We could have the Smartest People in the World in there, and I wonder if it would make any difference... When the tower collapses, is there anyone who could save it?
Jesus! will Obama ever wake up and realize what these fools and crooks are doing to this country--and his Presidency? As far as Im concerned Geithner is the most troubling person I can think of, other than perhaps Cheney.
Timmy and BB keep saying that they have to do what they or doing or the whole system will fail... I wonder what that would mean exactly... I hope they are smarter than me, but deep down I have a real bad feeling about all the printing/creating new money and debasing the currency, and also about all the debt accumulation and deficit spending by the Fed. govt... Debt bad, Savings good, in my simple world... I think we are in unknown territory with no idea what the unintended consequences will be...
another overlooked cause is simply demographics. ponzi economics only works with an increasing expanding base. the massive immigration of the past 15 years gave us a luxury Japan didn't have. no more kicking the can...
To be clear - I have no problem with innovation and securitization in general (I do have some problems with specific innovations like most Alt-A loans!)
But, as Seidman pointed out, when innovation is happening - that is when the regulators need to be looking for loans that will probably not be repaid.
It was obvious there was a problem - by 2004 at the latest - with first time homebuyers putting no money down and borrowing 10 or 12 time their income. That doesn't work and it was obvious.
Blaming the borrower is absurd. It was rational for people to speculate. Therefore it was a systemic problem ... and the first words out of Geithner's mouth should be about regulators and the failure of oversight. Otherwise he just doesn't get it.
will Obama ever wake up and realize what these fools and crooks are doing to this country
I don't think he - or anyone - has seriously contemplated what a post-FIRE economy would look like. What are we going to do? Go back to competing as a low-cost manufacturing center? The Pac Rim might have something to say about that.
Don't forget that the oil price run-up was a trigger of the collapse. When credit was extended to the house-of-cards limit, anything that forced increased personal expenditures could have pushed it over. It happened to be oil. There is a big lesson there about systemic risk: a cartel is a systemic risk to everyone, everywhere, even the cartel owners.
That's quite a bold headline for you, CR, who are known for your clear head and even-handed approach. Not like you to lay blame. You keep long hours for this blog and your restraint has been admirable. Is the circus beginning to wear on you a bit? I hope you know how much you are appreciated. The world needs more people like you.
Several policy missteps suggest that investors should stop trusting -- and lending to -- the U.S. government. These include the state’s pressure on Bank of America Corp. to buy Merrill Lynch & Co.; the priority given to Chrysler LLC’s unions over the automaker’s secured creditors (bolded for you, longtimelurker/shorttimeastroturfer); and the freedom that some banks will regain to supersize executive bonuses by giving back part of the government money bolstering their balance sheets.
Feckless Ness, I was just amazed at Geithner's comment. He should issue a clarification.
Greenspan keeps getting blamed for keeping interest rates too low for too long - but that misses the larger problem of failure of oversight under Greenspan.
If we aren't clear about the key causes - or, as it appears, Geithner's doesn't understand the causes - we will just repeated the same mistakes in the future. Seidman nailed it in 1993. Geithner hasn't shown an understanding yet ... and that is frustrating.
Yes, Geithner was part of the problem since he was a regulator. So what? Just admit it - acknowledge the problem - and fix it. I'm all for 2nd chances.
A month ago watched Timmay before congress. He said three times (3 different ways)
"The providers of capital can't get funding"
Sheesh. If they need funding, they are not the providers of capital. Conduits, maybe, but not the providers. I had to turn the TV off.
As CR says "Either Geithner misspoke or he still doesn't understand what happened - and that is deeply troubling. "
Shockingly, he apparently doesn't understand. Not even the very basics.
I don't understand why Timmay gets referred to as "smart."
The trigger (but not the cause) was the Federal Reserve's crackdown on subprime lending, which began in 2006 and which also happens to be the peak. Up to that point, there was always a greater fool. The government's actions regarding FHA is an implicit acknowledgment of this.
There may not be many people left in the banks able to do loans the old fashioned way. Everyone should know that their loan app. isn't approved by an individual anymore. No, not even a committee. It's work for a computer program, now.
Feckless Ness, nah - the circus doesn't wear on me. I supported Bernanke (the best we could hope for at the time IMO), and Geithner. Bernanke was slow to recognize the problem, but he has been innovative in providing liquidity (the role of the Fed in this type of crisis). I know many commenters don't like Bernanke's performance, but I think he is doing what he is supposed to do now.
Driving around the city this week I noticed the most wheel locks on vehicles ever....while at the same time noticed change of tactics by parking cops in neighborhoods. Caught them coming back to street that they had ticketed already and street sweeper came by to write more tickets on vehicles that parked after they went thru..
San Francisco parking ticket department will become model for other cities..They're generate some great revenue and are growing part of city government..
The big scary thing about these guys is that I dont think they actually know how this will work out... They keep saying that they will pull all this new liquidity back out of the system quickly when they need to, but I'm not sure they can pull that off... And when Mohamed El-Arain is worried about that too, then I get really concerned...
CR I think Geithner is way past redemption at this point. Deception, incompetence, and an obvious front man for Wall St.. If anyone should be booted to the curb at this point it is he.
CR is making a strong and important statement here.
It seems to me that Geithner won't or can't stand up for the American taxpayers against the banksters. A famous (retired) econ prof said last month that Geithner doesn't have the experience dealing with the top banksters. The Secretary's only experience in this area is "carrying their baggage".
Squidward, that is exactly the problem. Geithner thinks investors can't find productive uses for their money without the intermediation of Wall Street.
There are certainly plenty of instances where a knowledgeable broker can add value to a transaction. But there are very few examples of anyone associated with Wall Street performing this function in the last 10 years or so. All Wall Street did in the 2000-06 period was find ways to complicate transactions so the bankers could skim multiple fees without investors realizing the amount of risk the investors were taking on. The bankers were so successful that complicating transactions became the growth industry of the era.
That era is gone now, and nothing Geithner does can bring it back. People won't accept those risks again, and the economy simply isn't strong enough to carry such a large parasite load.
Unfortunately, Geithner appears to believe that the 2000-06 banking model is not just a productive model, it is the only possible model. The situation literally can't be fixed with him in charge.
broward (homepage, profile) wrote on Sun, 5/24/2009 - 5:23 pm
My mom and dad taught me that knowledge was important.
But the more I watch the U.S. economy, the more I realize that it's basically run by Alpha male dildoes with no true understanding of anything.
exactly. these aren't the "smartest guys in the room", just the toughest guys in the room. but a large fraction of the "smartest guys in the room" do work for them. and yes it all comes back to primate politics in the end. scientists in the future may in fact conclude there is nothing more to politics. the more things change, the more they stay the same...
"...the first words out of Geithner's mouth should be about regulators and the failure of oversight. Otherwise he just doesn't get it."
geithner and summers get it... there harvard education can at least understand the cause of the crisis. for the general public, they are still playing politics. for them the blame can be implicitly placed at the bush admin and greenspan. there is no conspiracy except of no accountability... oh and trillions in writeoffs to bailout wall street.
they are proactive with the economies financial sector... but completely lost with everything else. time and human nature will guide us wherever...
Geithner reminds me of the politician who shakes the guys hand who came out of the coma in the crowd and the guy gets a vision of a nuclear holocaust that he creates..maybe it was a financial holocaust instead. or as we know it THE CREDIT DEAD ZONE
There was a thread many moons back that stuck with me - about how the solution to a systemic problem really doesn't fix the system - it generates a new analog system on top of the old one. Somebody said he saw this in IT all the time.
So, like a house of cards, the existing system continues to grow in size and complexity until a portion of it collapses under its own weight. Rather than tearing down the whole structure, the collapsed portion is rebuilt and fortified so it can bear more weight and complexity.
What we are seeing is not the total collapse of our economic system. There will be no systemic fix. There will be no new foundation. There will only be sufficient buttressing to allow additional growth and complexity.
I have to respectfully disagree with you on a couple of things.
I don't think it was reasonable for people to speculate at 100+:1 leverage (zero down) on "investments" in amount greater than their net worth. It's one thing to speculate with 5% of your net worth using 5:1 or 10:1 gearing, but 100+:1 with more than your entire net worth? I call that unreasonable.
And even option ARMs have a small place for specific circumstances. For example, it's not all unusual for even low-level executives to get a substantial part of their annual income through awards of restricted stock. A couple of times a year, they can cash in their winnings and pay bills. Yes, it's high-risk, but it makes sense for some people. The problem with Option ARMs is that they were thoroughly abused, like many other financial "innovations". This is one of the changes in lending that you mentioned - the provision of Option ARMs to people who had no sane justification for using them.
But Geithner still scares me, and I don't think he gets it.
Ahem, I'll debate "toughest", their head comes off just as easily as anyone else's. But they're making an excellent argument that capitalism rewards dysfunctional behavior - The Pyschotically Greedy & Terminally Desperate. Anyone even halfway normal tries to avoid these guys.
