U.s. Banking Crisis: Capitalism "gone Wild"?

[LaoPo]

I agree -- somewhat. However, as I have posted previously, the push for "more affordable" loans took place started during the Clinton era. That's the real reason you didn't see a lot of Democrats opposing this monstrosity. Bush had inherited a foundation of quicksand, but instead of draining it, he decided to build a skyscraper on the top of it.

It really seems like Bush took the worst from previous presidents and added more than his own share of mistakes to boot.

President Bill Clinton left office in 2001 with a federal budget surplus of $127 billion. President George Bush ran a deficit of $319 billion in 2005

And that was just till 2005 What is it now in 2008? 9.5 Trillion?

http://www.federalbudget.com/

I am no expert but I wonder

I'm no expert either and I think nobody is in these crazy days, but maybe a graph will tell something ?

I think the Bush-family is coming out quite nicely qua INCREASES in NATIONAL DEBT

LaoPo

[flying]

I'm no expert either and I think nobody is in these crazy days, but maybe a graph will tell something ?

LaoPo

Judge a tree by its fruits ??

[LaoPo]

I'm no expert either and I think nobody is in these crazy days, but maybe a graph will tell something ?

LaoPo

Judge a tree by its fruits ??

The RED fruits are certainly a lot bigger than the blue ones

That's why they need 700 Billion fertilizers....but they've got a mere 300 million people to 'serve' the 700 Billion fertilizers.................

LaoPo

[IAmMarchHare]

I agree -- somewhat. However, as I have posted previously, the push for "more affordable" loans took place started during the Clinton era. That's the real reason you didn't see a lot of Democrats opposing this monstrosity. Bush had inherited a foundation of quicksand, but instead of draining it, he decided to build a skyscraper on the top of it.

It really seems like Bush took the worst from previous presidents and added more than his own share of mistakes to boot.

President Bill Clinton left office in 2001 with a federal budget surplus of $127 billion. President George Bush ran a deficit of $319 billion in 2005

And that was just till 2005 What is it now in 2008? 9.5 Trillion?

http://www.federalbudget.com/

I am no expert but I wonder

That was a surplus of funny money, though, which makes the deficit even worse than what you are saying. Let's face it, the US public has gotten so used to lies about the deficit that it rarely even gets challenged these days. In fact, politicians, like Ron Paul and Alan Keyes, who have a tendency to tell it like it is don't even get noticed by our "news" media.

[NovaBlue05]

I agree -- somewhat. However, as I have posted previously, the push for "more affordable" loans took place started during the Clinton era. That's the real reason you didn't see a lot of Democrats opposing this monstrosity. Bush had inherited a foundation of quicksand, but instead of draining it, he decided to build a skyscraper on the top of it.

It really seems like Bush took the worst from previous presidents and added more than his own share of mistakes to boot.

President Bill Clinton left office in 2001 with a federal budget surplus of $127 billion. President George Bush ran a deficit of $319 billion in 2005

And that was just till 2005 What is it now in 2008? 9.5 Trillion?

http://www.federalbudget.com/

I am no expert but I wonder

I believe the national debt was $5 1/2 T when Clinton left office in Jan 2001

[Naam]

Gentlemen (Ladies forgive me if some of you are reading this thread too),

i am quite surprised that nobody mentions that the $700bb to be (most probably) spent are not all down the drain as there is definitely some value contained in these 'toxic' derivatives. the land and homes for which the mortgages were given still exist, no matter in what dilapitated condition some might be.

and as far as the "poor taxpayer's" money is concerned my personal opinion is: if i was still a U.S. person and contributor to the IRS (as i was for some years) i'd rather prefer that my tax-dollars are wasted to bail out banks and perhaps avoid a big financial crisis than wasting them on cruise missiles, cluster bombs and land mines which (amongst others) killed and still kill innocent civilians.

thanks for listening

[LaoPo]

I agree -- somewhat. However, as I have posted previously, the push for "more affordable" loans took place started during the Clinton era. That's the real reason you didn't see a lot of Democrats opposing this monstrosity. Bush had inherited a foundation of quicksand, but instead of draining it, he decided to build a skyscraper on the top of it.

It really seems like Bush took the worst from previous presidents and added more than his own share of mistakes to boot.

