij | 02.04.09 - 3:58 pm | #
Vegas Book has set the BFF over/under line for this week at 3.5 Recall last week the line was 4 with the under winning.
Unlike the Supe, Prop bets will not be taken, so if you want the "in Atlanta action" (which would be set around -220) you need to call FFDIC.
Wisdom Speaker spake:
The lack of any real action on the signature issue after two weeks indicates that there's too much division within the administration. Someone will need to be thrown under the bus. Geithner is damaged goods and the Wall Street approach has too long a track record of failure.
The lack of "action" represents a time period of re-arranging the political terrain by giving time for all the bonus and bank party stories to come out, allowing Markoplus to testify, and allow time for the Bank CEOs to get hauled before Congress next week.
If you think this timing was an accident borne out of disagreements and not a political strategy, then I have a Hillary for President button to sell you.
Hope the big "O" is listening !
km4 | 02.04.09 - 4:04 pm | #
Oh, he is. In fact, I'm prety sure he posts to this site. I think he's Jas.
Today just shows that Timmay only gets once chance to hit the big red buy-now button.
And now I'm gonna read the business section on yahoo to see what wasn't the reason for the sell-off today.
If banks made bad decisions, let them go under. Just like the rest of us.
Dissenter | 02.04.09 - 4:04 pm | #
You do not seem to grasp the concept of nationalization.
I was out. Anyone know what happend at 1:30 that caused the sell off (i bet it also caused C&C to call "down goes fraiser"..... TIA
Morocc"O"Bama... HaHa
Stocks fell as investors were concerned that unlimited amounts of money may not be flushed down the black hole of banks.
ac writes:
Obama: Catastrophe coming if stimulus bill not passed- AP ...Barack "Dubya" Obama?
iirc, Dubya's pitch was the Dow being down because of the delay in passing TARP. Even the most unethical stock pusher would be more careful about that pitch.
You do not seem to grasp the concept of nationalization.
Gary | 02.04.09 - 4:07 pm | #
It worked for the third reich, for a while. Some hotheads object a bit of course.
Don't get caught up in the dog and pony show.
If Davos highlighted anything it showed how much panic and confusion is happening behind the scenes.
I have little doubt the practically unchanged cast of financial players and decision makers are going to do nothing but try to squeeze out every penny they can for themselves and their friends until it all collapses. They seem to truly believe that they can get away with it. So far they are.
The taxpayers are just letting them take it all.
So much apathy. So much delusion.
and the brick wall just keeps on getting closer.
G'nite all. Happy trading, and don't go buying HOG bonds just because they yield 15% now, mmkay?
"iirc, Dubya's pitch was the Dow being down because of the delay in passing TARP. Even the most unethical stock pusher would be more careful about that pitch."
Are you telling me that the market's gonna crash if we don't pass this bill? Now where have I heard that one before (:
so I think we are slowly starting to see Obama's true nature.
He is a loud talker. He talks a lot, leashes out at bankers, stomps around with rhetoric... and then does exactly the things corrupt bankers would have him do.
Stocks fell as investors were concerned that unlimited amounts of money may not be flushed down the black hole of banks.
eric in vegas | 02.04.09 - 4:08 pm | #
LOL! thanks!
We are so utterly and completely screwed.
Plus ca change, plus c'est la meme chose.
As always it is necessary to define the scope of the problem before attempting to solve it, so I think that the government really needs to know, in detail, each banks assets and liabilities before any more money is wasted.
eric in vegas writes:
Stocks fell as investors were concerned that unlimited amounts of money may not be flushed down the black hole of banks.
eric in vegas | 02.04.09 - 4:08 pm | #
appropos youtube:
YouTube - Should The Government Stop Dumping Money Into A Giant Hole?
The Volkswagon CC is one sweet ride.
@"R" - To carry the reboot analogy a little farther: I think you're saying that we can't swap out the motherboard and main RAM and then reboot the system, because there are too many CDS-linked "peripherals" that will blow up during the power outage. I haven't seen any hard evidence that triggering the CDS linkages would be that destructive (and would love to see some), so I think for now that may just be a bankers' bluff to try to extract more taxpayer funding.
But if in fact that problem is real and someone can prove it... if in fact the Gordian Knot of the CDS entanglements is too snarled to allow reprivatization of the near-death institutions as the first step ... Then we need to tackle the CDS mess as part of the reprivatization process in each case.
One idea would be to use an "Eminent Domain" type of authority to strip each reprivatized institution of its CDS portfolio, in exchange for some reasonable value (funds to be supplied by the Federal Reserve which would then hold the CDOs in Maiden Lane XXVIII etc.).
The reprivatizing might trigger side-bet CDSs, but those are the responsibility of the idiots who entered into the losing side. If the losers of those bets can't pay out, then reprivatize them too, dammit!
The fundamental issue is that the network of institutions has become too entangled, such that a failure of one might imply a faillure of all. A stable network needs to be created in which failure of a few junctions won't bring down the whole system. We have to break the entanglements through government action because the private-sector rules are broken.
My choice for Treasury's team of saviors would include someone from a place like Cisco, who understands network architecture theory and also corporate behavior and finance.
And now I'm gonna read the business section on yahoo to see what wasn't the reason for the sell-off today.
Pissed Off In California | 02.04.09 - 4:07 pm | #
I'll save you the trouble. It's the darn cold weather, again.
bought some BAC at the close for the lulz
Obama's pay cap plan has a income tax free loophole.
Seems like there's a cry for nationalizing the banks. I wonder how that would have flown a year ago.
Let the banks fail. If you want to nationalize, create The Bank of America, buy all the GOOD assets, and let the rest wither away. We could probably afford to buy all the good assets, because there are so few of them.
And mark them to market, obviously. This mark to fantasy is lunacy.
CR, you have to post the Ackerman laying into the SEC video.
Ackerman: SEC Officials Can't Find Their Own Backsides: Lawmaker - CNBC
I have never seen a congress member be that abrasive toward a government employee. Amazing!
also:
how can we hope to come up with a comprehensive plan for dealing with the current depression when there is still no consensus on the last Great Depression, in terms of reasons and remedies???
morroco,
Maybe this is the reason we dont have transparency for deals like maiden, is that if we even took one case study to value assets then we would/could have a benchmark and Wilie Coyote will have to look down pan to camea and wave goodbye
and deserved i might add...
