pkscottx

Greed As National Policy: How We Got Here

Are you kidding me? Lets blame the evil's of sub-prime lending/borrowing. It was a SYMPTOM of a disease that was allowed to infect the entire bloody world because of DEREGULATION and the frigging totally unregulated and completely OPAQUE derivatives market.
This was a Ponzi scheme of debt creation that was destined to collapse when the borrowers were ultimately TAPPED OUT.
Last time I looked these "exotic financial instruments" were created by Wall Street and the notional "value" of these marvels of alchemy was estimated at $1.125 QUADRILLION against the entire annual global GDP of $50 trillion. (that sound you hear is a sucking black hole)

They have ZERO underlying real assets and were based on complicated "models" of things like income streams.

They were, for the most part "insurance" against risk (although NOT called insurance because then they would have been regulated and someone would have been checking to see if there was any one with the ability to pay up) that was sliced, diced, packaged, swapped and sold off to the corners of the known universe with commissions taken at every step. "Profits" were booked when the deal was made, not when the actual income arrived (or didn't as it turned out), bonuses were had by all. (Party on, dudes!)
Unfortunately the bonds that they were insuring against loss started to crater (lehmans auction just went for less than 10 cents on the dollar.)
The sellers of the "insurance" were so positive that this was a "sure thing" that they used insane leverage and some had as little as 5 cents of assets to cover one dollars worth of risk.
Nobody knows for sure who has or how much liability but EVERYBODY has a mountain of this garbage swept under the carpet. This is what has banks hoarding cash and eying each other with suspicion. Geeze louizey!
I happen to think that free markets are a good idea, but somebody should have been minding the store on this one. At the very least, there should have been transparency and some sort of clearing house to make sure that institutions weren't writing contacts that they had no ability to deliver on.
If my house is hit by a tornado I expect my insurance company to pay for the damages. If they say, "OOPS we underestimated the risk and don't have the cash to pay you." I have a contract so we go to court and, as they are bankrupt, they are scrapped and sold for parts while I line up with all the other creditors to collect my measly 5 cents on the dollar, which is probably LESS than the premiums I have been paying them since they had "booked" their non-existan profits and paid themselves big honking huge commissions and bonuses. The investors in said insurance company are in line after me and will get nothing back.

If the government steps in and pays up, I get my money (or at least part of it) but guess what, as a taxpayer I am going to pay that money back with interest as taxes.

A really truly free market would wipe anybody who was stupid enough to even touch a derivative of the face of the financial earth. I know, the pain, the pain. Investors, pension funds, lots and lots of banks, horror, horror and blood in the streets.

Don't look now but it's happening anyway.

Wall Street Breakfast: Must-Know News

Here's a link that explains derivatives in plain english:
cbsnews.com/stories/20...

Wall Street Breakfast: Must-Know News

I paid 25% down on my house and bought within my means.

I pay my mortgage and my bills and save what I can. Who's going to "rescue" me from the bailout?

Do not believe for one second that this is caused by the evil sub-prime borrower. There is a root cause for all of this and it is DEREGULATION, which like it or not is a Republican mantra. There is however, enough blame to go around.

The thing they are just now starting to talk about that has the Big Boyz soiling themselves are "Derivatives." These are "complex financial instruments" created out of smoke and mirrors by WALL STREET.

You need to know these things. Derivatives have ZERO underlying assets. They have a notional "value" of tens of TRILLIONS or HUNDREDS of trillions of dollars. Nobody knows for sure because they were completly UNREGULATED and they are opaque as MUD.

It wasn't the collapse of the Securities backed by sub prime mortgages (bad as that was) that brought down Banks and AIG, it was the failure by said intitutions to reserve enough capital to pay off if these "side bets" went bad. Nobody knows how much or who holds the liability but ALL the financial institutions, some insurance companies, and most all the hedge funds have a MOUNTAIN of this toxic garbage swept under the rug. That is the "counterparty risk" everyone keeps yacking about.

THIS is what has banks hoarding cash and eying each other with distrust.

Even if you take the lowest estimate of 50 trillion (or 50 thousand billion) you can see that the "bailout" of $700 billion is like trying to bail out the ocean with a soup spoon.

If you take the higher estimates of hundreds of trillions, you are talking about more than the entire annual GDP of the entire freaking planet!

Lest you think I exagerate, look at Iceland. Ponder on the fact that some nations in Europe have guaranteed all deposits in their banks, to the tune of 3 times their annual GDP.

Either we let the institutions and the investors who took the risks fail and go bankrupt or we bankrupt the whole planet.

Inflation Could Cure Our Economic Ills

Wow! Inflate our way out of this crisis, yeah, that's the answer.

It worked so well for Zimbabwe we should try it here.

Everybody, google "Derivatives" right now.

It is the derivatives that have the Big Boyz soiling themselves.

There are a few things you need to understand. They have ZERO underlying real assets. They have a notional "value" of HUNDREDS OF TRILLIONS OF DOLLARS or more than the annual GDP of the entire freaking planet. They had absolutely NO regulation and are transparent as MUD.

