Sunday, September 14, 2008

Timbe-e-e-e-r! Wall Street is in Crisis Over Fears that Lehman Brothers Crash Will Trigger More Chaos

World financial markets hold their breath as another giant U.S. investment bank teeters on the brink of collapse

From this morning's Times Online story:

This weekend, Lehman’s head is on the block as meetings over its future continue. Will Paulson go to Washington on Tuesday having successfully whipped the banking industry into resolving this crisis? Will he have blinked and put government money in after all? Or will Lehman have simply collapsed, with untold knock-on effects to the banking system? Paulson has been so active on Wall Street recently that “Breakfast at Hank’s” has become bankers’ shorthand for a crisis meeting. In Lehman Brothers, he has a problem that cannot easily be resolved over muffins and coffee.
More choice commentary from one of Weber County Forum's favorite economic commentators, Professor Roubini:

Nouriel Roubini, professor of economics at the Stern School of Business and chairman of RGE Monitor, said Washington’s previously “fanatically laissez faire” attitude had precipitated this crisis and forced regulators to perform a humiliating about face to become “the United Socialist State Republic of America.” But this was “socialism for the rich” where profits were privatised but debts were picked up by the taxpayer.
Roubini said lax regulation had led to the current problems and now that the government’s coffers had been opened, officials will have a hard time closing them.
“Many of the companies not in financial services are going to say the banks are being bailed out, why shouldn’t we?” he said. The car industry is already looking for $50 billion in subsidies. The troubled airline industry may be next.
Paulson has talked of the “moral hazard” of government bailouts – a situation where companies act carelessly because they know the government will pick up the pieces. It’s a debate Roubini said American regulators should have been having years ago during the excesses of the boom years.
“In principle Lehman should be allowed to go,” said Roubini. “But if that happens the next day there will be a run on Merrill Lynch, Goldman Sachs. Let’s not pretend that’s not going to happen. The systemic risk is worse now than it was with Bear Stearns. It’s pretty pathetic really. They are running out of ideas.”
Just a little more chirpy economic news for this otherwise dazzling Emerald City Sunday morning.

Have a nice day, everyone.

20 comments:

Curmudgeon said...

Washington's "fanatically laissez faire" attitude toward regulation made the current disaster possible. Privatizing profit and socializing risk.

Prof. Roubini seems to be channeling Paul Krugman these days....

wsu_alumni said...

curm:
you may be right, but it doesn't change the fact that anyone who could get a loan, did. I've talked with ex-lenders who said they gave loans to people who were outright not able to make their payments IF their rate went up....yet there were apparently no rules or regs or even common sense in place when those people got their loans. BUT, those "people" ARE "we the people". Dems, Repubs, Indep, whoever. We all made this happen. So now we all get to deal with it.
Sorry, but I don't feel real bad for people who got huge loans for huge houses that should their rate go up, they knew they couldn't afford it,...which is what is happening. I do, however, feel bad there were not controls in place to keep opportunities in a checks/balance sort of way, so 'we the people" couldn't take advantage of the whole thing...and now just easily turn around and blame "the government"...as if those who got those loans had nothing to do with all of this.

Curmudgeon said...

WSU Alum:

Well, two points: (a) some of the people who got loans they could never pay were not well educated, and in some cases barely literate. The loans for them were written by mortgage brokers who then sold the loans, pocketed their commissions, and cared not a whit if the new homeowner, or the investment bank or hedge fund that bought the packaged loan, went under. That doesn't describe all of those who are being foreclosed, not by a long shot. But it does describe a not insignificant number. Sound banking practices [which clearly were not followed by institutions like WaMu and others] could have stopped the practice by refusing to buy unsound mortgages. So could a more effective banking regulatory system. One was taken off the boards by the greed of the banks, and the hedge fund managers, and the investment banks that eagerly packaged CDOs stuffed with sub prime mortgages and sold them to other investment conglomerates which didn't bother to determine the value of what they were buying. Added by the rating companies which happily labeled all this junk "AAA -- Investment Grade" without having themselves the foggiest idea in hell what was in them or what it was worth. Greed all around at every level. And in the absence of effective regulation and oversight... remember, most of the New Deal banking and investment regulatory system has been dismantled over the last two decades by Phil Gramm and his happy band of "get the government off the back of business" neo-cons... it all went belly up. I am NOT defending the greed involved, not at any level. Not at the level of homeowners either, except for the ones who were flat duped by corrupt mortgage brokers [some of whom are now being indicted. Way too late to do much good.]

