Corruption on Wall Street

[George Fergusson]

Hey! We had such fun with oil speculators, this thread ought to be a blast! There's just so much that has come to light lately about corruption and crime on Wall Street, especially in the financial sector, I couldnt' find another thread really appropriate to post in. Here, to get the ball rolling, a great Bloomberg article about what was going on behind the scenes when Bear Stearns bit the big one last spring:

Bringing Down Bear Began as $1.7 Million of Options (Update2)

By Gary Matsumoto

Aug. 11 (Bloomberg) -- On March 11, the day the Federal Reserve attempted to shore up confidence in the credit markets with a $200 billion lending program that for the first time monetized Wall Street's devalued collateral, somebody else decided Bear Stearns Cos. was going to collapse.

In a gambit with such low odds of success that traders question its legitimacy, someone wagered $1.7 million that Bear Stearns shares would suffer an unprecedented decline within days. Options specialists are convinced that the buyer, or buyers, made a concerted effort to drive the fifth-biggest U.S. securities firm out of business and, in the process, reap a profit of more than $270 million.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aGmG_eOp5TjE&refer=exclusive

[JPK1NH]

I wonder when someone is going to start the Corruption in the Movie Industry, Charity Organizations or Health Care Industry threads? :rolleyes:

[George Fergusson]

I wonder when someone is going to start the Corruption in the Movie Industry, Charity Organizations or Health Care Industry threads? :rolleyes:

Go for it dood, I got my hands full here :)

[George Fergusson]

The auction rate securities fraud is classic. Basically, these instruments were advertised as being "as good as cash" when gee, they weren't really. Then the bottom dropped out of the market.

Business as usual say the investment banks, but now they're being forced to buy back these worthless securities. Nice. I love it when a plan falls apart.

Citi, UBS, Merrill Say `Oops' on Auction Freezeout: Joe Mysak

Commentary by Joe Mysak

Aug. 12 (Bloomberg) -- Never mind.

Or, in the words of Merrill Lynch & Co. Chief Executive Officer John Thain, ``Our clients have been caught in an unprecedented liquidity crisis. We are solving it by giving them the option of selling their positions back to us.''

Thain said these words on Aug. 7, after the firm announced it would offer to buy back $10 billion in auction-rate securities from individual investors beginning in January.

The Merrill offer came the same day Citigroup Inc. reached an agreement with regulators to buy back the auction-rate paper it sold to individuals, small businesses and charities, and the day before UBS AG reached a similar agreement to make its customers whole.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aj0fk0EALY6w

[George Fergusson]

Old news, but it's nice to hear Alan Greenspan's perspective on Franny Mae and Freddy Mac, two fine examples of corruption on Wall Street, possibly only exceeded by the corruption of the United States Treasury under the direction of Henry Paulson. Emphasis mine:

Greenspan Tells WSJ Fannie, Freddie Deserved Breakup (Update1)

By Steve Matthews

Aug. 13 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan disagreed with the government's rescue of Fannie Mae and Freddie Mac, saying they should have been nationalized and split up into smaller companies, the Wall Street Journal reported.

``They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted,'' Greenspan said in an interview this week, the newspaper said. He made similar comments last month.

Greenspan's view reflects criticism from free-market proponents of the plan forged by Treasury Secretary Henry Paulson, who engineered a financial backstop for the companies in their current form. The two government-sponsored, shareholder- owned firms account for almost half of the $12 trillion U.S. mortgage market.

The crisis that engulfed Fannie Mae and Freddie Mac last month was ``the ideal opportunity to come to grips with what is a fundamentally flawed model, which privatizes profits and socializes losses,'' the Journal cited Greenspan as saying.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ab9wkHJKIzbc&refer=home

[tecumseh]

well just image 'my other brother' george some folks trust their entire retirement nest egg to those thieves....

once ya' read a bit about the tricks employed by the wall street crowd in the past the idea of letting those buzzards look after your social security contributions does sound like the thinking of a crazy person.

[George Fergusson]

well just image 'my other brother' george some folks trust their entire retirement nest egg to those thieves....

Yowza. Imagine that, I was just reading this:

States Double Down on Hedge Funds With Worst Returns Since '02

By Adam L. Cataldo and Michael McDonald

Aug. 14 (Bloomberg) -- Public pension funds in the U.S. are increasing bets on high-risk hedge funds and real estate in an attempt to fill deficits in retirement plans and make up for their worst performance in six years.