Nobody knows how much or who holds the liability. This is the "counter party risk" every one keeps yacking about. ALL the financial institutions have a mountain of this toxic crap swept under the carpet. This is what has them hoarding cash and eying each other with mistrust.

The harsh reality is this: Either the institutions and investors who took the risk go bankrupt or the whole world does.

Lest you think I exagerate, think Iceland or ponder the fact that some European governments have guaranteed bank deposits that in some cases exceed three times their annual GDP.

The $700 billion bailout is essentially an attempt to bail out the ocean with a soup spoon.

Roubini Was Right

OK, everybody Google "Derivatives."

These are what have the Big Boyz soiling themselves and what they are referring to when they talk about "counterparty risk."

You need to understand several things. They have ZERO underlying real assets. They have HUNDREDS OF TRILLIONS OF DOLLARS (more than the annual GDP of the entire freaking planet) in notional "value". They were COMPLETELY unregulated and as opaque as mud.

Nobody knows for sure how much or who has the liability but ALL the financial institutions have a mountain of this toxic crap shoved under the carpet. THIS is what has them hoarding cash and eyeing each other with distrust.

It was derivatives called credit default swaps (CDS) that made AIG go bankrupt. They "insured" billions of dollars of mortgage backed securities (MBS) without adaquet assets to pay up when the realestate market went bust. POOF!

$700 billion is a drop in the bucket for this amount of liability and won't thaw the credit markets. Either the people who took on the risk go bankrupt or the rest of the world does. (Lest you think I exagerate, please think Iceland or ponder the fact that European governments are now insuring bank deposits that are in some cases triple their annual GDP.)

Banning Shorts Works in Fancy Restaurants, Not the Marketplace

Maybe instead of protecting the Financials from short sellers we should protect the companies that have a smaller pool of stocks. Those are the truely vulnerable companies that hedge funds can aggressively short and do real undeserved damage to.

Did Lack of Regulation Create the Subprime Mortgage Crisis?

Those darned subprime borrowers and those pesky regulations did it.

I'm so glad you explained it for us economic illiterates.

You kind of breezed passed the whole subject of "dirivatives" a monster created wholly by the financial industry. Of couse these were completely UNREGULATED and everybody was so busy collecting a commission on "credit default swaps" that nobody checked to see if the people who were selling this "insurance" could actually pay up if things went sour. OOPS!

It's the dirivatives and the off balance sheet garbage that has every body soiling themselves. AIG was on the hook for a bunch of these and when they had to pay up they didn't have the cash. That's why they went bankrupt and we now own 80% of their sorry rears.

Then there is the whole question of "transparancy". This garbage is so convoluted and slip shod that few if anyone understands them. Nobody knows how much of it is out there or who has it. It's kind of a grizzly version of Old Maid.

The banks know this, it's a big part of the reason they won't lend to each other.

You also fail to mention that our fearless leaders in Congress are idiots and whores. Fannie and Freddie were throwing obscene amounts of money at them to get them to loosen lending standards and let them increase their leverage to insane levels. Congress didn't FORCE them to do anything.

Ditto every other Financial institution on planet earth.

These same idiots and whores are now falling all over themselves to dish out $700 billion of taxpayers money to them.

I'm puking in my wastebasket.

How to Solve the Banking Crisis

Finally, some sanity.

The Pols and the Pundits are rushing in to point the finger of blame to anyone but themselves. Truely there is enough blame to go around. This train wreck was decades in the making while every critic who predicted it was marginalized as a nut job.

There are arguments aplenty against the "bailout: Moral, Constitutional, and Economic. But the biggesst and the best is that IT WILL NOT WORK.

I've read the new and inproved version, it still won't work.

WE are witnessing the collapse of classic Ponzi scheme designed by economists who actually believe the absurd notion that you can build economic prosperity out of a mountain of debt.

It worked great as long as more debt was being shoveled into it.

Unfortunately this mountan of debt was built on the back of the American Consumer and we are TAPPED OUT.

This plan is an end game ploy to create more debt by confiscating our future earnings using the force of law as taxation.

The banks get the money right now. The taxpayer gets a deeper hole and an intergenerational transfer of wealth.

Does anyone see the flaw? It's a Ponzi scheme. It doesn't matter how much money/debt you shovel into it, unless you have infinate money/debt, it will inevitabley fail.

Theoretically you can "create" infinate money, but in the real world that didn't work out too well for Zimbabwe.

A Magic Multiplier?

Houston we have a problem!

We have a financial system that is run by "economists" like this one who believe the absurd notion that you can build a prosperous economy out of a mountain of debt.

This is a classic Ponzi scheme that works really fine untill you stop shoveling debt into it.

Unfortunately this mountain of debt is built on the back of the American consumer and we are TAPPED OUT!

This truely awfull "bailout" is an end game ploy to force the US taxpayer to take on more debt and confiscate it using the force of law through taxation.

The banks get the money right now. The tapped out taxpayer gets a deeper hole and an intergenerational transfer of wealth.

It won't work.

Do you see the FLAW? This is a Ponzi scheme, it doesn't matter how much money your pour into it, unless your resources are infinate, it will inevitably fail.