Gresham-Horne Law - the greediest, unethical and desperate people drive out good people where-ever there is money.
I'm not sure that Timmay meant that his list of causes were the ONLY causes but he does conveniently forget about regulation. That would just open a can of worms for him. But even CR's "innovation and lack of oversight" explanation doesn't get at the heart of the problem. I think it can be summed up as: our economy was build on exploitation (which, it occurs to me, may be what some here mean when they talk of our "ponzi economy").
Exploit immigrants. Exploit dumb homebuyers. Exploit over-eager investors. Exploit lax government oversight (and more: lobby for minimal oversight). Exploit the unwary (e.g. smokers). And on and on. "Opportunity" has too often meant that someone was being exploited.
This will take a generation to get out of our system because it is really part of our culture now. Execs/Banksters/MBAs/wealthy are still conniving to "win" in this recession/depression (and they are winning, mostly at the top, so far). These are people whose self worth is measured in dollars, and see the world as a "zero-sum game" (i.e. there is always a winner and loser). It started in the 80's, I think, when "greed is good" became in vogue.
I think global warming and the financial crisis may be cathartic. The move toward "sustainability" and the "triple bottom line" seems to be strengthening. That is refreshing but still only "green shoots" in a scary jungle full of creatures like banksters.
ok one more time with different profile name...I posted this when he was at NY FED a long time ago.. I trust him like the scorpion dangling on the rope that holds the sleeping baby in steinbecks novel......the pearl..
CR.........I might venture to say that here on this "little forum" are 200-700 (depending on the time) of the best informed people in the World. You should incorporate a new "Quick Vote" kind of thing once a week or so. See what your readership thinks about a subject pertaining to your threads - it might even increase your numbers. I'll send a statement for "consult fees" when appropriate......
"Therefore it was a systemic problem ... and the first words out of Geithner's mouth should be about regulators and the failure of oversight. Otherwise he just doesn't get it."
I have no doubt that he gets it. However, it would just not serve his purpose to focus on stricter regulation, at the same time that he is trying to re-inflate the bubble. Having to account for risk expenses, would be quite inconvenient when he is trying to sell PPiP to the masses. It is hard enough to try to sell MBS in the face of a falling dollar and rising rates, without the SEC poking around where it might not be helpful.
"Didn't we have the alpha male dildo conversation months ago?"
Yes, and it stuck in my mind. I realized that the CTO of my Dot Com company fit your description. He was an ex-policeman with ZERO IT background. But he made several million dollars before he and a couple of others destroyed the company.
I've pondered it since then and realized that your comment is often true.
I'm really thinking about ditching the twenty years I have in IT.
it's increasingly not worth it, just a lot of weenies like that, shrieking about sales numbers.
We are about to get a very good idea just how much liquidity the FED can soak up with the auctions next week. Personally, I think the odds of a failure similiar to the Bundesbank failures in 2008 are quite high.
-1 fer spellin
imo, geithner gets it... he is just a weak bureaucratic desk jockey. i dont doubt his intelligence... its his will and ability. summers on the other hand is the devious one.. .like cheney was. all of them are surrounded by the wall street elite which completely influences there decisionmaking. and obama seems to be a talking head celebrity president on a never ending campaign trail... no real power except to please as many ppl as he can. he is held accountable to wall street and lobbyists who keep him close. no change. more of the same.
"I don't think it was reasonable for people to speculate at 100+:1 leverage (zero down) on "investments" in amount greater than their net worth. It's one thing to speculate with 5% of your net worth using 5:1 or 10:1 gearing, but 100+:1 with more than your entire net worth? I call that unreasonable."
That is the key bit there. Which is really what "1) rapid innovation in the mortgage industry (securitization, automated underwriting, rapidly expanded wholesale lending, etc)," was all about.
I am amazed that you are amazed. What were you expecting from Rubin and Summer's protege? Think of it another way.. would you expect Himmler's assistant to be significantly less anti-semitic than his boss? Or Pol Pot's henchman to be much less blood thirsty than his boss?
//Feckless Ness, I was just amazed at Geithner's comment//
he is held accountable to wall street and lobbyists who keep him close. no change. more of the same.
He is also ultimately responsible to the American people and to history. He owns this crisis now, especially since he is following the same path as Bush. Only some of the players have changed.
He is a secret Vulcan. Or, perhaps Romulan. Look at those ears!! Look at the upward tilt of the eyebrows.
I know who Timmy reminds me of - Pan! Can't you just see him with a furry goat body, hooves, and a little pan pipe? A character worthy of myth and fantasy.
Why think of him as an old fashioned flamboyant villain? Think of him as a quiet bureaucrat doing his job.. Eichmann..
//I know who Timmy reminds me of - Pan! Can't you just see him with a furry goat body, hooves, and a little pan pipe? A character worthy of myth and fantasy.//
"Gresham-Horne Law - the greediest, unethical and desperate people drive out good people where-ever there is money."
Particularly when no one is looking, i.e. a lack of regulation.
The honest and rational players were driven out, as the big money sought out the ponzi-like returns. Without accountably there is anarchy. I have seen it over and over again in the I.T. world, where some manager posts phenomenal sales, headcount reductions and savings, and moves on to his next boondoggle just before the SHTF.
But Ayn Rand said otherwise.. and what about Austrian economics?
Ironically, Adam Smith had a much better grasp of the problems inherent in free markets than those who claim to follow his ideas (and that is why they only mention "the invisible hand"). Smith was very critical about lobbying, supported progressive taxation, wanted to outlaw associations of merchants and professionals, was averse to opaqueness in business transactions and believed that very low and high rates of interest both encouraged fraudulent enterprise.
//"Gresham-Horne Law - the greediest, unethical and desperate people drive out good people where-ever there is money."//
broward (homepage, profile) wrote on Sun, 5/24/2009 - 5:55 pm
But they're making an excellent argument that capitalism rewards dysfunctional behavior - The Pyschotically Greedy & Terminally Desperate. Anyone even halfway normal tries to avoid these guys.
Gresham-Horne Law - the greediest, unethical and desperate people drive out good people where-ever there is money.
economics is a psychopathic system. that doesn't mean it's useless by any means, much less ineffective, just that it is a horrible basis for a culture, a philosophy of life or a value structure embedding either or both. when the most successful outputs of the system (i.e. those which have best internalized its norms, laws, and behavioral idiosyncracies) are ruthless self-interested psychopaths it tells you something about that system.
CR:
"Either Geithner misspoke or he still doesn't understand what happened"
Or, what?
Here it is again:
CR:
"Therefore it was a systemic problem ... and the first words out of Geithner's mouth should be about regulators and the failure of oversight. Otherwise he just doesn't get it."
Why does this formulation persist?
Why repeatedly and pointedly exclude the other and more likely possibility that he does understand. Are you not aware that you're doing this? Or is it for some reason? Oversight on your part, or psychological manipulation?
"it is a horrible basis for a culture, a philosophy of life"
Right, that's one argument I have with the Free Marketeers.
They see the market as the foundation for morality, not as a function subservient to culture & morality.
Another big flaw is that they don't see a free market as part of an equilibrium, a constrained environment. One false assumption is that there's a big pile of work in the FuturoSphere just waited to be consumed. If you view the macro-system as a few equations, it's pretty obvious that pure capitalism produces below average productivity just as much as pure communism does.
That's why almost all nations are a mix of the two, it's a better producitivity point.
Blackhalo wrote;
"I have seen it over and over again in the I.T. world, where some manager posts phenomenal sales, headcount reductions and savings, and moves on to his next boondoggle just before the SHTF."
I have seen related boondoggles more than once in product development companies. It goes like this:
1. Fund development of numerous product prototypes, building a team or teams that could credibly do the product development if you don't look too closely at the lower-level hires or the line management.
2. Find a sucker, and convince them that the products are ready to ship, even though all you have is preliminary prototypes.
3. Sell the company to the sucker, making certain that the sucker can't talk to the engineers during due diligence.
4. Profit!!!
I just went back and read this thread from the afternoon of March 9th when the market bottomed at 666 (so far)... Congrats to user Sauron for telling everyone to buy then... I would also congratulate Mark Faber, but in one sentence he says rally through April and in the next sentence says the market could go to 500, so STFU then.... LL was still bearish or at least skittish...
broward (homepage, profile) wrote on Sun, 5/24/2009 - 6:29 pm
"it is a horrible basis for a culture, a philosophy of life"
Right, that's one argument I have with the Free Marketeers.
They see the market as the foundation for morality, not as a function subservient to culture & morality.
Another big flaw is that they don't see a free market as part of an equilibrium, a constrained environment.
yes. capitalism's biggest problem is that the engine is unfit to steer the boat. try building a self-steering mechanism that runs solely on positive feedback.