(b) However you resolve the "who's responsible" questions, the fact is the resulting crisis is going to impact us all. You, me, everybody. We've seen already substantial layoffs in the financial industry. Bankruptcy of home builders. More layoffs. More bank losses. Failures of banks, and more to come. [This AM, the Fed's "troubled banks" list has risen to 117.] Some pension funds are now in trouble, having made big investments in supposedly rock solid AAA blue chip companies... like Bear Stearns, Fannie Mae and Freddie Mac. The effects just keep cascading down, impacting us all... even we who didn't make or take bad loans, etc. Consumer economy down, retail down. Reported this morning that the US has now suffered job losses for the 8th consecutive month. Real wages in income of middle and lower class families has declined over the last seven years, when adjusted for inflation. Etc. etc. etc.

And putting the same rapacious crew of big finance lobbyists and neo-con economists [Phil Gramm remember is still one of McCain's chief economic advisers] back in charge of the mess their [I like this phrase] "fanatical laissez faire" policies helped create makes little sense to me.

Hard times are coming. There are only three options that I can see, no matter who wins: (a)heavy increase in taxes (b) massive cuts in government spending... and this means in the major areas that spending is in: social security, military spending, medicare. Cutting foreign aid [peanuts in terms of the overall debt] or Amtrak etc. would amount to rearranging deck chairs on the Titanic. Or (c) simply printing enough dollars to pay off the debt... which means massive inflation and an end, forever, to the dollar as the worlds medium of international exchange. We're already seeing some of that as more oil delivery contracts are not dollar-denominated but euro-denominated. And so the price of gas rises as we have to spend dollars of declining value to buy euros of increasing value to settle delivery contracts.

Do I think Sen. Obama is seriously addressing the problems in his campaign? Hell no. I wish he was, but he's not. But rewarding the greedy incompetent SOBs who got us in this mess over the last eight years with four years more makes, as I said, no sense to me at all. At the very least, a clean sweep sends [please God] a message to the powerful in office: "Screw up this badly, prove yourselves this incompetent, and your career is over. Remember what happened in 1932. And 2008." That's something at least. Not much, maybe, and definitely not enough. But something.

wsu_alumni said...

Yes curm, very well said.
I don't totally agree with all of it, but your "Hard times are coming." I totally agree with.
It's very frightening.
One person I talked to a couple months ago used to be one of those lenders who sold out after the market started to shift downward. He told me straight out about how so many lenders in his position would give loans to people unable to pay them, stating the borrowers said they would "make it work" somehow. I agree....not well educated, and barely literate, to say the least.
On one of the news channels this AM some woman was defining some of the "tax increase" plans for each party. She said Obama's (as delicious as is sounded) was still just his basic layout but intended to take 10 years to actually be put into place. McCain's offered not much change to what's already out there. So hell, what DO we do?? Hard times.
I guess after reading that SLT article...it didn't hit home to me until reading it that I am a repub from pre 1996 I suppose. But I have zero faith in dems. I guess dems are dems....taking from the wealthy and hard working to hand over to the poor and illegal. The repubs...not sure at this point in time, sorry to say.

As far as your career being over because of screwing up over & over...why then does The Royal Forehead keep getting re-elected?? No lessons learned yet in Ogden.

What exactly is a "fanatical laissez faire", anyway???

Curmudgeon said...

BBC reporting now [3:55 pm] the Lehman will go into Chapter 11 bankruptcy when the market opens Monday morning. It's last hope for a buy out, a consortium led by Barclay's Bank [Eng] ended when Barclay's pulled out of the deal unless the Fed was willing to subsidize, with taxpayer funds, a substantial portion of Lehman's bad paper.

BBC link:

http://news.bbc.co.uk/2/hi/business/7615712.stm

danny said...

I don't have time for much right now, but here are some comments.

Note that Curm is now not referring to Democrats as all-knowing. This is progress.

Note too that this all is happening in a post-Enron environment of Sarbanes-Oxley regulation. Free enterprise didn't do this. Government support and encouragement of mortgage lending did. Stuff like this is almost always the government's fault.

I do like Curm's complaint about privatizing profit and socializing risk. This is Godfrey's MO. The taxpayers take the risk, his cronies take little or no risk, and yet, the cronies stand to pick up any profits.

The Dow openened down 300 a few minutes ago but has since recovered to down 240.

What is happening is the government and the Fed are running out of money to bail out their cronines. The incopetence is too great.

More later.

Curmudgeon said...

Danny:

You wrote: Note that Curm is now not referring to Democrats as all-knowing. This is progress.

