Santelli's Chicago Tea Party: The Quest for Our Nation's Soul 59 comments
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CNBC’s Rick Santelli's calls for a Chicago Tea Party (here) are patriotic, American, and on point. A Chicago Tea Party is what our rabble-rousing founding fathers envisioned, and I will be there this July 4. Santelli’s diatribe of genius, fury and heart had one quick quote that you may have missed.
“Don’t get scared, Joe. They’re already scaring you.”
We are being scared into a submission. It’s not “their” intention, but you know that road to hell. We cannot submit. We have not so utterly gone down this road.
Our government started this race to bottom in the dark days of November, 2008. This was about the time I decided that Paper Is Dead.
Paper Is Dead
Jim Cramer has a post on TheStreet.com that you can read here. It is frightening that Cramer – whose life and repute have been tied to cheerleading the market – is citing the death of “paper”. To quote:
“The changes are so vast and so overwhelming that you really can have only one takeaway: Why did we ever come to trust this paper? Why did we have so much faith in it? Because the actual indictment here isn’t of the companies themselves, it is of an asset class that sheds value with a velocity that just didn’t seem possible even one year ago.
“I, for one, find the exercise sobering because the carnage, which we think is contained largely to financials, has really spared nothing, no sector, no group. And it is obvious from this week’s action that the crunching has got a way to go before it is done.”
Ours is a time of moral hazard. We launched into this time, this world, because our elected representatives wanted to ease the pain. But the pain must come. The pain is healthy.
Government intervention killed paper, and it keeps killing paper and the promises that this paper was meant to keep. When General Motors’ (GM) bondholders are locked out of dialogue about how to run the firm, they are left only to watch their bonds’ values plummet. Without the stick that their bonds promised, they might as well hold Confederate scrip.
That government intervention would lead to moral hazard was apparent. You can read my blog-post of November 12, 2008 here. Or below, in its entirety.
Paper Is Dead
Nov 12, 2008 – Financial paper is a promise to pay. Consumer or Company Debt is a promise to pay so much at certain intervals. Sometimes this promise is ordered and orderly, as in corporate bonds. Sometimes this promise (consumer credit card debt or commercial paper) is free-floating.
In any event, paper is only a promise.
Corporate common stock is similarly a promise to pay… as in, you get what is left after all of our firm’s other promises. Any CPA can tell you that.
Corporate promises have gone out the window. The (increasingly jumbled) government intervention – thanks, Hank, for today's press conference – has made it such that ALL companies’ promise to pay is suspect. This is the moral hazard of which we have been warned. If GM is let out of its promises, why not KBH (KB Homes)? Why not Comcast Cable (CMCSA)?
Why not any other company that has issued “paper”? Isn’t today’s wisest choice for any established company’s MBA to urge a rush to the bottom? That is, show a terrible “loss” at company XYZ - why not General Mills (GIS), Sun Micro (JAVA), or General Dynamics (GD), and apply to suckle at the government’s teat?
There are two answers. The first is that is that the broad market for paper – or the promises of established companies to pay – is dead.
The other answer is that the real money is going to be made by brand new companies that don't have any traded “paper” out. These are the simple start-ups who have to meet their obligations, because their very existence is dependent upon such. They are start-ups who cannot rely on any interventionist government to come through with today’s or yesterday’s bailout.
You can look around at the paragons of today’s economy for the Who’s Who of companies or brands that were started in similarly “bleak” environments. They are Intel (INTC). Cisco (CSCO). Apple (AAPL). Snapple (DPS). Charles Schwab (SCHW). (Go back to the Depression and the list of icons grows innumerable.)
Welcome to the new economy.
Let the creative destruction begin.
And all praise this creative destruction. Those start-ups who choose to battle on, in today’s heavy fogs, will be the brands and companies that drive the world of tomorrow.
Washington: let the creative destruction begin. We know you can’t stay out of the way wholly, nor should we want you to. But you need to uphold the contractual, legal, and moral promises that those who sold the paper made to those who bought it. The chains of preference implicit in each person's role must have value, and that value needs to be unlocked.
Let scarce capital be allocated to the newest, hungriest and best. For established firms, let the bondholders join the dialogue and not be captive to zombie managements who only hang on. If management’s path is the best, the bondholders can decide.
We have to make paper, and the promises written on it, stand for something again. Until we do, paper is dead.
The Chicago Tea Party
In the long run, we are not all dead. In the long run, we die and future generations live on.
I do not care one whit if I am able to pass on to my children the consumerist, leveraged, falsely prosperous America that we may have had for two decades.
But I will be damned to hell if I do not pass on to my kids what it is to be American. Capitalist. Striving. An America where the best and brightest succeed, a promise has meaning, and there is consequence.
Markets ebb and flow. I think we bottom early March, rally up into summer.
This is not about the markets. Rather, it is about what makes markets – what makes those pieces of paper have and retain value. We are Russia if promises are not kept, chains of preference not honored, and apparatchiks select winners and losers.
So ours is a quest for a nation’s soul. Santelli’s answer, mine or yours may not be the right one: the searching is the thing.
This July 4, join The Chicago Tea Party wherever you may be. All else is silence.
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This article has 59 comments:
Unrelenting determination, will always, ultimatly, lead to sucess!!!