Securitization, and the long standing practice in the United States of allowing the sale of loans from within the regulated banking sector to outside it, is the problem.
It is a massive exploit in the fractional reserve banking system, and until it is closed, this mess will continue to spiral hopelessly out of control.
Of course, closing it is a problem in and of itself.
Our Dot Com bought two other Dot Coms and folded their sales into current sales to create the illusion that sales were rising when, in fact, they'd already peaked and rate-of-change was declining. It seemed transparent to me but it popped the stock price for awhile.
broward (homepage, profile) wrote on Sun, 5/24/2009 - 6:39 pm
Separation of concerns.
That's an interesting view I never thought of.
if you think about it, I believe it makes perfect sense. capital is the means of growth which perpetually confuses itself with the ends. that's sort of the paradox of money anyway, isn't it?! a continual transition that always tries to become a State.
Geithner is a pawn--everyone knows that. He is there to serve the interests of wall street.
Yet CR criticism has no merit. G just agrees with the interviewer, mentions regulation, rates just not the way CR wants it. No biggie.If criticism is not substantial and focused, it distracts.
Ahhh sorry thepitchfork criticism is warranted....
Bush did it with the Iraq war...
War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives. A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small 'inside' group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes."
- U.S. Marine Major General Smedley Darlington Butler, one of only 19 people to be twice awarded the Medal of Honor,
Obama is doing ti with the 19 too big too fail banks
The US financial ponzi scheme is a racket.....Obama and his Wall St bought and paid for economic team have put all their chips on the Banking Oligarchs. It is conducted for the benefit of the very few ( The 19 too big to fail banks ) at the expense of the very many ( the American taxpayers). Obama's objective with his Wall St bought and paid for economic team is to pump up great chunks of the Big Shitpile that's essentially worthless unless the peak real estate values of the bubble can be miraculously restored.
Broward, do you know anyone in Mechanical engineering? Want to have something interesting to try and make?
I have an idea for a small platform for flight and motor racing simulation, would have a larger range of movement than professional flight simulators, be much cheaper, much easier to maintain, and take a lot less space ... could be something people would be able to have at home.
Minnesota is going to cut $2.7bn in spending. For reference their population is 5.17mn, GDP of $234bn, a formerly $17bn general fund, taxation as a % of personal income ranging roughly from 15.5% to 16.5% back to at least 2002 (eg total state revenues divided by total personal incomes, not the personal income tax rate) A Governor and His Veto Pen - WSJ.com Supporting Budget Documents
The scenario that is excluded by those constructions is the one in which Geithner does understand, but is concealing what he knows, by skillful omission. This seems more likely to me, but my opinion on that isn't important and isn't my point. What is important, is that in my opinion this exclusion decreases the likelihood, or momentarily blocks, the consideration of the uglier option.
It is not necessary to claim that this uglier scenario is fact, but it is a mistake to positively exclude it in this way. Again, I'm wondering if you really don't understand this. It's like this: an endless argument over who is "stupid", the Republicans or the Democrats, obscures for many people the possibility that they are both corrupt, that they are "stupid" intentionally.
a banking system which survives by cannibalising the real economy,
a military industrial system which we cannot afford,
a ridiculously expensive higher-ed system. higher- ed is not as big part of the economy as the others in this list, but included here because it prices out most of it's would be customers.
a medical system which prices out most it's consumers and where costs continue to spiral out of control.
to mention a few of our problems.
We are also massively indebted. Is'nt it a given that by the end of this crisis two or more of the systems above will be cut down to size. Now leaving aside the military, since it's a holy cow to both parties it seems to me that finance, higher education and healtcare will have to take cuts. Now assuming that drastic cuts in Social Security is politically unfeasible even for Obama, I don't think that Giethner/Summers can fully protect the bankers even if they want to.
mmckinl,
Sorry, a $17bn general fund and $26,852,555,000 total spending. I assume that the cuts will have to come from the general fund, unless he is cutting the program tied taxation? More than info data in the second link of that post.
Still, a $2.7bn cut on $27bn is a 10% top line spending cut.
Universities and banks. Each bank tries to find its own angle, and universities tend to be local. The one comprehensive deep resource on housing in Canada would be the CMHC which is the national mortgage insurer up here (only insures bottom 80%, but a few years ago some moonbat was appointed from the Conservative party and they brought in 40 year mortgages for 06-08 before stopping that and going back to max 30 years)
"Either Geithner misspoke or he still doesn't understand what happened..."
Um, DUH!
It is painfully obvious that Geithner does not understand the problem. The PPIP is a shining example.
As Barry Ritholtz so nicely illustrates in his new book Bailout Nation, securitization and low Fed Funds Rates turned mortgage financing on its head. Since the beginning of time, lenders lent to borrowers based on their ability to repay. With securitization, lenders lent to borrowers based on the lender's ability to repackage and sell the loan. Whether the borrower could repay or not was irrelevant. Low Fed rates spurred bond fund managers to buy the AAA rated MBS garbage that spewed out of this process as they were desparate for a safe, high yielding investment instrument. (Somehow, safe and high-yielding in the same sentence should have been a warning.)
It should be obvious that the securitization experiment has failed. Nevertheless, Geithner and Bernanke's great plan is to resurrect it through PPIP facilitated asset price reflation and TALF 3.0. You know, "get credit flowing again."
To repost something I said earlier:
We have an Agrarian Economy. Consumers are the soil, big finance and government are the farmers. The soil has been so over-farmed at this point that, rather than let it lie fallow to recover, we are pouring on the XXX power fertilizer in order to squeeze out one more harvest. This is despite the label on the XXX fertilizer bag warning that its use may lead to the need for a complete topsoil transplant.
their projected spending of the 2010-2011 general fund was K-12 Education 39.1%, Health & Human Services 28.7%, Property Tax Aids & Credits 9.7%, Higher Education 8.9%, Public Safety 4.8%, Debt Servicing 3.4%, ...
Once you start cutting in K-12, you need to close schools to really capture the savings. Could be like the dustbowl effect, where people just abandon their homes.
mmckinl,
It's only your 3-4% if the $2.7bn is cut over the next 2 years (they are in the 2nd year of a biennial budget), which makes no sense†. Even if that were the case, they would have needed a fat surplus going into this to only be down that little or be projecting some fat growth for tax revenues to completely recover and then some after a 1 year blip
see: http://www.mmb.state.mn.us/doc/budget/report-spend/feb09.pdf for historical spending
† Well actually it does make sense if you count current budget cuts against cumulative past revenues which is bullsh..t, as in the national deficit is only 0.0001% of cumulative GDP since America's independence in 1776. He still has to cut spending 10% for the upcoming fiscal year, would road apples by another name smell any fouler?
i don't know, Michael Shedlock has been pretty skeptical of placing blame on regulators saying that they are going to miss things like this anyway. so why bother having them around?
but that doesn't mean I don't agree with you that i think regulators were slow (or stupid) to recognize and react to these financial innovations.
mmckinl,
sorry about that then, I thought you had another source on it
re: State spending cuts
The reason why I mentioned it, other than the fawning wsj piece, is not that projecting from per capita numbers to a national basis that would total $158bn in cuts. It's that state spending is highly trusted. I wish I had the data handy to back this up, but I'll pull some out of thin air to make the point.
A state worker is 10 times less likely to be fired or laid off than a private sector worker and 100 time less likely than the swing shift worker at Abercrombie and Fitch store. So when those individual workers do their budgeting, the chance of an allowance for a period with no income is much different. Just like how mortgages had such high carrying rates on bank balance sheets, so do state pay checks. They are the rock of many local economies in rough economic times
Wait until the next "flight to safety" event where the USD index spikes.
Once the PPIP moves the toxic assets from bank balance sheets to the Treasury/FDIC, there may no longer be any flights to US Treasuries, given how compromised they may appear.
Hail the sun, Hail Gods, Hail the stars in the sky, Hail the power and glory, off all mankind in a jar. Bleakness of the youthfull essence the failure of men to react in pigments, I feel the lampost of doom at the door of the fire
Doesn't matter what the kids on the play ground did as much as the grown ups in charge of playground oversight. They are the real problem. Timmay looks dumber every minute! Another one of Obamas best!
Mr. Geithner is not a fool. Presidents an administrations come and go. This is a short term gig that will enhance his career. He knows long term who his employers are. I doubt if he even sees them as employers. Rather he probably seems them, and himself, as an aristocracy. Perhaps in many ways like Europe was run prior to WWI
Secretary Geithner represents what is wrong with our corrupt system of government which is to protect and provide for the wealthy and the powerful. Their need control and greed will bring forth darker days This financial crisis is nothing more than a sign of what is to happen. Obama has the right ideas and the wrong people. The die is cast, it will be one problem after another, with each problem worse than the one before.
Please, tell me again about the Golden Goose
Either Geithner misspoke or he still doesn't understand what happened - and that is deeply troubling.
