Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on October 17, 2009 11:43 AM
So if you've made more than $20 million in charitable donations it's always okay to cheat and therefore a valid excuse for obtaining leniency in the courts?
Goldman is this century’s octopus — almost literally so. The most-quoted sentence in financial journalism this year, by Matt Taibbi of Rolling Stone, describes the company as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” ...
[But] there is one other significant way that our 21st-century vampire squid differs from Rockefeller’s 20th-century octopus. Americans knew what oil was, and they understood how Standard Oil’s manipulations directly affected their pocketbooks. Even now many Americans don’t know what Goldman’s products are or how it makes its money. The less we know, the easier it is for reckless gambling to return to capitalism’s casino, and for Washington to look the other way as a new financial bubble inflates. ...
Blankfein may be giving $200 million to “education,” but Goldman is back to business as usual: making money by high-risk gambling, with all the advantages that the best connections, cheap loans from the Fed and high-speed trading algorithms can bring. As the Reuters columnist Rolfe Winkler wrote last week, “Main Street still owns much of the risk while Wall Street gets all of the profit.”
The idea of investing in the real economy — the one that might create jobs for Americans — remains outré in this culture. Credit to small businesses remains tight. The holy capitalist grail is still the speculative buying and selling of companies and the concoction of ever more esoteric financial “instruments.” The tragic tale of Simmons Bedding recently told in The Times is a role model. This successful 133-year-old manufacturing enterprise was flipped seven times in two decades by private equity firms. Investors made more than $750 million in profits even as the pile-up of debt pushed Simmons into bankruptcy, costing a quarter of its loyal workers their jobs so far.
Most leaders in America are against this kind of ethos in principle. Last month the president of Harvard, Drew Gilpin Faust, contributed a stirring essay to The Times regretting that educational institutions did not make stronger efforts to assert the fundamental values of pure intellectual inquiry while “the world indulged in a bubble of false prosperity and excessive materialism.” ...
What went unsaid, of course, is that some of Harvard’s most prominent alumni of the pre-Faust era — Summers, Blankfein, Robert Rubin et al. — were major players during the last two bubbles. As coincidence would have it, the same edition of The Times that published Faust’s essay also included an article about how Harvard was scrounging for bucks by licensing a line of overpriced preppy clothing under the brand Harvard Yard. This sop to excessive materialism will be a scant recompense for the $11 billion Harvard’s endowment managers lost in their own bad gamble on interest-rate swaps. ...
Treasury secretary, Timothy Geithner, never ceases to amaze. His daily calendars reveal that most of his contacts with the financial sector in the first seven months of 2009 were limited to the trinity of Goldman Sachs, Citigroup and JPMorgan. And last week Bloomberg News reported that his inner circle of “counselors” — key advisers who, conveniently enough, do not require Senate confirmation — are largely drawn from the same club. ...
What we also know is that if Teddy Roosevelt palled around with John D. Rockefeller as today’s political class does with Wall Street’s titans and lobbyists, the tentacles of the original octopus would still be coiled tightly around America’s neck.
Expert Mother tongue: English Posts: 1824 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
But once again, "capitalism" operates - in every country, within the overall framework that the government sets. If there is a "crisis" of this system, then let's please mention this overall regulatory framework. And if the government is bailing the bankers out (the "free market capitalist" solution would have been to let the bankers crash and burn and deal with their own mess !).
Jacek, please remember that free market libertarians like Ron Paul were AGAINST the bailouts, and wanted to let these "fat cats" crash and burn, so that real capitalism would emerge from the rubble.
It is the liberal Keynesians with their notions of government takeovers of banks that have created this mess. So don't hang it on the free market.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
It seems to me that there is an unhealthy preoccupation with the number of zeros whenever something happens.
Zeros are dying and zeros are being born almost continuously. Isn't it time to stop making a big deal about the tenuous association between a particular event and the number of zeros that evaporated coincidentally?
The bad news is that a lot of zeros died, the good news is that there are plenty more available just like them.
So now, optimistically looking to the future:
Who Will Be the Next Carlos Slim?
First, obviously nothing can stop Goldman Sachs and JP Morgan. With unfettered access to the Federal Reserve and no effective controls on their ability to take risk, they are in the catbird seat. The weakness of other big banks is further icing on their cake. GS and JPM are symbols will loom large over the national and international economy for a long time to come, with the main threat (to them) coming from their rather too blatant market share in many products.