THE SERPENTS KIN
Two black rat snakes coiled to mate
On spring viburnum, copulate,
Round and round each other twist,
Tongues that flicker in a kiss,
Narrow heads with shining scales,
Knot of female with the male
Not a sound these partners make
Although they cause the shrub to shake
If they but shift a hanging coil -
Their leather helmets shine like oil -
Muscular though they may be
They bend with flexibility
Those who see this twisted skein
See a passion without pain,
But we have come so far from this
We stand upright and do not hiss,
Yet those who are the serpents kin
Can silent be and cast the skin
\t\t\t\tPavel
\t\t\t\tMay 23, 2008
"Preprivatize" - love it!
That's essentially what I said, Speed.
No. I think Obama has found out what was whispered to Bush. You don't roll out numbers like this, nor have this much difficulty in setting a policy, unless everyone has a clue of what the risk is.
My guess is there is some serious bad news that are not seeing or hearing about. These people are scared bad enough to spend trillions of dollars and still possibly blow us all up.
These are not all stupid people. There are a few I am sure, powerful ones, that understand if this goes really bad - there will be no where to run.
Here is relevant
Censeo Bank Shareholders esse delendam
---I ain't no Latin Genius but I think it's Censeo Bank shoreholders esse delendOS--i.e. PLURAL!!!
Just sayin', Bro.....
The day before the Feds rescue of Bear Stearns, Chanos says he was walking to the Post House restaurant in New York City, when, at 6:15 p.m., his cell phone rang. He saw the Bear Stearns exchange come up on his caller I.D. and took the call.
Jim, hi, its Alan Schwartz.
Hi, Alan.
Well, Jim, we really appreciate your business and your staying with us. Id like you to think about going on CNBC tomorrow morning, on Squawk Box, and telling everybody you still are a client, you have money on deposit, and everythings fine.
Alan, how do I know everythings fine? Is everything fine?
Jim, were going to report record earnings on Monday morning.
Alan, you just made me an insider. I didnt ask for that information, and I dont think thats going to be relevant anyway. Based on what I understand, people are reducing their margin balances with you, and thats resulting in a funding squeeze.
Well, yes, to some extent, but we should be fine.
This is now 6:15 on Thursday night, the night before the collapse, Chanos says. It was after a meeting with MolinaroBear Stearns C.F.O. Sam Molinarowho basically told him at that meeting, Were done. Were gone. We need money overnight we dont have. So here he is, calling one of his biggest clients to go on CNBC the next morning to say everythings fine when clearly its not. And he knew it wasnt.
Chanos refused to go on CNBC. By 6:30 the next morning, word was out that the Fed was engineering the rescue of Bear Stearns. Chanos realized that he could have been on CNBC while that was announced. I thought, That fucker was going to throw me under the bus no matter what.
Obama's pay cap plan has a income tax free loophole.
politico | 02.04.09 - 4:14 pm | #
Yeah, a free lifetime subscription to Turbo Tax.
"when there is still no consensus"
that's because we still haven't had enough time to fully enjoy the spectacle of every element of bernanke's idiocy coming to fruition.
time wounds all heels. we're all going to become Austrian the hard way.
There's a lot of "Obama doesn't have clue" gnashing going on. Maybe it's entirely true and deserved.
Just a thought, though.
Maybe our current darling situation is one of the most complicated problems ever confronted.
Think back to the start of the Great Depression. Imagine that you have to solve that problem in real time. It's easy to look back today and say, "Well, here's where they went wrong. They should have . . . ."
I think one can argue that today's situation is at least as daunting as 1929-1932.
We're you expecting Obama to resolve this in 16 days? Do you think there's some magic solution?
Sure, maybe he and his new administration are going about this all wrong. Maybe they're as bad or worse than the Bush crew. Maybe.
But maybe, just maybe, extricating ourselves from this mess is going to look like a long, drawn out, back and forth chess game.
It seems to me some of the commenters here, if they were running the Federal government, would have lost the game within the first day or two with their simplistic diagnosis and prescriptions.
Maybe Obama and his team, new and inexperienced as they are, have an appreciation that the way to work our way out of this is first to proceed with "no fast moves." You know, methodical, piece by piece.
Then again, maybe some of you are right. He should just announce that "the banks" are nationalized, and the react to whatever shit storm follows.
Morocco Bama writes:
Volkswagon U.S. was only down 11.6% in January.
Morocco Bama | 02.04.09 - 4:05 pm | #
They sold 8 cars instead of 9?
I jest. Um, but not by much. 12,700 units is what they actually sold.
turbo tax could take on a whole new meaning...
" is one of the most complicated problems ever confronted."
not really... fake growth was created using fake money, fake credit standards and real leverage.
not much else to it.
I think the economy is more complex than the minds of our economists and politicians, and that you can't micromanage something more complex than you.
ac
.
Hey, I can't even micromanage my cat, Schrodinger. And she's somewhat less complex than I am. Or maybe not.
@take a name ass wipe -- next time you quote Ritholtz' blog, put in the damn URL.
It's easy to look back today and say, "Well, here's where they went wrong. They should have . . . ."
Actually, it's not that easy. There is still a debate. Not everyone agrees with Keynes, you know, even among the famous academics.
ot much else to it.
bgates | 02.04.09 - 4:20 pm
Making knots and tangles is easy. Untangling is a different story. You know that tho.
Maybe Obama and his team, new and inexperienced as they are,
I thought he had an experienced team. Oh, sorry, they're experienced at creating Depressions, not resolving them.
not really... fake growth was created using fake money, fake credit standards and real leverage.
hehe, go read Krugman, he will tell you it's all because there wasn't enough stimulus!
Maybe our current darling situation is one of the most complicated problems ever confronted.
OMG, you F*** Dope
anonymous writes:
Here is relevant
Censeo Bank Shareholders esse delendam
---I ain't no Latin Genius but I think it's Censeo Bank shoreholders esse delendOS--i.e. PLURAL!!!
Just sayin', Bro.....
If bank share holders are feminine, then shouldn't it be 'delendas' instead of 'delendos'. I don't the sex of bank shareholders ...
@ 5 Foot 3 Pablo Picasso
It is really not that complicated. The current back and forth between the administration and the bankers is simply thier way of figuring out how to steal from the taxpayers without making it seem like that is what they are doing. IMO.
But we will see.
Soooo
is it about time we start writing to our Senators again?!?
(don't tell me the fool's rally will be postponed for couple of weeks)
Dear Senator,
Please resign.