One thing Geithner does not do is mis-speak - anyone who articulates while making precise gestures with their hands and fingers is an individual who carefully selects their words. Not only does he understand what happened, he helped to design it and was recruited to fully exploit it.
"Mr. Geithner is not a fool. Presidents an administrations come and go. This is a short term gig that will enhance his career. He knows long term who his employers are. I doubt if he even sees them as employers. Rather he probably seems them, and himself, as an aristocracy. Perhaps in many ways like Europe was run prior to WWI "
I amend my comment to agree with you. He DOES understand. His solution would make this understanding questionable, but the motives you speak of are over-riding. (You're not the Berkshire East/ex-UBS Shaeffer, are you?)
Giethner is just the waterboy for the oligopolists as discribed by Simon Johnson (MIT Professsor and former IMF Economist). The US is in the same circumstance as third world countries that became insolvent in the past decade (Mexico, Vietman, Russia, etc.), the difference being the US is a major developed country and has the reserve currency. The oligopilists in finance and the military industrialist state are doing whatever is necessary to maintain themselves in power. It is ugly and will not end well. Do a search on simon johnson to get more, if interested.
If there were members of the NyFed in 2004 that could somehow discern that a "shadow banking system" had arisen, as we now have begun to describe it in the last year or so, and also discerned that the rating agencies were clearly wrong, in 2004, when it could have still mattered to do something....well, such an individual would be a great candidate for a top regulatory post.
But....while there must have been millions of us that knew house prices were going crazy in 2004, were there individuals that had a clear understanding back then that the ratings were hogwash and CDS and other derivative were blowing a more rapid bubble?
It's a great question.
On the other hand, what Geithner said in the quote here is all true.
It seems like a regulator in 2004 in order to do something would have needed the authority to pry into books at AIG for instance.
But we know factually that the various regulators for AIG were a mismash, right?
In other words, what Geithner already has said about the need for a more rational regulatory system seems to recognize that.
But in 2004 was there in fact a regulator that had a specific responsibility that could have mattered and specifically did not do their job? Pinpointing that would be of interest.
Meanwhile, I'm tending to believe what has already been said: a mismash of regulators, and thus no clear responsibility.
I'm really late to this thread, and I know the crowd has moved on, but I wanted to say: CR, thanks very much for continuing to point this out...in my view both lenders and borrowers acted in fairly rational ways given the structural distortions of the market. The problem was the crazy 'gaming' and distortion of the system, and that was the result of a deliberate policy of breaking regulatory oversight...that's Raygun ideology, but both parties were complicit...Simon Johnson is really dead on about the Oligarchy. They are mainly just smash-and-grab artists.
Woa?
Geithner is a bankster agent ...
Not as troubling as having a tax cheat overseeing the IRS, but maybe that's just me.
Geithner will never admit to
the incompetence, greed and fraud of Wall Street banks ...
or the failure of regulators, since he was a regulator at the
New York Fed ...
And now he is pushing for a private
OTC club for his bankster buddies
and their toxic derivatives ...
We could have the Smartest People in the World in there, and I wonder if it would make any difference... When the tower collapses, is there anyone who could save it?
The immense regulatory failure is well known.
He just points out more of the aspects of the same problem, CR.
I don't find this to be such a big deal.
He further points out that interest rates were kept too low, and too long.
That is quite the stunning criticism of the Fed, and not just implied but explicit criticism of an institutional failure that led to epic damage.
So, I don't have quite the same takeaway you have from this post.
Someday this war's gonna end...
Jesus! will Obama ever wake up and realize what these fools and crooks are doing to this country--and his Presidency? As far as Im concerned Geithner is the most troubling person I can think of, other than perhaps Cheney.
ShadowInventory
The banksters are already in post collapse mode ...
trillions in tax payer money ...
to bail themselves out ...
while the public gets cuts ...
and jobless futures ...
Timmy and BB keep saying that they have to do what they or doing or the whole system will fail... I wonder what that would mean exactly... I hope they are smarter than me, but deep down I have a real bad feeling about all the printing/creating new money and debasing the currency, and also about all the debt accumulation and deficit spending by the Fed. govt... Debt bad, Savings good, in my simple world... I think we are in unknown territory with no idea what the unintended consequences will be...
another overlooked cause is simply demographics. ponzi economics only works with an increasing expanding base. the massive immigration of the past 15 years gave us a luxury Japan didn't have. no more kicking the can...
FDR did the right thing ...
The Bank Holiday ...
Let the chips fall where they may ...
Instead we get
socialism for the banksters
and Disaster Capitalism for the public ...
To be clear - I have no problem with innovation and securitization in general (I do have some problems with specific innovations like most Alt-A loans!)
But, as Seidman pointed out, when innovation is happening - that is when the regulators need to be looking for loans that will probably not be repaid.
It was obvious there was a problem - by 2004 at the latest - with first time homebuyers putting no money down and borrowing 10 or 12 time their income. That doesn't work and it was obvious.
Blaming the borrower is absurd. It was rational for people to speculate. Therefore it was a systemic problem ... and the first words out of Geithner's mouth should be about regulators and the failure of oversight. Otherwise he just doesn't get it.
best to all
I made some high fiber cherry muffins in a regrettable spurt of productivity.
I combined 2 recipes, so I hope they come out.
Geither's forehead wrinkles are becoming more pronounced.
will Obama ever wake up and realize what these fools and crooks are doing to this country
I don't think he - or anyone - has seriously contemplated what a post-FIRE economy would look like. What are we going to do? Go back to competing as a low-cost manufacturing center? The Pac Rim might have something to say about that.
My mom and dad taught me that knowledge was important.
But the more I watch the U.S. economy, the more I realize that it's basically run by Alpha male dildoes with no true understanding of anything.
FDR created the CCC camps to soak up the unemployed and keep them from getting into trouble... Maybe we get something like that again...
Don't forget that the oil price run-up was a trigger of the collapse. When credit was extended to the house-of-cards limit, anything that forced increased personal expenditures could have pushed it over. It happened to be oil. There is a big lesson there about systemic risk: a cartel is a systemic risk to everyone, everywhere, even the cartel owners.
That's quite a bold headline for you, CR, who are known for your clear head and even-handed approach. Not like you to lay blame. You keep long hours for this blog and your restraint has been admirable. Is the circus beginning to wear on you a bit? I hope you know how much you are appreciated. The world needs more people like you.
a tax cheat won the indy 500.
Amen, Feckless.
Please wally, from where I stand, the collapse was evident long before the oil run-up.
Several policy missteps suggest that investors should stop trusting -- and lending to -- the U.S. government. These include the state’s pressure on Bank of America Corp. to buy Merrill Lynch & Co.; the priority given to Chrysler LLC’s unions over the automaker’s secured creditors (bolded for you, longtimelurker/shorttimeastroturfer); and the freedom that some banks will regain to supersize executive bonuses by giving back part of the government money bolstering their balance sheets.
Dollar Is Dirt, Treasuries Are Toast, AAA Is Gone: Mark Gilbert - Bloomberg.com
"The world needs more people like you."
No, it doesn't.
It needs less people like us and more monkeys.
My mom's house closing will happen in a month. Where the heck are we gonna put the proceeds?
Shiller's dad is in jail at 90 for refusing to pay taxes.
LL let me tell you about my Asset Management Service...
Are you twirling your mustache, Shadow. Tell me you aren't twirling
your mustache.
HAHAHA
YOU MUST PAY THE RENT!!!
i cannot pay the rent...
YOU MUST PAY THE RENT!!!
" Where the heck are we gonna put the proceeds?"
~~~~~
Somewhere liquid and safe ?
Liz, you're a gem. LOL.
Feckless Ness, I was just amazed at Geithner's comment. He should issue a clarification.
Greenspan keeps getting blamed for keeping interest rates too low for too long - but that misses the larger problem of failure of oversight under Greenspan.
If we aren't clear about the key causes - or, as it appears, Geithner's doesn't understand the causes - we will just repeated the same mistakes in the future. Seidman nailed it in 1993. Geithner hasn't shown an understanding yet ... and that is frustrating.
Yes, Geithner was part of the problem since he was a regulator. So what? Just admit it - acknowledge the problem - and fix it. I'm all for 2nd chances.
best wishes
A month ago watched Timmay before congress. He said three times (3 different ways)
"The providers of capital can't get funding"
Sheesh. If they need funding, they are not the providers of capital. Conduits, maybe, but not the providers. I had to turn the TV off.
As CR says "Either Geithner misspoke or he still doesn't understand what happened - and that is deeply troubling. "
Shockingly, he apparently doesn't understand. Not even the very basics.
I don't understand why Timmay gets referred to as "smart."
The trigger (but not the cause) was the Federal Reserve's crackdown on subprime lending, which began in 2006 and which also happens to be the peak. Up to that point, there was always a greater fool. The government's actions regarding FHA is an implicit acknowledgment of this.
