Does Anyone feel like Bailing

[tw]

Originally Posted by Undertoad

http://cellar.org/showpost.php?p=499135&postcount=88

An FDIC law was passed that required American banks to conform to Basel 1. Then the administration exempted investment banks from that law. Deregulation. Administration let investment banks raise their debt to equity ratio from 12:1 to 30:1. FDIC law was to make such debt to equity ratios unacceptable. Ahhh .. but this was not deregulation, says UT.

Administration continued deregulation which meant not agreeing with another international banking standard - Basel 2 - so that financial deregulations would not be reversed. Basel 2 further defined the equity required by financial firms for all those new investment vehicles. But that would eliminate the new deregulation - especially self regulation.

UT, your citation was disputed for multiple reasons. You chose to ignore facts such as the new debt to equity levels. And you again ignore those facts to repost nonsense.

Meanwhile, The Economist said

What will be the long-term effect of this mess on the global economy? ...
First, Western finance will be re-regulated. At a minimum, the most freewheeling areas of modern finance, such as the $55 trillion market for credit derivatives, will be brought into the regulatory orbit. Rules on capital will be overhauled to reduce leverage and enhance the system’s resilience. America’s labyrinth of overlapping regulators will be reordered.

Not regulated. Re-regulated as in putting back and enforcing the regulations that were eliminated by deregulation and self regulation ... again contradicting UT.

Or another citation from The Economist says deregulation existed and then created a mess:

The rationale behind financial deregulation was that freer markets produced a superior outcome. Unencumbered capital would flow to its most productive use, boosting economic growth and improving welfare. ... Today, however, a different premise has become popular: that financial markets are inherently unstable.

Of course, that entire article is a myth because UT tells us that deregulation did not exist.

Of from the NY Times of 28 Sept 2008

Remember, his chief mentor on economics is Phil Gramm, the arch-deregulator, who took special care in his Senate days to prevent oversight of financial derivatives — the very instruments that sank Lehman and A.I.G., and brought the credit markets to the edge of collapse.

Or from the NY Times of 26 Sept 2008:

The chairman of the Securities and Exchange Commission, a longtime proponent of deregulation, acknowledged on Friday that failures in a voluntary supervision program for Wall Street’s largest investment banks had contributed to the global financial crisis, and he abruptly shut the program down.

Voluntary supervision. Another deregulation. Christopher Cox was a strongest advocate of deregulation (which is why he got the SEC job to eliminate regulations and enforcement).

Or this editorial from the NY Times on 27 Oct 2008 entitled "Rescuing Capitalism". Oh. There is no deregulation according to UT. Therefore the editorial is about something that does not exist?

Financial deregulation enabled our boom-and-bust dynamic — removing barriers to capital flows, allowing unrestricted trading of abstruse financial products and letting financial institutions take on more and more debt. Cheap money, from China or the Federal Reserve, fueled the fire. But America’s virtually unregulated shadow financial institutions — brokerages, hedge funds and other nonbank banks — played a particularly important role at the center of this process.

The solution will require rethinking the rules of finance. The amount of capital that banks must keep in reserve will have to rise; deregulated financial institutions will have to be regulated. Yet much more will be needed than just putting the bridle back on American banks.

Or this from a Washington Post article entitled "What went wrong" on 15 Oct 2008:

The House passed the bill Oct. 19 [2000], but then the legislation stalled. Gramm was holding out for stronger language that would bar both the CFTC and the SEC from meddling in the swaps market. Alarmed, SEC lawyers argued that the agency at least needed to retain its authority over fraud and insider trading. What if a trader, armed with inside knowledge, engaged in a swap on a stock? Treasury Undersecretary Gary Gensler brokered a compromise: The SEC would retain its antifraud authority but without any new rulemaking power.

UT also says if a law exists and is no longer enforced, then that is not deregulation. So yes, to law books, that is not deregulation. To all relevant parties and the real world, that is clearly deregulation. Just another way that George Jr got his desired deregulation.

We are now prospering from the deregulation that George Jr wanted. Argue semantics all you want. CDSs are simply insurance policies renamed with the cooperation of Federal authorities so as to not be regulated. Laws did not change. But the regulation did. Just another example of deregulating the business.