Theoretically can you pour infinate "money" into it, but in the real world that didn't work out so good for Zimbabwe.

No Bailout? Heaven Help Us

It won't work.

This train wreck is a classic PONZI scheme created by financial "engineers" who believe the absurd notion that you can create a prosperous economy out of a mountain of debt.

It only works as long as new debt is being created.

This mountain of debt is built on the back of the American consumer and we are TAPPED OUT.

The "bail out" is an end game ploy to force us to create new debt and confiscate our future earnings using the force of law as taxes.

The banks get the money right now and the taxpayer gets a deeper hole and an intergenerational transfer of wealth.

Do you see the FLAW?

This is a Ponzi scheme. I doesn't matter how much you pour into it, unless your resources are infinite it will inevitably fail.

Hoping Paulson's Plan Works Is Not a Plan

We are witnessing the collapse of a classic Ponzi scheme.

Our financial "engineers" promoted the absurd notion that you could create prosperity out of a mountain of debt.

As long as new debt was being created it worked fine.

Unfortunately that mountain of debt was built on the backs of the American Consumer and we are TAPPED OUT.

This "bailout" is an end game ploy to compell us to take on more debt which is a confiscation of our future earnings, using the force of law.

They get the money right now and the taxpayer gets a deeper hole and an intergenerational transfer of wealth.

Does anyone see the FLAW?

Remeber, this is a Ponzi scheme, it only functions as long as new debt is being created. This merely prolongs a scheme that will inevitably fail.

Bailout Talks Lose Sight of the Cost Question

The National Australian Bank wrote this garbage off 95%. They valued it a 5 cents on the dollar. No sane institution or investor is buying this crap at any price. The underlying assets are still in freefall and forclosures are excelerating. Paulson wants to use US taxpayer dollars to buy what granny would have called "a pig in a poke."
Part of the problem is that nobody knows what they are "worth" but as the saying goes "it's only worth what someone is willing to pay for it" so mark it to market!
I certainly won't be loading up my portfolio with this junk and I resent the hell out of being forced to purchase it by the government.
Oh yeah, the so called "financial rescue" won't work on any terms that don't cost the taxpayer a bundle.

We Stand at a Precipice

Quick, everybody look surprised!

This train wreck was decades in the making. All it took was hubris, stupidity, greed and the collusion of Congress, the Fed, the Treasury, and the Financial institutions. There were just such HUGE piles of nice sweaty money that everyone got a cut.

Our economy was being propped up on the absurd notion that you could create true prosperity out of a MOUNTAIN of debt.

That mountain of debt was built on the back of the American consumer. Now that he is TAPPED OUT, the corrupt ponzi scheme is collapsing.

The bank that just jacked your credit card interest rate up to 30% needs more juice and you have been squeezed dry. No one will loan it any money and nobody will buy buy its toxic garbage assets at any price above 5 cents on the dollar.

This plan would CONFISCATE YOUR FUTURE EARNINGS using the force of law via TAXATION and essentially give it to the banks.

This is called "taxation without representation" and our forefathers fought a revolution against an Empire over this crap.

Don't kid yourself, anyone that says that this plan is "good" for the Average American is a LIAR and a TOOL!

You are already screwed! Your savings, your retirement accounts, your equity, the buying power of your US dollar. POOF. There is no easy button quick fix for this disaster but this so called "financial rescue" digs the hole you are in much, much deeper and fits you with a nice yoke of slavery to corporate fascism. (Remember you will be paying for this whopper with or without your participation or consent via TAXES for generations.)

There were credible people who saw this coming and tried to warn us, but they were marginalized as "nut jobs." None of them think this plan will work.

I am not rooting for "financial distruction". I just know that it is inevitable.

Another Day Without Precedent

TOOL!

Another Day Without Precedent

Quick everyone act surprized!

It took DECADES of corruption, greed, hubris, and stupidity to create this train wreck. Congress, the Fed, the Treasury, and the Financial institutions all colluded because there were such nice piles of sweaty money and every one got a cut. There is plenty of blame to go around.

One problem though, this whole corrupt ponzi scheme was built on the rediculouse assumption that you could build prosperity out of a MOUNTAIN of debt.
That mountain of debt was built on the backs of the American Consumer and the scheme is collapsing because he is TAPPED OUT.
The Bank that just raised your credit card interest rate to 30% needs more juice but nobody will loan it any money and nobody is stepping up to buy its toxic garbage assetts.
THE ONLY WAY it can get more juice is by CONFISCATING OUR FUTURE LABOR by force of law via TAXATION!
Remember "No taxation without representation!" Our forefathers fought a revolution against an Empire over this crap!

Anyone who tells you that this rip-off is for the good of the "average" American is a LIAR and a TOOL.

There is no "easy button" quick fix. Your savings, your retirement accounts, your equity, the value of a USD; POOF they are gone. They aren't coming back. This "plan" just puts you in a deeper hole and fits you for a yoke of slavery to corporate fascists.

Oh, and the same people who saw this comming say the "bail-out" won't work.

Now go back to sleep, because the government is here and they will take care of you.