Just for the record, I have never referred to Democrats as "all knowing." I'm harder on my own party's office holders than I am on Republican officeholders, as a rule, because I expect better from my guys than I do from Republicans.

Curmudgeon said...

WSU Alum:

You don't trust Dems. I understand the sentiment. I don't trust Repubs.

In our present deep deep hole, though, I think we maybe should take a lesson from those who bet on the ponies. Putting their own money on the line, race by race, they tend to be hard nosed and skeptical assessors of horseflesh, and so they rely a lot on what they call "past performance" as an indicator [not a guarantee, but a significant indicator] of future performance.

Applying that: last Dem. administration left us with a surplus. Then the "fiscal conservative" G. Bush and his Republican Congress came in. The national debt has doubled in the ensuing eight years. The deficit this year will be double that projected last year. Based on past performance, I'm hard put to see how anyone could put more money down on Republican performance being the better bet.

I'm hard put to see how any Dem admin could possibly do worse. I recall every day with nostalgic longing Al Gore's plan for dealing with the surplus: one third to paying down nat. debt, one third to shoring up Social Security and social services, one third to modest tax reductions for middle and low income folk. Imagine where we'd be today if he'd won instead of the.... fiscal conservatives.

danny said...

Curm, no quarrel:

Click Here

Look at Chart 1 and 2. Amazing. Note Clinton was '93 to '00. Bush is a spendthrift, no doubt, like his dad was.

Conclusions:

1.Limbaugh and Hannity (who are Clinton haters and Bush defenders)are not reliable for identifying conservative politicians

2.Party affiliation means little.

3. Clinton was conservative.

4. Clinton was popular.

5. Conservative (limiting government) is popular, for good reason.

But unfortunately, your conculsions are not supported by the data.

Clinton=good therefore Demos=good is non sequiter.

Correct conclustion:
Clinton=conservative=good=popular.
Bush=liberal=big govt=unpopular=bad.

wsu_alumni said...

curm:
You stated: "I'm hard put to see how any Dem admin could possibly do worse. I recall every day with nostalgic longing Al Gore's plan for dealing with the surplus: one third to paying down nat. debt, one third to shoring up Social Security and social services, one third to modest tax reductions for middle and low income folk. Imagine where we'd be today if he'd won instead of the.... fiscal conservatives."

If a Dem can't do worse, then neither can a Repub. Ground Zero is ground Zero.
Are you referring to the same Al Gore who invented the internet?
Just had to throw that in there...totally pointless. Sorry.

Good argument on the horse betting. I like the thought process there. I never said I was all gung-ho for repub, just not in favor of Obama.

Just out of curiosity, because I'm an uniformed fool from a political standpoint as of a few years ago and back....please fill me in on what the debt was when the last Dem came INTO office, and what great things said Dems did for our economy when in office, not to mention our safety.

Shoring up SS and social services....you mean what I said earlier? About the wealthy hard working guy paying out the nose in taxes so that the LAZY unwilling to work and illegals can have their free rides....since after all, they are in America, and they have rights, too??

Our system sucks, and I'm certain it sucks because of all the hands in the pie. Too many germs from unwashed, filthy little greedy hands. The germs are multiplying and spreading out of control. No amount of Bath & Body hand goo is going to remedy that. This mess will take YEARS to see any progress.
I cringe with pain, instead of feel joy, for those with small children or new ones on the way, knowing that their futures are likely going to be very troubled in this country.
Sorry for rambling.

wsu_alumni said...

danny:

"Clinton was popular"
I suppose...but why?
Doesn't change the fact he was a proven liar. And Hillary is pathetic for staying with a liar and cheater.
"I did NOT have sex with that woman, Monica Lewinsky."
Why does none of that matter, but anything the repubs do that seems questionable matter?
Oh wait...it DID matter, all of a sudden, for John Edwards screwing around on his cancer-riddled wife. I almost forgot. I wonder had he made it to Obama's shoes, or even further, to the presidency, and THEN that info got out, would the world call him popular, too?
At least keep it fair playing grounds.

Was Clinton really conservative by good sense, or because he didn't take any steps to improve anything? And what would have been the choice of anyone else in the oval office if upon first arriving having to deal with 9-11 right off the bat?

I'm CERTAINLY not saying all choices since then have been what I would think the right ones. But wars cost money. Defending our country costs money. But that's a whole different matter, not one for this blog today.