Bruce is correct. Lack of regulation has also contributed mightily to our economic problems. My every post agrees with him. In 2005, Credit Default Swaps amounted to $10trillion in a world now worth $70trillion. In 2007, CDSs were estimated at $60trillion. All this time (in 1999 and 2004), regulators had become alarmed, especially because of lessons from LTCM. But the new mantra was deregulation including its variation - self regulation. Therefore even new regulations were constantly stifled by the powers that be.

I never said otherwise. But I also said deregulation by an extremist administration significantly contributed to this mess.

Regulations on new financial instruments were sorely needs - ie Basel 2. But UT has argued that George Jr's administration is innocent. That's just plain stupid from both the facts and the administration's reputation. George Jr's administration promoted deregulation, and stifled repeated attempts to regulate or even measure new financial instruments such as CDS.

Numerous responsible sources all say that deregulation also contributed to our economic fiasco. UT said

The Economist doesn't call it deregulation so why do you?

The Economist was quoted calling it deregulation both before UT posted in error and after. Deregulation is clearly to blame for this economic fiasco.

Apparently UT read a Wall Street Journal editorial that claimed George Jr did not institute any deregulation. He can argue semantics. Bottom line - deregulation was the only relevant George Jr regulation.

[Griff]

Originally Posted by smoothmoniker

I think I misunderstood. I took option 1 to be the bailout with the government taking over failing institutions, and option 2 to be no bailout, letting the economic chips fall where they fall.

Looking back at it, I wasn't clear. My preference would have been to take the hard economic adjustment, leaving market forces in place to punish bad behavior. I saw Merc giving the administration a pass when they had asked Congress for the cash. That criticism isn't based in any belief that Congress will be virtuous.

[Undertoad]

Wherever you are getting your information from, it's broken.

An FDIC law was passed that required American banks to conform to Basel 1. Then the administration exempted investment banks from that law.

Citation needed.

Administration continued deregulation which meant not agreeing with another international banking standard - Basel 2 - so that financial deregulations would not be reversed.

Well if that sorta thing happened, it would be nonregulation not deregulation. But, you know, you're wrong.

http://en.wikipedia.org/wiki/Basel_II

On November 1, 2007, the Office of the Comptroller of the Currency (U.S. Department of the Treasury) approved a final rule implementing the advanced approaches of the Basel II Capital Accord.

Oops.

Originally Posted by Economist

First, Western finance will be re-regulated

Originally Posted by NYTimes

Financial deregulation enabled our boom-and-bust dynamic

Did they happen to mention what deregulation they were talking about here? No they didn't. Did tw assume it was Bush deregulation. Yeah he's not a very good reader. When did it actually happen? Banking deregulation preceded the Bush years.

Originally Posted by washington post

The House passed the bill Oct. 19 [2000], but then the legislation stalled.

Does anyone know why legislation stalling in 2000 is not relevant to Bush administration deregulation. Anyone? Anyone?


Here's the Washington Post's story "What Went Wrong". Its opener:

A decade ago...

And they go on to describe how the big guys at Treasury ensured that deregulation was the interest of the day... although the story fails to connect that deregulation to any parts of the failure, except Bear Stearns.

Does anyone know why matters that happened in a back room at Treasury in 1998 are not a good example of Bush administration deregulation? Anyone? Anyone?

The story puts much of the onus on the 1999 Gramm-Leach-Bliley Act, which prevented SEC regulation of the investment banks the way they wanted, leading to a system of self-regulation that failed. Does anyone know why 1999 acts of Congress are not a good example of Bush administration deregulation? Anyone? Anyone?

[TheMercenary]

Originally Posted by Griff

Wrong, that is a complete rewrite of history. The Bush plan was to demand the money with no strings attached during a panic.

I don't buy that, it is a rewrite of history to call it a rewrite of history. It was no pass for the Bush admin because as you see from the posts above, it started before Bush became president.

[Griff]

Is this the Limbaugh angle, pretending there is no bailout unless the Democrats change it from serving incompetent bankers to serving incompetent borrowers? As narratives go it's convenient but hardly compelling.

[xoxoxoBruce]

We can play the blame game, fo evah. What we need is the cure.

[Griff]

word

[ZenGum]

I got this from a cow orker. I am too lazy to check its veracity, but I like it.

Quote of the Week

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.
Thomas Jefferson 1802

[tw]

Originally Posted by xoxoxoBruce

We can play the blame game, fo evah. What we need is the cure.