New York Comptroller Thomas DiNapoli is asking lawmakers to increase a cap limiting the amount of so-called alternative investments in the state's Common Retirement Fund, the third- biggest U.S. public pension at $153.9 billion. South Carolina's retirement system adopted a plan in February to invest as much as 45 percent of its $29 billion in hedge funds, private equity, real estate and other alternatives, from nothing 18 months ago.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDC_42LM.oj4&refer=home


That can't be a good idea....

[Sundance]

Wall Street.......... Corruption??? Stop............:eek:

Just the fact that there are people out there making
money doing zero, producing zero, is corrupt IMO.

[George Fergusson]

Ho hum, just a teeny fraud, peanuts, really, but you know, it's the kind of thing that just looks bad.

Thursday, August 14, 2008 - 1:05 PM
Former Apple general counsel Heinen agrees to $2.2M backdating settlement

Nancy Heinen, former general counsel of Apple Inc., has settled options backdating charges with the Securities and Exchange Commission for $2.2 million, the agency announced on Aug. 14.

Heinen, of Portola Valley, is also barred as part of the settlement from serving as an officer or director of a public company for five years, and she cannot appear as an attorney before the SEC for three years.

Heinen does not admit or deny the commission's allegations.

Former Apple CFO Fred Anderson, of Atherton, agreed in April to a $3.5 million settlement in connection with the allegations of stock option backdating.

The two executives of Cupertino-based Apple were accused by the SEC in connection with the backdating of stock options in 2001 that resulted in the underreporting of nearly $40 million.

Heinen “caused” the options to be backdated and altered company records to conceal the fraud, including certifying minutes for a meeting that never happened, according to the SEC. Anderson should have noticed Heinen’s backdate of the first grant and failed to take steps to ensure Apple’s financial statements were correct.

According to the SEC, Heinen suggested to Apple CEO Steve Jobs in February 2001 that the company backdate a grant of $4.8 million to six members of Apple’s executive team, including herself.

Apple backdated the options to Jan. 17, 2001, when Apple’s share price was lower -- $16.81 per share instead of $21 per share -- to avoid reporting approximately $18.9 million in compensation expense in publicly filed statements, according to the SEC. Heinen also prepared false paperwork to Apple’s board of directors so it could authorize the grant.

In a second backdate of options, this time a December 2001 grant of 7.5 million options to Jobs , the SEC accused Heinen of suggesting several dates to avoid some $20.3 million in pre-tax compensation expense, according to the lawsuit.

Also, a month later, Heinen directed her staff to create false meeting minutes that she then signed.

http://www.bizjournals.com/eastbay/stories/2008/08/11/daily67.html

[George Fergusson]

Wall Street.......... Corruption??? Stop............:eek:

Just the fact that there are people out there making
money doing zero, producing zero, is corrupt IMO.

Well you know Sundance, at first I didn't really know how to respond to your message. I don't have a problem with speculators per se. They're generally good for the market. I do have a problem with crooks and thieves and other disreputable, conscienceless people that lie, cheat, and steal. Some of the financial shenanigans that go down in and around Wall Street would blow your mind. I've also come to the conclusion that the markets can be and often are, in effect, manipulated by the concerted actions of institutional investors and other people with a lot of money to throw around.

The thrust of this thread really is outright, unmitigated corruption and crime commited by Wall Street firms but I'd love to talk about people "making money doing zero, producing zero" and what might be wrong with that, or not.

[George Fergusson]

Well, we saw this coming, the passage of the housing bill had the provision to "bail out" Fannie Mae and Freddy Mac if necessary, and it's looking increasingly like it is going to be necessary.

I'm expecting this to happen sooner rather than later as things have been too quiet of late. The recapitalization will effectively wipe out existing stock holders and I can't imagine they're going to sit around and watch. Expecting FNM and FRE stock to go to nothing fast. At $7.91 and $5.85, they don't have far to go :)

I expect the government to inject at least $880 billion of tax payer dollars, as this is about the amount of the GSE's debt that Asian investors own. Go figure. This bailout is of course a horrendous example of corruption, greed, and incompetence being rewarded by our corrupt, greedy, and incompetent Congress. Heads should roll.

U.S. likely to recapitalize Fannie, Freddie: report
Sun Aug 17, 2008 2:47pm EDT

NEW YORK (Reuters) - The U.S. Treasury is growing increasingly likely to recapitalize Fannie Mae and Freddie Mac in the months ahead on the taxpayer's dime, Barron's reported in its August 18 edition.

The weekly financial newspaper said that such a move could wipe out existing holders of the agencies' common stock, with preferred shareholders and even holders of the two entities' $19 billion of subordinated debt also suffering losses.

