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#39822 - 09/17/08 02:38 AM So is this the buttom of the rabbit hole?
Smike Offline
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The Feds thinking saving Bear Sterns was going to reverse the tide in the world financial markets.

Now a mere 4 months later the Feds are embarking on the largest intervention by the Feds of a private company (AIG) in the history of the US.

Is this the bottom?

I'm pretty sure this is as close to world economic chaos as this country has seen since the Great Depression.

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#39838 - 09/17/08 01:55 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
Daniel Offline
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The bottom may happen when government buys the bad debt. Greg Ip of The Economist said on last night's PBS Newshour:

Well, I think fundamentally, as we heard David McCormick from the Treasury Department say, you need housing prices to basically hit bottom. When that happens, the loans will stop going bad. The banks will stop, you know, running up big losses. They'll be willing to lend again, and the crisis will slowly come to an end.

The thing that I worry about is that we're into this adverse feedback loop where the declining housing prices are causing loans to go bad. Banks are cutting back lending. That hurts the economy. And home prices keep going down further.

The lesson from other big crises, both in the United States and overseas, is that when you get into these adverse feedback loops eventually the government with taxpayer money has to step in, buy those bad assets, and take them out of the system. That's what we saw, for example, with the savings and loan crisis.


And Joe Nocera of the New York Times said:

Well, I mean, I agree with Greg. It's hard to see how else it will happen. I mean, you need a change in psychology.

And for a change in psychology to take place, there has to be enough confidence among Main Street to start buying homes again. And there has to be enough confidence on Wall Street that these bad loans and these bad assets can somehow be dealt with.

So in the S&L crisis, they put them in the resolution trust, and they started to sell them off as the market came back. You know, so far nobody has been willing to do anything like that, but something like that really kind of needs to happen.


According to today's New York Times, some in Congress are considering just such a step.

Taxpayers shouldn't be put on the hook for this debacle, but if the consequences of inaction would be far worse, what other choices do we have?

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#39840 - 09/17/08 02:27 PM Re: So is this the buttom of the rabbit hole? [Re: Daniel]
oenophore Online   confused
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Some may say that the most benign procedure is for governments to stand aloof while things sort out, disastrous as that may be, all the while biting a bullet good and hard, so to speak.
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#39843 - 09/17/08 03:27 PM Re: So is this the buttom of the rabbit hole? [Re: oenophore]
Daniel Offline
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 Originally Posted By: oenophore
Some may say that the most benign procedure is for governments to stand aloof while things sort out, disastrous as that may be.


Not that I'm an expert in such things, but the fear is that allowing companies like AIG that are "too big to fail" to actually fail would have a cascade effect that would create a global credit crunch, produce a downward economic spiral, and cost us far more than the cost of taking on the bad debt.

If that's the case, I don't know what we'd gain by not intervening. It seems to me that there's not much choice but to pick up the tab and try to put rules in place so it doesn't happen again.

The whole situation is astounding in that the two most basic rules of investment were broken at almost every level: don't buy what you don't understand, and if it sounds too good to be true it probably is. These fundamental precepts were violated from the people who bought the mortgages, to the people who sold them, to the people who securitized them, to the people who rated the securities, to the institutions that bought the securities.

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#39844 - 09/17/08 04:07 PM Re: So is this the buttom of the rabbit hole? [Re: oenophore]
Smike Offline
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 Originally Posted By: oenophore
Some may say that the most benign procedure is for governments to stand aloof while things sort out, disastrous as that may be, all the while biting a bullet good and hard, so to speak.


Most have no idea how big AIG is and involved it is in the world economies. It would behoove everyone to learn more about them. As Daniel stated not intervening would most likely have caused a big cascade effect leading to world recession and I have heard this from several prominent speakers that the possibility of a deep recession was (is) very likely.

As screwed up and bad the choices may have been that is all water under the bridge and right now action by the Fed’s is a 100% must do.
All I can say I look at were we were just 12 months ago to now…. Wow. These are historic times for the world economic systems.


Edited by Smike (09/17/08 04:09 PM)

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#39845 - 09/17/08 04:14 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
Smike Offline
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After just hearing the comments from House Speaker Nancy Pelosi regarding this she needs to step down ASAP. She is poised to do this country and everyone in it a great disservice.

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#39850 - 09/17/08 04:34 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
Daniel Offline
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If I found the Pelosi commets you referred to, I agree that they're not a high point for her, but I'm not going to judge a person by her worst moments. Moreover, she did not say she would block a bailout but requested hearings regarding the administration's actions, the (probably weak) possibility of fraud, and asked why foreign governments should not help out if they also bear the risk of being adversely affected by inaction.