President Bill Clinton left office in 2001 with a federal budget surplus of $127 billion. President George Bush ran a deficit of $319 billion in 2005

And that was just till 2005 What is it now in 2008? 9.5 Trillion?

http://www.federalbudget.com/

I am no expert but I wonder

I believe the national debt was $5 1/2 T when Clinton left office in Jan 2001

If we have to believe the US Treasury Department it was:

Clinton Presidency: January 20, 1993 – January 20, 2001

01/20/1993 4,188,092,107,183.60 the date Clinton inherited $ 4,1 Trillion Debt

01/19/2001 5,727,776,738,304.64 the date Clinton left Office it was $ 5,7 Trillion Debt

George W. Bush Presidency: January 20, 2001 - today

01/20/2001 5,727,776,738,304.64 the date Bush inherited $ 5,7 Trillion Debt

09/24/200 9,788,080,661,828.23 $ 9,7 Trillion Debt EXCLUDING the $ 700 Billion total Debt: 10,4 Trillion

http://www.treasurydirect.gov/NP/NPGateway

LaoPo

[PeaceBlondie]

I came across this Gore Vidal quote this week, from the 1970's: "There is only one party in the United States, the Property Party...and it has two right wings: Republican and Democrat. ... essentially, there is no difference between the two parties."

This is not a national emergency because workers' mortgages are threatened. Property owned by rich folks is threatened.

America's blindness to indebtedness is nowhere more obvious than their federal debt. Politicians have no intent or will to pay it down, although remarkably enough, Democrats balanced the budget. with some help from Republicans. But the peace dividend died, and the budget balancing died. That federal debt of SIXTY TRILLION cannot and will not ever be paid off.

[PeaceBlondie]

...if i was still a U.S. person and contributor to the IRS (as i was for some years) i'd rather prefer that my tax-dollars are wasted to bail out banks and perhaps avoid a big financial crisis than wasting them on cruise missiles, cluster bombs and land mines which (amongst others) killed and still kill innocent civilians.

thanks for listening

US taxpayers do not really have a choice. Their congressmen vote for cruise missiles, cluster bombs, land mines, and financial bailouts. And for a few social programs so that their president can read fairy tales to the children while Rome burns.

[Naam]

...if i was still a U.S. person and contributor to the IRS (as i was for some years) i'd rather prefer that my tax-dollars are wasted to bail out banks and perhaps avoid a big financial crisis than wasting them on cruise missiles, cluster bombs and land mines which (amongst others) killed and still kill innocent civilians.

thanks for listening

US taxpayers do not really have a choice. Their congressmen vote for cruise missiles, cluster bombs, land mines, and financial bailouts. And for a few social programs so that their president can read fairy tales to the children while Rome burns.

and who -pray tell- votes the congressmen in power?

[PeaceBlondie]

US politicians are elected by citizens who only can choose between those two right-wing parties that represent property (assets, cash, etc.). Ron Paul ran for president on the Libertarian ticket, and got no electoral votes. He switched to calling himself a Republican, but is a lone wolf-pariah in Congress, who never was a serious contender for the Republican candidate for presidency. Note how often here on ThaiVisa the broken 'political system' in Thailand is compared to that of the USA. The only Golden Rule is that gold rules.

So Wall Street, with its multi-millionaire brokers and investors, will get rescued from bankruptcy because they are too rich to fail, while Ma and Pa Sixpack's home is foreclosed. Ma and Pa can live under the bridge and be ThaiVisa trolls.

[Lopburi99]

US politicians are elected by citizens who only can choose between those two right-wing parties that represent property (assets, cash, etc.). Ron Paul ran for president on the Libertarian ticket, and got no electoral votes. He switched to calling himself a Republican, but is a lone wolf-pariah in Congress, who never was a serious contender for the Republican candidate for presidency. Note how often here on ThaiVisa the broken 'political system' in Thailand is compared to that of the USA. The only Golden Rule is that gold rules.

So Wall Street, with its multi-millionaire brokers and investors, will get rescued from bankruptcy because they are too rich to fail, while Ma and Pa Sixpack's home is foreclosed. Ma and Pa can live under the bridge and be ThaiVisa trolls.

You and many others posting on this thread are obviously highly intelligent individuals. I also have been highly critical of the American government and Wall Street but I don't want a catastrophic economic collapse, complete with serious worldwide repercussions. Our ideologies aside, what are you all specifically suggesting should be done now in Washington to avoid this? Unfortunately time is of the essence!

