Anandakos

Jon Stewart Takes on Goldman Sachs [Video]

Hedge Fund,

That swipe against Judge Sotomayor was uncalled for.

On Jul 18 02:15 PM Mad Hedge Fund Trader wrote:

> ) I am frequently asked where I find my best sources of market data.
> Well here they are: Saturday Night Live, David Letterman, and the
> Jon Stewart Show. Unfortunately, Jay Leno retired and won’t be back
> until his new show starts in September. I’ve found my investment
> returns are much better when I keep the Comedy Channel on all day,
> instead of CNBC, which is basically a giant fan club for its owner,
> General Electric (seekingalpha.com/symbo...). How else would
> I know that Jim Cramer argued vociferously that Bear Stearns wouldn’t
> go under, or that Dora the Explorer had been appointed to the Supreme
> Court? For a perfect example of this, take a look at the video clip
> above outlining John Stewarts take on the Goldman Sachs (seekingalpha.com/symbo...)
> earnings

Why Capping Pay Is Likely to Work

Think,

I believe you are making a fundamental mistake about what banks are and should be. Because banks drank the Wall Street Kool-Aid they abandoned their traditional role and adopted the behavior of investment banks (leverage!). The regulators were drinking too, so they allowed them to act like investment banks, even encouraging them.

This was a disastrous error, and like the last time it was allowed in the 1920's, led to exactly the same sort of excesses. The so-called "talent" you want to reward subsumed the depository function into large casino capitalist enterprises and poisoned the well for all and sundry.

Depository banks should be free from political interference -- we don't want the kind they have in China and Japan. But also they should be strictly regulated and prevented from engaging in behavior that can eviscerate their capital adequacy. Such institutions would not and should not make a gazillions of dollars in profit. So they don't need the sort of buccaneer "leadership" that unlimited compensation attracts.

Those folks have a perfectly valid place in American capitalism: as entrepreneurs, private equity managers, and venture capitalists. But they should not run depository institutions because their gambling ways put the government's insurance programs at risk. Let them reap huge gains and suffer huge losses on their own, without the taxpayer's implicit, explicit, or fantasy backing. And caveat investor when dealing with them.

Banks serve the vital function of providing credit to businesses and citizens, and obviously they need to make a profit to increase their regulatory capital allowing greater loan making capability. But they should NEVER engage in non-depository activities. They also need to be forbidden from becoming "too big to fail". The only real value I can see in Wells-Fargo and Bank of America having become truly "national" banks is that people can visit an ATM in a different state without having to pay a fee.

Thus they will not need enormously compensated CEO's. There are plenty of people running local banks and credit unions profitably for low six figure salaries who are completely capable of running larger enterprises so long as the "financial engineering" element of the mega-banks are not present. Let them.

By the way, credit unions offer the same fee-free "foreign" ATM access through their national co-op. Smaller banks could do the same thing if they wanted to offer the service to their customers.

On Feb 04 11:23 AM Think! wrote:

> Unfortunately, it is looking more and more like nationalization.
>
> Obama has opened up the gates of hell by feeding populist opinion
> in order to achieve his policy objectives.
>
> The American people are angry and "rich and fat" bankers look like
> a great place to blame, right? No realtor, mortgage broker, appraiser,
> leveraged borrower or home buyer has any responsibility for this
> mess, right? Let's sock it to those nasty bankers who have the nerve
> of getting paid part of their comp with bonuses!
>
> Capping comp in the short-term is probably ok but has risks. It
> has a lot more downside in the medium and long term.
>
> You arm-chair pundits don't have any idea what it takes to run or
> even be in the top 2 levels of management at a major financial institution.
> No, they won't be "giving you a call" because you don't even begin
> to have the skill set to get the job done. I have regular personal
> contact with the Treasurers, CFOs and CEOs of most of the top 20
> banks in the U.S. You have no idea how hard these people work and
> the pressure that they are under.
>
> If you drain the talent, then these organizations will truly be brain-dead.
> That is the problem. Removing all employee incentives will produce
> corresponding behavior. Equity (how Sr. Mgt and even the rank and
> file has been receiving the majority of its compensation for the
> past few years) has been gutted.
>
> How will you recruit, manage and motivate talent? "Be glad that
> you have a job" is a very-short term motivator. If there is no upside
> offered, there will be a brain drain from the industry.
>
> That will not be good for the institutions or the country.
>
> Try to moderate the emotion and maximize the strategic thinking.

