Expert Bahasa ibu: English Jumlah entri: 1818 Bergabung: February 1, 2008 Lokasi: United States
RE: Economy
Disagree. Fannie Mae and Freddie Mac are about as socialist and "progressive" as you can get, and they are at the core of this crisis. My understanding is that Fannie Mae and Freddie Mac bought up and/or "backed" subprime mortgages, so that the mortgage companies could then go out and write even more mortgages. And Fannie Mae was created by FDR in the 1930s to provide mortgages to people who might not be able to afford them. This freed up the mortgage industry to write ever more bad mortgages, which created this bubble.
The Community Reinvestment Act of 1977 fueled the subprime crisis. Again, at its core: "progressive".
Government action (low interest rates and nonsensical "mark-to-market" accounting standards, along with lax ratings agencies - all government actions and/or inactions facilitated this bubble and crisis). All of this by the government distorted the clarity of the picture and obscured the risk picture.
I don't want to say that "progressives" are to blame for this crisis, because in my opinion, the blame lies with classic social psychology and the "psychology of bubbles", which has existed from the start of time, or at least, from the start of financial markets. But it is just too much when "progressives" now say that they were on the right side, and fiscal conservatives and pro-free-marketers were the bad guys. The reality is, we all had a hand in this, and no one group is the bad guys, and no one group has all the answers. For every "greedy" finance guy, I can show you a politician who pressured banks in America to lend to subprime borrowers, out of "progressive" reasons, and that all fueled the bubble.
[Diedit oleh John Bunch pada December 16, 2008 12:52 AM]
Bahasa ibu: Polish Bergabung: February 18, 2003 Lokasi: Poland
RE: Economy
Originally written by John Bunch on December 16, 2008 6:44 AM
Government action (low interest rates and nonsensical "mark-to-market" accounting standards, along with lax ratings agencies - all government actions and/or inactions facilitated this bubble and crisis). All of this by the government distorted the clarity of the picture and obscured the risk picture.
Yup, the US government was hardly progressive over the last years...
FOLLOWERS of the past year and a half’s financial misadventures have become inured to bucketfuls of red ink. Even so, the potential losses from the scam perpetrated by Bernie Madoff, a Wall Street veteran, are jaw-dropping. The $17 billion of investors’ funds that his firm supposedly held earlier this year have all but evaporated and the hole could be as big as $50 billion. That would make it the biggest financial fraud in history.
Details are still emerging, but Mr Madoff has himself described it as a giant Ponzi scheme. For years, it seems, the returns paid to investors came, in part at least, not from real investment gains but from inflows from new clients. It might still have been going on, were it not for the global financial crisis. Redemption requests for $7 billion, by investors looking to pull back from turbulent stockmarkets, forced Mr Madoff to admit that his coffers were empty—bearing out Warren Buffett’s adage that only when the tide goes out is it clear who was swimming naked.
Expert Bahasa ibu: English Jumlah entri: 1818 Bergabung: February 1, 2008 Lokasi: United States
RE: Economy
And the people who bought from Madoff did not do their due diligence. On NPR radio yesterday, they interviewed a financial advisor who once looked at Madoff as a potential customer, but balked when he saw Madoff's claim that the hedge fund run by Madoff was steady monthly gains, which were always the same.
Once again, when people do not do their due diligence, and/or understand economics, and/or not use common sense, the result is something like this. Whenever someone claims that the standard laws of economics do not apply, or that they have a "secret formula" or system, run for the hills. If people do not do their due diligence, and let themselves be led by wishful thinking or sheer greed and blindness, bubbles and scams like this will always occur. Unfortunately, as they say, "a sucker is born every minute", and bubbles appear to result from the foibles of the human psyche.
Bahasa ibu: Polish Bergabung: February 18, 2003 Lokasi: Poland
RE: Economy
That's scary. I don't want to be prey to a herd of morons/fools/maniacs/ignorants ready to destroy the world only because it's a free jungle out there with no one willing to muzzle the gang. While I also say that victims of Nigerian-like scams deserve to see their stupidity punished, I expect at the same time law enforcement to go after the fraudsters, and possibly not only after but also ahead of their next strike, using the taxes I am paying. Otherwise, if it's to be a free-for-all, let's make sure first that no taxes are collected and we are officially back to the stone age with no such idiocy as society.
Expert Bahasa ibu: English Jumlah entri: 1818 Bergabung: February 1, 2008 Lokasi: United States
RE: Economy
I agree that they should be punished (Madoff will be), but law enforcement is after the crime has already been committed. People need to do their due diligence, and not rely on the authorities, who only come in after the fact.
Also, the regulators who are supposedly going to "protect" us, often have less information than the perpetrators, and they also tend to come in with remedies too late. I think that this is happening in the financial crisis in general, by the way.
And it also bothers me how incestuous this whole thing is (the finance guy Paulson rescuing his buddies over on Wall Street). Why was Enron allowed to collapse (good riddance !), but these finance companies are bailed out ? Could it be that Houston has no cronies in D.C., but that you can't swing a dead cat without hitting some crony of Goldman Sachs, in Washington D.C. ?