And that would be where mmck?
securitization <==> automated underwriting
There may not be many people left in the banks able to do loans the old fashioned way. Everyone should know that their loan app. isn't approved by an individual anymore. No, not even a committee. It's work for a computer program, now.
I don't know, CR. Broward may be on to something. Alpha male dildoes, indeed.
Feckless Ness, nah - the circus doesn't wear on me. I supported Bernanke (the best we could hope for at the time IMO), and Geithner. Bernanke was slow to recognize the problem, but he has been innovative in providing liquidity (the role of the Fed in this type of crisis). I know many commenters don't like Bernanke's performance, but I think he is doing what he is supposed to do now.
But I have far less confidence in Geithner.
best to all.
OT-
Driving around the city this week I noticed the most wheel locks on vehicles ever....while at the same time noticed change of tactics by parking cops in neighborhoods. Caught them coming back to street that they had ticketed already and street sweeper came by to write more tickets on vehicles that parked after they went thru..
San Francisco parking ticket department will become model for other cities..They're generate some great revenue and are growing part of city government..
CR
Geithner will always put the welfare of the banksters
ahead of the welfare of the country ...
Why you think he is salvagable escapes me ...
He has proven, in your own words, incapable
of understanding the problem.
His loyalties and future depend on him not understanding it .
The big scary thing about these guys is that I dont think they actually know how this will work out... They keep saying that they will pull all this new liquidity back out of the system quickly when they need to, but I'm not sure they can pull that off... And when Mohamed El-Arain is worried about that too, then I get really concerned...
He is a secret Vulcan. Or, perhaps Romulan. Look at those ears!! Look at the upward tilt of
the eyebrows.
Lower the interest rates so that people can make the payments. Hahahahahahahahah. He
should sit in on a few of my consultations.
Innovation as spoken of(mostly by the culpable) in this on going crisis is nothing more than a red herring.
I've seen this movie before.
Securitization is not new. CDS(insurance) are not new either.
CR I think Geithner is way past redemption at this point. Deception, incompetence, and an obvious front man for Wall St.. If anyone should be booted to the curb at this point it is he.
You think the O will kick BB out too? If so who gets in - Summers?
I stopped listening. All I heard after a while was blah, blah, blah, blah.
Of course they don't know how this will turn out, I don't expect them to.
But I'd like more than blah, blah, blah.
Doesn't he know about underwater homeowners? 'Course it wasn't the
O's administrations fault that cramdowns failed.
Didn't we have the alpha male dildo conversation months ago?
When you look at the collapse of the housing market, who do you think bears the greatest responsibility?
The Housing Bubble Hall of Shame® has the answers they are seeking.
MWAHAHAHA
CR is making a strong and important statement here.
It seems to me that Geithner won't or can't stand up for the American taxpayers against the banksters. A famous (retired) econ prof said last month that Geithner doesn't have the experience dealing with the top banksters. The Secretary's only experience in this area is "carrying their baggage".
Squidward, that is exactly the problem. Geithner thinks investors can't find productive uses for their money without the intermediation of Wall Street.
There are certainly plenty of instances where a knowledgeable broker can add value to a transaction. But there are very few examples of anyone associated with Wall Street performing this function in the last 10 years or so. All Wall Street did in the 2000-06 period was find ways to complicate transactions so the bankers could skim multiple fees without investors realizing the amount of risk the investors were taking on. The bankers were so successful that complicating transactions became the growth industry of the era.
That era is gone now, and nothing Geithner does can bring it back. People won't accept those risks again, and the economy simply isn't strong enough to carry such a large parasite load.
Unfortunately, Geithner appears to believe that the 2000-06 banking model is not just a productive model, it is the only possible model. The situation literally can't be fixed with him in charge.
What I find comical is that the investor expectations of inflation will now be realized throughout the economy.
The massive stimulus and bailout guarantee we will have inflation, especially as our vendor financed trade deficit collapses.
Now, we just wait for the next bunch of collapses as bit by bit the new economic regime arises from the collapse of the old.
The new new is coming, and the old is defunct.
So, realistically, one should be buying commercial property at the bottom of the collapse, but that will still take time.
Knife catching is painful until inflation finally manifests.
Someday this war's gonna end...
broward (homepage, profile) wrote on Sun, 5/24/2009 - 5:23 pm
My mom and dad taught me that knowledge was important.
But the more I watch the U.S. economy, the more I realize that it's basically run by Alpha male dildoes with no true understanding of anything.
exactly. these aren't the "smartest guys in the room", just the toughest guys in the room. but a large fraction of the "smartest guys in the room" do work for them. and yes it all comes back to primate politics in the end. scientists in the future may in fact conclude there is nothing more to politics. the more things change, the more they stay the same...
Off to have a muffin.
"...the first words out of Geithner's mouth should be about regulators and the failure of oversight. Otherwise he just doesn't get it."
geithner and summers get it... there harvard education can at least understand the cause of the crisis. for the general public, they are still playing politics. for them the blame can be implicitly placed at the bush admin and greenspan. there is no conspiracy except of no accountability... oh and trillions in writeoffs to bailout wall street.
they are proactive with the economies financial sector... but completely lost with everything else. time and human nature will guide us wherever...
Geithner reminds me of the politician who shakes the guys hand who came out of the coma in the crowd and the guy gets a vision of a nuclear holocaust that he creates..maybe it was a financial holocaust instead. or as we know it THE CREDIT DEAD ZONE
There was a thread many moons back that stuck with me - about how the solution to a systemic problem really doesn't fix the system - it generates a new analog system on top of the old one. Somebody said he saw this in IT all the time.
So, like a house of cards, the existing system continues to grow in size and complexity until a portion of it collapses under its own weight. Rather than tearing down the whole structure, the collapsed portion is rebuilt and fortified so it can bear more weight and complexity.
What we are seeing is not the total collapse of our economic system. There will be no systemic fix. There will be no new foundation. There will only be sufficient buttressing to allow additional growth and complexity.
Welcome to the holographic Universe.
CR,
I have to respectfully disagree with you on a couple of things.
I don't think it was reasonable for people to speculate at 100+:1 leverage (zero down) on "investments" in amount greater than their net worth. It's one thing to speculate with 5% of your net worth using 5:1 or 10:1 gearing, but 100+:1 with more than your entire net worth? I call that unreasonable.
And even option ARMs have a small place for specific circumstances. For example, it's not all unusual for even low-level executives to get a substantial part of their annual income through awards of restricted stock. A couple of times a year, they can cash in their winnings and pay bills. Yes, it's high-risk, but it makes sense for some people. The problem with Option ARMs is that they were thoroughly abused, like many other financial "innovations". This is one of the changes in lending that you mentioned - the provision of Option ARMs to people who had no sane justification for using them.
But Geithner still scares me, and I don't think he gets it.
"So, realistically, one should be buying commercial property at the bottom of the collapse, but that will still take time."
~~~~~
Ask the Japanese about buying CRE over the last 20 years or so ...
Geithner is impotent. I mean, incompetent. Wait, maybe I had it right the first time.
" just the toughest guys in the room"
Ahem, I'll debate "toughest", their head comes off just as easily as anyone else's. But they're making an excellent argument that capitalism rewards dysfunctional behavior - The Pyschotically Greedy & Terminally Desperate. Anyone even halfway normal tries to avoid these guys.
Gresham-Horne Law - the greediest, unethical and desperate people drive out good people where-ever there is money.
Geithner is doing exactly what he's supposed to be doing ...
Putting the banksters' welfare above all else ...
He will crash the economy to protect the banksters ...
and that's where we are headed ...
Geithner is the banksters' servant , not the Publics' servant ...
I'm not sure that Timmay meant that his list of causes were the ONLY causes but he does conveniently forget about regulation. That would just open a can of worms for him. But even CR's "innovation and lack of oversight" explanation doesn't get at the heart of the problem. I think it can be summed up as: our economy was build on exploitation (which, it occurs to me, may be what some here mean when they talk of our "ponzi economy").
Exploit immigrants. Exploit dumb homebuyers. Exploit over-eager investors. Exploit lax government oversight (and more: lobby for minimal oversight). Exploit the unwary (e.g. smokers). And on and on. "Opportunity" has too often meant that someone was being exploited.
This will take a generation to get out of our system because it is really part of our culture now. Execs/Banksters/MBAs/wealthy are still conniving to "win" in this recession/depression (and they are winning, mostly at the top, so far). These are people whose self worth is measured in dollars, and see the world as a "zero-sum game" (i.e. there is always a winner and loser). It started in the 80's, I think, when "greed is good" became in vogue.
I think global warming and the financial crisis may be cathartic. The move toward "sustainability" and the "triple bottom line" seems to be strengthening. That is refreshing but still only "green shoots" in a scary jungle full of creatures like banksters.
ok one more time with different profile name...I posted this when he was at NY FED a long time ago.. I trust him like the scorpion dangling on the rope that holds the sleeping baby in steinbecks novel......the pearl..