An insider in the Bush administration told Barron's that Fannie and Freddie "are being jawboned" by the Treasury Department and their new regulator, the Federal Housing Finance Agency (FHFA), to raise more equity.

But government officials don't expect the agencies to succeed, Barron's reported.

If the government-sponsored enterprises fail to raise fresh capital, the administration is likely to mount its own recapitalization, with Treasury infusing taxpayer money into the agencies, according to the Barron's source.

The paper reported the infusion would take the form of a preferred stock with such seniority, dividend preference and convertibility rights that Fannie's and Freddie's existing common shares "effectively would be wiped out, and their preferred shares left bereft of dividends."

The report called an equity injection by the government a quasi-nationalization -- without having to put the agencies' liabilities on the U.S. balance sheet, and thus doubling the U.S. debt.

After accounting for deferred tax assets and generous asset marks, Fannie and Freddie each may have a negative $50 billion in asset value, and little prospect of digging themselves out of the hole, Barron's reported.

(Reporting by Ed Tobin, editing by Richard Chang)

http://www.reuters.com/article/ousiv/idUSN1747783620080817

[Sundance]

That is extremely bad news!!! Once again privatization in
its glory. And we're going to bail out some fat cats???

Ridiculous!

Wish I could get bailed out of some of my past business
screw ups.... (there have been a few;)).

Get a rope!

[JPK1NH]

Not cool.

Not cool at all.

[papa bear]

``They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted,'' Greenspan said in an interview this week, the newspaper said. He made similar comments last month.

aren't' they already nationalized (like in fascism) and only loosely private? this could be one of the problems. if a private company had done things like what was done there would be jail time.

[tecumseh]

my other brother george writes:
I don't have a problem with speculators per se. They're generally good for the market.

tecumseh replies: well I reckon like in any family there are some topic of which we will just have to agree to disagree.

[John F]

my other brother george writes:
I don't have a problem with speculators per se. They're generally good for the market.

tecumseh replies: well I reckon like in any family there are some topic of which we will just have to agree to disagree.

Be careful tecumseh, you and George are talking about two different ideas. I know where you got your idea of speculator and thief is a better description and is very precisely the behaviour George is condemning here in this thread. You are in agreement, you are just using two different semantics.

[John F]

For Galaxy:

Something is happening in the world of fiat money that is being described right here in this thread. It is significant. Significant enough that the world is breathing a sigh...

What?

[George Fergusson]

aren't' they already nationalized (like in fascism) and only loosely private? this could be one of the problems. if a private company had done things like what was done there would be jail time.

No, they really were private corporations in all the ways that really count. They'll be effectively nationalized after the Treasury gets hold of them. I say effectively because the takeover will be structured in such a way as to keep their liabilities off the Government balance sheet. It wouldn't do to slap another 5 TRILLION dollars of liabilities on the gubmint books. So why aren't they in jail again?

Just like many people think Fannie and Freddie are government entities, many people think Federal Reserve is a government entity... which it ain't.

my other brother george writes:
I don't have a problem with speculators per se. They're generally good for the market.

tecumseh replies: well I reckon like in any family there are some topic of which we will just have to agree to disagree.

From what I know about you tecumseh, I think that John F has it right: We're not talking about the same people. But feel free to elaborate in fact, please do.

[George Fergusson]

For Galaxy:

Something is happening in the world of fiat money that is being described right here in this thread. It is significant. Significant enough that the world is breathing a sigh...

What?

The end of our fiat currency cycle is rapidly approaching.

Oops. Did I give it away?

[John F]

The end of our fiat currency cycle is rapidly approaching.

Oops. Did I give it away?

Nope. Quite the opposite. :)

(Sorry, I know hope springs eternal...)

[George Fergusson]

tecumseh replies: well I reckon like in any family there are some topic of which we will just have to agree to disagree.

I don't know if you saw this post tecumseh. I don't usually cross-post stuff here, but I will this time since I guess it really belongs in this thread too. I originally posted it in the World Wide Stock Market Crash thread, or whatever it's called. It's about crooks.

Enjoy.

"This is as good a place as any to post this, I guess. Many of you have heard of "asset backed securities" and such "derivatives" and have been told that they're the cause of the subprime mortgage meltdown and instrumental in causing the great credit contraction that is well underway. Great. Nice to know eh?

Well I'd bet dollars to donuts that you wouldn't know an asset backed security if it bit you and if you're like me, reading a Wikipedia entry describing collateralized debt obligations (CDOs) leaves you feeling faint, and confused...