Regards,
Morocco Bama
DIANOSAURS MUST die!
"do you think there is some magic solution?"
...well, actually yes. It is being applied and seems to be working quite well. It seems to be a sort of suspension of disbelieve. Everyone just goes on asking the government for money and the government supplies it. This could go on forever, no?
Who knows, ten years from now we could be on a monthly Stimulus plan.
@take a name ass wipe -- next time you quote Ritholtz' blog, put in the damn URL.
Wisdom Speaker
Got it, oh ye great speaker of wisdom.
Quote of the Day: Blaming Short Sellers | The Big Picture
@5 foot 3 Pablo Picasso: "We're you expecting Obama to resolve this in 16 days"
He's been a part of the government for several years and has had as much time as any of us here to figure out what to do. More, if you count all the people he's got working for him.
Yes, I expected prompt and immediate action other than Nancy Pelosi's shopping spree.
Also, no, I don't think the problem is that complicated. It's not impossible to take defunct banks apart and put them under new management; the FDIC does it every week. The reprivatization plan (which admittedly is a concept, not a detailed 300-page blueprint) is just to do whatever it takes to apply the same plan to the larger banks where the government has balked.
I think the hard part is that the people who created the mess are still in charge of the cleanup, they don't understand the problem fully because they created it. That is not simply unjust, it's a poor recipe for good policy. I've seen a number of cleanups, and IMHO they usually go better when a fresh perspective and strong personality is brought in to lay down the law and kick ass where needed.
I think the economy is more complex than the minds of our economists and politicians, and that you can't micromanage something more complex than you.
ac
.
Hey, I can't even micromanage my cat, Schrodinger. And she's somewhat less complex than I am. Or maybe not.
scone | 02.04.09 - 4:20 pm |
Seriously, micromanaging a business with 50 people is next to impossible.
And yet the government claims it can somehow control the aggregate output of all the businesses and individuals in this country?
You can see how well it's worked so far.
not much else to it.
bgates | 02.04.09 - 4:20 pm | #
There wasn't until someone had the bright idea of buying the fake paper with real money. Getting 80 cents on the dollar for phantom investments is a hell of a boondoggle. Somewhere Barnum is looking down and crying in joy.
Think of the economy as if it were the worlds biggest software program. Almost all the code in the last 6 years has no documentation, and some of it has been lost. The upgraded version we got these last 6 years looked pretty good until it actually had to deal with transactions.
Rebooting is not an option in this kind of production environment. You can't reboot a hospital. This software is a lifesupport system. So what do you do?
writing the Senators...yes, hahahahahahaha..that worked well last time
Maybe the government is not all powerful. Let them choose their action with great care, because if they fail they will have failed on a machiavellian course with no moral justification. If they succeed in saving only the bankers, there will be terrible price to pay. It will also destroy any community organization legitimacy the Obama administration has. Let's come together (so we can get everybody in one spot, which makes the pick pocketing so much easier).
Dear Senator,
I hope you die of a massive debilitating aneurism you freak. Stop spending my money!
"Untangling is a different story. "
nope. easy peasy. we can absorb currenct redemptions of FRNs fairly easier - there still is less than a trillion of real paper currency out there.
knots are easy. you just whip out the appropriate size blade. dissolve the fed, recall the FRNs over the next year and start fresh. no prob.
this time, if we're going to issue fiat, we do it on the terms of congress - not a private corporation.
After decades of GOP propaganda, nationalizing the big banks would be a political suicide. That's a fact.
No matter that Wall Street has already destroyed itself - if Obama nationalizes now, he will be destroyed by the right-wing media mavens.
And GOP always has 2-1 advantage in the cable and broadcast shows; there is statistics on this going back a decade.
Are people really upset that Obama is not willing to destroy his presidency two weeks after being sworn in?
The powers that be will just continue to meddle along until there is literal blood in the streets.
Take Madoff. He perpetrated the single costliest crime in the history of the world. The PTB says "We'll restrict him to his penthouse". Then they say they would do more but we are all innocent until proven guilty. Madoff should be in chains in a dungeon and enhanced interrogation should be used to extract the locations of his offshore accounts. His extended family should be in chains. His friends should be in chains.
This will end when there is enough frustration and hunger that the crowds in DC and on Wall Street scare the crap out of the PTB and they stop playing government playhouse and take appropriate action.
Power to the people!
let's see;
the main solution is to allow banks to capture fat spread with no investment and no risk.
wow
It seems to me some of the commenters here, if they were running the Federal government, would have lost the game within the first day or two with their simplistic diagnosis and prescriptions.
which ones? clawbacks?
BK's?
what constitutes losing the game? civil war?
"It is really not that complicated."
Well, there you go. I stand corrected. It's simple.
Next stop: simple solution.
After that: crooks and dopes, guns and ammo, Hitler and Pelosi.
this time, if we're going to issue fiat, we do it on the terms of congress - not a private corporation.
bgates | 02.04.09 - 4:27 pm
Sounds good. Only problem I see is that it would need a revolution. I don't mean a nice one either.
And GOP always has 2-1 advantage in the cable and broadcast shows; there is statistics on this going back a decade.
Tin foil- I'm going long term, like 4-8 years
5 Foot 3 Pablo Picasso
No matter that Wall Street has already destroyed itself - if Obama nationalizes now, he will be destroyed by the right-wing media mavens.
He's doing exactly what they want and being destroyed by the right-wing media mavens. He's got a short clock to work with on the popularity timer. He should use it where it matters. I'm with Wisdom, the solutions need to be far more sweeping than the crap they are pulling right now. I'm all for stimulus infrastructure that pays out later, but TARP is worse than a joke.
Simian, what's our version of Siberia? We shall have our Siberia!
There is a simple solution to this dealing with bankrupt banks.....nobody who has any power just likes that solution.
There is no simple solution to dealing with the fallout of this country suddenly realizing it is a whole heck of a lot poorer than it thought it was.
But just because the PTB pretend that the losses aren't there do not make them go away.
Civil war would be losing? Patrick Henry and Thomas Jefferson would disagree, methinks; tree of liberty and all that.
Have a look at the Fed's balance sheet - the nationalization of the banking system has already happened. I wonder when they announce the +30% price level reset to formalize the recapitalization?
Obama is either going to be remembered as one of our greatest presidents or the last president.
Scary
And now I'm gonna read the business section on yahoo to see what wasn't the reason for the sell-off today.