Credit Default Swaps May Be Playing a Supporting Role in Chrysler Bankruptcy Filings

This was a good analysis until the snarky, egregious reference to "Barry O". And the big banks you enumerated aren't supporting the work-out because they "are doing the bidding of the administration". They're the ones who SOLD those CDS that you've rightly pointed out give the hedgies a perverse incentive to force a bankruptcy.

Given the completely unregulated nature of CDS, there may be twice or even ten times the exposure to CDS issued against Chrysler debt a couple of years ago when the automakers were riding high. Sure, the banks probably BOUGHT CDS to hedge against the ones they sold, but the circle can only go around so many times; somebody will be left without a chair.

The banks have a big incentive to get a work-out; the hedgies have the opposite incentive. This is one time that the banks are the "good guys".

Let's Hurt the American Financial Services Industry

Morph,

The complications you foresee will not occur if regulated and insured depository institutions are FORBIDDEN from any activity other than taking deposits and making loans up to their statutory capital ratio maximum. Not if they are FORBIDDEN from owning any subsidiary or being owned by a holding company that does unregulated activities. Not if any single institution is FORBIDDEN from holding more than 5% of the total deposits in the United States. Not if they are FORBIDDEN from loaning any amount to unregulated financial institutions. Not if they are FORBIDDEN from packaging their liabilities and selling them as opaque derivatives. Allow them to sell the liabilities one at a time as they used to before Freddie Mac invented the MBS, but prevent them (and Fannie and Freddie) from packaging and selling their liabilities in artificial securities.

In other words, make banking the utility it was until the 1970's and should be again, and let the sort of person who today runs a credit union because he or she is interested in public service run the a bank tomorrow.

At the same time, allow the descendants of investment banks and hedge funds to do what they want with invested money, not loans. And make it very clear that there is no Federal guarantee explicit or implied backing any of those investments. Caveat investor.

This would result in the shrunken financial sector Felix envisions operating at the service of the economy, not as its master.

And a fantastic "unintended consequence" -- well, in truth very much intended -- would be the humbling of a large group egregiously smug and reactionary opportunists. Rick Santelli, I'm lookin' at you and your millionaire trading buddies howling for the blood of poor people who listened to shysters in the mortgage origination business.

U.S. Debt Default, Dollar Collapse Altogether Likely

Scholar,

Ah that it were so easy. Just raise the retirement age to 75 and everything will be fine. Wipe the unfunded liability slate clean! Make the buck a 12 pointer again!

Ummm. Where are all us boomers going to work for the extra nine years? I just turned 63 and have a twenty three year career in I/T with many successful systems in my resume, but people laugh when I apply for a job. Business knowledge and proven skills solving problems are no longer desired; nope, it's all Java all the time. As long as it looks pretty it doesn't matter if it chokes. "It was probably a Denial of Service attack that brought down the server", (not crappy SQL queries generated by the webtool used by the hipster who knows nothing about business except splashing Flash elements around an HTML screen). Who was hired by a bitter Gen-X'er who also knows nothing about business.

And if you don't hail from Bangalore or Mumbai don't even bother applying. You're too expensive. No, I don't care what you'll work for; you're too expensive. (Meaning of course, "Since I don't have the threat of revoking your H1B I'm afraid that you'll make me look stupid in front of my boss by speaking out". That would REALLY be "too expensive", wouldn't it?)

Remember that I work in an "in-demand" career classification. What about all those mortgage originators, salesreps at Ikea, BestBuy, and Macy's, truck drivers, framing carpenters and on and on? What will everyone do between 66 and 75? Very few people have enough in retirement savings to live entirely without an external income for nine years.

While your solution is good from the "macro" economy viewpoint, it's hell for the "micro" of peoples' lives. I'm not saying retired and retiring people are "entitled" to bankrupt the country. Rather I'm saying that we need to think long and hard about any amelioration, and not make misery and want more severe than they will be anyway.

On Feb 03 09:55 AM cyclingscholar wrote:

> With the financial markets desperate for gov't bonds, the US gov't
> wouldn't have to default..it could 'merely' ROLL over the debt as
> it comes due, to 100 year treasury bonds. Given the increase lifespan
> humans will have as medical breakthroughs proceed apace, this would
> make alot of sense. Raise the retirement/social security eligibility
> age in stages up to 70, 75, 80, as is appropriate; and most of the
> government's unfunded liabilities would disappear.
>
> cyclingscholar

Shift in U.S. - China Dialogue Is Louder than Words

Pax,

It doesn't matter that the US has been keeping "ancient and deep enmities" in check in various parts of the world. While that may have been a beneficial result, it occurred as a result of actions taken from less than altruistic motives, at least for the past three or four decades.