Clinton = liar = secrets = untrustworthy = confused/betrayed "we the people" = bad leader for this honorable country

Obama = liar = secrets = untrustworthy = confused voters = highly questionable leader for this honorable country

WhatWardRUin said...

i'd hate to see us waste too much space here debating national politics. it's not like either side has a stellar candidate and neither party is without some major faults and some accomplishments. with so many local issues that we can and should be doing something about let's join together to work on those. we should be attending council meetings and using our 3 minutes to demand answers about the golf course committee, and the campground, and the train car rehab, or even this high adventure committee that seems to be nothing more than a fan club lead by godfrey's favorite cheerleader, patterson. lot's to do here in ogden without stretching and dividing d.c. politics.

danny said...

Folks,

I'd just like to suggest, if you want to know what Clinton really did, and why he was popular, look at Chart 1 and 2 in my earlier post.

It's right there. You could watch TV, listen to radio and read newsmags for the last 20 years and not know.

But it is right there in hard data, if you'd care to look. Most of the big government you see under Bush was not terrorism related at all. Note his Dad increased spending about the same as the current Bush did. I suggest you accept Bush's liberalism rather than excusing it.

It's related to local politics and to everything else, because it shows what a bright person (like Clinton) does regarding government, like our Founding Fathers did - make it smaller.

That's really the whole enchilada, local, national, whatever. But after 200+ years, almost no one gets it.

BTW, Dow holding at 270 down at Lee Ping's fish shop and trading floor, Singapore.

Curmudgeon said...

Alum:

You wrote: Shoring up SS and social services....you mean what I said earlier? About the wealthy hard working guy paying out the nose in taxes so that the LAZY unwilling to work and illegals can have their free rides....since after all, they are in America, and they have rights, too??

I don't consider SS welfare. Nor do most Americans. Nor should you. Before SS, the largest demographic of the seriously poor in the US was old people. It isn't any more, and that's a good thing. And SS is largely the reason. And the truly wealthy are not shelling out nearly as much as the working middle classes since they don't take SS taxes out beyond... I think it's what, now, 86K in pay a year? And they don't take it out at all from stock profits, etc.

I'd like to see it means tested beyond what you put in plus interest. Everyone would get back what they put in, plus interest for the years to retirement age. Beyond that, it would be means tested so that we are not paying say VP Chaney or G. Bush social security for as long as they live. [Or Bill Clinton, or any other wealthy Dem politician]. But it would pay for those below the threshold income. [We could argue about what that threshold income should be. I'd say $100K a year in current dollars, adjusted for inflation from this point on. That would reduce the actuarial unsoundness of SS somewhat over time. Not enough, but some.]

And by the way, illegal aliens working in the US do NOT get social security payments, though while working they pay into the system. Hence, they are supporting, with no hope of a return on their SS tax, American citizens who are drawing SS. There's been much of late about illegals engaging in "identity theft." What that means is, they work under false [i.e. somebody else's] SS number. Meaning the SS tax taken out of the illegal's pay is NOT going into a SS account for them. The notion that illegal alien workers are entitled to, and are drawing, SS benefits is flat wrong.

As for welfare, we all are angry at welfare cheats. But the notion that there are millions of them sucking the working stiff dry just is not supported by the facts. Most people on long-term welfare are the disabled and infirm. People who cannot work. Most of the able bodied on welfare are on it for a short period, until they find jobs that enable them to get off it. Or get training that will enable them to get off it. Thanks to welfare reform , the able bodied and capable of work can not spend endless years on welfare. They have a few years support during which they have to take training to get off. It now runs out. I think three years is the end for the able bodied. The notion that welfare provides a cushy life for the lazy is, again, flat wrong. It's a marginal existence at the bottom of the economic food chain. Most of the able bodied on it are trying their damndest to get off as quickly as they can. Or so the numbers indicate.

There are other "welfare" costs that are more long lasting. ADC for example. But what's the option? Let kids starve? Not in my country. And education for illegal minors. But again, what's the option? Telling a six year old who shows up at an elementary school that he cannot enter and learn, because his parents may have committed a crime? Again, not in my country. If that makes me a bleeding heart liberal, so be it.

I'm not any happier about the... what is it now, 11 million or so?... illegals in the US. If you have a viable plan to deal with the problem, I'd love to hear it. "Throw 'em all out" is not a viable plan, since we don't know where they are, and haven't the police and INS resources to track them down, arrest, detain and deport them all. It's just not practical. Naturalize them all isn't a solution either. Nor is the absolutely idiotic electronic "wall" we're supposed to be building along the border, which has failed, to date, every effectiveness test it's been given.Every one.

I don't know what to do. I agree it's a problem. But any solution needs to be feasible, workable, practical. Nobody's proposed one yet. Not my guys. Not your guys. And any solution cannot [for me] be based on turning children away from doctors, hospitals or schools.