Pissed Off In California | 02.04.09 - 4:07 pm | #
LOL! Have they even changed their headline from earlier today when the market was up? "Stocks rally on Geithner's doritos fart"
Maybe the Big O stands for Omega.
Not Barack W. Obama, it's as someone said on a previous thread, Barry O'Bildenberg
And yet the government claims it can somehow control the aggregate output of all the businesses and individuals in this country?
You can see how well it's worked so far.
ac
.
That's why I don't buy the conspiracy theories. It implies more competence and mastery of the situation that is credible. Although I'm sure the banksters are hiding their screwups as fast as they can. I'm long on industrial strength paper shredders.
Obama sure talked a lot about the first days in office, but he's shot nothing but air-balls so far. Nominations have been an embarrassment, and the leadership on the biggest economic collapse in decades has been uninspiring.
mp was right, despite Obama's rhetoric, he came to office without a plan of action. We will all pay the price for this indecisiveness and ineffectual beginning.
Omega... but, it's a false ending.
This is the crap I don't get:
"Obama is either going to be remembered as one of our greatest presidents or the last president."
Why are Americans turning into such teenage drama queens? Finland had a devastating banking crisis that lopped off 12% from GDP in two years. So fucking what. People deal and move on.
So many Americans are acting like a massive recession never happened anywhere.
@nova "Rebooting is not an option in this kind of production environment. You can't reboot a hospital. This software is a lifesupport system."
I'm not saying we should reboot the entire system en masse. I'm saying we should reboot individual components and backstop the ones that will take strain in the process.
You can reboot a hospital if you do it one wing at a time or have a failover backup system; ask any hospital how they handle electrical system upgrades/maintenance.
And you can reboot a life support system if you do it within a few heartbeats.
You can reboot a bank if you have a weekend to work with, the FDIC does it every week!
Rome will rise again...but this time without grapes.
Drama queens? It's all about scale, nothing of this scale has EVER happened before... even John Law would be impressed by this one.
"Preprivatize."
Sounds like what they'd do in a hospice for dying banks. Well, we do have those and the feeding tubes are getting expensive.
Wisdom Speaker
I agree. As you do more - you can do more because you will be training staff.
Is it going to happen? I don't think so.
What did one anorexic say to the other?
"It's all about scale."
Obama late with his homework. It's ok, he's from south chicago, give him a break.
Really? Like what happened in the 1930's was a picnic - Dow dropped 90% and people had no pensions or healtchare.
Are you SURE this is ten time worse?
"I don't mean a nice one either."
that's just silly. people let the mad max fantasies surrounding the tin-foil crew disturb their reality.
andrew jackson did the exact same thing as what needs to be done now. the constitution survived.
the difference is that no one in our country has 1/10 the testicular fortitude of andrew jackson. we never would have won the battle of new orleans with the crew we have running the country today. when he scowls at us out of the $20, he's doing it for a reason - we're soft, and unworthy of our liberty and democratic institutions.
One big difference between this depression and the depression of the 1930s is people in GD1 had the good sense to panic.
we're soft, and unworthy of our liberty and democratic institutions.
bgates | 02.04.09 - 4:37 pm
Speak for yourself. I got an Rx.
FaradayShieldedHeadgearBrigade writes:
Drama queens? It's all about scale, nothing of this scale has EVER happened before.
Do read any history older than 1930?
It has happened before.
Think dark ages for a really bad outcome.
karelian | 02.04.09 - 4:35 pm
because the world does not depend on Finlands economy nor does it's collapse start the perpetual motion of world wide colon blow....
Americans don't know how to be anything but Drama Queens. It is part of our makeup now.
I am sure Jas can explain it better than I.
"I got an Rx."
Fiscalis?
Think of the economy as if it were the worlds biggest software program. Almost all the code in the last 6 years has no documentation, and some of it has been lost. The upgraded version we got these last 6 years looked pretty good until it actually had to deal with transactions.
Rebooting is not an option in this kind of production environment. You can't reboot a hospital. This software is a lifesupport system. So what do you do?
nova
.
Copy the code to a spare computer, read the whole thing, fix it, test it, test it again with live duplicate data, then upload.
I'm not sure how that applies to markets?
"Why are Americans turning into such teenage drama queens? Finland had a devastating banking crisis that lopped off 12% from GDP in two years. So fucking what. People deal and move on."
Did anyone in your family live through the great depression? Ask them about it and get back to me
karelian writes:
Really? Like what happened in the 1930's was a picnic - Dow dropped 90% and people had no pensions or healtchare.
Are you SURE this is ten time worse?
karelian | 02.04.09 - 4:37 pm | #
Give it time. We're getting there. It's being nursed along.
There's good evidence the dark ages was a climatic event. This one is at least somewhat artifical - derivative monsters in the dark.
we're soft, and unworthy of our liberty and democratic institutions.
bgates | 02.04.09 - 4:37 pm
Speak for yourself. I got an Rx.
nova
.
So you're long on Viagra?
Gates told venture capitalists and investors gathered at the annual TED conference in California on Wednesday. "We're going through a period ... where a 50-year credit expansion has moved to contraction."
"You're going to have a number of years where aggregate demand is low," he said without elaborating.
UPDATE 1-Microsoft founder warns of tough economic outlook
| Reuters
Gates gets it.
"That's why I don't buy the conspiracy theories. It implies more competence and mastery of the situation that is credible. Although I'm sure the banksters are hiding their screwups as fast as they can. I'm long on industrial strength paper shredders."
It would also need to 'shred' this in particular:
YouTube -
I'm not sure how that applies to markets?
scone | 02.04.09 - 4:39 pm
Maybe we see things differently?
Each bank is a subroutine.
Please - my grandma lost everything to Russians and 10% of Finland's male population died in the Winter War.
How about throwing a hissy fit after 15 Americans die in a conflict?
#
Wow. That Ackerman video is amazing.
Anyone who worries that no one has a clue should watch it.
So you're long on Viagra?
scone | 02.04.09 - 4:40 pm | #
And short without it.
Politicians generally no longer have control. There is enough momentum on the current vector that any deviation from the present course and there will be an instant wreck. The one thing they have is better seats to watch from.
You might as well blame/praise a nobody.
The system is behaving exactly as expected. There is no contingency out there large enough to interrupt the system.
The one thing within our ability is to control how long (& the longer, the deeper), and how volatile the step shift is.
But as is the tragedy of the commons individual countries will pursue self-interests first, and there are many rounds of games to be played before everyone is tired of them.