This is the simpleton thinking..."Government prints money, so obviously it destroys the value of the dollar"
or comments like the one above
"Good article, Mr. Garot. Paper is dead, at least in the U.S. For the next cycle, commodities will the source of value. "
Except, one dollar can now buy you more of any commodity (outside of gold, which I think is in a bubble) than it did just a year ago before government started printing on massive scale. Far from dead, the dollar is at its strongest point in years. Now, this does not mean that the economy is strong just cause the dollar is strong. That is another simpleton conclusion. That is why the Treasury secretary, whomever he may be, has to keep saying we have a "strong dollar" policy. But what it does mean is that the dollar is still the world's reserve currency and that is not going to change anytime soon.
Because even those people who are holding gold right thinking that the dollar is going to zero, when they lose their jobs, they will find that McDonalds does not take their American Eagle coins and if they want to eat they will have to sell their gold coins and "buy" the dollar.
The governemnt was correct to intervene but the manner in which it has intervened will impose great costs upon us. The most obvious cost is the publicized cost of all of the policy initiatives, variously estimated to be around $8 trillion committed.
The steepest cost, though, will be in future tax hikes; the national division between taxpayers and beneficiaries; the loss of individual accountability and responsibility; loss of counter party faith; further encroachment of the state in private affairs; weakening of contract law; expansion of court powers; and the dampening of the rugged individualism that has made this country what it is.
I don't know how many Rick Santelli's will be around in thirty years or so.
I actually think that this country is more than just capitalism. Capitalism is a part of our society but I do not think it is or should be the sole defining element.
Capitalism in this country has become a shield that allows greed and criminal behavior to thrive. If it is to continue as an important part of our society then it must be reformed. This can come from the outside (government) or within. The total lack of self policing by the financial industry that brought us to this point is unforgivable. The government is left to deal with the wreckage of this greed and criminal behavior.
Rick Santelli would like to ignore the mess capitalism has created and focus on the inequity of the government attempt to clean up the mess. That is an excellent way to change the subject but does not address the real problems that brought us to this point.
A more productive rant would be to root out the problems that made it necessary for government intervention in the first place.
A good start would be the elimination of CDS. If borrowers and lenders think they need insurance policies then let them buy real insurance policies not some pseudo unregulated substitute.
Why work and own a home or have ownership of any kind if you have no right to keep it?
This is true of stocks, bonds, or anything else. This is not Republicrats versus Demicans, it is good versus evil.
Corporations and Government are in collusion to enslave the average citizen.
If your home or property can be confiscated by a municipality and sold to a developer to increase tax revenue (as the Supreme Court ruled) - you do not own anything - you are a renter at the mercy of the government and/or banks.
If common stocks and bonds can be devalued to zero by the FED or CEO's or Boards asleep at the wheel; what value is any of it?
If you and I can be taxed to subsidize the banks and the irresponsible debt holder, what value is your toil and savings and investment? Nothing, it is nothing, and it can be debased and taken from you at any moment.
If there is no moral or principle or ethics underlying a promise you have nothing, despite what you may tell yourself or want to believe.
We have debased individual rights that we had gained with the Magna Carta; that is not politics or theory it is reality and a return to indentured servitude, culagium, and outright slavery.
You get your pitchfork, I'm spending my "tax break" on and AK-47.
- It is not a land of the LAW. The Law and the equality of its enforcement are the cornerstones of any free and democratic society.
- Socialism is its economic and political system
The free-market economies have made the Western world free and prosperous.
Socialism historically was a total failure. Just look at the "great" socialist leaders like Hitler, Mussolini, Stalin, Mao and 10s of millions people who were killed, slaughtered and starved to death and 100s of millions of people who were enslaved. Both Russia and China have said good-bye to socialist economies and embraced free-market capitalism.
The present worldwide economic crisis is the result of America and EU socialist mentality superimposed on the West economies. No free bank would ever offer 100%-mortgages. Capitalism would not ever tolerate such reckless lending. These mortgages were forced on banks and lending institutions by our extremely corrupt elected socialist officials in the White House and the Congress. The both US major political parties have very little respect either for the rules of Law or free-market economy.
Look at hoodlums and gangsters like Mandoff and Stanford and their Wall-Street friends and associates. They have stolen zillions of dollars and they are free. No country can function with this kind looting of the national treasury and/or its people.
Obama has offered a change from corrupt and criminal Bush administration, and he assembled his own administration with even more corrupt and dishonest people.
Thank you Obama. You are leading us directly to a second American revolution. The present malignant cancer that is killing America and the free-world must and will be surgically removed.
I have a feeling that by July 4th I will not need to go to Chicago to attend a tea party. By July 4th there will be tea parties throughout the US.
I keep hearing the phrase "largest crisis since the great depression", pretty soon the populous is going to realize that this is a crisis greater than the great depression. When that happens Herd Mentality kicks in and it will not be pretty.
This country is being destroyed by the people we stupidly voted for (DEM and REP) and placed into power. Things need to change so radically for this country to turn around that I fear it cannot be done without a full scale rebellion and civil war. The possibility of both is increasing with every stupid decision that comes out of Washington.
I have been short the market since last summer and I am not expecting to cover my positions until 2011, when I will take my profits and get on a plane for a safer place.
Atlas is not just shrugging, he is out looking to buy a gun with one bullet.
John Galt.
On Feb 22 12:49 PM Machiavelli999 wrote:
> Stupid, lies, and more stupid. This is what happens when you make
> economics a morality play instead of a technical exercise.
>
> This is the simpleton thinking..."Government prints money, so obviously
> it destroys the value of the dollar"
>
> or comments like the one above
>
> "Good article, Mr. Garot. Paper is dead, at least in the U.S. For
> the next cycle, commodities will the source of value. "
>
> Except, one dollar can now buy you more of any commodity (outside
> of gold, which I think is in a bubble) than it did just a year ago
> before government started printing on massive scale. Far from dead,
> the dollar is at its strongest point in years. Now, this does not
> mean that the economy is strong just cause the dollar is strong.
