We're Financial Moguls!!!

[cryptique]

Dear American:

 

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

 

I am Minister of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

 

I am working with Mr. Phil Gramm, lobbyist for UBS, who will be my replacement as Minister of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transaction is 100% safe.

 

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

 

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

 

Yours Faithfully,

 

Minister of Treasury Paulson

[Good Old Neon]

Dear American:

 

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

 

I am Minister of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

 

I am working with Mr. Phil Gramm, lobbyist for UBS, who will be my replacement as Minister of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transaction is 100% safe.

 

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

 

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

 

Yours Faithfully,

 

Minister of Treasury Paulson

 

Awesome -

[cryptique]

I should have linked to the site where I got that: Kiss My Big Blue Butt, which is always a good read.

[NightOfJoy]

The Bitter Fruits of Deregulation

By PAUL CRAIG ROBERTS

 

Remember the good old days when the economic threat was mere recession? The Federal Reserve would encourage the economy with low interest rates until the economy overheated. Prices would rise, and unions would strike for higher benefits. Then the Fed would put on the brakes by raising interest rates. Money supply growth would fall. Inventories would grow, and layoffs would result. When the economy cooled down, the cycle would start over.

 

The nice thing about 20th century recessions was that the jobs returned when the Federal Reserve lowered interest rates and consumer demand increased. In the 21st century, the jobs that have been moved offshore do not come back. More than three million U.S. manufacturing jobs have been lost while Bush was in the White House. Those jobs represent consumer income and career opportunities that America will never see again.

 

In the 21st century the US economy has produced net new jobs only in low paid domestic services, such as waitresses, bartenders, hospital orderlies, and retail clerks. The kind of jobs that provided ladders of upward mobility into the middle class are being exported abroad or filled by foreigners brought in on work visas. Today when you purchase an American name brand, you are supporting economic growth and consumer incomes in China and Indonesia, not in Detroit and Cincinnati.

 

In the 20th century, economic growth resulted from improved technologies, new investment, and increases in labor productivity, which raised consumers

[Good Old Neon]

The Bitter Fruits of Deregulation

By PAUL CRAIG ROBERTS

 

Remember the good old days when the economic threat was mere recession? The Federal Reserve would encourage the economy with low interest rates until the economy overheated. Prices would rise, and unions would strike for higher benefits. Then the Fed would put on the brakes by raising interest rates. Money supply growth would fall. Inventories would grow, and layoffs would result. When the economy cooled down, the cycle would start over...........................

 

Thank's for posting that - scary stuff.

[Good Old Neon]

My understanding of the Great Depression and the events leading up to it, the short/long-term consequences, etc, is, to put it mildly, lacking

[NightOfJoy]

Thank's for posting that - scary stuff.

 

Yeah, it put me in a rather dark mood after reading it.

 

Might as well contemplate how reality may play itself out, eh?

 

If I was a praying man, I'd be on my knees right now.

 

Perhaps I will, for my kids sake.

[miss jayne]

I have my place for a pencil stand picked out...between Gordon Getty's house and his limo anyone care to join me

 

the solution should include investment in green businesses that are american owned and operated...think they will put that in the plan?

[Good Old Neon]

I have my place for a pencil stand picked out...between Gordon Getty's house and his limo anyone care to join me

 

the solution should include investment in green businesses that are american owned and operated...think they will put that in the plan?

 

That strikes me as, at least in part, a viable solution. As I

[Mrs. Peel]

Forbes.com

 

"The secretary and the administration need to know that what they have sent to us is not acceptable," says Committee Chairman Chris Dodd, D-Conn. The committee's top Republican, Alabama Sen. Richard Shelby, says he's concerned about its cost and whether it will even work.

 

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

 

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

 

Are we on Candid Camera? Seriously. Where are they hidden?

[austrya]

Someone must not have told the credit card company that called me earlier to offer me a special introductory rate that we're in an economic crisis.

[Winston Legthigh]

Interesting read that came across my desk...

 

Three lessons from post-bubble Japan

 

Since its property bubble burst in 1990, Japan has taught the world three important lessons about fixing a banking system, which the US seems to be following closely. The only noticeable difference is that the US appears to be acting in haste, but this is only to be expected given its dependence on foreign money.

 

 

The first lesson is that the easy solutions do not work. From the bursting of the bubble in 1990 until early 1997, Japan appeared to be in a state of denial about the seriousness of its banking crisis. It tried gentle solutions such as cutting interest rates, discouraging short selling, spending heavily on public works and using a convoy system of strong banks to bail out the weak.