Just watch the decline spread
synergy of commercials that immediately follow each other...
"it's time to repower America" is the ending to one which then is followed by:
Time's up!"
the truth is out there
Mostly I am just holding.
Nova, it's not about "pre-priapasmizing"
It's pre-privatizing. This blos is SFW.
"There's good evidence the dark ages was a climatic event."
Rats. The Dark Ages was all about rats carrying the plague.
Bill Gates for Treasury Secretary?
He's tanned, rested and ready. He understands complex systems. He understands modern finance. He's a close friend of Warren Buffett.He understands the importance of putting the banking sector back in its place. He's got the balls (and, more importantly, the "my bank account is bigger than yours mojo") to kick Wall Street ass where needed.
Hmm...
"It seems to me some of the commenters here, if they were running the Federal government, would have lost the game within the first day or two with their simplistic diagnosis and prescriptions.
Maybe Obama and his team, new and inexperienced as they are, have an appreciation that the way to work our way out of this is first to proceed with "no fast moves." You know, methodical, piece by piece.
Then again, maybe some of you are right. He should just announce that "the banks" are nationalized, and the react to whatever shit storm follows.
5 Foot 3 Pablo Picasso | 02.04.09 - 4:18 pm | #
A reasoned and thoughtful post, thank you; it will be roundly attacked.
Karelian, you could nuke Iceland; wouldnt matter to the global economy. Admitting that the US banking sector is as a whole, insolvent, that spells trouble.
We missed our chance unfortunately, to announce this. Had anyone not been too intimately connected (read Paulson) to the problem, we could have nuked the banks then, and used all the money we wasted to capitalize new banks.
But that option is gone. We cant afford it now, and the problem has got much bigger since.
Snooze you lose. Big Os hands were tied as soon as he stuck with people like Geithner and others who were part of the problem, not the solution. Those people could never ever be the solution. And sorry to say , the big O blew it on that call. Im sure he regrets it now, but oh well. Sucks being wrong, especially when you probably knew better.
"The American Dream Down Payment Fund"
YouTube - Home Ownership and President Bush
This mess has W written all over it.
Rats. The Dark Ages was all about rats carrying the plague.
Elvis | 02.04.09 - 4:43 pm | #
That's why I'm long small household predatory animals.
"Maybe we see things differently?
Each bank is a subroutine."
Then C and BAC have memory leaks when their sub-routines run and running AIG subroutine causes a core-dump.
"Instead of decisive action to recapitalise banks, which must mean temporary public control of insolvent banks, the US may be returning to the immoral and ineffective policy of bailing out those who now hold the toxic assets."
Insipid. As if the gov't could even act in such a matter, let alone that the power centers would allow it to. And of course, we get another STOOPID either or, where one or both sides of the clause reference things that do not exist.
From there I'll just say ditto ac.
Oh and can't resist:
scone,
"So you're long on Viagra?"
Long and hard.
;P
Nostrovia,
People had to be sick to succumb to the plague rats. Less food and lots of mouths = funeral pyres.
Scone always sneers at my wit anyways...
EHP - Your basically saying that we're going down - it is predestined. Kind of a Lutheran economist?
And yet the government claims it can somehow control the aggregate output of all the businesses and individuals in this country?
You can see how well it's worked so far.
ac
.
That's why I don't buy the conspiracy theories. It implies more competence and mastery of the situation that is credible. Although I'm sure the banksters are hiding their screwups as fast as they can. I'm long on industrial strength paper shredders.
scone
Also note that companies that are successful usually get that way by hiring talented motivated people and then delegating responsibility for accomplishing some goal.
Sadly, our government doesn't have the luxury of hiring and firing citizens - the best we can do is to provide the means and incentive for people to improve themselves. I think we've neglected that, and it's going to be impossible to fix that in the short-term.
I think creating the illusion that the Federal Reserve and our government can make the economy better removed some of the necessary incentives for our population to actually do the kind of things that make the economy better in a structurally viable way.
Businesses have been screaming for help from the government and the Federal Reserve in recent months. As if paper can fix the problems they have, or the government has access to some cache of wealth that doesn't come from the businesses themselves.
Our economy is being destroyed by these kinds of illusions of prosperity and power that don't exist.
We're continuing to promote them with all this talk of government rescues. The best they can do is move things around and provide goals and legal restrictions.
They have no magic economy juice to make things better like everybody seems to think.
"the difference is that no one in our country has 1/10 the testicular fortitude of andrew jackson. we never would have won the battle of new orleans with the crew we have running the country today. when he scowls at us out of the $20, he's doing it for a reason - we're soft, and unworthy of our liberty and democratic institutions."
Andrew Jackson was also, arguably, a maniac. Though possibly, as one of my political science profs said, the right maniac for his time and place. Except for that part about overruling the Supreme Court and dooming the Cherokees and other settled tribes in the southeast to exile.
We need cold-hearted ruthlessness in killing these bad banks. We need a bitch so cold she would eat her own mother.
We need CRbot as president!
"Less food and lots of mouths = funeral pyres."
Jim Morrison is alive.
I understand this is a huge crisis.
But huge crisis are built into the system; all nations get them in every century.
I simply do not get this "Obama is the last president" or "end of everything" hysteria.
Yes, there will be riots, yes there will be upheaval, yes there will be hunger and despair.
Does not mean that democracy is over or that End of Times is nigh. We have been living inside a dream for a couple of decades and now it's over.
I'm not sure how that applies to markets?
scone | 02.04.09 - 4:39 pm
Maybe we see things differently?
Each bank is a subroutine.
nova
.
Well, you can isolate subroutines, plugging the functions with fake variables... I'm just not happy with the analogy, is all. If you're looking for a complex 'systems and structure' analogy, I'd look in biology-- big open systems-- rather than cybernetics. Economics as, say, a big dumb dog.
karelian
I agree that life will go on, and it won't feel like the end of the world -- that's just what one can tell their grandchildren later.
However this is much larger than Finland's pain. You will see it spread throughout the world, and it will cut deep.
We're moving to a low risk-adjusted rate of return world. Which won't be so bad, infrastructure and R&D will become cheaper or rather their ability to attract sensible financing.
Germany's just seen the world tour land, wait until you see the knock on effects before dismissing the magnitude. It's not a 5 year subprime mortgage bubble, it's a 30 year global credit bubble. Even if you weren't participating, your clients were.