Edited September 26, 2008 by Lopburi99

[PeaceBlondie]

Just because I appear intelligent does not mean I understand derivatives. I flunked Economics 101 at age 18, but learned some since. Here in Thailand, I have decided we can understand something about what caused a problem, but we are not supposed to mention it if we do not have a solution. But I am not Thai. I think .....the rock star is right. Bono is quoted today as saying, "It is extraordinary to me that the United States can find $700 billion to save Wall Street and the entire G8 can't find $25 billion dollars to saved 25,000 children who die every day from preventable diseases."

I just think it odd that free enterprise is asking for the world's biggest hand-out. Yes, I care about my own small investment portfolio, and the federal govt.'s ability to pay my pensions. But as they say in the china shop, if you break it, you have to pay for it. I did not break it.

[Lopburi99]

Just because I appear intelligent does not mean I understand derivatives. I flunked Economics 101 at age 18, but learned some since. Here in Thailand, I have decided we can understand something about what caused a problem, but we are not supposed to mention it if we do not have a solution. But I am not Thai. I think .....the rock star is right. Bono is quoted today as saying, "It is extraordinary to me that the United States can find $700 billion to save Wall Street and the entire G8 can't find $25 billion dollars to saved 25,000 children who die every day from preventable diseases."

I just think it odd that free enterprise is asking for the world's biggest hand-out. Yes, I care about my own small investment portfolio, and the federal govt.'s ability to pay my pensions. But as they say in the china shop, if you break it, you have to pay for it. I did not break it.

Bono, definitely a good man IMO.

I certainly don't understand derivatives either. I am glad this thread has provided a venting for those of us who are so frustrated and angry. To answer my own question about what should be done now in Washington, I would say everybody should just slug it out all weekend, pulling no punches, but somehow get an agreed-upon plan in place before Saturday night USA time. Remember, a previous post here warned at one point Armageddon was only 500 trades away and the notion is still most disconcerting. At least a plan would avoid a possible further meltdown upon opening bells Monday morning worldwide. Continued squabbling and indecision in Washington would not be well received. Just "get it done", then fine-tune it the best they can over time.

Edited September 26, 2008 by Lopburi99

[BEENTHEREDONETHAT]

CNN was interviewing a new multimillionaire a couple of days ago. His name is Jeff Greene and in a two year period he made $500,000,000 by trading in derivatives. The interview took place in his 10,000,000 beach home. He only used that on weekends his nice home was in an LA suburb (forget which one).

The CEO of fannie or freddie made more in one month than the average worker makes in 25 years. Then he gets a years pay (golden parachute) when they can him, thats like 12 million dollars++.

Personally I don't care if the banks go under, they were the ones making the stupid deals. They win they put it in their pocket, they lose they want the tax payer to pick it up. BS let them go under, with that kind of $ they can establish new ones and include some regulations.

I would not want my tax dollars to be used for military adventures either but that is no reason to use it to bail out the banks, it is not a either or situation. IMHO it is the ones who will benefit from the bailout that are pushing for it. If they ask the tax payers the bailout would be overwhelmingly rejected. If a politician votes for the bailout he should be voted out on the next opportunity.

[Lopburi99]

...Personally I don't care if the banks go under, they were the ones making the stupid deals. They win they put it in their pocket, they lose they want the tax payer to pick it up. BS let them go under, with that kind of $ they can establish new ones and include some regulations.

I would not want my tax dollars to be used for military adventures either but that is no reason to use it to bail out the banks, it is not a either or situation. IMHO it is the ones who will benefit from the bailout that are pushing for it. If they ask the tax payers the bailout would be overwhelmingly rejected. If a politician votes for the bailout he should be voted out on the next opportunity.

Hi BTDT,

I also don't give a rip about the banks, or for greedy Wall Streeters either for that matter. And I hate and oppose any form of government bailout for them. But I do care very much about Main Street-ers, the general populace (both in and out of the states). If the problem could be contained to the banks I'd say in a heartbeat, like you, let them just go belly up - $crew 'em. But the tentacles of this problem are everywhere, worldwide. IMO almost everybody would suffer as a result of a devastated overall economy, even those of us having no financial portfolios. For that reason I see no alternative but to hold my nose and hope for some sort of a reasonable plan, and quickly.