Geithner in the day
http://www.bloomberg.com/apps/data?pid=avimage&iid=iIfSMQjbZGXw
Geithner at night
http://www.wweek.com/photos/3352/large/9909.jpg
CR.........I might venture to say that here on this "little forum" are 200-700 (depending on the time) of the best informed people in the World. You should incorporate a new "Quick Vote" kind of thing once a week or so. See what your readership thinks about a subject pertaining to your threads - it might even increase your numbers. I'll send a statement for "consult fees" when appropriate......
"Therefore it was a systemic problem ... and the first words out of Geithner's mouth should be about regulators and the failure of oversight. Otherwise he just doesn't get it."
I have no doubt that he gets it. However, it would just not serve his purpose to focus on stricter regulation, at the same time that he is trying to re-inflate the bubble. Having to account for risk expenses, would be quite inconvenient when he is trying to sell PPiP to the masses. It is hard enough to try to sell MBS in the face of a falling dollar and rising rates, without the SEC poking around where it might not be helpful.
it might even increase your numbers
Is that a good thing?
"Didn't we have the alpha male dildo conversation months ago?"
Yes, and it stuck in my mind. I realized that the CTO of my Dot Com company fit your description. He was an ex-policeman with ZERO IT background. But he made several million dollars before he and a couple of others destroyed the company.
I've pondered it since then and realized that your comment is often true.
I'm really thinking about ditching the twenty years I have in IT.
it's increasingly not worth it, just a lot of weenies like that, shrieking about sales numbers.
We are about to get a very good idea just how much liquidity the FED can soak up with the auctions next week. Personally, I think the odds of a failure similiar to the Bundesbank failures in 2008 are quite high.
-1 fer spellin
imo, geithner gets it... he is just a weak bureaucratic desk jockey. i dont doubt his intelligence... its his will and ability. summers on the other hand is the devious one.. .like cheney was. all of them are surrounded by the wall street elite which completely influences there decisionmaking. and obama seems to be a talking head celebrity president on a never ending campaign trail... no real power except to please as many ppl as he can. he is held accountable to wall street and lobbyists who keep him close. no change. more of the same.
Geithner's answer can be summed up as follows:
Hoocoodanode?
I like how Geithner keeps calling Obama's economic team terrifically talented people.
It amplifies Paul Krugman's recent comment to the effect that Summers and Geithner are really smart guys, just ask them.
"I don't think it was reasonable for people to speculate at 100+:1 leverage (zero down) on "investments" in amount greater than their net worth. It's one thing to speculate with 5% of your net worth using 5:1 or 10:1 gearing, but 100+:1 with more than your entire net worth? I call that unreasonable."
That is the key bit there. Which is really what "1) rapid innovation in the mortgage industry (securitization, automated underwriting, rapidly expanded wholesale lending, etc)," was all about.
CalculatedRisk,
I am amazed that you are amazed. What were you expecting from Rubin and Summer's protege? Think of it another way.. would you expect Himmler's assistant to be significantly less anti-semitic than his boss? Or Pol Pot's henchman to be much less blood thirsty than his boss?
//Feckless Ness, I was just amazed at Geithner's comment//
We are also get a very good idea of how much liquidity Gold is gonna soak up next week.. Could be a bad week to stop sniffing kool-aid flavored glue.
CalculatedRisk,
Maybe it is both.. he is lying and he is incompetent.
//Either Geithner misspoke or he still doesn't understand what happened - and that is deeply troubling.//
he is held accountable to wall street and lobbyists who keep him close. no change. more of the same.
He is also ultimately responsible to the American people and to history. He owns this crisis now, especially since he is following the same path as Bush. Only some of the players have changed.
"I think the odds of a failure similiar to the Bundesbank failures in 2008 are quite high."
I'd take that bet, as I believe Ben will be sitting in the background on a astounding stack of freshly printed notes.
none of them have the balls to stand up to the elite money... instead they ask them for advice and help.
He is a secret Vulcan. Or, perhaps Romulan. Look at those ears!! Look at the upward tilt of the eyebrows.
I know who Timmy reminds me of - Pan! Can't you just see him with a furry goat body, hooves, and a little pan pipe? A character worthy of myth and fantasy.
geithner is eraserhead... hes living in his own kafkaesque nightmare... at the expense of the american public.
Feckless Ness,
Why think of him as an old fashioned flamboyant villain? Think of him as a quiet bureaucrat doing his job.. Eichmann..
//I know who Timmy reminds me of - Pan! Can't you just see him with a furry goat body, hooves, and a little pan pipe? A character worthy of myth and fantasy.//
Goat boy!!
Scapegoat!
Why think of him as an old fashioned flamboyant villain? Think of him as a quiet bureaucrat doing his job.. Eichmann..
+1
Timmy--just making sure the trains run on time.
BH,
swapping dollars for claims on dollars aint gonna solve anything.
as the world churns.....tune in next week.
a QE during the bond auctions would dislocate the dollar and spike the precious while ramping inflations expectations or devaluation concerns.
short the widows and orphans trade is coming right up.
"Gresham-Horne Law - the greediest, unethical and desperate people drive out good people where-ever there is money."
Particularly when no one is looking, i.e. a lack of regulation.
The honest and rational players were driven out, as the big money sought out the ponzi-like returns. Without accountably there is anarchy. I have seen it over and over again in the I.T. world, where some manager posts phenomenal sales, headcount reductions and savings, and moves on to his next boondoggle just before the SHTF.
But Ayn Rand said otherwise.. and what about Austrian economics?
Ironically, Adam Smith had a much better grasp of the problems inherent in free markets than those who claim to follow his ideas (and that is why they only mention "the invisible hand"). Smith was very critical about lobbying, supported progressive taxation, wanted to outlaw associations of merchants and professionals, was averse to opaqueness in business transactions and believed that very low and high rates of interest both encouraged fraudulent enterprise.
//"Gresham-Horne Law - the greediest, unethical and desperate people drive out good people where-ever there is money."//
"a QE during the bond auctions would dislocate the dollar and spike the precious while ramping inflations expectations or devaluation concerns."
Agree completely. But I highly doubt they are willing to take the risk of a failed sale. Bad PR that.
broward (homepage, profile) wrote on Sun, 5/24/2009 - 5:55 pm
But they're making an excellent argument that capitalism rewards dysfunctional behavior - The Pyschotically Greedy & Terminally Desperate. Anyone even halfway normal tries to avoid these guys.
Gresham-Horne Law - the greediest, unethical and desperate people drive out good people where-ever there is money.
economics is a psychopathic system. that doesn't mean it's useless by any means, much less ineffective, just that it is a horrible basis for a culture, a philosophy of life or a value structure embedding either or both. when the most successful outputs of the system (i.e. those which have best internalized its norms, laws, and behavioral idiosyncracies) are ruthless self-interested psychopaths it tells you something about that system.
The graph for people that think this started in 2002 ....
http://4.bp.blogspot.com/_rWY3qGfe6gc/SI1dtCRoXGI/AAAAAAAAA5o/FCp7-0EiyKI/s1600-h/Picture+1.png
Trickle Down Reaganomics with Greenspan at the wheel ... debt, debt, debt ...
CR:
"Either Geithner misspoke or he still doesn't understand what happened"
Or, what?
Here it is again:
CR:
"Therefore it was a systemic problem ... and the first words out of Geithner's mouth should be about regulators and the failure of oversight. Otherwise he just doesn't get it."
Why does this formulation persist?
Why repeatedly and pointedly exclude the other and more likely possibility that he does understand. Are you not aware that you're doing this? Or is it for some reason? Oversight on your part, or psychological manipulation?
"it is a horrible basis for a culture, a philosophy of life"
Right, that's one argument I have with the Free Marketeers.
They see the market as the foundation for morality, not as a function subservient to culture & morality.
Another big flaw is that they don't see a free market as part of an equilibrium, a constrained environment. One false assumption is that there's a big pile of work in the FuturoSphere just waited to be consumed. If you view the macro-system as a few equations, it's pretty obvious that pure capitalism produces below average productivity just as much as pure communism does.
That's why almost all nations are a mix of the two, it's a better producitivity point.
Blackhalo wrote;
"I have seen it over and over again in the I.T. world, where some manager posts phenomenal sales, headcount reductions and savings, and moves on to his next boondoggle just before the SHTF."
I have seen related boondoggles more than once in product development companies. It goes like this:
1. Fund development of numerous product prototypes, building a team or teams that could credibly do the product development if you don't look too closely at the lower-level hires or the line management.
2. Find a sucker, and convince them that the products are ready to ship, even though all you have is preliminary prototypes.
3. Sell the company to the sucker, making certain that the sucker can't talk to the engineers during due diligence.
4. Profit!!!
Newbie 101
LOL ...
