There's only one thing I know that's impossible to achieve ... Stick your ass out the bathroom window, then run outside and throw stones at it. Other than that, if you can believe in something, you can achieve it. – Joe Robson's Father
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: 1818 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]
Expert Mother tongue: English Posts: 1818 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
It really depends. There are many things that I want my government to do (defend the borders, kill bad guys in wars, run the airports, and provide a level playing field for business). And there is a very large number of things I don't want my government to do (about 70 % of what they are now doing).
One example of government failure:
- There is currently $ 60 billion of fraud in the Medicare (public health care) system. One young woman in Florida even managed to defraud $ 105 million from Medicare, on her own (on her PC, from her room).
- The government simultaneously claims that the $ 8 billion of profit made by private insurance companies is the reason our health care system is so expensive and bad (in their view).
The government is trying to convince us that it will root out this $ 8 billion to "give it back to the people" or whatever. But that nasty $ 60 billion (per YEAR, by the way) of fraud remains...
I guess this is what is referred to as "You lie !!"
[Edited by John Bunch on November 5, 2009 2:14 PM]
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
About healthcare and not only:
Nearly one out of every five dollars nationwide is spent on health care; it’s one of the few industries in America experiencing both employment and fiscal growth, and yet millions of Americans aren’t covered under any provision of the current system. ...
In the meantime, banks would like to continue paying their executives large amounts of money, thank you, except in the form of stock. ...
Perversely, many compensation experts have advocated for stock-based bonuses as a way to tie compensation to performance. Most did not seemingly consider a scenario in which stock performance was backstopped by billions of dollars of taxpayer money and guarantees. ...
As bank stocks crashed last year, firms issued their bonuses in the form of stocks and stock options. Once the government bailout of the banking industry was under way, stock prices rebounded, making the grants worth more, in some cases much more, than their original value. The Times has the story, along with the example of Goldman Sachs’ (GS) general counsel, who has watched his bonus’s value double to nearly $12 million in less than a year thanks to the rebound in the firm’s stock price.
The aftermath of Wall Street's meltdown reminds me of the aftermath of the Berlin Wall's fall. Not in a good way
[...]
Operating at the pinnacle, members of both clans and institutional nomadic groups secure the resources and power necessary to further their group's goals, whatever they might be, often at the expense of the institutions they supposedly serve. It may seem absurd to suggest that American democracy today has anything in common with Russia or Poland in the early 1990s, or far-fetched to compare American businessmen and government officials with Russian clans and Polish nomads. But in the aftermath of the financial crisis in the United States, some things are starting to look familiar.
The post-communist players bear a striking resemblance to the interlocking handful of Wall Street–government policy deciders who "coincide" at the highest echelons of power and have come to be symbolized by "Government Sachs." From those who ruined Enron to those who wrought more recent Wall Street wreckage, a lack of loyalty to institutions, including the dearth of regard for shareholders and boards of directors, has characterized the modus operandi of the Wall Street players who brought on the financial crisis in America -- and the world.
In both the East European and U.S. cases, operators at the top challenge governments' rules of accountability and businesses' codes of competition, ultimately answering only to each other. In both cases, it's hard to get more "efficient," because inside information and power is confined to very few actors who trust each other. And, because only the players have the information, they can brand it for everyone else’s consumption without anyone being able to challenge them. Their maneuverings are largely beyond the reach of traditional monitors. Gone are the messy disagreements and competing interests of the democratic process. You can hardly get more efficient, for example, than having two former Goldman Sachs executives like Treasury Secretary Henry Paulson and assistant Neel Kashkari hand $700 billion in taxpayer money to errant financial firms, including a hefty chunk to Goldman Sachs.
Moreover, the intertwined coterie of financial and policy deciders in the United States is creating not only the financial architecture of the future, backed by the power and billions of the state, but, more generally, new relationships between the bureaucracy and the market. A perfect example of these relationships in Russia is Gazprom, the natural gas conglomerate created from the Soviet gas ministry in 1989 and staffed by nomenklatura turned capitalists. While it was nominally privatized in the 1990s, the Russian government holds a controlling stake and Gazprom is run by Putin cronies. Just as the Russian government holds a controlling stake in this major industry, bailouts have made the U.S. government a huge shareholder in two financial firms, AIG and Citi, as well as two carmakers, General Motors and Chrysler. Through their maneuverings, these networks help create new institutional forms of governance in which state and private power are not only interdependent but often blurred. With minimal public input or even notice, this new architecture provides more and more opportunities for the players to reinforce their power and wield influence -- largely beyond public scrutiny.
Though practically invisible to the public, the current challenge to democracy actually characterizes much of federal governance in the United States today.
[...]
Janine R. Wedel, a professor in the School of Public Policy at George Mason University and a senior research fellow at the New America Foundation, is the author of "Shadow Elite: How the World's New Power Brokers Undermine Democracy, Government, and the Free Market"
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Jacek K. on August 21, 2009 10:08 AM
Here is music to brokers' ears, a saw diagram:
Up you win, down you win, up you win, down you win...
Hence the slang term
sawbuck
for the U.S. ten dollar paper currency. The slang is derived from the Roman numeral for ten, "X". The "X" looks like the shape of a sawbuck, a device used to hold wood in place for sawing it into pieces. (InvestorWords)
Expert Mother tongue: English Posts: 1818 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
The reason that health care costs so much in the U.S. is because the entire system is "pointed at" government, through Medicare. If it were "pointed at the consumer", it would not be so expensive. In short, hospitals overcharge because they can, and Medicare let's them get away with it. For instance, Lasik eye surgery is not covered by Medicare, and its costs have fallen every year since it was invented. The reason is that it is not covered by Medicare. In my ideal world, health care would look like this and be pointed at the consumer (the patient) and not at government bureaucrats. And the poor would be given vouchers and/or tax credits to use to get their health care.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
If someone is still wondering where that burst bubble money went, it's not exactly true that it was only money that existed in the form of electronic entries that were adjusted accordingly, on paper.
This WSJ article's title is "How You Can Make $20 Billion." In other words, next time let's not be stupid and let's all of us make $20 billion each. Here is how:
Even as the financial system collapsed last year, and millions of investors lost billions of dollars, one unlikely investor was racking up historic profits: John Paulson, a hedge-fund manager in New York.
His firm made $20 billion between 2007 and early 2009 by betting against the housing market and big financial companies. Mr. Paulson's personal cut would amount to nearly $4 billion, or more than $10 million a day. ...
How did he do it? Believing that a housing-market collapse was coming, Mr. Paulson spent over $1 billion in 2006 to buy insurance on what he then saw as risky mortgage investments. When the housing market cracked and the mortgages tumbled, the value of Mr. Paulson's insurance soared. One of his funds rose more than 500% that year. Then in 2008, he shorted financial shares, or wagered that they would fall in price, profiting again when these companies collapsed.
And are there any investing skills that average investors can learn from his success? Yes. There are no guarantees, of course, but the success of Mr. Paulson and a few other underdog investors lends encouragement to individuals trying to compete with Wall Street's pros.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
America’s mainstream religious denominations used to teach the faithful that they would be rewarded in the afterlife. But over the past generation, a different strain of Christian faith has proliferated—one that promises to make believers rich in the here and now. Known as the prosperity gospel, and claiming tens of millions of adherents, it fosters risk-taking and intense material optimism. It pumped air into the housing bubble. And one year into the worst downturn since the Depression, it’s still going strong.
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