Edited September 26, 2008 by Lopburi99

[Samuian]

J.....the rock star is right. Bono is quoted today as saying, "It is extraordinary to me that the United States can find $700 billion to save Wall Street and the entire G8 can't find $25 billion dollars to saved 25,000 children who die every day from preventable diseases."

Well then I suggest, if "he is right" let rock stars rule the world and the economy with the columbian snowstorm up their noses and let the politicians play reggae, rock'n roll and some hip hop!

How about it?

because the comparison seems so dam_n clever (for the simple minds), but at a closer look, it's plain and simple popular chitchat!

geldorf and bono -sorry..." or my sweet lord, hallelujah!".. sorry but people who are dam_n millionaires themselves "praying" such BS... simply lost their marbles (IMHO) at least (IMHO) lost their credibility!

Edited September 26, 2008 by Samuian

[lannarebirth]

Gentlemen (Ladies forgive me if some of you are reading this thread too),

i am quite surprised that nobody mentions that the $700bb to be (most probably) spent are not all down the drain as there is definitely some value contained in these 'toxic' derivatives. the land and homes for which the mortgages were given still exist, no matter in what dilapitated condition some might be.

and as far as the "poor taxpayer's" money is concerned my personal opinion is: if i was still a U.S. person and contributor to the IRS (as i was for some years) i'd rather prefer that my tax-dollars are wasted to bail out banks and perhaps avoid a big financial crisis than wasting them on cruise missiles, cluster bombs and land mines which (amongst others) killed and still kill innocent civilians.

thanks for listening

I agree with you for the most part Herr Naam, and had mentioned before there is still considerable value in these instruments. In the past, when discounted sufficiently, opportunistic, risk taking capitalists would be vying to purchase these instruments. Some would take a hit, and some would make out like bandits. That's the game and I don't see it working any different this time. The only difference I see is they want the stupid public to take the downside, while they take the upside.

I'm sick of it and see them only "raising the stakes" of the "fear factor", for what it takes to put in a market bottom. People should be able to opt out of volatility. What next? Are they going to have that clown in North Korea point nuclear tipped missles at grandmas house to top this?

[SNGLIFE]

I'm an American and politically Independent. I say let all the banks fail. Bring the PAIN. It's a good thing in the long run. I got off credit 10 years ago. It was painful for the first 2 years, but has been LOVELY ever since. I will not be affected at all (heheheh - saw it coming); and if it takes something like this to get everyone to kick the credit habit, then that's a GOOD thing.

[BEENTHEREDONETHAT]

...Personally I don't care if the banks go under, they were the ones making the stupid deals. They win they put it in their pocket, they lose they want the tax payer to pick it up. BS let them go under, with that kind of $ they can establish new ones and include some regulations.

I would not want my tax dollars to be used for military adventures either but that is no reason to use it to bail out the banks, it is not a either or situation. IMHO it is the ones who will benefit from the bailout that are pushing for it. If they ask the tax payers the bailout would be overwhelmingly rejected. If a politician votes for the bailout he should be voted out on the next opportunity.

Hi BTDT,

I also don't give a rip about the banks, or for greedy Wall Streeters either for that matter. And I hate and oppose any form of government bailout for them. But I do care very much about Main Street-ers, the general populace (both in and out of the states). If the problem could be contained to the banks I'd say in a heartbeat, like you, let them just go belly up - $crew 'em. But the tentacles of this problem are everywhere, worldwide. IMO almost everybody would suffer as a result of a devastated overall economy, even those of us having no financial portfolios. For that reason I see no alternative but to hold my nose and hope for some sort of a reasonable plan, and quickly.

Lopburi............I also care about the average Joe in the US. But if what they are saying is true, that being there are $60trillion in derivatives what is 700 billion going to do to solve the problem? According to Paulsons plan they can keep coming back for more, and will. It appears it is just delaying the problem and making it bigger. Let them make derivative transactions illegal. Why should you be able to insure something you have no interest in. If it was just mortgages that were the problem you could see a solution. For derivatives I don't think anyone has a workable solution. Spreading more $ among the rich sucks IMHO.