Working weekends at the UST Timmay?
What this means, essentially, is that the Obama administration has no plans to seriously overhaul financial regulation.
3. Sell the company to the sucker, making certain that the sucker can't talk to the engineers during due diligence."
Sometimes the sucker doesn't care if he believes he can re-sell it to bigger sucker.
I just went back and read this thread from the afternoon of March 9th when the market bottomed at 666 (so far)... Congrats to user Sauron for telling everyone to buy then... I would also congratulate Mark Faber, but in one sentence he says rally through April and in the next sentence says the market could go to 500, so STFU then.... LL was still bearish or at least skittish...
Roubini on CNBC: Could be 36 Month Recession | Hoocoodanode?
What this means, essentially, is that the Obama administration has no plans to seriously overhaul financial regulation.
Not gonna be any serious overhauling until things get a lot worse.
broward (homepage, profile) wrote on Sun, 5/24/2009 - 6:29 pm
"it is a horrible basis for a culture, a philosophy of life"
Right, that's one argument I have with the Free Marketeers.
They see the market as the foundation for morality, not as a function subservient to culture & morality.
Another big flaw is that they don't see a free market as part of an equilibrium, a constrained environment.
yes. capitalism's biggest problem is that the engine is unfit to steer the boat. try building a self-steering mechanism that runs solely on positive feedback.
mmckinl, do you really not understand what I said?
the engine is unfit to steer the boat.
Separation of concerns.
That's an interesting view I never thought of.
"Sometimes the sucker doesn't care if he believes he can re-sell it to bigger sucker."
I haven't seen that one before, I must admit. At least I have never seen anyone pull it off.
Potemkin Products, Inc.
Newbie 101
"mmckinl, do you really not understand what I said?"
~~~~
You reference facts not in evidence ...
ie: That Geithner understands ...
Geithners pronouncements preclude the fact that he understands
that regulators failed miserably and were the direct cause of the
Reaganomics - Greenspan bubble bursting ...
With a great deal of due respect to CR.
Securitization, and the long standing practice in the United States of allowing the sale of loans from within the regulated banking sector to outside it, is the problem.
It is a massive exploit in the fractional reserve banking system, and until it is closed, this mess will continue to spiral hopelessly out of control.
Of course, closing it is a problem in and of itself.
-- w
"I haven't seen that one before,"
Our Dot Com bought two other Dot Coms and folded their sales into current sales to create the illusion that sales were rising when, in fact, they'd already peaked and rate-of-change was declining. It seemed transparent to me but it popped the stock price for awhile.
broward (homepage, profile) wrote on Sun, 5/24/2009 - 6:31 pm
3. Sell the company to the sucker, making certain that the sucker can't talk to the engineers during due diligence."
Sometimes the sucker doesn't care if he believes he can re-sell it to bigger sucker.
they call that guy "Mr. President"
All, I changed the title to make it clear that Geithner is blaming borrowers and others - but not regulators - for the bubble.
best to all
Timmah G. & Reality never the twain shall meet. What a freaking tool.
CalculatedRisk Sun, 5/24/2009 - 4:46 pm
ROTFLOL ...
broward (homepage, profile) wrote on Sun, 5/24/2009 - 6:39 pm
Separation of concerns.
That's an interesting view I never thought of.
if you think about it, I believe it makes perfect sense. capital is the means of growth which perpetually confuses itself with the ends. that's sort of the paradox of money anyway, isn't it?! a continual transition that always tries to become a State.
Geithner is a pawn--everyone knows that. He is there to serve the interests of wall street.
Yet CR criticism has no merit. G just agrees with the interviewer, mentions regulation, rates just not the way CR wants it. No biggie.If criticism is not substantial and focused, it distracts.
Ahhh sorry thepitchfork criticism is warranted....
Bush did it with the Iraq war...
War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives. A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small 'inside' group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes."
- U.S. Marine Major General Smedley Darlington Butler, one of only 19 people to be twice awarded the Medal of Honor,
Obama is doing ti with the 19 too big too fail banks
The US financial ponzi scheme is a racket.....Obama and his Wall St bought and paid for economic team have put all their chips on the Banking Oligarchs. It is conducted for the benefit of the very few ( The 19 too big to fail banks ) at the expense of the very many ( the American taxpayers). Obama's objective with his Wall St bought and paid for economic team is to pump up great chunks of the Big Shitpile that's essentially worthless unless the peak real estate values of the bubble can be miraculously restored.
And they will fail because America and Americans are swimming in debt
U.S. National Debt Clock : Real Time
km4 wrote on Sun, 5/24/2009 - 5:01 pm
Spot on km4 ...
Broward, do you know anyone in Mechanical engineering? Want to have something interesting to try and make?
I have an idea for a small platform for flight and motor racing simulation, would have a larger range of movement than professional flight simulators, be much cheaper, much easier to maintain, and take a lot less space ... could be something people would be able to have at home.
I'd like to find a few guys to make it happen.
/rant on
Someone needs to take that man (Geithner) aside and refer him to a good tailor. His suit looks like it came off the rack at Sears.
And lose the orchid tie. Only pimps wear orchid ties.
For Christ's sake, he's supposed to look like a banker, even if he isn't one.
/rant off
Either Geithner misspoke or he still doesn't understand what happened - and that is deeply troubling.
Not troubling at all. Whenever he needs to set policy it will be handed to him by GS, MS etc. All is well
Minnesota is going to cut $2.7bn in spending. For reference their population is 5.17mn, GDP of $234bn, a formerly $17bn general fund, taxation as a % of personal income ranging roughly from 15.5% to 16.5% back to at least 2002 (eg total state revenues divided by total personal incomes, not the personal income tax rate)
A Governor and His Veto Pen - WSJ.com
Supporting Budget Documents
Geithner is frontman for a criminal enterprise.
That's a 15.88% budget cut.
The scenario that is excluded by those constructions is the one in which Geithner does understand, but is concealing what he knows, by skillful omission. This seems more likely to me, but my opinion on that isn't important and isn't my point. What is important, is that in my opinion this exclusion decreases the likelihood, or momentarily blocks, the consideration of the uglier option.
It is not necessary to claim that this uglier scenario is fact, but it is a mistake to positively exclude it in this way. Again, I'm wondering if you really don't understand this. It's like this: an endless argument over who is "stupid", the Republicans or the Democrats, obscures for many people the possibility that they are both corrupt, that they are "stupid" intentionally.
Again, I can't believe this isn't obvious, here.
EHP - I think that's what they call "The Paradox of Everybody but Ben is Broke".
They got 5 trillion left. It has to be enough, if not, endgame.
Nice softball questions. The American public is short changed again. Yay
Kinda OT, but I just found what may be the Case-Schiller equivalent for Canada:
http://www.housepriceindex.ca/
BTW, any Canadians have advice on Canadian Government Notes or Bills?
If the C$ drops back a bit, I'm thinking of converting some money.
Why doesn't Geithner have eyebrows?
There's something sinister about a man with no eyebrows.
" "The sky isn't going to fall," Mr. Pawlenty told reporters on Tuesday, just because Minnesota has to trim 3% to 4% from a $34 billion budget. "
EvilHenryPaulson
Pawlenty describes it as a 3%-4% budget cut ...
It surely is troubling if Geithner does not understand the failure. Home buyers were not the PROBLEM! Regulators who looked the other way Might be.
We have on an ongoing basis,
to mention a few of our problems.
We are also massively indebted. Is'nt it a given that by the end of this crisis two or more of the systems above will be cut down to size. Now leaving aside the military, since it's a holy cow to both parties it seems to me that finance, higher education and healtcare will have to take cuts. Now assuming that drastic cuts in Social Security is politically unfeasible even for Obama, I don't think that Giethner/Summers can fully protect the bankers even if they want to.
mmckinl,
Sorry, a $17bn general fund and $26,852,555,000 total spending. I assume that the cuts will have to come from the general fund, unless he is cutting the program tied taxation? More than info data in the second link of that post.
Still, a $2.7bn cut on $27bn is a 10% top line spending cut.
the wsj.com article is poorly written in that it mixes annual and biennium figures. mn is one of the few states that operates on a biennial FY budget.
sm_landlord,
Wait until the next "flight to safety" event where the USD index spikes. As for the index, I don't know about that, will look at it later. There are a number of free ways to track Canadian real estate.
Try: Centre for Urban Economics and Real Estate or TD Economics - Canada - National Economy
Universities and banks. Each bank tries to find its own angle, and universities tend to be local. The one comprehensive deep resource on housing in Canada would be the CMHC which is the national mortgage insurer up here (only insures bottom 80%, but a few years ago some moonbat was appointed from the Conservative party and they brought in 40 year mortgages for 06-08 before stopping that and going back to max 30 years)
You are right on!
oops, meant that for mmckinl.