Some of the Bush critique was excessive--it seems to me that the regulatory scheme (or lack thereof) is partially but not entirely to blame--but hardly unexpected going into an election. Not that it should be an excuse.

According to the NYT article I referenced above, House Finacnial Services Committee chairman Barney Frank seems to be on top of the situation. And unless I missed something, I didn't hear Pelosi say she'd block a rescue if that's what was needed to prevent a financial collapse.

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#39853 - 09/17/08 04:55 PM Re: So is this the buttom of the rabbit hole? [Re: Daniel]
Smike Offline
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I stand by my comments.

She is taking one of the most serious financial situations this counrty has faced since possibly the depression and is trying to turn it into a bunch of poltical punch lines for the Democrates.

If this coutry ever needed real leaders to rise above party lines and bring the two sides together….. this would be it.

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#39854 - 09/17/08 05:00 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
Daniel Offline
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Yes, I agree that she shouldn't politicize the problem. But in the end, I very much doubt that she would take action that will endanger the nation.

I agree that it's wrong for her to use the crisis as a political punching bag. But I don't think it's reason enough for her to step down. (Franky, I don't know how anyone manages to do that job.)

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#39855 - 09/17/08 05:29 PM Re: So is this the buttom of the rabbit hole? [Re: Daniel]
learningtolead Offline
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 Originally Posted By: Daniel
Yes, I agree that she shouldn't politicize the problem.


How can you politize a problem that is already deeply and fundamentally political in nature?

I personally think it's crucial that we turn this into a series of political punch lines that get through to americans how incredibly deeply flawed the last 8 years of economic policy have been. We may or may not need to bail out these companies now (you can pontificate on the subject as you individually choose but it all really depends on which economist you choose to listen to) but we clearly need to make changes for the future to stop incenting these huge companies with tax breaks and sweetheart deals.

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#39862 - 09/17/08 08:08 PM Re: So is this the buttom of the rabbit hole? [Re: Daniel]
Smike Offline
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 Originally Posted By: Daniel
I very much doubt that she would take action that will endanger the nation.



Buy the mere fact she will take up that space she sits in, while keeping someone else from being able to step up and be a real leader. (only faw in that is as of this moment I can't give you the name of who that other person should be)

I would say the same exact thing about Bush (but he guaranteed to get removed in 3.5 months.)

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#39863 - 09/17/08 08:08 PM Re: So is this the buttom of the rabbit hole? [Re: learningtolead]
J@son Offline
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I suppose a bail out is in order. However the CEO's and board members of these companies really ought to have their feet held to the fire at some point. They conveniently privatize the profits during a boom economy, and then publicize the losses when the stuff hits the fan.
I think the Chinese shot somebody after the lead paint debacle.
Our financial geniuses go to the best schools, enjoy lifestyles second to none. Then pull the cord on a golden parachute when it all goes wrong. All the while telling us the working poor, that we need to just buck up, and learn to do more with less. Pull ourselves up by our bootstraps etc..
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#39864 - 09/17/08 08:19 PM Re: So is this the buttom of the rabbit hole? [Re: learningtolead]
Smike Offline
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 Originally Posted By: learningtolead
I personally think it's crucial that we turn this into a series of political punch lines that get through to americans how incredibly deeply flawed the last 8 years of economic policy have been.


If you mean flawed bilaterally from Dems and Reblicans then I agree with that statement. Only a bipartisan screw up across the board could have created a mess of this magnitude. If not then it represents a failure of the constitution.




Edited by Smike (09/17/08 08:21 PM)

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#39865 - 09/18/08 12:13 AM Re: So is this the buttom of the rabbit hole? [Re: Smike]
J@son Offline
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We could probably count some clinton years as well. Some de-regulation went on while he was in office. Not to mention NAFTA
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#39866 - 09/18/08 12:41 AM Re: So is this the buttom of the rabbit hole? [Re: learningtolead]
mworking Offline
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 Originally Posted By: learningtolead
How can you politize a problem that is already deeply and fundamentally political in nature?

I personally think it's crucial that we turn this into a series of political punch lines that get through to americans how incredibly deeply flawed the last 8 years of economic policy have been.


I this case I do blame people in power for not forseeing this result or at least insuring better oversight. Republicans have help the top positions, and I have heard over and over again in recent years of them deregulating business and requiring less oversight. So even having read some of Alice’s links I still blame them far more for our current situation and feel the situation is highly political and is ripe for sound bites. They are at least more valid than lipstick and other rubbish,.