Barry O'Bildenberg
He's Irish, too?
OMG.
.
Panetta banking on the system as well...
Could they have done a worse job on cabinet selections? Good glod!
CIA Nominee Panetta Received $700,000 in Fees - WSJ.com
@EvilHenryPaulson - I hear you. In my darker moments I often wonder whether anything the world's governments do will really matter. 6 billion people are all going through the economic equivalent of a physical phase transition, from risk-accepting to risk-averse, credit-seeking to cash-seeking, and so on.
At least I wonder whether anyone in any government can see in advance what they can do that will matter.
It does seem like cleaning up the obvious messes and then reprogramming the system to prevent a similar crisis in the future might not be complete wastes of time. On the other hand, we rewrote the system 80 years ago and then over the next 80 years dismantled all the protections that had been installed.
scone | 02.04.09 - 4:48 pm
I got to go with what I know - which means I show up empty handed sometimes...
Let me see if I understand this, the laissez faire crowd is upset because the Obama team isn't acting quickly enough?
novawrites:
\t"Think of the economy as if it were the worlds biggest software program . . . "
Good analogy. Anyone who has worked in a production IT environment knows how difficult it is to upgrade a piece of the system. You have to methodically plan, coordinate change control, do the work in off-hours (if possible). Even with all thos precautions, shit still happens.
What's worse is when something bad happens during production hours. People in different departments start making changes all at once, so even if you do locate the problem, someone else may have made a change that screws up something else.
So, imagine you're in charge of a global corporation's IT systems. Stuff starts breaking: The phone system in Asia, internet access in Europe. You can't even log on to your own system in New York. There are several problems going on at once, and more start cropping up.
So, what do you do?
How 'bout this one: replace all the servers!
Rewire the data centers!
Stop using phones!
Or . . .
Organize. Identify each problem. Formulate a plan, etc., etc. (You know the drill.)
Even when you manage the problem correctly, it can be an awful mess.
Fixing the global economy while it's still operating (albeit at reduced capacity) strikes me a tad more difficult.
He's Irish, too?
OMG.
.
Broward Horne | Homepage | 02.04.09 - 4:48 pm | #
He's whatever anyone wants him to be, apparently. "I am your's. Make of me what you will."
Does not mean that democracy is over or that End of Times is nigh. We have been living inside a dream for a couple of decades and now it's over.
karelian
yes, because of Peak Oil
Can we privatize both morgan stanley and goldman sach? besides b of a and citi and chase! Wow
Geoff...you must have missed the last 30 years of US History..most administrations have cabinets 10x worse than this
However, I'd agree with you that none of it is acceptable
W, on behalf of the taxpayer, told the banks to hand out as much funny money as possible to everyone.
Now the banks get a taxpayer bailout because of W's f-up.
What is so hard to understand about that? jeeez, it's that simple.
" the right maniac for his time and place."
for good or ill, he created the nation as we know it, and he was the people's champion. that's the job, and dissolving a corrupt, non-functioning fed was one of the many dirty jobs he did on behalf of the people he lived amongst and took pride in representing. that's called being a democrat, in the full sense.
The only way people wouldn't criticize cabinet selections is if there was only one. And that was Secretary of Golf. And Tiger Woods was nominated. Even then, Phil Mickelson and definitely Sergio Garcia would complain.
Our economy is being destroyed by these kinds of illusions of prosperity and power that don't exist.
We're continuing to promote them with all this talk of government rescues. The best they can do is move things around and provide goals and legal restrictions.
They have no magic economy juice to make things better like everybody seems to think.
ac
.
Concur. It would be best for the rank and file, however, to get their enlightenment slowly. People like my hairdresser still think "Obama will fix it." They aren't ready for "it's broken and time to move on."
"Let me see if I understand this, the laissez faire crowd is upset because the Obama team isn't acting quickly enough?"
All I can say is anyone who voted for Bush should be banned from commenting on any of this.
dcrogers (3:36): Brilliant!
A number of metaphors come to mind to describe how the largest banks rigged the system to prevent nationalization as an option, one of which Buffett long ago suggested:
Buffet's "weapons of mass financial destruction" (the cds and related derivatives) were intentionally planted in the banks' vaults. If the government opens the vault doors to take a peak inside, BOOM!
So the banksters tell the government cops: give us a TARP "loan" or "investment" or we blow the whole thing up! The cops don't really know if a bomb exists or not because they can't get a look at it without risking a massive explosion. The local politicians, not wanting to be blamed for a wrong decision that destroys the entire financial district, suggest a "deal" with the banksters.
Hollywood probably already has several scripts in the works with production soon underway. I'd like to see a buddy film with Bruce Willis and Matt Damon as the good guys who figure out how to defuse the cds bomb just before they nationalize all the insolvent banks and throw banksters in jail...
But every era has to end - Belle Epoque, Jazz Age, Weimar, Swinging Sixties, Cold War.
This Bubble Age had to end - and it had to end ugly. Our grandparents went through incredibly painful economic and social upheavals. And we see that as a given.
I think the problem here is that in America people did not suffer much from WW1 or WW2. America has lost is sense of proportion - this idea of avoiding serious crisis indefinitely is an entitlement.
In 2012 it will be revealed that we, and our world, are nothing more than a computer simulation.....a really excellent one.
I know this is horribly off-topic but wtf is up with SRS after hours? Bid/Ask is oscillating between 61/61.05ish to 58.11/58.12ish. Data issue? It was about 61.2 at close or so.
Dang, I hate being this off-topic but it just looks weird.
-Mike J
Drama queens? Yeah, judging from the hysterical reaction to weather reports recently. Even in chicago it's like every 2 inch snow prompts news flashes about stock-piling beans, blankets and black-powder. Others probably have more emotional energy invested in their theories of economic reality being proved eternally and universally valid than in their nation, especially a nation governed by "the dreaded other team". My gosh, everythings not been solved in minutes so panic panic panic panic panic! It's not like it takes weeks to get food to NO or anything. give up on 99.8% of the comments anymore.
They have no magic economy juice to make things better like everybody seems to think.
ac | 02.04.09 - 4:45 pm | #
They do, actually, it's called Justice. If the system even appears inherently unfair all of those independent citizen actors will pull back on doing their part.
Perp walks and show trials would go a long way toward improving the general mood as well as distracting the press who have delusionally decided they know what journalism is and believe the country is best served by insisting at 120 decibels that two poorly vetted cabinet appointments are 10x worse than illegal wars, torture and eight years of breaking the law. Throw them some bones to chew on, preferably mercury-laced ones.