Basel Too,
I took all but the $2.7bn spending cut, which I got from the wsj article, from Supporting Budget Documents
I would think state revenues are probably down at least 10%, or $2.7bn, given the condition of some other states
As for the article's author, a lot of people are stupid. I don't know what to say about it
"Either Geithner misspoke or he still doesn't understand what happened..."
Um, DUH!
It is painfully obvious that Geithner does not understand the problem. The PPIP is a shining example.
As Barry Ritholtz so nicely illustrates in his new book Bailout Nation, securitization and low Fed Funds Rates turned mortgage financing on its head. Since the beginning of time, lenders lent to borrowers based on their ability to repay. With securitization, lenders lent to borrowers based on the lender's ability to repackage and sell the loan. Whether the borrower could repay or not was irrelevant. Low Fed rates spurred bond fund managers to buy the AAA rated MBS garbage that spewed out of this process as they were desparate for a safe, high yielding investment instrument. (Somehow, safe and high-yielding in the same sentence should have been a warning.)
It should be obvious that the securitization experiment has failed. Nevertheless, Geithner and Bernanke's great plan is to resurrect it through PPIP facilitated asset price reflation and TALF 3.0. You know, "get credit flowing again."
To repost something I said earlier:
We have an Agrarian Economy. Consumers are the soil, big finance and government are the farmers. The soil has been so over-farmed at this point that, rather than let it lie fallow to recover, we are pouring on the XXX power fertilizer in order to squeeze out one more harvest. This is despite the label on the XXX fertilizer bag warning that its use may lead to the need for a complete topsoil transplant.
Basel Too
Thanks ... I'm still not clear abut the actual % of the budget cut ...
EHP says 10% ... the article 3-4% ...
Are there dedicated taxes Pawlenty includes but can not reallocate?
their projected spending of the 2010-2011 general fund was K-12 Education 39.1%, Health & Human Services 28.7%, Property Tax Aids & Credits 9.7%, Higher Education 8.9%, Public Safety 4.8%, Debt Servicing 3.4%, ...
Once you start cutting in K-12, you need to close schools to really capture the savings. Could be like the dustbowl effect, where people just abandon their homes.
My Dad, a dropout of seminary, went to the CCC in Maine. It was one of his best life experiences.
EHP, Thanks!
So, it was those borrowers.
Is it the taxpayer's fault when taxes are unpaid?
mmckinl,
It's only your 3-4% if the $2.7bn is cut over the next 2 years (they are in the 2nd year of a biennial budget), which makes no sense†. Even if that were the case, they would have needed a fat surplus going into this to only be down that little or be projecting some fat growth for tax revenues to completely recover and then some after a 1 year blip
see: http://www.mmb.state.mn.us/doc/budget/report-spend/feb09.pdf for historical spending
† Well actually it does make sense if you count current budget cuts against cumulative past revenues which is bullsh..t, as in the national deficit is only 0.0001% of cumulative GDP since America's independence in 1776. He still has to cut spending 10% for the upcoming fiscal year, would road apples by another name smell any fouler?
MN is facing a $4.6B biennial shortfall. the $2.7B that Pawlenty is "cutting" is from the governor's unallotment powers.
MinnPost - Primer on unallotment: How it works and why it's done
"It's only your 3-4% if the $2.7bn is cut over the next 2 years"
~~~~
It ain't mine ... it's Pawlenty's ...
I'll take your word for it ...
i don't know, Michael Shedlock has been pretty skeptical of placing blame on regulators saying that they are going to miss things like this anyway. so why bother having them around?
but that doesn't mean I don't agree with you that i think regulators were slow (or stupid) to recognize and react to these financial innovations.
mmckinl,
sorry about that then, I thought you had another source on it
re: State spending cuts
The reason why I mentioned it, other than the fawning wsj piece, is not that projecting from per capita numbers to a national basis that would total $158bn in cuts. It's that state spending is highly trusted. I wish I had the data handy to back this up, but I'll pull some out of thin air to make the point.
A state worker is 10 times less likely to be fired or laid off than a private sector worker and 100 time less likely than the swing shift worker at Abercrombie and Fitch store. So when those individual workers do their budgeting, the chance of an allowance for a period with no income is much different. Just like how mortgages had such high carrying rates on bank balance sheets, so do state pay checks. They are the rock of many local economies in rough economic times
later
Shedlock has read too much ayn rand ..
Geithner's a pig. Just refuses to accept regulators were a primary cause because he was the head of the NY Fed, the epicenter of banking fraud.
EvilHenryPaulson said:
Wait until the next "flight to safety" event where the USD index spikes.
Once the PPIP moves the toxic assets from bank balance sheets to the Treasury/FDIC, there may no longer be any flights to US Treasuries, given how compromised they may appear.
The regulatory system, are they not funded and the regulators paid from and by the Banks themselves?
Hail the sun, Hail Gods, Hail the stars in the sky, Hail the power and glory, off all mankind in a jar. Bleakness of the youthfull essence the failure of men to react in pigments, I feel the lampost of doom at the door of the fire
Doesn't matter what the kids on the play ground did as much as the grown ups in charge of playground oversight. They are the real problem. Timmay looks dumber every minute! Another one of Obamas best!
Mr. Geithner is not a fool. Presidents an administrations come and go. This is a short term gig that will enhance his career. He knows long term who his employers are. I doubt if he even sees them as employers. Rather he probably seems them, and himself, as an aristocracy. Perhaps in many ways like Europe was run prior to WWI
Alas, Broward, alpha males are everywhere, hogging the resources.
Can't avoid them by leaving IT.
Secretary Geithner represents what is wrong with our corrupt system of government which is to protect and provide for the wealthy and the powerful. Their need control and greed will bring forth darker days This financial crisis is nothing more than a sign of what is to happen. Obama has the right ideas and the wrong people. The die is cast, it will be one problem after another, with each problem worse than the one before.
Please, tell me again about the Golden Goose
Either Geithner misspoke or he still doesn't understand what happened - and that is deeply troubling.
One thing Geithner does not do is mis-speak - anyone who articulates while making precise gestures with their hands and fingers is an individual who carefully selects their words. Not only does he understand what happened, he helped to design it and was recruited to fully exploit it.
"Mr. Geithner is not a fool. Presidents an administrations come and go. This is a short term gig that will enhance his career. He knows long term who his employers are. I doubt if he even sees them as employers. Rather he probably seems them, and himself, as an aristocracy. Perhaps in many ways like Europe was run prior to WWI "
Touche' and we are the peasents
Please, tell me again about the Golden Goose
you mean the Goldman Goose
I amend my comment to agree with you. He DOES understand. His solution would make this understanding questionable, but the motives you speak of are over-riding. (You're not the Berkshire East/ex-UBS Shaeffer, are you?)
you mean the Goldman Fleece!
Giethner is just the waterboy for the oligopolists as discribed by Simon Johnson (MIT Professsor and former IMF Economist). The US is in the same circumstance as third world countries that became insolvent in the past decade (Mexico, Vietman, Russia, etc.), the difference being the US is a major developed country and has the reserve currency. The oligopilists in finance and the military industrialist state are doing whatever is necessary to maintain themselves in power. It is ugly and will not end well. Do a search on simon johnson to get more, if interested.
Yeah, he was on NPR a few weeks ago and impressive.
We are all socialists now.
We are all capitalist now
We haven't figured out what we are now.
Socialism is capitalism as designed by government rather than competition.
Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it.
-Mark Twain
If there were members of the NyFed in 2004 that could somehow discern that a "shadow banking system" had arisen, as we now have begun to describe it in the last year or so, and also discerned that the rating agencies were clearly wrong, in 2004, when it could have still mattered to do something....well, such an individual would be a great candidate for a top regulatory post.
But....while there must have been millions of us that knew house prices were going crazy in 2004, were there individuals that had a clear understanding back then that the ratings were hogwash and CDS and other derivative were blowing a more rapid bubble?
It's a great question.
On the other hand, what Geithner said in the quote here is all true.
It seems like a regulator in 2004 in order to do something would have needed the authority to pry into books at AIG for instance.
But we know factually that the various regulators for AIG were a mismash, right?
In other words, what Geithner already has said about the need for a more rational regulatory system seems to recognize that.
But in 2004 was there in fact a regulator that had a specific responsibility that could have mattered and specifically did not do their job? Pinpointing that would be of interest.
Meanwhile, I'm tending to believe what has already been said: a mismash of regulators, and thus no clear responsibility.
I'm really late to this thread, and I know the crowd has moved on, but I wanted to say: CR, thanks very much for continuing to point this out...in my view both lenders and borrowers acted in fairly rational ways given the structural distortions of the market. The problem was the crazy 'gaming' and distortion of the system, and that was the result of a deliberate policy of breaking regulatory oversight...that's Raygun ideology, but both parties were complicit...Simon Johnson is really dead on about the Oligarchy. They are mainly just smash-and-grab artists.