 

 

The US passed through this stage when the Fed aggressively cut interest rates in the second half of 2007, the US gave tax rebates of $100bn to consumers, Bear Stearns was bailed out by JP Morgan, and Fannie Mae and Freddie Mac were placed in conservatorship, whatever that means.

 

 

The second lesson is that the government has to nationalise the worst banks, recapitalise the rest, and force banks to make their necessary loan loss provisions. Japan only took this action after the bankruptcies of big financial institutions began in late 1997. The banks were recapitalised in 1998 and 1999, and continued making large write-offs through 2003.

 

 

The US is now in this second stage, compelled to do something by the bankruptcy of Lehman Brothers and the near failure of AIG. Its plan to spend $700bn to buy bad mortgages appears to be a move in the right direction, but could reflect a continued state of denial. If banks sell their toxic bonds at market prices, they will have to take losses and then raise new capital, probably from the government. If the Treasury buys at artificially high prices, it would amount to a free recapitalisation of the banks and nationalisation of losses.

 

 

The third lesson is that regulations introduced after the crisis actually keep banks out of trouble but limit their profitability. While Japan only suffered an $8bn loss from subprime debt, its banks are still suffering from a weak property market, higher credit costs, poor fee income and losses overseas. For whenever a business starts to look good, vigilant regulators tend to crack down. We suspect US banks will not be the money spinners they once were.

 

 

Japanese bank shares may rally on this latest rescue package, which has yet to be finalised. But we do not think there can be a sustainable rally until the banks

[quarter23cd]

I'm not really sure what thread this belongs in, but is the National Review really saying that WaMu failed because it hired too many minorities??

[bjorn_skurj]

I'm not really sure what thread this belongs in, but is the National Review really saying that WaMu failed because it hired too many minorities??

They might be hinting, but let's face it: it was the white dudes who made all the bad decisions.

[viatroy]

fuckin white dudes. seriously, 'you people'. Okay women everywhere, on the count of three, lift your shirts and say "I'm taking over."

[mfwahl]

fuckin white dudes. seriously, 'you people'. Okay women everywhere, on the count of three, lift your shirts and say "I'm taking over."

Please do; that will show us.

[viatroy]

[tugmoose]

 

IknowIknowIknow!!!

 

Cut taxes!!!

Was I right, or was I right?

 

We can spend $700 Billion and cut taxes!!!

[sureshot]

60 Minutes segment from last night on credit default swaps

[sureshot]

I remember this article from last December...its looking pretty prophetic right about now..

 

http://www.washingtonpost.com/wp-dyn/conte...0402186_pf.html

It's Not 1929, but It's the Biggest Mess Since

 

By Steven Pearlstein

Wednesday, December 5, 2007; D01

 

It was Charles Mackay, the 19th-century Scottish journalist, who observed that men go mad in herds but only come to their senses one by one.

 

We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has seen. Everyone seems to acknowledge now that there will be lots of mortgage foreclosures and that house prices will fall nationally for the first time since the Great Depression. Some lenders and hedge funds have failed, while some banks have taken painful write-offs and fired executives. There's even a growing recognition that a recession is over the horizon.

 

But let me assure you, you ain't seen nothing, yet.

 

What's important to understand is that, contrary to what you heard from President Bush yesterday, this isn't just a mortgage or housing crisis. The financial giants that originated, packaged, rated and insured all those subprime mortgages were the same ones, run by the same executives, with the same fee incentives, using the same financial technologies and risk-management systems, who originated, packaged, rated and insured home-equity loans, commercial real estate loans, credit card loans and loans to finance corporate buyouts.

 

It is highly unlikely that these organizations did a significantly better job with those other lines of business than they did with mortgages. But the extent of those misjudgments will be revealed only once the economy has slowed, as it surely will.

 

At the center of this still-unfolding disaster is the Collateralized Debt Obligation, or CDO. CDOs are not new -- they were at the center of a boom and bust in manufacturing housing loans in the early 2000s. But in the past several years, the CDO market has exploded, fueling not only a mortgage boom but expansion of all manner of credit. By one estimate, the face value of outstanding CDOs is nearly $2 trillion.

 

But let's begin with the mortgage-backed CDO.

 

By now, almost everyone knows that most mortgages are no longer held by banks until they are paid off: They are packaged with other mortgages and sold to investors much like a bond.

