Owen

Derivatives: Just One Reason to Short the Banks

Where did you get your figures? According to their latest quarterly reports, each of the three banks you mention has less than $200 billion in equity - that's $0.2 trillion, not $1+ trillion as you mention.

They may have over a trillion each in total assets, but that number is meaningless for this discussion. Most of these assets are segregated regulated funds in client accounts, so the banks have no access to these funds for paying off derivative losses.

The Main Street - Wall Street Bout, Round Two

ROTFL! Best quote of the week.

Smarty_Pants, I love your posts. Keep'em coming!

The Main Street - Wall Street Bout, Round Two

Absolutely. The banks knew what they were doing when they lent money to those deadbeats, and deliberately chose to ignore the risk.

But we have to stop treating the borrowers as the victim here. It is not the barman's responsibility to tell you that you've had too much to drink, and it's not your loan officer's job to tell you that your real estate speculation is dangerous. It is time for those who started this ordeal by buying into a real estate bubble using other people's money to take responsibility for their actions, and stop pointing fingers at everyone else.

The Main Street - Wall Street Bout, Round Two

swrichmond,

You make some valid points. Note, however, that I never accused anyone of being a 'stupid rube', as you claim. All participants in this fiasco were reckless and greedy, and it's only our amazingly lenient personal bankruptcy laws that allow irresponsible borrowers and soccer-mom-real-estate... to welch on their commitments, and leave Wall Street holding the bag and having to pay the bill. Blaming the banks is like blaming the bookie for accepting an IOW from a penniless gambler.

I don't want any money from taxpayers. I want to see a national list of those who tricked their bank into lending them money based on false statements, and make sure none of them have access to a loan again unless they can secure it with hard assets. Financially unsound borrowers should all get the same treatment, whether they are an insurance company or an unemployed bum.

The Main Street - Wall Street Bout, Round Two

It's actually Wall Street versus Trailer Park Lane. Everyone seems to forget that this whole thing started when Joe Sixpack, which we now call "the poor taxpayer", decided to buy a $400,000 home which he knew he could never afford. But crafty Joe figured he could flip the house for $450,000 before the first mortgage payment was due, and his bank was foolish enough to turn a blind eye to this folly.

When housing prices started to fall, Joe didn't want to lose face and sell at a loss, so he kept the house and started being delinquent on the mortgage payments. Inevitably, the bank had to repossess the house, but not before our hero Joe decided to get back at the evil bank and trashed the place, reducing the resell value even further. The bank wasn't the main victim; banks don't keep most of the mortgages on their books. It was the general investing public who paid the price for Joe's recklessness and vandalism.

Now Joe Sixpack, who started this whole fiasco, is sitting in his trailer, avoiding the credit card collection guys, and protesting this "Wall Street Bailout Package". Why should he pay for the losses? After all, he weaseled out of his debts fair and square.