I don’t blame our leaders for not being able to pass a particular piece of legislation to solve a particular problem. I only require them to actively promote effective solutions. I can only hope that if enough of them were to do this then good solutions would be the result.

 Originally Posted By: learningtolead
we clearly need to make changes for the future to stop incenting these huge companies with tax breaks and sweetheart deals.


I keep hearing the phrase “to big to fail”. Hearing that makes me think the very first thing we should legislate is the size of business so that none are too big to fail. That leaves me with the problem of the size of government, which in my perfect would certainly be to big to fail!


Edited by mworking (09/18/08 12:44 AM)

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#39867 - 09/18/08 12:55 AM Re: So is this the buttom of the rabbit hole? [Re: J@son]
mummert Offline
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Loc: Danbury, CT, USA

a little history...

After the 1929 stock market crash which led into the Great Depression, the Glass-Steagall Act (1933) was passed in order to avoid another financial crash. In part, by reducing commercial speculation by the banks, it hoped to limit the amount of risk that a bank could accept.

Fast forward to 1999, the Gramm-Leach-Bliley basically overturned Glass-Steagall.

Now you may note this was during Clinton's term, but the original passage in the Senate was strictly on a Republican Party line vote (54-44).
reference: http://www.govtrack.us/congress/vote.xpd?vote=s1999-105

However, once the bill went into committee to resolve the House and Senate differences it was approved overwhelmingly (90-8).

As for what this means to our current candidates:
McCain voted for the original bill, and against the committe report.
Biden voted against the original bill, and for the compromise version.
One of the sponsors of the bill was Phil Gramm, now McCain's top economic advisor.

Make of it what you will.

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#39869 - 09/18/08 01:21 AM Re: So is this the buttom of the rabbit hole? [Re: mummert]
Smike Offline
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I listened to Hank Greenberg get interviewed this evening. Two very important take aways from what he said. (well at least I thought anyway)

1. Regulation can not replace good management. - he went on to explain that most of the trouble (real trouble) was due to poor mis-management of some of these companies (over leverage)

2. There are very sound investment companies that are on solid ground but that the fear being pushed right now in the markets is taking out the good with the bad. (They would be the 'not in real trouble') Goldman Sachs was one example.

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#39870 - 09/18/08 01:28 AM Re: So is this the buttom of the rabbit hole? [Re: Smike]
mworking Offline
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 Originally Posted By: Smike
1. Regulation can not replace good management...


Absolutely, but it provides a known minimum - kind of like a diploma.

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#39871 - 09/18/08 01:38 AM Re: So is this the buttom of the rabbit hole? [Re: mworking]
Smike Offline
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You can still be a lousy Doctor with a diploma from the best med school ;\)

Regulation are needed to keep the idiots from screwing up everyone else's stuff. (in a prefect world anyway)

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#39872 - 09/18/08 03:56 AM Re: So is this the buttom of the rabbit hole? [Re: Smike]
Daniel Offline
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 Originally Posted By: Smike
Regulation are needed to keep the idiots from screwing up everyone else's stuff. (in a prefect world anyway)


I think that's the point. Extreme free market types argue that no regulation is needed for things like fraud because the market will punish those who commit fraud; they'll eventually be found out and no one will do business with them.

I think that's true, but they'll be found out only after they've perhaps run off with the money and left their investors with no recourse to recover their losses. Regulation, such as mandatory disclosures, imposes some costs but helps prevent those without fault from suffering losses in the first place, thereby "keep[ing] the idiots from screwing up everyone else's stuff," as Smike aptly put it.

But regulation is always behind the times as the bright boys (and girls) keep finding new ways of screwing up everyone else's stuff. Greed always seems to get ahead of the rules, and the market in the end imposes some very painful discipline. There seems to be no way to impose prudent management--or to require investors to ask prudent questions before taking managements' recommendations.

Unfortunately, so many people's stuff has been screwed up this time that it looks like we're all going to have to help pick up the tab. It is astounding that Goldman Sachs and Morgan Stanley may not survive as independent entities; when you're that leveraged, you're extremely exposed when people lose confidence and valuations drop.

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#39878 - 09/18/08 12:51 PM Re: So is this the buttom of the rabbit hole? [Re: Daniel]
alicex4 Offline
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Ummmmm, Sarbanes-Oxley Act of 2002, Public Company Accounting Reform and Investor Protection Act of 2002. The Sarbanes-Oxley Act is arranged into eleven 'titles'.