In any case, it can't continue. Every empire in history has undergone the same cycle of scrappy ascendancy, hegemony for a shorter or longer time, and bankrupt overwhelm. It seems that each lasts for fewer years than the former, but I have a feeling that China's coming one will endure for quite a while, simply because there will be no credible competitor.

You are correct that we have a highly productive agricultural base at this time. But at least 20% of our grain production is over the rapidly failing Ogalalla Aquifer and will be gone in ten years. When you fly over the region between the 100th Meridian and the Front Range of the Rocky Mountains and see all those green circles, you're over Ogalalla country.

When it goes we will have great difficulty feeding ourselves at the level to which we're accustomed, never mind exporting our golden river of wheat and barley.


On Jul 29 03:46 PM Pax Americana wrote:

> The USA is not, and will not, be "swept aside" as easily as you presume,
> the US military still is the Arbiteur of Global power reach, and
> maintains a tenuous peace in extremely fractious corners of our planet.
> Without Americas overiding Military power in these regions, Ancient
> and deep enmities would again raise their head. Secondly America
> is the "Bread Basket" of the planet, and food is, and will become
> increasingly important. We also issue more scientific patents than
> anyother Nation, "right off America at your peril!

Shift in U.S. - China Dialogue Is Louder than Words

King,

Much of what you say has a strong element of truth, but your assumption of "an adequate social safety net" assumes continued access to borrowed capital by the government. The point of this article is that continuation of that access is in doubt. I don't see that you disproved that point, so your argument that the US middle class is an advantage is flawed.

The only way out of our dilemma here in the US is to abandon empire and redirect the resources consumed by it to productive assets here: a better energy grid, renewable energy generation, a revamp of our transportation infrastructure, and significant improvements in education.

Those steps would revitalize the social safety net over time without unsustainable borrowing.


On Jul 30 10:59 AM KingGeithner wrote:

> Feng -
>
> I completely agree. China is in the process of creating its own massive
> bubble. While its recent stimulus spending has allowed for China
> to maintain its critical 8% growth rate (again one always has to
> question the reliability of these figures coming out of China), its
> state controlled banks have been shelling out easy money left and
> right, with lending standards ever more dubious. Apparently the Chinese
> government has not learned an important lesson: that lowering loan
> and banking standards in order to spur growth will always come back
> to bite a country in the rear years down the road. The main reason
> the U.S. saw growth after the internet bubble burst was because we
> lowered banking standards and began peddling ever more complex financial
> weapons of mass destruction. Thus, China can claim they have 8-10%
> GDP growth every year over the next 5 years, much like how we had
> nice GDP growth during the mid 2000s; let's see how sustainable China's
> growth will be.
>
> I think people are too quick to write off the U.S. and upgrade China
> as the world's sole future financial power. The U.S. has the world's
> strongest middle class and an adequate social welfare safety net.
> China has no safety net for its citizens, and a nonexistent middle
> class. It will forever be dependent on the U.S. and the rest of the
> world to sustain its growth, unless it can guarantee a basic safety
> net for its citizens and close the income gaps so that a healthy
> middle class can actually develop. China is essentially at the mercy
> of the economic situation of the U.S.

Unlike AmEx, Capital One's Defaults Worsening

This could not happen to a nicer group of scumbuckets.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

WD216,

Many Americans have "an anti-business mentality" because their interactions with business are unpleasant, unsafe, and unfair. Businesses deploy armies of lawyers against their customers, collude with one another to fix prices and limit service, exploit the employees who generate the revenue keeping the lights on, and buy legislation from Congress making it all legal and protecting the processes.

There is no doubt that the limited liability corporation is the economic organization best able to accomplish large projects lasting an extended period of time. But giving such legal enterprises access to Bill of Rights protections was stupendous folly. Sure, they need access to courts and court procedures as a "person" in order to defend themselves against torts and to initiate them against one another in order to protect their contract rights. But they should not be assumed to have the POLITICAL rights guaranteed by the first ten amendments (free speech, petition of grievance, bearing of arms, and so on).

Since we don't have the initiative at the Federal level I have no idea how to correct this one hundred and thirty year old catastrophe, but it is the root of most of the distortions that afflict our democratic republic today.