 

In the simple version, each investor owned a small percentage of the entire package and got the same yield as all the other investors. Then someone figured out that you could do a bigger business by selling them off in tranches corresponding to different levels of credit risk. Under this arrangement, if any of the mortgages in the pool defaulted, the riskiest tranche would absorb all the losses until its entire investment was wiped out, followed by the next riskiest and the next.

 

With these tranches, mortgage debt could be divided among classes of investors. The riskiest tranches -- those with the lowest credit ratings -- were sold to hedge funds and junk bond funds whose investors wanted the higher yields that went with the higher risk. The safest ones, offering lower yields and Treasury-like AAA ratings, were snapped up by risk-averse pension funds and money market funds. The least sought-after tranches were those in the middle, the "mezzanine" tranches, which offered middling yields for supposedly moderate risks.

 

Stick with me now, because this is where it gets interesting. For it is at this point that the banks got the bright idea of buying up a bunch of mezzanine tranches from various pools. Then, using fancy computer models, they convinced themselves and the rating agencies that by repeating the same "tranching" process, they could use these mezzanine-rated assets to create a new set of securities -- some of them junk, some mezzanine, but the bulk of them with the AAA ratings more investors desired.

 

It was a marvelous piece of financial alchemy, one that made Wall Street banks and the ratings agencies billions of dollars in fees. And because so much borrowed money was used -- in buying the original mortgages, buying the tranches for the CDOs and then in buying the tranches of the CDOs -- the whole thing was so highly leveraged that the returns, at least on paper, were very attractive. No wonder they were snatched up by British hedge funds, German savings banks, oil-rich Norwegian villages and Florida pension funds.

 

What we know now, of course, is that the investment banks and ratings agencies underestimated the risk that mortgage defaults would rise so dramatically that even AAA investments could lose their value.

 

One analysis, by Eidesis Capital, a fund specializing in CDOs, estimates that, of the CDOs issued during the peak years of 2006 and 2007, investors in all but the AAA tranches will lose all their money, and even those will suffer losses of 6 to 31 percent.

 

And looking across the sector, J.P. Morgan's CDO analysts estimate that there will be at least $300 billion in eventual credit losses, the bulk of which is still hidden from public view. That includes at least $30 billion in additional write-downs at major banks and investment houses, and much more at hedge funds that, for the most part, remain in a state of denial.

 

As part of the unwinding process, the rating agencies are in the midst of a massive and embarrassing downgrading process that will force many banks, pension funds and money market funds to sell their CDO holdings into a market so bereft of buyers that, in one recent transaction, a desperate E-Trade was able to get only 27 cents on the dollar for its highly rated portfolio.

 

Meanwhile, banks that are forced to hold on to their CDO assets will be required to set aside much more of their own capital as a financial cushion. That will sharply reduce the money they have available for making new loans.

 

And it doesn't stop there. CDO losses now threaten the AAA ratings of a number of insurance companies that bought CDO paper or insured against CDO losses. And because some of those insurers also have provided insurance to investors in tax-exempt bonds, states and municipalities have decided to pull back on new bond offerings because investors have become skittish.

 

If all this sounds like a financial house of cards, that's because it is. And it is about to come crashing down, with serious consequences not only for banks and investors but for the economy as a whole.

 

That's not just my opinion. It's why banks are husbanding their cash and why the outstanding stock of bank loans and commercial paper is shrinking dramatically.

 

It is why Treasury officials are working overtime on schemes to stem the tide of mortgage foreclosures and provide a new vehicle to buy up CDO assets.

 

It's why state and federal budget officials are anticipating sharp decreases in tax revenue next year.

 

And it is why the Federal Reserve is now willing to toss aside concerns about inflation, the dollar and bailing out Wall Street, and move aggressively to cut interest rates and pump additional funds directly into the banking system.

 

This may not be 1929. But it's a good bet that it's way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.

[MattZ]

Dow breaks through 10,000 (the wrong way).

 

Edit: good thing they banned short selling.

[remphish1]

Under 9700! Scary times!

 

http://biz.yahoo.com/ap/081006/wall_street.html

 

[MattZ]

How many loaves of bread will it cost to buy a gallon of milk?

[PigSooie]

Jeez.

 

It's down under 9600 now.

[Good Old Neon]

How many loaves of bread will it cost to buy a gallon of milk?

 

I don