That begins with the purpose of companies. Having defined that, only then can a bank's function be defined.

What is the purpose of a company? Zengum quotes what happens when society and its company's objectives (and therefore a bank's purpose) are subverted.

Some of that destructive behavior was quoted previously and grasped by those who need more than sound bytes to comprehend.

CDSs quickly became instruments of speculation for pension funds, insurers, companies and (especially) hedge funds. And with no fixed supply of raw material, unlike stocks or bonds, bets could be almost limitless.

A banking system serving unlimited speculation is clearly not serving society. One industry that definitely cannot be trusted to be unregulated is the finance industry. One industry whose primary purpose is supposed to profit only by servicing other industries is the finance industry.

An example. Intel had technically superior microprocessors well before 1981. Intel constantly had one problem. Intel could not get financing to make what the world (society) needed. Banking and Wall Street could not do its job for obvious reasons. They only understood profits - not their purpose. Intel finally made killer products only after IBM made the major investment that resulted in fabs.

Today, another financial institution solves that same fundamental problem. Too many banks still forget their purpose. Venture capitalists do what banks routinely fail to do. The only valid speculation results in what society needs - innovative products. Something with a defining characteristic: investment in raw materials that are limited and that result in a useful (innovative) product.

Again, why are we in this mess? Our wacko extremists (mostly due to total ignorance and a political agenda) encouraged a Ponzi scheme where investment had "no fixed supply of raw material" so that "bets could be almost limitless."

Only legitimate investment invests in reality - products that come from limited raw materials and that serve the fundamental purpose - advance mankind.

The Economist was quoted to demonstrate what deregulation created and what happens when the finance industry serves itself rather than society: [QUOTE}They are, ... a “Ponzi scheme” that no self-respecting firm should touch. Eric Dinallo, the insurance superintendent of New York state, calls them a “catastrophic enabler” of the dark forces that have swept through financial markets. Alan Greenspan, who used to be a cheerleader, has disowned them in “shocked disbelief”. ... [/quote] CDSs, SIVs, mortgage backed securities, etc all existed or were perverted to enrich bankers and brokers; not to serve society.

Not defined in paragraph one, because you were already expected to know this. Those who promote corruption say the purpose of a company is profits. Honest purpose of any company is to serve mankind. Profits must only exist when it achieves its purpose. Otherwise a company (or its bankers) are corrupt.

We have a massive economic fiasco because deregulation openly encouraged the finance industry to enrich itself rather than serve society. How does a Merrill Lynch executive get $200million to bankrupt his company and leave? Welcome to an America now subverted to enrich so many who produce nothing - who get rich playing legalized ponzi schemes. Why are so many bankers permitted to play that game rather than serve society? Deregulation of the wrong industry. How many actually knew the purpose of a company (and its bankers)?

[tw]

Using economic stimulus plans (throwing money at a problem) simply encouraged America to play money games rather than innovate. Economics will again take revenge. Intel announced a $1billion reduction of sales in the 4th quarter.

With a market reduction of 40%, I had assumed the market had finally found a new, lower, and realistic value for America. A reduction directly traceable to George Jr's "deficits don't matter" and "welfare to the rich" (ie the secret changing of tax laws at the start of October).

I may have been too optimistic. Numbers (even in home prices) suggested that America (and your pensions) should drop as much as 40%. Based upon this Intel revelation and what may happen tomorrow (Thursday), America's net worth value may drop again. Show me where the real problems have been addressed?

Welcome to what happens when your government does nothing to avert Enron accounting and to throw money at problems. Even GM has no restructuring plans for good reason. GM is queuing up early for even more government welfare rather than fire Rick Wagoner and use 70 horsepower per liter engines.

Tomorrow, the stock market will again ask, "How much is America really worth?" now that so many Americans are MBAs rather than people who do something productive and innovative.

I had hoped the market found a bottom. Since we have not done anything to attack problems - ie Enron style accounting - and while even Cisco and Intel sales have tanked - we will see tomorrow what happens when "Deficits don't matter".

Of course, Palin could have saved us - as if George Jr's praying for guidance averted all this. Tomorrow, we will ask how much of America's wealth disappeared before government starting handing out billions like it was candy. Has America been only 40% overvalued - or were spreadsheet lies even more egregious?

Soon to line up for free government money - boat building companies. Clearly we must save jobs.