> That is another simpleton conclusion. That is why the Treasury secretary,
> whomever he may be, has to keep saying we have a "strong dollar"
> policy. But what it does mean is that the dollar is still the world's
> reserve currency and that is not going to change anytime soon.<br/>
>
> Because even those people who are holding gold right thinking that
> the dollar is going to zero, when they lose their jobs, they will
> find that McDonalds does not take their American Eagle coins and
> if they want to eat they will have to sell their gold coins and "buy"
> the dollar.
Again, all you think is... "Government prints money -> dollar down, inflation up"
While nothing could be further from the truth in this current environment. We are headed for a long period of deflation, something that Austrian economists will have a hard time explaining, so they'll just ignore it.
On Feb 22 05:47 PM Smartinvestor30 wrote:
> You my friend, are a simpleton.
If you think capitalism breeds greed and fraud, reread the histories of the most socialist states in history. The greed and fraud are different than what we experience in America, and they're 10 to 100 times worse.
On Feb 22 01:45 PM oldumbguy wrote:
> Honestly, I think Santelli is an idiot.
>
> I actually think that this country is more than just capitalism.
> Capitalism is a part of our society but I do not think it is or should
> be the sole defining element.
>
> Capitalism in this country has become a shield that allows greed
> and criminal behavior to thrive. If it is to continue as an important
> part of our society then it must be reformed. This can come from
> the outside (government) or within. The total lack of self policing
> by the financial industry that brought us to this point is unforgivable.
> The government is left to deal with the wreckage of this greed and
> criminal behavior.
>
> Rick Santelli would like to ignore the mess capitalism has created
> and focus on the inequity of the government attempt to clean up the
> mess. That is an excellent way to change the subject but does not
> address the real problems that brought us to this point.
>
> A more productive rant would be to root out the problems that made
> it necessary for government intervention in the first place. <br/>
>
> A good start would be the elimination of CDS. If borrowers and lenders
> think they need insurance policies then let them buy real insurance
> policies not some pseudo unregulated substitute.
>
I am surprised that cynicism and critical perspective have rarely been applied to our country and it's actions. Though amply documented (always by immoral employees who 'worked' with in the system -enriched themselves and then write a 'tell-all' book --such as 'Confessions of an Economic Hitman'.
What does this really say about the american 'character'- where and why is Iraq so drastically different from Vietnam? Why is it necessary to kill millions of people rather than simply remove the leaders -who after all -were/are in the employ of the US/ Western powers (see Eygpt/Saudi Arabia/ etc)?
'Our governement' has started down this road -with the support of the Unnited Fruit Company (Cuba), the invasion of a pennniless and practically armyless Grenada, a decade long genoicde that eventually encompassed Laos, Vietnam etc -and now Iraq and Afghanistan. How are we so 'advanced' from the Dutch/English who killed millons to feed a population that congratualted themselves of
their' hard work -when all the while cannabalizing other populations fora 'lifestyle'. Sorry -I got to go vomit -- the gall that is in this article -not to mention the ignorance.
On Feb 22 07:51 PM Donald Johnson wrote:
> Santelli's right on. To the dismay of Obamians, he's a good communicator
> and has restarted the conversation.
>
> If you think capitalism breeds greed and fraud, reread the histories
> of the most socialist states in history. The greed and fraud are
> different than what we experience in America, and they're 10 to 100
> times worse.
money.cnn.com/2009/02/...
See how Martinez is underwater but can make his payments. See how he will only see negative returns on his payments. See how it is far better for him to undergo a rational default. That's just common sense. Any economic theorist would actually encourage him to do so and shaft his neighbours. If he pulls an Ayn Rand, all his neighbours properly values spike down as well, not just the estimated $450k, but below that. And then the cycle begins again, just with the guy next door.
Martinez gets foreclosed because he stops paying into a depreciating asset, and then simply rents next door, reducing the net flow of capital from his household to the bank. The bank is underwater as a result as this action multiplied thousands of times destroys its capital cushion and reserves. It stops lending. Now 2 people in the neighbourhood are laid off as a result. The FDIC takes over the bank, but cannot sell the house for even $450k, and dumps it for $300k to a guy who just sits on it, grass un-mowed. The taxpayers eat the losses (you'll pay somehow). All other properties suffer from the dereliction. Martinez doesn't care. He's just renting. Lower property values mean lower taxes for the city. They close a library, shut some schools, fire some police officers and firemen and the quality of life deteriorates. Now the property is further devalued. The guy who bought the house from the FDIC receiver realizes it will not bounce back and dumps it to another fellow for $260k. Now a dozen more people in the neighbourhood are underwater. They too contemplate rational default, and the cycle continues. The neighbourhood has gone from an 70% ownership rate to a 40% ownership rate and so has no continuity (like the projects).
Where is the incentive for Martinez to stay? You need an economic incentive. Moralizing (like Santelli) will not do it. A stick (credit rating) will not do it. Only the carrot will get him to stay and pay. Martinez acting rationally in his own self-interest (the premise of American capitalism) is skewering the local economy and taking all his neighbours with him.
So the dilemma is how to reduce the principal amount. Is foreclosure really the best way? If someone says "cut me a reasonable deal" and you spurn him, he can take action that will subsequently devalue everything you own by a substantial margin. We are all seeing that with the markets. That's the paradox that needs solving.