Periodic statutory financial reports are to include certifications that:


• The signing officers have reviewed the report
• The report does not contain any material untrue statements or material omission or be considered misleading
• The financial statements and related information fairly present the financial condition and the results in all material respects
• The signing officers are responsible for internal controls and have evaluated these internal controls within the previous ninety days and have reported on their findings
• A list of all deficiencies in the internal controls and information on any fraud that involves employees who are involved with internal activities
• Any significant changes in internal controls or related factors that could have a negative impact on the internal controls
Summary of Section 401

Financial statements are published by issuers are required to be accurate and presented in a manner that does not contain incorrect statements or admit to state material information. These financial statements shall also include all material off-balance sheet liabilities, obligations or transactions.
Summary of Section 404

Issuers are required to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures.

The registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reportin
Summary of Section 409

Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. These disclosures are to be presented in terms that are easy to understand supported by trend and qualitative information of graphic presentations as appropriate.

Summary of Section 802

This section imposes penalties of fines and/or up to 20 years imprisonment for altering, destroying, mutilating, concealing, falsifying records, documents or tangible objects with the intent to obstruct, impede or influence a legal investigation. This section also imposes penalties of fines and/or imprisonment up to 10 years on any accountant who knowingly and wilfully violates the requirements of maintenance of all audit or review papers for a period of 5 years

Where is the prosecutorial full court press against the CEO and CFO of Fannie Mae and Freddie Mac?


From Fortune Magazine In January 2005 (This shit has been going on a long time)
http://money.cnn.com/magazines/fortune/fortune_archive/2005/01/24/8234040/index.htm

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#39881 - 09/18/08 02:05 PM Re: So is this the buttom of the rabbit hole? [Re: alicex4]
alicex4 Offline
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Also, In March 2005, after Fannie Mae's 10 billion dollar accounting scandal (that somehow escaped SOX prosecution), John McCain introduced a bill the FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005
"Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay."

The bill died in the Senate and never came to a vote.



Edited by alicex4 (09/18/08 02:06 PM)

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#39883 - 09/18/08 04:51 PM Re: So is this the buttom of the rabbit hole? [Re: Daniel]
mworking Offline
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Registered: 05/26/04
Posts: 764
 Originally Posted By: Daniel
 Originally Posted By: Smike
Regulation are needed to keep the idiots from screwing up everyone else's stuff. (in a prefect world anyway)


I think that's the point. Extreme free market types argue that no regulation is needed for things like fraud because the market will punish those who commit fraud; they'll eventually be found out and no one will do business with them…I think that's true, but they'll be found out only after they've perhaps run off with the money and left their investors with no recourse to recover their losses… But regulation is always behind the times as the bright boys (and girls) keep finding new ways of screwing up everyone else's stuff


The free market might work if everyone had to stay forever in the game. It can not punish abusers as described when entities can operate with short term goals and/or cheat and then cash out while they are ahead.

 Originally Posted By: Daniel
Unfortunately, so many people's stuff has been screwed up this time that it looks like we're all going to have to help pick up the tab. It is astounding that Goldman Sachs and Morgan Stanley may not survive as independent entities; when you're that leveraged, you're extremely exposed when people lose confidence and valuations drop.


It really does only take a few bad apples to screw things up because while they are offering higher profits by getting away with things like not disclosing the risks the are taking, they drive others to do the same just to maintain their business. Competition played a large role in our current fiasco.

Regulation can help level the playiong field.


Edited by mworking (09/18/08 05:12 PM)

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#39884 - 09/18/08 05:13 PM Re: So is this the buttom of the rabbit hole? [Re: mworking]
alicex4 Offline
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Regulation, we have regulation, what we don't have is enforcement of the regulations.

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#39887 - 09/18/08 06:17 PM Re: So is this the buttom of the rabbit hole? [Re: alicex4]
Smike Offline
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 Originally Posted By: alicex4
Regulation, we have regulation, what we don't have is enforcement of the regulations.


Agreed 100%. Anyone that talks about the need for more regulations doesn't understand the problem or the current landscape of regulations. Someone made a good comparison to pre-911 to the fact that you have all these regulatory watch dog systems working as separate entities.

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#39889 - 09/18/08 07:04 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
mworking Offline
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 Originally Posted By: Smike
 Originally Posted By: alicex4
Regulation, we have regulation, what we don't have is enforcement of the regulations.


Agreed 100%. Anyone that talks about the need for more regulations doesn't understand the problem or the current landscape of regulations.


In my last post I wasn't making a distinction. Earlier though I mentioned "less regulation being associated with the Republican Party. Do you know of regulations in place that might have prevented the housing and credit crisis we are now experiencing? Seems even Alice mentioned deregulation though she tried to blame Clinton as much as Republicans.