In short I doubt seriously that the 700 billion plan will solve the problem. I sure as hel_l don't trust the politicians to do the right thing.

Sorry for the rant but the mess pi$$e$ me off.

[Jingthing]

I'm an American and politically Independent. I say let all the banks fail. Bring the PAIN. It's a good thing in the long run. I got off credit 10 years ago. It was painful for the first 2 years, but has been LOVELY ever since. I will not be affected at all (heheheh - saw it coming); and if it takes something like this to get everyone to kick the credit habit, then that's a GOOD thing.

Nah. There is nothing wrong with credit per se. What we are seeing now is kind of a cancerous credit. Radical action is necessary and the vast majority of American people are demanding it, the loud whiners notwithstanding. Will the surgery save the patient? Who knows, but we have to try.

[Naam]

I'm an American and politically Independent. I say let all the banks fail. Bring the PAIN. It's a good thing in the long run. I got off credit 10 years ago. It was painful for the first 2 years, but has been LOVELY ever since. I will not be affected at all (heheheh - saw it coming); and if it takes something like this to get everyone to kick the credit habit, then that's a GOOD thing.

do you keep your money under the mattress?

[Samuian]

latest from The Los Angeles Times:

"The working proposal contained most of the features that critics of the administration's original plan had been demanding: limits on compensation for executives of companies that take part in the bailout, a provision for taxpayers to share in any profits from the sale of distressed assets, and payout of the $700 billion in three stages instead of one. The final $350-billion tranche would require a congressional vote."

the "guy from north korea" might not be able to do much, he had a emergency brain operation after a hemorrhage, but then the surgeon slipped....

[PeaceBlondie]

Washington Mutual has just become the largest bank bankruptcy in history, by a long shot.

http://news.yahoo.com/s/ap/20080926/ap_on_...n_mutual_future

How many more big boys? Will it be like the deaths and mergers of the Big 8 Accounting firms, where they could joke about the final four?

[lannarebirth]

I might be very wrong about this, but everytime I see JP Morgan as the receiver of a company likely to have held a great amount of derivatives, I think to myself, "they've just taken some counterparty risk off the table".. Maybe.

[Naam]

But if what they are saying is true, that being there are $60trillion in derivatives what is 700 billion going to do to solve the problem? According to Paulsons plan they can keep coming back for more, and will. It appears it is just delaying the problem and making it bigger. Let them make derivative transactions illegal. Why should you be able to insure something you have no interest in. If it was just mortgages that were the problem you could see a solution. For derivatives I don't think anyone has a workable solution.

hold your horses BHDT it is correct that trillions of derivatives are in the market (much more than 60, more likely 500-600 trillions). but one has to understand that most of these trillions are not debt per se but commitments between parties and nobody has ever said or insinuated (not even our learned friend Bingobongo) that all these trillions will not be honoured. a high number of derivatives are also quite harmless and absolutely normal business transactions and have an existing underlying value. tens of thousands of the "harmless" derivatives are used daily in the markets. as simple as that. it is worrisome but panic not justified!

in the case of U.S. mortgages that underlying value is a fraction what it should have been. in this context it is worthwhile to mention that the ability of a mortgage-taker to pay back the loan is in fact a part of the underlying value. in many cases that ability does not exist or has never existed. but it's not only the greedy bankers or mortgage brokers who are responsible for the desaster. a part of the guilt falls on the ignorant or even greedy homeowner thinking "why shouldn't i move to a bigger and much more expensive house as it's only 1,299 dollars and 68 cents a month" and who did not ask "what will the monthly payment be when the fixed period of the ARM has passed?" sure, some little old ladies were tricked. but don't tell me all were tricked!

[BEENTHEREDONETHAT]

From Bloomburg

Wall Street firms have shared profits liberally with employees. The five biggest -- Goldman, Morgan Stanley, Merrill, Lehman Brothers Holdings Inc. and Bear Stearns -- paid their 185,687 employees $66 billion in 2007, as problems with subprime mortgages mounted, including about $39 billion in bonuses. That amounts to average pay of $353,089 per employee, including an average bonus of $211,849. The five firms had combined net income of $93 billion during the five years through 2007.

CEO Pay Doubled

The $3.1 billion paid to the top five executives at the firms between 2003 and 2007 was about three times what JPMorgan spent to buy Bear Stearns. Goldman Sachs had the highest total, with $859 million, followed by Bear Stearns at $609 million. CEO pay at the five firms increased each year, doubling to $253 million in 2007, according to data compiled from company filings.