So Santelli can rant and moralize, but is he right? Martinez acts like a capitalist in the "this is America" way that Santelli advocates, but in doing so he destroys the joint value of a neighbourhood. That cannot be good. Perhaps rewriting contracts and taking group losses is better. Call that socialism if you want, it's just common sense. Then write better rules so this does not happen again. The law is very firm that a person can walk from a unproductive mortgage and suffer the consequences to themselves. They are just reallocating their capital more efficiently. In this case, Martinez loses credit and equity. But the net effect for everyone else is far, far, far greater. The neighbours get the shaft. The banks does too. Local government and schools gets the shaft. No one wins.
The unintended consequences of the current foreclosure system are worse than anyone (except maybe Peter Schiff) ever imagined. I doubt a majority of Americans will continue to pay into houses that will not appreciate to their original value within their lifetime. If these cycles are not broken, that is the inevitable outcome. It happened in the Great Depression. It is happening again.
Will those who receive help with their mortgages be surrendering any part of the ownership of their homes to the federal government ?
If the answer is "NO" then there is a clear issue
If the answer is "YES" then I bet this program will go nowhere
Clearly, there is something here for everybody to dislike
On Feb 22 01:45 PM oldumbguy wrote:
> Honestly, I think Santelli is an idiot.
>
> I actually think that this country is more than just capitalism.
> Capitalism is a part of our society but I do not think it is or should
> be the sole defining element.
>
> Capitalism in this country has become a shield that allows greed
> and criminal behavior to thrive. If it is to continue as an important
> part of our society then it must be reformed. This can come from
> the outside (government) or within. The total lack of self policing
> by the financial industry that brought us to this point is unforgivable.
> The government is left to deal with the wreckage of this greed and
> criminal behavior.
>
> Rick Santelli would like to ignore the mess capitalism has created
> and focus on the inequity of the government attempt to clean up the
> mess. That is an excellent way to change the subject but does not
> address the real problems that brought us to this point.
>
> A more productive rant would be to root out the problems that made
> it necessary for government intervention in the first place.
>
> A good start would be the elimination of CDS. If borrowers and lenders
> think they need insurance policies then let them buy real insurance
> policies not some pseudo unregulated substitute.
>
If a business in bankruptcy can re-negotiate terms with creditors, perhaps a person in foreclosure should have that option too.
The fallout from all this is that people will need to know better the rules and regulations (none of this shadow banking nonsense) before they buy and sell and sign on the dotted line. They'll also have to be open to contractual re-negotiation should the original terms turn out to be unfounded. It's done all the time in law and commerce. This is bigger, but the same principles and solutions apply.
All of this "paper is dead" and "this is America" nonsense is just bizarre histrionics. If contracts were poorly written, poorly graded, had poor risk assessments, you don't just throw in the towel and run down the hall naked screaming about a nation's "soul". You work the problem.
Get a grip.
There ya go confusing the extremist-capitalist supplicants with facts!
On Feb 22 09:43 PM Aristophanes wrote:
> Read this article:
>
> money.cnn.com/2009/02/...
>
> See how Martinez is underwater but can make his payments. See how
> he will only see negative returns on his payments. See how it is
> far better for him to undergo a rational default. That's just common
> sense. Any economic theorist would actually encourage him to do so
> and shaft his neighbours. If he pulls an Ayn Rand, all his neighbours
> properly values spike down as well, not just the estimated $450k,
> but below that. And then the cycle begins again, just with the guy
> next door.
>
> Martinez gets foreclosed because he stops paying into a depreciating
> asset, and then simply rents next door, reducing the net flow of
> capital from his household to the bank. The bank is underwater as
> a result as this action multiplied thousands of times destroys its
> capital cushion and reserves. It stops lending. Now 2 people in the
> neighbourhood are laid off as a result. The FDIC takes over the bank,
> but cannot sell the house for even $450k, and dumps it for $300k
> to a guy who just sits on it, grass un-mowed. The taxpayers eat the
> losses (you'll pay somehow). All other properties suffer from the
> dereliction. Martinez doesn't care. He's just renting. Lower property
> values mean lower taxes for the city. They close a library, shut
> some schools, fire some police officers and firemen and the quality
> of life deteriorates. Now the property is further devalued. The guy
> who bought the house from the FDIC receiver realizes it will not
> bounce back and dumps it to another fellow for $260k. Now a dozen
> more people in the neighbourhood are underwater. They too contemplate
> rational default, and the cycle continues. The neighbourhood has
> gone from an 70% ownership rate to a 40% ownership rate and so has
> no continuity (like the projects).
>
> Where is the incentive for Martinez to stay? You need an economic
> incentive. Moralizing (like Santelli) will not do it. A stick (credit
> rating) will not do it. Only the carrot will get him to stay and
> pay. Martinez acting rationally in his own self-interest (the premise
> of American capitalism) is skewering the local economy and taking
> all his neighbours with him.
>
> So the dilemma is how to reduce the principal amount. Is foreclosure
> really the best way? If someone says "cut me a reasonable deal" and
> you spurn him, he can take action that will subsequently devalue
> everything you own by a substantial margin. We are all seeing that
> with the markets. That's the paradox that needs solving.
>
> So Santelli can rant and moralize, but is he right? Martinez acts
> like a capitalist in the "this is America" way that Santelli advocates,
> but in doing so he destroys the joint value of a neighbourhood. That
> cannot be good. Perhaps rewriting contracts and taking group losses
> is better. Call that socialism if you want, it's just common sense.
> Then write better rules so this does not happen again. The law is
> very firm that a person can walk from a unproductive mortgage and
> suffer the consequences to themselves. They are just reallocating
> their capital more efficiently. In this case, Martinez loses credit
> and equity. But the net effect for everyone else is far, far, far
> greater. The neighbours get the shaft. The banks does too. Local
> government and schools gets the shaft. No one wins.