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#39890 - 09/18/08 07:41 PM Re: So is this the buttom of the rabbit hole? [Re: mworking]
Smike Offline
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 Originally Posted By: mworking


In my last post I wasn't making a distinction. Earlier though I mentioned "less regulation being associated with the Republican Party. Do you know of regulations in place that might have prevented the housing and credit crisis we are now experiencing? Seems even Alice mentioned deregulation though she tried to blame Clinton as much as Republicans.


That’s odd I thought I was replying to Alice’s post \:\/

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#39891 - 09/18/08 07:49 PM Re: So is this the buttom of the rabbit hole? [Re: mworking]
alicex4 Offline
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Britain just made a move to regulate naked selling short, which the US is still letting happen willy nilly which is another reason why the market is fluctuating so wildly. You don't have to actually buy the stock when you do this. See the BBC news business section for the article.

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#39893 - 09/18/08 09:06 PM Re: So is this the buttom of the rabbit hole? [Re: alicex4]
Smike Offline
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Yes that should happen here soon, Naked short selling has been going on with out much notice, but given the last several weeks this can not be ignored any longer.

Which bring up a good point that regulations need to be fluid and evolve to meet the current market practices. What was once a non issue years ago has become a factor in driving down stock prices today. The environment that comprises of market forces is in a state of constant change, the same is needed from oversight and regulations.

Hard to believe we are in a second financial meltdown (This one appearing worse then before) being only 15 years or so out from the last one.

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#39894 - 09/19/08 12:52 AM Re: So is this the buttom of the rabbit hole? [Re: Smike]
pedestrian Offline
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ok, so this is not quite the bottom of the rabbit hole... basically the prices of mortgage securities is going to continue to be written down as long as the housing decline continues and that's going to continue to cause Bad News. keep your eye on the case-shiller index, if there's ever a quarterly increase (that can't be accounted for by seasonal changes) that might be a positive sign

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#39896 - 09/19/08 12:31 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
oenophore Online   confused
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In my initial post in this thread, I began with the weasel words, “Some may say that” in order to conceal my ignorance of the subject. Here is some sound investor advice:

“The time to buy,” said Nathan Rothschild in 1815, “is when blood is running in the streets.”

From a viewpoint of advocacy of creative destruction/social Darwinism, perhaps it is best for governments to stand by and let this blood run.
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#39902 - 09/19/08 05:41 PM Re: So is this the buttom of the rabbit hole? [Re: alicex4]
Smike Offline
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 Originally Posted By: alicex4
Britain just made a move to regulate naked selling short, which the US is still letting happen willy nilly which is another reason why the market is fluctuating so wildly. You don't have to actually buy the stock when you do this. See the BBC news business section for the article.


Well the SEC just took action today. But they actually temporary banned all short selling till Oct 2.

God they are complete idiots.

This explains why:

http://money.cnn.com/2008/09/19/markets/thebuzz/index.htm

"The SEC is attempting to curtail market manipulation. But it is doing so by manipulating the market."

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#39903 - 09/19/08 06:13 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
alicex4 Offline
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Idiots at Happy Hour

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#39938 - 09/22/08 05:01 AM Re: So is this the buttom of the rabbit hole? [Re: Smike]
MarcC Offline
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They're not idiots at all. By banning short selling for 2 months, they've ended the McCain campaign. It's obvious that the ban is intended to prevent speculators from betting on the decline of the US by voting for McCain.

[with plagiaristic thanks to The Satirical Political Report.]
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#39940 - 09/22/08 10:25 AM Re: So is this the buttom of the rabbit hole? [Re: mummert]
oenophore Online   confused
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#40195 - 09/28/08 11:01 AM Re: So is this the buttom of the rabbit hole? [Re: alicex4]
oenophore Online   confused
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#40308 - 10/01/08 10:44 AM Guess who wrote this [Re: alicex4]
oenophore Online   confused
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Markets have inherent and well-known inefficiencies. One factor is failure to calculate the costs to those who do not participate in transactions. These "externalities" can be huge. That is particularly true for financial institutions.
Their task is to take risks, calculating potential costs for themselves. But they do not take into account the consequences of their losses for the economy as a whole.

Hence the financial market "underprices risk" and is "systematically inefficient," as John Eatwell and Lance Taylor wrote a decade ago, warning of the extreme dangers of financial liberalization and reviewing the substantial costs already incurred - and also proposing solutions, which have been ignored.