Expert Bahasa ibu: English Jumlah entri: 1818 Bergabung: February 1, 2008 Lokasi: United States
RE: Economy
BTW, I find it not very "progressive" what Bush-Obama-Paulson are doing. They have collected $ 700 billion, but don't seem to know what to do with it. They also are now going to use part of it to prop up inefficient, costly auto companies. The end result of TARP will be rewarding inefficiency and stupidity. It also will crowd out private investment, and will raise interest rates.
Instead of this, what Bush-Obama-Paulson should be doing is the following:
a. Give all U.S. businesses a 1-year tax break from paying all taxes
b. Drop the corporate tax from 35 % to 17 %
c. "Defend" the dollar and set a floor on it vs. the euro and yen and remnimbi
(Source: economist Robert Mundell, Nobel Prize winner, and "father of the euro").
This would stimulate the economy much more than taking on vast public debt would.
[Diedit oleh John Bunch pada December 16, 2008 11:45 AM]
Bahasa ibu: Polish Bergabung: February 18, 2003 Lokasi: Poland
RE: Economy
Originally written by John Bunch on December 16, 2008 5:39 PM People need to do their due diligence, and not rely on the authorities, who only come in after the fact.
To encourage people to come back to the stock market this Slate's Field Guide to Financial Scams may come in handy as it explains the rules of the game:
Lots of schemes are stock-market specific. There's the pump and dump, in which the perpetrator boosts the price of a stock through false or exaggerated statements, then sells his position at an artificially inflated level. And front-running, in which a broker buys himself shares of a stock right before his brokerage buys a much larger block of shares (or recommends the stock as a good prospect). In the jitney game, brokers trade a stock back and forth to give the impression that it's a hot commodity. Bucket shop is a common term for a brokerage that defrauds its customers, usually by selling worthless or highly speculative stocks that it wants to offload. http://www.slate.com/id/2206859/
Happy games, everybody!
* * *
Following the recent JPMorgan's games on the Warsaw Stock Exchange (WSE) (Post #162986, item 1)), Polish regulator issued an unprecedented warning today addressed to an anonymous foreign investor who holds 40% of all the open future contracts on the WSE and whom the FSA suspects of planning to unload them this coming Friday in order to cause the WSE prices to collapse and thus make a windfall profit. We will be playing too, the FSA says, and will block such attempts.
Jacek
[Diedit oleh Jacek K. pada December 17, 2008 5:58 AM]
Expert Bahasa ibu: English Jumlah entri: 1818 Bergabung: February 1, 2008 Lokasi: United States
RE: Economy
Whereas I have no doubt, Jacek, that you are right, I still blame almost all of us for falling for the housing bubble, at least in the U.S. Up until 2006, you could ask almost any American, and they would have said that the price of their house would keep jumping in price every year, into eternity. Complete lack of all economic understanding.
We have met the enemy, and it is us, as they say...
[Diedit oleh John Bunch pada December 18, 2008 1:18 AM]
Bahasa ibu: Polish Bergabung: February 18, 2003 Lokasi: Poland
RE: Economy
Originally written by John Bunch on December 16, 2008 5:39 PM
I agree that they should be punished (Madoff will be), but law enforcement is after the crime has already been committed. People need to do their due diligence, and not rely on the authorities, who only come in after the fact.
Also, the regulators who are supposedly going to "protect" us, often have less information than the perpetrators, and they also tend to come in with remedies too late.
Since at least 1992, when the SEC sued two accountants peddling Madoff investments while promising sky-high returns, the commission missed opportunities to dig deeper into his operations. In 1999, trader Harry Markopolos wrote that "Madoff Securities is the world's largest Ponzi Scheme," in a letter to the SEC. More recently, multiple SEC inquiries and exams in 2005 and 2007 found only minor infractions.
So the nagging question is: WHY does law enforcement only come after the fact???
Elite Veteran Bahasa ibu: English Jumlah entri: 664 Bergabung: August 3, 2003 Lokasi: United States
(removed)
RE: Economy
How does that saying go? "If it is too good to be true, it probably is." 9/11 opened Pandora's Box. We had Enron, which was the first domino to fall followed shortly thereafter by WorldCom. The housing crisis is the third domino, which has started a world-wide fall of dominos. Did the regulators see this coming? I believe they did. But, like all the others caught up in this mess, the greed for quick, unheard of profits overshadowed common sense. The Madoff scheme is a good example of this. Will Maddoff be punished? Yes, I believe he will, but at 70 I doubt he is overly worried. I am sure he and his wife are not cutting coupons, or trying to figure out where they will find their next meal.
I do feel sorry for those who, through the dubious acts of others (supposed economic experts), have lost money. At the same time, as John has pointed out, there are no innocents in this. The bubble grew and grew and all were happy. Now that the bubble went "POP", everyone wants to cry foul and receive a bail-out. IMHO, there should be NO bailout of any kind. The banks and business that are able to survive will be stronger, and more likely to be trusted. The ones that fail, well... it just might humble a few and put them back in touch with reality. Considering that the Wall Street is still giving out bonuses to executives (example, Goldman Sacs) after receiving a bailout, imho shows they are still as unscrupulous as ever and will get every dime they can before letting the their companies collapse.
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