>
> The unintended consequences of the current foreclosure system are
> worse than anyone (except maybe Peter Schiff) ever imagined. I doubt
> a majority of Americans will continue to pay into houses that will
> not appreciate to their original value within their lifetime. If
> these cycles are not broken, that is the inevitable outcome. It happened
> in the Great Depression. It is happening again.
> Martinez - Maybe he should go back to his country
And which one would that be? Should Obama go back to his?
> as I for one as
> an American would honor my agreement with the bank despite the fact
> my house may be under water. Not everyone has moral ethics like
> Martinez.
You are missing the point. Martinez is acting like a rational capitalist, redirecting his capital into a more productive activity that will see a return on productivity.
You would be a fool to stay and pay. If that is the moral high ground, then the terms defining that morality need to be re-examined. You being wasteful of your capital in the face of a contract that is clearly sucking the wealth out of your productivity is just plain and simply dumb.
Your ethics (take one for the team) are more socialist than his! He's behaving like a free agent in a purely capitalist, self-serving mode. You are serving the large corporate mortgage holder with no hope of individual gain.
And that is why there is a foreclosure process. So you can get out of contracts that kill your net wealth and start over.
> That's what makes us different from them (other countries), and why
> America is the most generous and sort after country in the world.
So what does make America different? Securitized mortgages traded in a "shadow banking system"? Bernie Madoff? Stanford? Enron? Tyco?
There is no moral high ground in your argument.
> What we do current lack right now is accountability and prosecution.
> When the likes of Stan O'Neil are held accountable we will move on
> as a country.
The only way to hold Stan O'Neal accountable would be to rip up his contract!
These are civil contracts. People can walk and the only penalty is financial in terms set before contractual inception. Either that, or you have to re-negotiate.
Thank-you for making my points.
On Feb 22 10:29 PM BM1087 wrote:
> Martinez - Maybe he should go back to his country as I for one as
> an American would honor my agreement with the bank despite the fact
> my house may be under water. Not everyone has moral ethics like Martinez.
> That's what makes us different from them (other countries), and why
> America is the most generous and sort after country in the world.
> What we do current lack right now is accountability and prosecution.
> When the likes of Stan O'Neil are held accountable we will move on
> as a country.
Oh, really? I think we have seen many exceptions to this...just look a G.W. Bush for starters.
You say capitalism has become a shield that allows greed and criminal activity to thrive.
But, America is still a land where law and order overwhelmingly prevails. The Madoffs and the Stanford's are the exception rather than the rule. I suggest you gain some perspective by visiting other countries in Europe and Asia. Greed, criminal activity, and corruption are significantly more prevalent in nations that scoff at capitalism.
You say that the actions of the financial industry are unforgivable. I ask you, if banks are really that bad, then why are we so afraid of them failing?
Bankers, are by far, the most persecuted minority in human history.
American investment banks are incredibly innovative and that innovation has allowed our nation to grow strong. However, sometimes innovations lead to mistakes. This is not a crime, losing money, in and of itself is not against the law. These things are a natural part of innovation. People cry about securitization today, but securitization led to the greatest era of wealth creation in human history (think 1980s-today).
Is that something bankers should be sorry about?
What most people fail to realize is that capitalism, and our investment banks have created an enormously wealthy America. Now some of that wealth has disappeared, but we are far better off that we would have been without capitalism and the banks.
The knee-jerk liberal reaction to the crisis has been to attack "pure capitalism." By framing their modifications as adjustments to capitalism they are essentially turning america into a socialist economy. They fail to recognize that capitalism, even with its ups and downs, significantly outperforms sociaism, communisim, and every other ism.
God Bless Capitalism. God Bless Investment Bankers.
God Bless America.
On Feb 22 01:45 PM oldumbguy wrote:
> Honestly, I think Santelli is an idiot.
>
> I actually think that this country is more than just capitalism.
> Capitalism is a part of our society but I do not think it is or should
> be the sole defining element.
>
> Capitalism in this country has become a shield that allows greed
> and criminal behavior to thrive. If it is to continue as an important
> part of our society then it must be reformed. This can come from
> the outside (government) or within. The total lack of self policing
> by the financial industry that brought us to this point is unforgivable.
> The government is left to deal with the wreckage of this greed and
> criminal behavior.
>
> Rick Santelli would like to ignore the mess capitalism has created
> and focus on the inequity of the government attempt to clean up the
> mess. That is an excellent way to change the subject but does not
> address the real problems that brought us to this point.
>
> A more productive rant would be to root out the problems that made
> it necessary for government intervention in the first place. <br/>
>
> A good start would be the elimination of CDS. If borrowers and lenders
> think they need insurance policies then let them buy real insurance
> policies not some pseudo unregulated substitute.
>
On Feb 22 11:55 PM mikebhand wrote:
> Honestly, I think you are an idiot, oldumbguy.
>
> You say capitalism has become a shield that allows greed and criminal
> activity to thrive.
>
> But, America is still a land where law and order overwhelmingly prevails.
> The Madoffs and the Stanford's are the exception rather than the
> rule.
> They
> fail to recognize that capitalism, even with its ups and downs, significantly
> outperforms sociaism, communisim, and every other ism.
>
> God Bless Capitalism. God Bless Investment Bankers.
>
> God Bless America.
> But, America is still a land where law and order overwhelmingly prevails.
Except for the part where it has the highest crime rate in the West.