All the solutions so far... the earlier amnesties, etc... have been based on an agreement that as a quid pro quo for the amnesty, the border would be tightened so that future illegal immigration would be substantially reduced. No administration has been able to manage that. Not G. Bush I, not Clinton, not G. Bush II.

I don't have a workable answer. And nobody out there that I've heard of yet has one either, so far as I can see. I wish I... or anyone... did.

wsu_alumni said...

curm:
True true.
I'm not for turning starving children away or any of that. I'm not heartless or inhumane. In fact, just the opposite when it's not taken for granted or as if owed.

I do know more than I can state on this blog. Sadly, it's not necessarily the welfare system or the social security one that they "get" for free. But they get many, many free benefits that even my own family can't get, and we are not illegals. We ARE the taxpayers. Again, things I know but can't state here..as much as I'd love to.

I know for a fact there are M A N Y users of the system that could care less about making their own way, regardless of how little or limited welfare income might be.

The term "disabled" is abused and misused over and over. Seems so many people that are clearly "able" find it more rewarding or satisfying to jump on the "the world owes me something" bandwagon.

You are right. There is no answer that I've heard either, that is a true, workable solution to solve this problem.

And so it goes.
G'night, all.

Curmudgeon said...

This kind of says it all. From this morning's Daily Kos:

Looking back at the vast economic wreckage brought on by conservative policies provides a chilling picture for a future under the thumb of John McCain and his merry band of industry lobbyists. It's frightening to contemplate where we'd be, right now, if these bozos had succeeded in 'privatizing' social security, as in throwing it and the future of millions of retiring Americans who rely on it into the same snapping jaws that brought us this latest financial shitpile.

Tec Jonson said...

"Looking back at the vast economic wreckage brought on by conservative policies..."

Let's get one thing clear, Nothing Bush has done resembles conservatism of government. All of the arguments posted here and elsewhere on the net continues a pattern of soundbite slinging that devoid of any foundation.

Repugnantcans sling Limbaughisms at Demo-rats, who in turn answer with their own told-you-so's.

It's all so empty and off the mark. Good luck surviving in the new world order. Guns and trucks and a stronger military and more police state surveillance will not rescue our economy or integrity. Americans are falling for a politic of fear and rescue by the state. Pity the slovenly fools.

Let's try again in another 4 years for some real conservatism. Read Ron Paul or Bob Barr. Get the government out of the solutions business. It does not exist to provide solutions. Our govt. exists to provide a common identity to it's citizens and nothing more. I'm sick of the "govt should do this or that" syndrome. Why do people always default to govt as an answer to anything. I ask you to ask yourself...Has the govt EVER done anything to directly benefit you, or is it all some nationalist illusion. Americans' absurdly nationalistic, jingoistic, banter resembles more a homecoming pep rally than a mature evaluation of our place in the world. Wake up and grow up.

Curmudgeon said...

Tec:

Well, let's see. Bush ran as a conservative, and in particular, a fiscal conservative. The Republican Party nominated him and endorsed him on that basis. His polices... disastrous ones as we all to our pain now know... were joyfully voted into law for six years by Republican Senators and Congressmen who ran for their officers as fiscal conservatives, and were re-elected, many of them, during Bush's two terms, running as fiscal conservatives.

Now, suddenly, when the disastrous consequences of the policies endorsed over and over by all those fiscal conservatives are becoming plain, suddenly we're told "oh, well, they weren't really conservatives." Uh huh. Right.

And John McCain is running right now, this morning, as a... wait for it... "fiscal conservative" while he endorses the Bush economic program.

Give me a break, Tec....

Tec Jonson said...

Curm, Your response confirms what I posted...that 'Merkins do not know what a conservative or conservative policy looks like.

disgusted said...

we need more than two parties.
we need to look at term limits for our congress and senate just like we have for the president and we need campaign spending limits. limits that are realistic and that dont just keep the two party system protected. england limits their prime minister to spending $40 million, france to $23 million for their presidential candidates.
we should limit our presidential candidates to say total of $75 to $80 million maximun and limited government provided funds to say 25% of maximum based on matching funds.
then we could have choices rather than the hand picked party loyalists that do what the party wants instead of what the country needs run for office. not that i'm indorsing him but guys like ron paul could have been a viable candidate had he not been outspent by the major parties.
we need more than two parties and we need realistic campaign spending limitations that dont preclude anyone or party other than for the two that we now have.
im tired of having to choose if id rather be shot or hung.

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