On Jul 31 01:39 PM WD216 wrote:

> If those are the correct numbers, then is program costing $1 billion
> and 22,000 vehicles were sold, then the $45,000 per vehicle is correct.
>
>
> However more importantly, are the lines, "This government is, unfortunately,
> a reflection of the current state of economic immaturity that prevails
> in America. The vast majority of people, including most people in
> Congress, do not understand the forces that drive the real economy"
>
>
> Brilliant lines, they sum up the entire mess. We have a bunch of
> good speakers in office that don't know their a*s from their elbow
> when it comes to the economy. The American people don't either as
> they have an anti-business mentality, learned mostly through our
> liberal education system.
>
> The country is going to come out of this recession, only because
> of the trillions that are being spent. However, within 2 to 3 years
> you will see disaster strike due to these same spending policies.
> Our problems will be much worse then. This all due to ignornat Americans
> electing people that speak well.

Why Economic Dogma Threatens Our Future Prosperity

Rosey,

Not just drafted, inducted for the duration..... There will be no cease fire or peace accord in this economic disaster. The US is Napoleon's army in Russia; we didn't take Moscow, it's FRICKING cold, the food's gone, and it's 1500 klicks back to gay Paree.

The saddest thing about all this is the degree to which the flim-flam artists on Wall Street have snookered so many otherwise intelligent people in Congress into carrying their water in this grand Shell Game.

I'm not excluding either party from that assessment; you have to be pretty darn smart to get into Congress these days. I even include Michelle Bachmann; she's not dumb, just ill-educated.

I may take a nolo contendere on James Inhofe, though; the bell curve pretty much works on any group greater than 35. Even though the median is probably about 120 in the Senate, there have to be 1.4% (one or two people in this case) who are two normal distributions on the dumb side. One of those would definitely be Inhofe.

On Jul 10 02:41 PM rosey99 wrote:

> Ballsy play to criticize Saint Ronald here on SA, though the bulk
> of the comments reflect our collective, and deep, denial.
>
> For those of you who still don't get it: It was grossly irresponsible
> to cut taxes, mostly for the very wealthy, while increasing spending.
> Accepting the tax cuts without requisite spending cuts was immoral.
> Combined with trickle-down - or voodoo - economics it was grossly
> immoral.
>
> The intellectual gymnastics one has to go through to rationalize
> tax-cut and spend behavior is frightening to behold. It speaks volumes
> about who we are, and the thinness of our moral fabric. This mess
> is now so huge, I don't know that those of us tasked with cleaning
> it up will be able to do it in a single generation. The budgetary
> wars to come will not allow for college deferments, though running
> off to Canada may remain an option. We're all gonna get drafted,
> and that pisses me off.

Why Is Oil Creeping Back Up?

@Vuke,

Ah that it were so. Unfortunately, it's not, unless you go with Plutonium breeders or Thorium. There just isn't enough U-235 in the outer crust to get much more than 50 to 70 years' production of electricity assuming only replacement of current aging reactors.

A worldwide increase to 80% would use it up before all the reactors were completed.

Successful Thorium reactors would last a lot longer as would of course PU breeders.

But the truth is that the only way for human beings to maintain a technological society is complete conversion to gravitational (tidal) and solar (direct, wind and perhaps space-based direct if one can avoid cooking all life under the transmission receivers) energy. It's the ONLY way; there is no other option.

All other options will run out quickly at a human population of 6 to 10 billion or more slowly with fewer. But run out they will. Hello; they all depend on resources which are mined from the Earth. The Earth is not growing larger, nor are radionuclides, hydrocarbons, or coal being created at any rate other than one over some huge power of 10 percent of that being consumed.

I have a hard time understanding why so many otherwise intelligent human beings simply are unable to see this incontrovertible fact.

The more quickly we decide to make the transition -- e.g. lower our current consumption in trade for a decent future for humans yet to come -- the more opportunity those in the future will have to use a little of the Earth's amazing treasure trove of biological and stellar riches. The more of it we use, the poorer ALL future human civilizations are condemned to be.

And for you hard-core supply-siders, No, I'm not saying that we should not develop new technologies or "go back to the stone ages" (a favorite canard about "leftists"). I'm saying that each human being alive today should use those technologies which consume non-renewable resources less today and each tomorrow she or he lives.

On May 31 10:16 AM Vuke wrote:

> Freya has it right. Car sales in China now surpass those in the
> U.S.. Add the rush to autos in India, Africa, Indonesia and you've
> got a tsunami of new oil consumption.
>
> But, even more, add the scooters, roto-tillers, generators, tractors
> and other fuel systems billions of people want and a second wave
> appears.
>
> Existing oil fields are in decline and producers are reluctant to
> export the last drops cheaply. New oil, because it's offshore or
> embedded in sands is going to be much more expensive.
>
> Quietly, (as a search in SA will tell you) uranium is appearing as
> the energy source to help fill the void. New reactors are being
> proposed everywhere. If France can generate 80% of its electricity
> from nuclear so can the rest of the world.