> The Madoffs and the Stanford's are the exception rather than the
> rule.
You forgot Enron, Tyco, Worldcom, the entire S&L mess.
> You say that the actions of the financial industry are unforgivable.
> I ask you, if banks are really that bad, then why are we so afraid
> of them failing?
Because they'll call my car loan in even if I am making the payments. Read the fine print.
> Bankers, are by far, the most persecuted minority in human history.
Hmmmm......a few camps in East Europe run by the Germans about 55 years ago would say different.
Also, I seem to recall some guy named Jesus throwing the moneychangers out of a temple. He was a real persecutor, that Jesus guy.
> American investment banks are incredibly innovative and that innovation
> has allowed our nation to grow strong. However, sometimes innovations
> lead to mistakes. This is not a crime, losing money, in and of itself
> is not against the law. These things are a natural part of innovation.
> People cry about securitization today, but securitization led to
> the greatest era of wealth creation in human history (think 1980s-today).
>
>
> Is that something bankers should be sorry about?
Only the 50% that have been laid off already. The rest are too busy filling out their résumés. They'll get back to you.
I'm not a homeowner, so I don't know all of the ins and outs, but I definitely agree with Santelli and, yes, some of it is self-interest, but another part of it is concern that when you can start forcing "re-negotiation" of contracts, all you do is introduce more uncertainty into transactions, which is a net negative for society that goes beyond housing into nearly everything we do.
On Feb 22 10:28 PM Aristophanes wrote:
> Paper is only dead if both parties walk away from obligations. That's
> not what is happening. Instead, contracts are being opened again
> for re-negotiation. That has some people wearing $3,000 suits on
> TV in a tizzy. Santelli wants it all black-and-white. It's never
> been like that, any lawyer or diplomat will inform you of that. That
> is the entire point of Chapter 11.
>
> If a business in bankruptcy can re-negotiate terms with creditors,
> perhaps a person in foreclosure should have that option too.
>
> The fallout from all this is that people will need to know better
> the rules and regulations (none of this shadow banking nonsense)
> before they buy and sell and sign on the dotted line. They'll also
> have to be open to contractual re-negotiation should the original
> terms turn out to be unfounded. It's done all the time in law and
> commerce. This is bigger, but the same principles and solutions apply.
>
>
> All of this "paper is dead" and "this is America" nonsense is just
> bizarre histrionics. If contracts were poorly written, poorly graded,
> had poor risk assessments, you don't just throw in the towel and
> run down the hall naked screaming about a nation's "soul". You work
> the problem.
>
> Get a grip.
Furthermore, in the housing sector there was collusion between mortgage brokers and appraiser to jack prices up. No one cared because they could tranche and sell the risk downstream.
Mass foreclosures begets rational default. If a house goes 10-15% below market value in what appears to be a temporary downturn, people will hang on even if they are only paying rent and not gaining equity (barring job loss or transfer, medical issues). When a market depreciates so much as we see now, in the range of 20-50% in many areas, then it makes sense to simply get out and pass the risk downstream yourself.
That's what securitization is; that's what a rational default foreclosure is. It's passing the risk downstream. If you want to keep cash flowing and avoid swamping a market with cyclical foreclosures, you need to have an incentive to stay.
On Feb 23 12:24 AM user344210 wrote:
> The problem is that in the future, risks of this sort ("re-negotiation")
> will have to be priced into contracts, which means higher interest
> rates for everyone, whereas foreclosing and letting the market clear
> limits most of the damage to those who made bad decisions. I may
> be disappointed to learn that my neighbor's house, which is substantially
> similar to mine, is worth $100K less than he paid for it, but unless
> I plan on selling, it doesn't necessarily matter and I may even be
> able to get a new appraisal to lower my property taxes.
>
> I'm not a homeowner, so I don't know all of the ins and outs, but
> I definitely agree with Santelli and, yes, some of it is self-interest,
> but another part of it is concern that when you can start forcing
> "re-negotiation" of contracts, all you do is introduce more uncertainty
> into transactions, which is a net negative for society that goes
> beyond housing into nearly everything we do.
THAN I Would LIKE MR S TO EXPLAIN THIS AND APOLOGIZE TO THE AMERICAN PUBLIC
To the reporter who was upset about the Housing Bailout He might want to explain this to his viewers.
Not only did this part of the economy artificially inflate prices of commodities to record levels that increased the price of many products that America consumers had to pay, if the trader loss money on the trade, the debt was not paid. (sound familiar)
Read and learn something the MSM doesn't want to report on. Just blame it on the consumer, instead of sharing the burden with others involved in an economy that was running fast, but running out of track.
Global commodity derivatives market has surpassed physical markets in the last five years and continues to grow by leaps and bounds amidst widespread allegations about speculation and manipulation in commodity futures markets.
According to International Financial Services London (IFSL), in the five years up to 2007, the value of global physical exports of commodities increased by 17% while the notional value outstanding of commodity over the counter (OTC) derivatives increased more than 500% and commodity derivative trading on exchanges more than 200%.
Prices of many commodities such as oil, nickel, tin, corn and wheat have reached record highs in early 2008. Commodity exporting countries have benefited from this trend due to rapidly growing export revenue.
Santelli is a hero. Why won't anyone bring up these kinds of points.
Thanks for your comments. Let me share what prompted me to write the original Nov 2008 Paper Is Dead post.
In August 2008, I picked up work for a small estate for one client's in-laws. The estate had $200K paper-value in GM Senior Secured bonds as its largest asset; the bonds' market value was 60, or $120K.