Second, the surviving big hedge funds will do very well (partial list). They can move fast, they have no regard for anything other than profit, and they will not be effectively regulated. Their access to credit runs through the biggest banks and this can be a double-edged sword--expect more instability in the future from hedge fund-bank dynamics (as Morgan Stanley found out last fall). http://www.tnr.com/blog/the-plank/who-will-be-the-next-carlos-slim
And that's the good news for today, folks. You just carry on.
Originally written by Jacek K. on October 21, 2009 12:22 PM
So now, optimistically looking to the future:
First, obviously nothing can stop Goldman Sachs and JP Morgan. With unfettered access to the Federal Reserve and no effective controls on their ability to take risk, they are in the catbird seat.
And that's the good news for today, folks. You just carry on.
Thanks, and to help celebrate the carrying on just mosey on over to Post #187337 where the piper ...
[snip] Call it déjà voodoo. I wrote a column that ran three days before Christmas in 2007 that focused on the deeply disturbing disconnect between Wall Streeters harvesting a record crop of bonuses — billions on top of billions — while working families were having a very hard time making ends meet.
We would later learn that December 2007 was the very month that the Great Recession began. I wrote in that column: “Even as the Wall Streeters are high-fiving and ordering up record shipments of Champagne and caviar, the American dream is on life support.”
So we had an orgy of bonuses just as the recession was taking hold and now another orgy (with taxpayers as the enablers) that is nothing short of an arrogantly pointed finger in the eye of everyone who suffered, and continues to suffer, in this downturn. ...
We cannot continue transferring the nation’s wealth to those at the apex of the economic pyramid — which is what we have been doing for the past three decades or so — while hoping that someday, maybe, the benefits of that transfer will trickle down in the form of steady employment and improved living standards for the many millions of families struggling to make it from day to day.
That money is never going to trickle down. It’s a fairy tale. We’re crazy to continue believing it.
We cannot continue transferring the nation’s wealth to those at the apex of the economic pyramid — which is what we have been doing for the past three decades or so —
No! You don't say, and who is going to gainsay you? Not those at the apex. Of course you can continue channeling the wealth to the wealthy - what else should we do we it. Give it to the poor, who will drink it up, or go to the race tracks, or whore around town or take drugs and buy expensive cars and flashy clothes, all because they don't have the intelligence to know any better?
That's just inopportune and not the way to create more wealth. How on earth will the poor create any way for that money to trickle-up? It's a fairy-tale...
For the record: I don't think we want to abolish the SEC...yet....
As for lavishing the poor with tax monies...it's been happening for decades, with decidedly mixed results. Here's a swell story from my own town. Never mind that the article is from 1997; it could have been written last week.
Expert Mother tongue: English Posts: 1824 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
The entire financial crisis can be explained as follows:
- Lax lending and too much lending to people who are bad risks
- By banks and financial institutions that are undercapitalized
That is it. But to say that this is "within capitalism" (as if capitalism were not operating in the U.S. within the framework defined by government, and not also to a large degree, about government itself, would be grossly wrong.
Take the example of mortgages: the U.S. government positively "encouraged" (some would say: blackmailed) banks to loan to people with bad credit histories, or no credit histories, and then did not demand that banks have enough reserves to cover it, when it all blew up. And then when the banks failed, the government threw a net up to catch them when they fell.
So the message from our government has been:
a. Lend to people who can't repay the loan
b. Or else we will sue you
c. We don't demand that you have the reserves when the loans go bad
d. We will bail you out when this system explodes.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on November 5, 2009 6:36 PM
the U.S. government positively "encouraged" (some would say: blackmailed) banks to loan to people with bad credit histories, or no credit histories, and then did not demand that banks have enough reserves to cover it,
John,
Polish special services revel in provocations and controlled purchases lately. Does that mean all businesses have to follow their game? Don't you have law enforcement agencies where you could report the U.S. government for blackmailing your bank into operations that are destructive for the whole world?
Expert Mother tongue: English Posts: 1824 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Jacek, who are you going to "complain" to, when the Justice Department sends you a letter telling you to stop "redlining" part of a city (i.e. to stop making determinations of credit based on actual credit-worthiness ?).
There is no one to go to, because the Justice Dept is the ultimate federal authority for enforcement. I know a guy who is an attorney here in the U.S. and he compared going to court against the government, with "having sex with a gorilla. You don't stop when you are tired, you stop when the gorilla is tired". The government basically has unlimited resources.
The notion that the bad banks were off giving bad loans, and the government didn't want that, it totally incorrect. The government wanted the banks to issue debt to people with bad credit.
[Edited by John Bunch on November 5, 2009 2:02 PM]
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