Mortgage Cramdowns: A Disaster in the Making

What a crazy idea! How would forcing a family of six in a $600K home into a $150K single bedroom condo going to help reduce foreclosures? The family will say "f you" to the bank and let the house go.

And if you will do some very simple math, you will see that the LTV ratio goes from 1.5 to 2.33 in your scenario. You're not only depriving the owner of a superior asset you are making it LESS likely that she or he will ever recover the $200K loss.

You're not just a shill for the banks; you're a DUMB shill for the banks.

On Jan 09 12:53 PM redeyeant wrote:

>
> To qualify mortgage reduction, the debtor should be reallocated
> to another cheaper foreclosure house. Suppose he owes 600K and house
> he own worth 400K, then the bank can move him to a 150K condo and
> he can ref. to a 350K loan that he can afford. Thus reduce foreclosure
> homes and doesn't cost tax payer's money.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Mud Engineer,

What foolishness; the people buying these new cars are not poor. The government is not buying the car for them, lock, stock, and barrel. It is basically providing a bigger trade-in allowance on guzzlers worth less than $4,500; most buyers still have to take out a loan. It's just somewhat smaller than it would have been.

Nobody whose car is worth more than $4,500 trade in is going to participate; if they were going to buy anyway, they'll take the trade-in offered by the dealer. I hope you're able to understand that.

Because of this there will be an economic cost, paid by the buyers of relatively low-priced used cars over the next few years. The truth is that anyone who can afford a new car in this economy is probably already driving a decently running, reliable vehicle. Those worth less than $4,500 are being trashed irrevocably and removed from the pool of available used vehicles. While that's a bit of a fuel economy and emissions benefit, it is an economic cost for people who are struggling anyway.

So in fact the people who you so hate -- the "losers" of society who "don't have to pay taxes or even get a so called tax refund -- will be the ones most hurt by this program, since reliable used cars will rise in price.

I surprised you aren't cheering their comeuppance, Ebeneezer.

On Aug 03 11:35 AM MudEngineer wrote:

> This cash for clunkers program "is not a tax rebate". This is taking
> money from the people who pay taxes and giving it to the people who
> make so little money that they don't have to pay any taxes and may
> even get a so called tax refund even though they paid no taxes.
> That my friend is exactly "socialism".
>
> Your wonderful "cap and trade" will really screw the people who have
> no or little money as energy in all forms will rise in cost and they
> can least afford to pay those new taxes. All because of a few idiots
> who mistake CO2 as the cause of global temperature change when sun
> spots actually cause this cycles naturally. If cap and trade and
> the healthcare plan both pass, we will be permenantly in a recession
> or a depression. THANK YOU LORD OBAMA, OUR NEW DICTATOR!

Jon Stewart Takes on Goldman Sachs [Video]

Wisdom,

Actually, they are ("writing the laws and hiring the bureaucrats"). Or at least, supplying them.

On Jul 18 03:37 AM Wisdom vs. Information wrote:

> GS is not writing the laws and hiring the bureaucrats that are taking
> away your money and rights-- that would be the politicians (that
> jon stewart supported, BTW). stewart is funny, but he is a symptom
> of the problem

Why Economic Dogma Threatens Our Future Prosperity

Jeff,

"Unless Americans believe that 80% of their population are a bunch of losers who DESERVE to get poorer and poorer every year..."

Well I think that most of the posters here DO believe that. In my heart of hearts I hope they hear Marley's chains clanking before it's too late.

On Jul 10 01:15 PM Jeff Nielson wrote:

> What a SUPERB essay! I've bookmarked this - to refer to it myself
> in the future.
>
> For those criticizing the author's tax "heresy", it's important to
> focus. It's not the poor and middle-class who have been "under-taxed",
> it's the filthy-rich. 1% of the U.S. population holds more than 35%
> of ALL wealth - and 55% of ALL stock. And their grip on America's
> wealth grows stronger every year.
>
> Meanwhile 80% of the U.S. population holds only 15% of total wealth
> (about 25% less than in other industrialized nations).
>
> Unless Americans believe that 80% of their population are a bunch
> of losers who DESERVE to get poorer and poorer every year, then the
> numbers are unequivocal. The very wealthy have been grossly UNDER-TAXED
> every year - and as a result, they are the ONLY people who have been
> benefiting from Ronald Reagan's "trickle-down" economics of giving
> the wealthy a free-ride (at the expense of everyone else).