Clearly GM was losing liquidity in August. I started inquiring if GM had made outreach to Senior Secured bondholders; could not find any. By November, GM was speaking to the Gov... and still had not engaged bondholders in dialogue.
Fast forward to now, the Gov has passed laws on loans it's made to GM. Gov has put its (and taxpayer) interests ahead of bondholders. So-so for taxpayers. NOT good for bondholders... who were promised the procedural "calls" on GM's assets that you cite (senior secured, sub-o, etc.)
With the loans to GM that the Gov made, a new sheriff is in town, the Gov -- with its infinite resources and nothing but time. Government has changed the rules, so distorting any "orderly liquidation process".
Paper Is Dead because the Govt is changing the rules -- literally the LAW -- to suit its perception of developing situations. Absent consistent application of civil law and procedural order, the contracted agreements on that paper are not civil nor orderly.
They are only promises. If we are setting up a world where investors cannot trust that our courts will uphold these promises, investors will not invest in them.
I earnest believe that we need to turn this ship around, and make Paper mean something.
Best regards -- Patrick Garot
ps: Thanks to all for your comments.
On Feb 23 12:28 PM raytayzmd wrote:
> ...paper is NOT dead...paper is a simple contractual agreement...failure
> to live up to the contract has civil consequences...if you hold senior
> debt then you get first call on the assets, next comes subordinated
> debt, etc, etc...if there is a problem then it is one of clarity
> -- if GM says it has a billion in assets, it's important to the bondholders
> that those assets are in fact really worth a billion...unfortunatel...
> on any given day, S&P and Fitch and the other ratings agencies
> can't seem to make up their minds what those assets are worth...and
> that makes it pretty darn hard to value the bonds.
Santelli's thing was the equivalent of yelling fire in the theatre... Of course we're all going to run out of the theatre with you. No one wants to get burned by the fire. Duh, no one wants to pay the way for anyone else..but I never heard Santelli yell fire about Corporate Welfare all these years...
People find it easier to rationalize lining the pockets of the haves than the have nots, mostly because they don't really see the big picture.
As far as the whole "Capitalism" thing, if anyone really thinks we have ever been living under Capitalism they are even more naive then any Socialist. But to explain further would be useless...I am not trying to change minds here.
My advice is to you is to take an economics course or a class. In a fiat money long-term deflation is an impossibility. If you are confident in what you say, cite one example in history which will back up your claim.
On Feb 22 06:21 PM Machiavelli999 wrote:
> Can you explain to me why the dollar is at multi-year highs? Why
> "Austrian economist" based investors like Peter Schiff are down 50%?
>
>
> Again, all you think is... "Government prints money -> dollar down,
> inflation up"
>
> While nothing could be further from the truth in this current environment.
> We are headed for a long period of deflation, something that Austrian
> economists will have a hard time explaining, so they'll just ignore
> it.
> giving shareholders more say in corporate governance. If we can do
> that, we'd all be better captalist, leave government intervention
> at minimum. The tea party talk and rant are just that, acting on
> emotion not deep thought.
Yes...but why does government need to change corporate governance? Don't you vote your shares?
www.opensecrets.org/ne...
www.mediacircus.com/20.../
On Feb 23 01:06 PM Henry Blankett wrote:
> I'd much rather my taxpayer dollars go to help laid-off homeowners
> who are now drowning in mortgage debt and bank usury interest rates
> and fees than to finance junkets and cocktail parties for Wall St.
> hoodlums whose criminal shell-games brought down the house-of-cards
> in the first place. Bring back the guillotine -- the necks of those
> "capitalists" who off-shored the nation's manufacturing jobs could
> also use a little trimming.
> ...paper is NOT dead...paper is a simple contractual agreement...failure
> to live up to the contract has civil consequences...
Not anymore it doesn't! Instead, you get government help for being in over your head.
Government intervention is absolutely necessary to clean up the mess left by the alleged free market capitalists that appear on CNBC.
No, on this, the passionate revolutionary Santelli and his courageous comrades in arms at the front lines on the Chicago trade floor are strangely silent.
You have to get him back on, or it gets worse. When people of his means drop off the ladder, then there is a true deflationary spiral downward.
One way to get Martinez back on the ladder is to simply rewrite his loan agreement more in line with a pre-bubble market reality. Sure, there are issues surrounding that—ethical, financial, legal—but the alternative is he sits with his income on the sidelines while his neighbourhood declines. The longer he stays off the property ladder with his earnings, the worse it gets for everyone still on it, and the better for him.
As with any economic system, the key is incentive. The neighbours, state and national taxpayers have to make a choice about how much decline they will tolerate before they will need to offer him an incentive to climb back on in a rational manner at a price more in line with real, pre-bubble values.
The worst outcome is extreme polarization whereby a majority of mortgage holders are underwater, losing more seam every month to property devaluation, made worse by even modest fiscal deflation; while those who rationally defaulted are saving cash from NOT being on the property ladder, and, with a surplus of housing stock, have far better bargaining position for their housing costs. You could see an outcome where families not on the ladder pay as low as 20% of their income on housing and have better accommodations in better neighbourhoods than real property owners who are paying about 40% of their income in property support, plus higher taxes, more maintenance, and general labour immobility. It will suck to be an owner if this process is not arrested. The consequences are very, very dire. In Florida, California, Nevada, Arizona, that process has already begun. Exurbs in the middle South are next, followed by the Pacific Northwest, Colorado, and finally almost everywhere.