The threat became more severe when the Clinton administration repealed the Glass-Steagall act of 1933, thus freeing financial institutions "to innovate in the new economy," in Clinton's words -- and also "to self-destruct, taking down with them the general economy and international confidence in the US banking system," financial analyst Nomi Prins adds.

The unprecedented intervention of the Fed may be justified or not in narrow terms, but it reveals, once again, the profoundly undemocratic character of state capitalist institutions, designed in large measure to socialise cost and risk and privatize profit, without a public voice.

That is, of course, not limited to financial markets. The advanced economy as a whole relies heavily on the dynamic state sector, with much the same consequences with regard to risk, cost, profit, and decisions, crucial features of the economy and political system.
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#40313 - 10/01/08 12:32 PM Re: Guess who wrote this [Re: oenophore]
Smike Offline
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Isn't Noam Chomsky a somewhat socialist?

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#40314 - 10/01/08 01:04 PM Re: Guess who wrote this [Re: Smike]
mworking Offline
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Doesn't matter what you call him. He was obviously correct when he wrote:

 Quote:
"to self-destruct, taking down with them the general economy and international confidence in the US banking system,"


What aggravates me so much is that I feel this was all so very easily foreseen and easily avoided.


Edited by mworking (10/01/08 01:05 PM)

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#40337 - 10/01/08 08:29 PM Re: Guess who wrote this [Re: mworking]
acdnyc Offline
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Why avoid it. The whole planned idea behind deregulation was to bankrupt the US Government and us. I can't belive it only took 2.5 years.
I've been down on Wall St. the past few days and I haven't seen any chaulk outlines. I guess those windows are bolted shut. Darn.


Edited by acdnyc (10/01/08 08:30 PM)
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#40341 - 10/01/08 08:54 PM Re: Guess who wrote this [Re: acdnyc]
Smike Offline
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 Quote:
The whole planned idea behind deregulation was to bankrupt the US Government and us. I can't belive it only took 2.5 years.


Ok, so lets assume for one minute that spew were true, who benefits from world economic crisis? Isn’t business, isn’t politicians (as most get voted out of office promptly when the sh*t hits the fan) so who?

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#40353 - 10/02/08 02:21 AM Re: Guess who wrote this [Re: acdnyc]
empicard Offline
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who's plan and why, acd?
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#40384 - 10/03/08 12:15 AM Re: Guess who wrote this [Re: empicard]
J@son Offline
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I think he was being sarcastic. At least I hope he was. Conspiracy theories are b.s.
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#40547 - 10/08/08 07:59 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
alicex4 Offline
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Nope!

Iceland teeters on the brink of bankruptcy
REYKJAVIK, Iceland -- This volcanic island near the Arctic Circle is on the brink of becoming the first "national bankruptcy" of the global financial meltdown.

Home to just 320,000 people on a territory the size of Kentucky, Iceland has formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy _ from fashion retailers to top soccer teams.

The strategy gave Icelanders one of the world's highest per capita incomes. But now they are watching helplessly as their economy implodes _ their currency losing almost half its value, and their heavily exposed banks collapsing under the weight of debts incurred by lending in the boom times.

"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

The government had earlier announced it had nationalized the bank under emergency laws enacted to deal with the crisis.

"We have been forced to take decisive action to save the country," Prime Minister Geir H. Haarde said of those sweeping new powers that allow the government to take over companies, limit the authority of boards, and call shareholder meetings.

A full-blown collapse of Iceland's financial system would send shock waves across Europe, given the heavy investment by Icelandic banks and companies across the continent.

One of Iceland's biggest companies, retailing investment group Baugur, owns or has stakes in dozens of major European retailers _ including enough to make it the largest private company in Britain, where it owns a handful of stores such as the famous toy store Hamley's.

Kaupthing, Iceland's largest bank and one of those whose share trading was suspended last week to stop a huge sell-off, has also invested in European retail groups.

Thousands of Britons have accounts with Icesave, the online arm of Landsbanki that regulators said was likely to file for bankruptcy after it stopped permitting customers to withdraw money from their accounts Tuesday.

To try to wrest control of the spiraling situation, the government also loaned $680 million to Kaupthing to tide it over and said it was negotiating a $5.4 billion loan from Russia to shore up the nation's finances.

The speed of Iceland's downfall in the week since it announced it was nationalizing Glitnir bank, the country's third largest, caught many by surprise despite warnings that it was the "canary in the coal mine" of the global credit squeeze.

Famous for its cod fishing industry, geysers, moonscape and the Blue Lagoon, Iceland was the site of the Cold War showdown in which Bobby Fischer of the United States defeated Boris Spassky of the Soviet Union in 1972 for the world chess championship. Last year, Iceland won the U.N.'s "best country to live in" poll, with its residents deemed the most contented in the world.