5 Foot 3 Pablo Picasso | 02.04.09 - 4:50 pm
Meanwhile management is arguing about what colors the UI should have.
"Perp walks and show trials would go a long way toward improving the general mood as well as distracting the press who have delusionally decided they know what journalism is and believe the country is best served by insisting at 120 decibels that two poorly vetted cabinet appointments are 10x worse than illegal wars, torture and eight years of breaking the law. Throw them some bones to chew on, preferably mercury-laced ones."
It's too bad the press never treated bush this way.. 100s of thousands of people might still be alive.. including thousands of americans
Pulling some serious troll g's tha last few threads.
I got to go with what I know - which means I show up empty handed sometimes...
nova
.
Oh, I don't know. Anyway, this economy reminds me of a dog that's been alternately petted and whipped: scared and confused. It the "emotional reactions" of the markets that interest me right now, it's so animal-like, so irrational.
ObP - I do agree that others have picked very poorly, but I dont think the stakes have ever been this high to pick well, especially things related to the economy. It's all establishment, as if somehow O forgot that the election was about getting rid of the establishment. Just...plain...stupid.
Our economy is being destroyed by these kinds of illusions of prosperity and power that don't exist.
The productive capacity and know-how is still there. It just needs to be liberated from all the un-payable debt. TPTB want to prevent that at all costs it seems. The rich want to preserve their false wealth and rentier lifestyles.
We really need a new system. The debt money system is untenable in my mind if you don't allow periodic busts. Beyond that, inflation is immoral - thou shall not steal.
The Dark Ages followed the sack of Rome, 410 A.D. The Black Death was almost 1000 years later.
I think the problem here is that in America people did not suffer much from WW1 or WW2
Nice sweeping generalization. Just curious. Do you live in Finland?
As Robocop would say, "The market fairies will fix it. They fix everything."
So come on market fairies, do your work. You did a bang up job the past several years.
You got it Angry Saver - As RATM would say, we gotta fight TPTB. We thought we did with the election, but instead, we've been hoodwinked, bamboozled, etc.
Geoff,
You are right.. it's important.. unfortunately as much as I think Obama has a lot of potential.. I've worried all along that it's just too late to change the status quo.....
Obama needs to do a 180 degreee turn with an aircraft carrier.. and has little space to do it
sigh
"The Dark Ages followed the sack of Rome, 410 A.D. The Black Death was almost 1000 years later.
matty"
That is what the revisionists want you to think.
It's too bad the press never treated bush this way.. 100s of thousands of people might still be alive.. including thousands of americans
Osama bin Paulson | 02.04.09 - 4:56 pm | #
And they are currently frantically trying to rewrite their own little part in our recent history.
When the papers all go under, I will not cry.
Rebooting is not an option in this kind of production environment. You can't reboot a hospital. This software is a lifesupport system. So what do you do?
nova
.
Copy the code to a spare computer, read the whole thing, fix it, test it, test it again with live duplicate data, then upload.
I'm not sure how that applies to markets?
scone
That's the problem with economics in general:
We don't have spare economies and markets available to do this kind of stuff.
That's one of the real problems with having something like having a global economy - with singular monolithic systems, failure can become a cultural catastrophe. There are no backups to revert to.
This isn't a limitation of many other types of sciences, and is the reason that claims of economic "cures" have to be viewed with such skepticism.
We simply don't have a laboratory that allows us to repeatedly test and experiment with these economic therapies in different scenarios the way we do in other fields.
And if one of these therapies fails, it could roll a society's progress back years or decades.
" the problem here is that in America people did not suffer "
it isn't coincidental that the year the depression survivors/WW2/korea vets began to hand over the economy to the boomers (circa 1993) is just when the leveraging, securitizing, etc, began to get way out of control.
We thought we did with the election, but instead, we've been hoodwinked, bamboozled, etc.
"Meet the new boss, same as the old boss" - The Who.
"The productive capacity and know-how is still there. It just needs to be liberated from all the un-payable debt. TPTB want to prevent that at all costs it seems. The rich want to preserve their false wealth and rentier lifestyles. "
As I've said -- this time America wouldn't tolerate a 30's era shutdown, when distribution of vital goods including food just shut down in large areas. If it's good life vs. preserving the economic system, guess which one they'll choose?
In this case, I think "entitlement" is the right thing to feel.
@scone: agree with bio metaphor. The big dog has, say, a blood cancer, and the red cells are no longer transmitting the life-giving oxygen (credit) to the body?
Except, does the dog's body really need the same oxygen supply it had before? Or has it perhaps hyperventilated and passed out, and it just needs a bit of a rest?
It could be that the whole focus on the banking sector's problems is just Washington/New York narcissism at work.
Perhaps it's the metastasized cancer in the dogs vital organs (the real, physical goods-and-services economy) that needs the medical attention? The cancer stole most of the oxygen that was being supplied anyway.
"it isn't coincidental that the year the depression survivors/WW2/korea vets began to hand over the economy to the boomers (circa 1993) is just when the leveraging, securitizing, etc, began to get way out of control."
You are way too late.. this all starting with Ronnie Raygun's voodoo economics back in the 80s... That's when it became ok to run massive deficits
Sweeping generalization? Major cities in countries like Germany and Austria were destroyed nearly completely. Loss of life per capita was ten times higher than in America.
So yeah, it is a sweeping generalization. USA did not lose manufacturing base or lives anywhere near the levels of the UK or Russia.
Of course.
Plague of Justinian - Wikipedia, the free encyclopedia
539 AD
Nightstand cowboy gets a much deserved rest.
When the papers all go under, I will not cry.
____________-
Starting with the wall street urinal. Do they have any investigative reporters? The blogs did a much better job educating us the past 2-3 years.
karelian | 02.04.09 - 5:02 pm
Oh, I said my thing about the war (w2k) here before. I am a student of the war in the east. I am hoping to be in Riga and Tallin in a few months.
More midwest jobs go poof! Snyder's Drug closes 19/47 ( 40% ) of stores in Twin Cities.