On Feb 23 01:44 PM henarl wrote:
> Aristophanes: Your Martinez analogy, where his acting understandably
> in his own best interest screws over his whole neihborhood, city,
> and sociely is well taken. Unfortunately the most accurate sentence
> in your comment is the last one in the penultimate paragraph; "No
> one wins". We are now in a situation where "no one wins" and there
> is really nothing we can do to change that. We will just have to
> take our losses and learn to live with it.
Rick Santelli said what was needed to be said, and apologized for using the word "Losers" the following day on WGN Radio.
Perhaps Hollywood's Oliver Stone, should now really be blamed because of the movie "Wall Street", and the character "Gordon Gekko" with his famous statement of "Greed is Good".
It appears, that those in charge of all of these hemoraging financial institutions, took those words to heart, and ordered their staff to start extending loans to the subprime clients.
This empire city of cards was erected so fast without any fear of collapse, because of all of the profits that were being reaped, overcame common sense.
The cards have collapsed, the economy is trashed, and all of those corporate leaders that created this whole mess, are still out on the loose. It's time for a round-up, the gathering of these hogs, put them on trial for treason, and then lock them away for good.
The lesson to be learned, is if you want to be a "hog on the street", be prepared to "squeal like a pig" when that prison door closes.
"Just look at the "great" socialist leaders like Hitler, Mussolini, Stalin, Mao and 10s of millions people who were killed, slaughtered and starved to death and 100s of millions of people who were enslaved. Both Russia and China have said good-bye to socialist economies and embraced free-market capitalism."
Socialism is equated to especially murderous dictatorships. Capitalism is equated to Russia, ruled by gangsters who don't hesitate to kill their opponents, and China, where milk buyers (among others) didn't hesitate to poison their customers. By this standard, not even the USA is capitalist! I'm glad of that.
There must be another way. There is another way -- as shown by Scandinavia, Benelux, Canada, and (West) Germany. These countries may be a bit dull for the risk-takers among you. There are too many laws, too many social norms which constrict freedom. Belgium has a nasty ethnic conflict between the Flems and Wallons. All are having problems, more or less, with Muslim immigrants who don't want to assimilate. Germany does not allow the publication of any Nazi words or symbols, even with the intent of ridicule.
The USA, Great Britain, Ireland and Spain are closer to the middle way than Nova's "socialists" and "capitalists." But all have the housing bubble hangover. Chancellor Merkel, the product of a Stalinist education system, wants the hangover countries to become adults, as she is and as she leads her country to be. Rick Santelli wants to retain his childish ways. Go to it Rick! I pray you don't drag our whole country with you!
So please can it on Santelli and the righteous outrage of his merry band of derivative traders. Please tell me how we're supposed to view this lopsided criticism as anything other than mere partisanship. And let's remember how this genius McCain supporter was telling us how the economy was going to be just fine ... right before the crash.
On Feb 22 07:51 PM Donald Johnson wrote:
> Santelli's right on. To the dismay of Obamians, he's a good communicator
> and has restarted the conversation.
>
> If you think capitalism breeds greed and fraud, reread the histories
> of the most socialist states in history. The greed and fraud are
> different than what we experience in America, and they're 10 to 100
> times worse.
"Right Wing" far-extremism tends to take the form of authoritarian rule by the landed gentry, moneyed merchants, corrupted capitalists or whatever the incarnation of Aristotle's "aristocracy" -- per the Attic Greek translation -- is. Visit early Russian Czars for instances.
Contrary, Hitler and Mussolini were men of the people. Fascism and National Socialism (the Nazi Party) were populist movements, wherein the individual, collectively, voluntary succumbed to the State. Hitler and Mussolini began as leftist, populist uprisings in hyper-inflationary environments. This populism was directed against the perceived control of industrialists, large merchants, and (especially but not exclusively in the German case) enterprises thought "Jewish".
(Incidentally, the treatment of Jewish merchants in Britain from the 1500s to 1940s is a fabulous case study to see how even a heroic Magna Carta may be supplanted by both left- and right-wing extremism.)
I agree with you that extremism tends negative for a nation... but I think that's whether it's from the left or the right.
Hitler and Mussolini I put on the "left" (due to populist origins), and Mao I put initially on the left, then moving to just paranoiac crazy. I would put Stalin on the right -- although he was first "elected", he subsequently consolidated rule by disenfranchising all opponents to the point where he became a true Czar, using the authoritarian mechanisms available him at the time.
As a student of history, I suppose my point is, you automatically cannot look left or right for fascism, authoritarianism, or whatever you wish to call it.
Rick Santelli's "rant" is a healthy part of the dialogue that must happen should we wish to remain the United States of America that we grew up in -- without succumbing to a neuvo-McCarthyism that may come from either "right", or the "left".
Thank you to all who posted for your comments,
and Best regards --
Patrick Garot
On Feb 24 10:16 AM Titoman wrote:
> FYI, Hitler and Mussolini were RIGHT-WING fascists. Mao, Stalin
> were left wing communists. Either way, when you are extreme on either
> side, you had terrible leaders that slaughter millions of people.
> Read your history you Santelli sucker.
Assholes. I’m so sick of them. Could someone please round up the greedy fuckers of our nation and shove some tea bags up their asses so they can have a party as Santelli suggests in his little rant? Thank you!
What is happening today in the stock market and in our economy was already underway under George Bush, you know, the president who didn’t do a damn thing to plug the hole in the ship. Had his neocons in the House & Senate in 2005 passed laws to regulate the banking industry, our economy may very well be a ton better today. Instead, we have President Obama who is being blamed by the greedy wingers like Santelli for trying to make right with the American people, which tells me that Wall Street and the companies associated with it don’t give a flying rats ass about this country. At all.
Santelli is the loser. And a maggot. The End."