No more.

Despite sunny skies Tuesday after three days of unseasonably cold weather, Reykjavik's mood remained grim _ cafes were half-empty, real estate agents sat idle, and retailers reported few sales.

"I'm really starting to get worried now. Everything is bad news. I don't know what's happening," said retiree Helga Jonsdottir as she headed to a supermarket.

Icelanders are also beginning to question how a relative few were able to generate the disproportionate wealth _ and associated debt _ that Haarde has warned puts the entire country at risk of bankruptcy.

Iceland's reinvention from the poor cousin in Europe to one of the region's wealthiest countries dates to the deregulation of the banking industry and the creation of the domestic stock market in the mid-1990s.

Those free market reforms turned Iceland from a conservative, inward-looking country to one of a new generation of internationally educated young businessmen and women who were determined to give Iceland a modern profile far beyond its fishing base.

Entrepreneurs become its greatest export, as banks and companies marched across Europe and their acquisition wallets were filled by a stock market boom and a well-funded pension system. Among the purchases were the iconic Hamley's toy store and the West Ham soccer team.

Back home, the average family's wealth soared 45 percent in half a decade and gross domestic product rose at around 5 percent a year.

But the whole system was built on a shaky foundation of foreign debt.

The country's top four banks now hold foreign liabilities in excess of $100 billion, debts that dwarf Iceland's gross domestic product of $14 billion.

Those external liabilities mean the private sector has had great difficulty financing its debts, such as the more than $5.25 billion racked up by Kaupthing in five years to help fund British deals.

Iceland is unique "because the sheer size of its financial sector puts it in a vulnerable situation, and its currency has always been seen as a high risk and high yield," said Venla Sipila, a senior economist at Global Insight in London.

The krona is suffering in part from a withdrawal by a falloff in what are called carry trades _ where investors borrow cheaply in a country with low rates, such as Japan, and invest in a country where returns, and often risks, are higher.

After watching the free-fall for several days, the Central Bank of Iceland stepped in Tuesday to fix the exchange rate of the currency at 175 _ a level equal to 131 krona against the euro.

Haarde said he believed the measures had renewed confidence in the system. He also was critical of the lack of an Europe-wide response to the crisis, saying Iceland had been forced to adopt an "every-country-for-itself" mentality.

He acknowledged that Iceland's financial reputation was likely to suffer from both the crisis and the response despite strong fundamentals such as the fishing industry and clean and renewable energy resources.

As regular Icelanders begin to blame the government and market regulators, Haarde said the banks had been "victims of external circumstances."

Richard Portes of the London Business School agreed, noting the banks were well-capitalized and had not bought any of the toxic debt that has brought down banks elsewhere.

"I believe it is absolutely wrong to say these banks were reckless," said. "Quite the contrary. They were hugely unlucky."

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#40550 - 10/08/08 08:30 PM Re: So is this the buttom of the rabbit hole? [Re: alicex4]
Smike Offline
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Reality check:
From the article above:
“The country's top four banks now hold foreign liabilities in excess of $100 billion, debts that dwarf Iceland's gross domestic product of $14 billion.”

Which translates to something like the debt of just those 4 banks equals about 700% of Iceland’s GDP.

In the US = "In 2007, the public debt was 36.9 percent of GDP [5], with a total debt of 65.5 percent of GDP."

http://en.wikipedia.org/wiki/Image:USDebt.png

Huge difference in leverage situation.


Edited by Smike (10/08/08 10:42 PM)

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#40551 - 10/08/08 08:34 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
alicex4 Offline
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Yeah, you're right, but this will impact Britain. Do you think this will have any lasting effect on the ability of the EU to remain a functioning entity?

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#40553 - 10/08/08 08:40 PM Re: So is this the buttom of the rabbit hole? [Re: alicex4]
Smike Offline
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 Originally Posted By: alicex4
Yeah, you're right, but this will impact Britain. Do you think this will have any lasting effect on the ability of the EU to remain a functioning entity?


The biggest road block to the EU now and in future is its inability to deal with any non NATO crisis such as this one in any kind of unified matter. A lot of people for years talked about the power that the EU would have to become the world economic leader. What this current event proves is that the EU lacks unilateral ability to act positivity to an economic crisis thus crippling its members. So the answer is yes.