And they want these mongrols and companies bailed out. No way.

[BEENTHEREDONETHAT]

But if what they are saying is true, that being there are $60trillion in derivatives what is 700 billion going to do to solve the problem? According to Paulsons plan they can keep coming back for more, and will. It appears it is just delaying the problem and making it bigger. Let them make derivative transactions illegal. Why should you be able to insure something you have no interest in. If it was just mortgages that were the problem you could see a solution. For derivatives I don't think anyone has a workable solution.

hold your horses BHDT it is correct that trillions of derivatives are in the market (much more than 60, more likely 500-600 trillions). but one has to understand that most of these trillions are not debt per se but commitments between parties and nobody has ever said or insinuated (not even our learned friend Bingobongo) that all these trillions will not be honoured. a high number of derivatives are also quite harmless and absolutely normal business transactions and have an existing underlying value. tens of thousands of the "harmless" derivatives are used daily in the markets. as simple as that. it is worrisome but panic not justified!

in the case of U.S. mortgages that underlying value is a fraction what it should have been. in this context it is worthwhile to mention that the ability of a mortgage-taker to pay back the loan is in fact a part of the underlying value. in many cases that ability does not exist or has never existed. but it's not only the greedy bankers or mortgage brokers who are responsible for the desaster. a part of the guilt falls on the ignorant or even greedy homeowner thinking "why shouldn't i move to a bigger and much more expensive house as it's only 1,299 dollars and 68 cents a month" and who did not ask "what will the monthly payment be when the fixed period of the ARM has passed?" sure, some little old ladies were tricked. but don't tell me all were tricked!

Naam.......I'll be the first to admit I'm over my head when discussing dirivatives. I never heard of them before this fiasco started, so I will not hesitate to defer to your knowledge on the subject.

But that said I have never heard anyone say that the 700 billion would solve all the problems. That 700B is in addition to the 85 to AIG and the billions they have dunped into Fannie and Freddie.And even if it does solve the problem it should not be paid for by the taxpayer when the Wall street firms are ripping off everyone big time. And as you mentioned the people looking for a free ride in the housing market. If it has to be a loan to bail them out that is one thing but buying their bad debt and leaving them with the good mortgages does not make sense.

I'm not near smart enough to know the solution to the problem, I'm not even sure I understand the problem. But I do recognise when everyone is being ripped off big time. The politicians aren't looking after the people so who is going too?

[Naam]

So Wall Street, with its multi-millionaire brokers and investors, will get rescued from bankruptcy because they are too rich to fail, while Ma and Pa Sixpack's home is foreclosed. Ma and Pa can live under the bridge and be ThaiVisa trolls.

PB, let me act as advocatus diaboli and present the other side of the coin with fiction and facts.

fiction (but highly likely):

Ma and Pa Sixpack had most probably already a home which they could afford. then they decided to buy a bigger one or refinance the old one to withdraw the surplus because Pa wanted to replace his big ol' truck with a shiny new Cadillac, Ma the latest model of plasma big screen TV (amongst other things they bought) and then they spent two weeks holidaying in Cancun. now they don't have a home because they could not afford what they bought.

facts:

the lion part of the money did not flow into the pockets of greedy bankers but into the pockets of those who sold their home to suckers because it appreciated 100% in a couple of years!

real money (besides the usual fancy commissions connected to mortgages) flowed into the bankers' pockets only after they repackaged shitty mortgages, sold them to each other and of course to investors who were tricked by AAA ratings of the meanwhile infamous triplets Poor Standards, Moody Blues and Bitch&Co!

Edited September 26, 2008 by Naam

[LaoPo]

I'm an American and politically Independent. I say let all the banks fail. Bring the PAIN. It's a good thing in the long run. I got off credit 10 years ago. It was painful for the first 2 years, but has been LOVELY ever since. I will not be affected at all (heheheh - saw it coming); and if it takes something like this to get everyone to kick the credit habit, then that's a GOOD thing.

do you keep your money under the mattress?

He said it was painful, so I assume he had/has no mattress at all...

Probably hiding his cash in buried in the soil in his garden beneath a pond...

LaoPo