[TheMercenary]

First the Democrats in Congress Bail out the big corps, now they are going to bail out the Automakers, and the DNC has the balls to ask for people to send them money to reduce their debt from the election. Screw them.

[tw]

Originally Posted by TheMercenary

First the Democrats in Congress Bail out the big corps, now they are going to bail out the Automakers,

This was Paulson's plan to save America. Now that TARP and $700billion has not solved anything, he is responding to Democratic calls (more stupidity) to bail out companies without any requirements to fix their problems. Did no one learn from 1979 Chrysler and 1981 Ford? Even NPR tonight discussed the severe medicine that saved those companies. Does everyone still worship myths from the MBA schools?

"Ford to NYC: Drop Dead" - a headline on the NY Post that actually saved NYC. Why is this poster who some called a liberal, instead, such a hardass and more conservative than even our wacko conservatives? Maybe there wacko liberals and conservatives - and then others who deal in reality?

What has become apparent: Paulson's (a George Jr man) only plan was ill conceived (in a three page memo), was only supposed to be a temporary solution, and remains the only plan on the table. Why? He and Bernanke have no idea what to do. That realization is starting to scare the many and the markets.

This sudden revelation on Wall Street combined with Intel's hours old announcement may create but another massive sell off.

Oh. Last of the banks given special exemption (deregulation) by George Jr on equity requirements - both Morgan Stanley and Goldman Sachs - may need to concede. Neither appear to be solvent enough to become a commerical bank. That would mean all five investment banks, provided George Jr liberation from equity requirements, will disappear.

Just another example of economics taking revenge on a nation who let their leaders play money games - who said "deficits don't matter". As Warren Buffet said, the only [real] tax cut is one that cuts spending. We have yet to pay for that $1trillion war. And so our illustrious leaders spend more money than any Democrat ever did AND will now use more debts to pay for that bailout. The rooster has come home to ... shit? George Jr's legacy.

Notice another example promoted by MBAs. Drill, Drill, Drill. Notice that solution also completely ignored the problem. Welcome to Paulson's latest plan. It's getting scary again.

If only Palin replaced Cheney. Then all this would go away.

[glatt]

Originally Posted by TheMercenary

First the Democrats in Congress Bail out the big corps

Fuck you and your fucking revisionist history. I can appreciate an honest difference in opinions about how to best proceed to make this country better, but your blatant lies about this recent history are unforgivable.

The $700 billion dollar bailout was a bipartisan plan devised primarily by Bush through his appointee Paulson and modified by Congress to gain the votes needed to pass it. Bush gave a speech begging Congress to support the revised plan. And said he was "very disappointed" when they didn't at first. The Democrats and Republicans in the House and Senate passed it together, and Bush quickly signed it into law the same day. You may hate the plan, but to say it is a Democrat only plan is a complete rewrite of history. You are a liar. Stop being one.
-----------------

For the record, Merc. Here's the time line:

September 29, 2008: The Emergency Economic Stabilization Act of 2008 (H.R.3997) was introduced. This bill was a revision of the Bush/Paulson plan. In an early morning White House address, Bush urged lawmakers to pass this revised plan into law.* Just before the vote, Pelosi made some partisan comments that some Republicans didn't like.* The bill was defeated.* The Republicans may not have had the votes anyway. * As a result of the defeat, the DJIA dropped 777 points that day. White House spokesman said that Bush was "very disappointed."*


October 1, 2008: The Senate approved a revised measure, H.R.1424. 34 Republicans and 39 Democrats voted for it.

October 3, 2008: The House approved H.R. 1424 on October 3, 2008. 91 Republicans and 171 Democrats voted for it. President Bush, a Republican, quickly signed it into law the same day.*

[Shawnee123]

*applause*

[classicman]

I love this one. (see bold)

In October, I announced the creation of the Lt. Governor's Foreclosure Prevention Task Force to help Delaware homeowners deal with the growing foreclosure crisis in the state. ... helping as many Delawareans as possible keep their homes.

First, as outlined in the task force's Interim Report, we have secured almost $700,000 in additional funding for the DEMAP program, which helps homeowners who are facing foreclosure through no fault of their own.

Foreclosure Prevention website

Through no fault of their own. Like a truck came outta nowhere while they were sitting on the couch eating popcorn and crashed into
their den?