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#40554 - 10/08/08 09:16 PM Re: So is this the buttom of the rabbit hole? [Re: Smike]
Mike Rawdon Offline

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 Originally Posted By: Smike
Reality check:
From the article above:
“The country's top four banks now hold foreign liabilities in excess of $100 billion, debts that dwarf Iceland's gross domestic product of $14 billion.”

Which translates to something like the debt of just those 4 banks equals 140% of Iceland’s GDP.


Why isn't that 700% of GDP?

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#40556 - 10/08/08 10:40 PM Re: So is this the buttom of the rabbit hole? [Re: Mike Rawdon]
Smike Offline
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 Originally Posted By: Mike Rawdon


Why isn't that 700% of GDP?
\

um because it is \:\/ thanks... corrected!

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#40684 - 10/14/08 10:06 AM Re: So is this the buttom of the rabbit hole? [Re: Smike]
oenophore Online   confused
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#41995 - 11/26/08 10:54 AM Re: So is this the buttom of the rabbit hole? [Re: Smike]
oenophore Online   confused
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#41998 - 11/26/08 01:08 PM Re: So is this the buttom of the rabbit hole? [Re: oenophore]
empicard Offline
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"Stimulate it out the window."
love it.
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#42250 - 12/09/08 10:41 AM Re: So is this the buttom of the rabbit hole? [Re: empicard]
oenophore Online   confused
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#42469 - 12/23/08 12:11 AM Re: So is this the buttom of the rabbit hole? [Re: empicard]
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#50368 - 01/26/10 10:48 AM Re: So is this the buttom of the rabbit hole? [Re: oenophore]
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#50580 - 02/20/10 04:10 PM Yet another *&%$#@ cartoon strip in this thread [Re: oenophore]
oenophore Online   confused
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#50588 - 02/22/10 12:09 AM Re: Yet another *&%$#@ cartoon strip in this thread [Re: oenophore]
alicex4 Offline
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Dude, does anybody read these strips??

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#50591 - 02/22/10 07:45 AM Re: Yet another *&%$#@ cartoon strip in this thread [Re: alicex4]
tokyo bill Offline
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Registered: 08/24/00
Posts: 793
Loc: Tokyo
I read the ones that Oeno posts; and hope he doesn't stop.

My own online perusal is usually limited to doonesbury, questionable content and c'est la vie; but it's fun to see what else is out there, and a fair number of Oeno's choices make me laugh, groan or otherwise respond.

Can't complain about that.

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#50592 - 02/22/10 11:11 AM Re: Yet another *&%$#@ cartoon strip in this thread [Re: tokyo bill]
oenophore Online   confused
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Dude, does anybody read these strips??

You just did, Alice.

a fair number of Oeno's choices make me laugh

Making someone laugh is usually a non-zero sum game benefiting the maker and the made.
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#51841 - 05/04/10 09:55 AM Re: So is this the buttom of the rabbit hole? [Re: Smike]
oenophore Online   confused
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Goldman Sachs was one example.


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#51853 - 05/04/10 04:47 PM Re: Yet another *&%$#@ cartoon strip in this thread [Re: alicex4]
Mark Heyman Offline
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Registered: 12/23/99
Posts: 1123
Loc: South Jersey (Pinelands)
Originally Posted By: alicex4
Dude, does anybody read these strips??


I always do - even though I often have to use zoom to read them.
Oh, and the last one was a particularly good one!


Edited by Mark Heyman (05/04/10 04:50 PM)

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#51854 - 05/04/10 04:55 PM Re: Yet another *&%$#@ cartoon strip in this thread [Re: Mark Heyman]
oenophore Online   confused
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even though I often have to use zoom to read them.

I post images as they appear on my browser. But settings vary among other computers. Does anyone have any suggestions as to how I can post to accommodate all?
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#51912 - 05/07/10 04:32 AM Re: Yet another *&%$#@ cartoon strip in this thread [Re: oenophore]
tokyo bill Offline
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Registered: 08/24/00
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No clue, sorry - but I agree with Mark H.: that Goldman strip is a good one!

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#51937 - 05/07/10 11:48 PM Re: Yet another *&%$#@ cartoon strip in this thread [Re: tokyo bill]
Mark Heyman Offline
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Registered: 12/23/99
Posts: 1123
Loc: South Jersey (Pinelands)
OE: I wasn't complaining, just noting that I even go through extra effort to read them. Also I'm not sure there is anything you can do that easily.

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#55854 - 11/02/10 11:43 PM Re: Yet another *&%$#@ cartoon strip in this thread [Re: Mark Heyman]
oenophore Online   confused
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#56186 - 12/07/10 10:50 AM Re: Yet another *&%$#@ cartoon strip in this thread [Re: oenophore]
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