Snyder's To Close 40 Percent Of Minn. Stores - wcco.com
"this all starting with Ronnie Raygun's "
it really started with the FHA and sense of entitlement that came out of the GI bill... both sides of the aisle played their part in creating the worst-of-both-worlds that a public FRE and FNM inevitably became - the liberal side in the 'homeownership for everyone' fantasy, the conservative side in the 'markets are rational' 'debt is cheaper than equity' and 'deficitis don't matter' horseshit.
we used to have real conservatives and real liberals... then the 1980s came along and we got the neo-liberal republicans and the neo-liberal lite democrats.
The american people decided that they wanted to cut taxes and maintain or even increase government spending... the consequences of that decision were somehow postponed for almost 30 years.. but now they are here
Bob Dobbs,
You lost me (not hard to do).
Are you saying that distribution of vital goods will shut down?
I don't see that. I'll carry water for free if need be.
Actually it all started when the Beatles broke up.
I too think a debt jubilee is the answer.
The problem is not just that TPTB want to hog all the wealth.
The bottom line for many of them and most everyone else is that IF we forgive all debts, or at least, let some of these banks and companies go bust, we will speed ourselves to the Greatest Depression anyway.
While I am not sticking up for TPTB, it is my contention that their is soooooooooooooooooooo much debt, even among the so-called wealthy, that there is no longer an easy way out.
So much corruption, manipulation, indebtedness, etc. means we are gonna suffer.
Okay, maybe some like Buffett and Gates and Microsoft (no debt), escape, but everyone else is gonna have one heckuva time before this is over.
You see, once this thing really starts in earnest, it is going to get ugly! Just wait until the food trucks don't arrive for 2 weeks. Oh that is going to sit well in the major cities.
As Robocop would say, "The market fairies will fix it. They fix everything."
So come on market fairies, do your work. You did a bang up job the past several years.
Actually, if you spend time in these markets you realize that the past several years the market fairies were just sitting around waiting to see where the central banks would shift the flow of credit next.
The central banks were the ones that gave the market fairies the means, protection, and incentives to take as much risk as possible without regard to consequences.
How this kind of centralized monopoly on credit constitutes a "free market" I'll never know.
Nova writes:
"Meanwhile management is arguing about what colors the UI should have."
Yeah, but that's the way it always is. As the Marines say, "Improvise, adapt, overcome."
You know Congress is going to be assholes. You know the Chinese are going to scream bloody murder if their Agencies fall. You know the bankers are going to fight for their slice of pie.
So, how do you take those factors -- and thousands of others -- into consideration and still reach your objective?
My simple plea is this: it ain't easy, man. This particular shit sandwich was decades in the making. Gonna take some time. No easy fix. Much pain.
If Obama's as bad as some make him out to be, patients may notice acute swelling, bloody discharge, prolonged anxiety . . . .
Osama bin Paulson writes:
"Perp walks and show trials would go a long way toward improving the general mood....
You mean like this
Defendants in the dock at the Anglo-American War Crimes Trial of 2010, held at The Hague under the jurisdiction of the International Criminal Court..
The Nowtopian: Thanks Billmon!!
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You see, once this thing really starts in earnest, it is going to get ugly! Just wait until the food trucks don't arrive for 2 weeks. Oh that is going to sit well in the major cities.
OCDan | 02.04.09 - 5:05 p
I am hoping the French get assigned my area for food drops.
This isn't a limitation of many other types of sciences, and is the reason that claims of economic "cures" have to be viewed with such skepticism.
We simply don't have a laboratory that allows us to repeatedly test and experiment with these economic therapies in different scenarios the way we do in other fields.
And if one of these therapies fails, it could roll a society's progress back years or decades.
ac
.
(Forgive me for repeating myself, I said this a few threads ago.) Economists seem to be pretty isolated from the mainstream of intellectual life. I don't see a lot of evidence in their writings that they are keeping up with post-structuralism, post-modernism, information theory, etc. The seem to live in a separate universe, about 40 years behind the leading edge. Did you read Greenspan's auto? The guy is just so out of it. I mean, Ayn Rand? Nobody takes that shit seriously anymore.
FSHB: Thanks for the link; We'll have to leave it to Elvis to confirm that this is what he was referring to.
2 weeks? NYC has a 12 hr food supply if the trucks stop.
Don't blame me, monkey boy
this all starting with Ronnie Raygun's voodoo economics back in the 80s... That's when it became ok to run massive deficits
Osama bin Paulson | 02.04.09 - 5:01 pm | #
Sacrilege! No one talks evil about the Great One.
Does most everyone in here have one foot nailed to the floor? Repetitive. Endlessly repetitive.
The neo-civil war begins:
New Hampshire Bans Unconstitutional Federal Control » Right Pundits
2 weeks? NYC has a 12 hr food supply if the trucks stop.
FaradayShieldedHeadgearBrigade | 02.04.09 - 5:07 pm | #
Does that include Pastis, Gramercy Tavern or Craft. That's where I go when I'm hungry.
Anyway, this economy reminds me of a dog that's been alternately petted and whipped
Yeah, by my dream girl!
Speaking animal themes, perhaps we're watching a "pre-cat bounce". an intial spike of awareness which fades out from denial, and then reasserts itself into the major trend line.
.
Does most everyone in here have one foot nailed to the floor? Repetitive. Endlessly repetitive.
burnside | 02.04.09 - 5:09 pm | #
It's my job to be repetitive. My job. My job. Repetitiveness is my job!
Another thing 'mercans have lost with their/our two-party system of tweedledee and tweedledum is the art of real compromise, political or otherwise. that's another major difference between the lot on this side of the atlantic vs. the other side. The EU is far from perfect but it has kept alive the practice of not expecting every single thing to go your own way.
Does most everyone in here have one foot nailed to the floor? Repetitive. Endlessly repetitive.
burnside | 02.04.09 - 5:09 pm | #
I loved that scene in Yellowbeard. ^__^
NYC has a 12 hr food supply if the trucks stop
By a strange coincidence, I was watching "Dawn Of The Dead (2004)" last night.
I never imagined it was a future documentary, though.
.
Shortage of brains and hearts though, what will the poor undead feed on?
Yeah, I'm repetitive, but so what?
At least I know what is coming and can prepare accrdingly.
It is the ostriches that are gonna make a real mess of this collpase!
Economists seem to be pretty isolated from the mainstream of intellectual life.
My complaint about economists is that they seem to be isolated from real world experience.
I get the sense that they haven't had the experience of being supremely confident about a genuinely brilliant theory, only to see it fail completely when applied to a real world system due to some infinitesimal divergence or oversight.
Did you know that there are snake balls made of hundred of copulating snakes? I read it a while back in Science News.