Well, you'll want to read this. It is by far the best explanation of what went wrong and why that I've run across to date. It's written in plain English. Keep in mind that is was written back in July 2007, as the Bear Stearns hedge funds that started this whole mess were just beginning to melt down."


Investment Landfill: How professionals dump their toxic waste on you

by Paul Tustain
BullionVault
Monday, 2 July 2007

THIS IS NOT the idle chatter of permanent bears. The subprime mortgage collapse now hitting Bear Stearns may be just the start.

Serious analysts from big investment firms are talking ominously about "the big one". It will make you angry to learn just how the investment industry has got you involved. If you can understand what's happening, you should have time to move. So let’s get to the bottom of it now, and in plain English.

The humble mortgage

It all starts with the mortgage. About six million people in the United States who have no money have borrowed about 100% of the value of a house, right at the top of a housing market which has since fallen sharply. These are the subprime borrowers.

The lenders, however, did not have to worry very much about the risk of default, because they rolled these mortgages into bonds called Mortgage-Backed Securities, which they then sold. They got to be off-risk within a few weeks, because by then these re-packaged mortgages belonged to other financial organizations.

But it is not always easy to sell a package of these Mortgage-Backed Securities (known as MBS for short). Selling such a product demands that the credit quality is assessed; and because the underlying mortgages are subprime they are quite likely to go into default.

So a credit-ratings agency will only give the subprime MBS a low credit score, which means it is not considered investment grade. That disqualifies it from the portfolios of many professionally managed funds.

This is where it pays to get a bunch of smart investment bankers involved.

The investment bankers slice the MBS into several “tranches”. These are known as Collateralized Debt Obligations, or CDOs for short.

http://goldnews.bullionvault.com/files/Investment_Landfill.pdf

[Sundance]

Here's the way I see it...........

You get a house that was financed 100% (the ol' no
money down) by unscrupulous lenders. You walk away,
pretty simple. You have nothing invested, the buyer
should look at it as rent.

Should the buyer have purchased the house? No way.

What happened to the good old days when you needed
to save up for a down payment? You became vested in
"your" home immediately because you had 20% into it.

Let the money changers take the hit............ They
earned it.

[George Fergusson]

Well in retrospect I should have titled this thread "Corruption in the United States" since it doesn't just happen on Wall Street.

GM, Ford, and Chrysler are looking for government-backed loans. Is that the job of the United States government? Loaning money it doesn't have to private companies that through incompetence and mismanagement are in danger of failing?

I don't think so.

GM, Ford Seek $50 Billion From U.S., Double Request (Update1)

By Jeff Green

Aug. 22 (Bloomberg) -- General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.

The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year's energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today.

GM and Ford lost $24.1 billion in the second quarter as consumers, battered by record gasoline prices, abandoned the trucks that provide most of U.S. companies' profit and embraced cars that benefit overseas competitors such as Honda Motor Co. U.S. auto sales may drop to a 15-year low this year and fall even more in 2009, analysts have said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=amGc6ZPSzRLM&refer=home

[dragonfly]

Well in retrospect I should have titled this thread "Corruption in the United States" since it doesn't just happen on Wall Street.



Yes, you probably should have. ;)

Is that the job of the United States government? Loaning money it doesn't have to private companies that through incompetence and mismanagement are in danger of failing?

I don't think so.

I don't think so either, but apparently, we're in the minority. Hey, the government bails out the little guy, why not the big guy?

[Bodo]

Hey, the government bails out the little guy, why not the big guy?

I think you're on to something there...

[JPK1NH]

Gov (American Taxpayer) shouldn't be bailing ANYONE out....big or small.

The removal of Risk is a large part of why we're in the situation we're in.....

Its sorta like removing Natural Selection from the natural world.....sorry, but there are a lot of unfit induviduals/businesses out there that have been artificially supported and allowed to spawn other weak businesses because of the artificial support....end result is a system that is not particularly sound.

[George Fergusson]

I don't think so either, but apparently, we're in the minority. Hey, the government bails out the little guy, why not the big guy?

The government bails out the little guy?

Gov (American Taxpayer) shouldn't be bailing ANYONE out....big or small.

The removal of Risk is a large part of why we're in the situation we're in.....


Exactly right.

[dragonfly]

Gov (American Taxpayer) shouldn't be bailing ANYONE out....big or small.



I agree with you completely. I was just being my usual sarcastic cynical droll self.;)

[dragonfly]

The government bails out the little guy?




Yeah, the one that won't bail out himself.

[George Fergusson]

Yeah, the one that won't bail out himself.

How about the ones that for whatever reasons can't bail themselves out? When a company fails, it goes out of business and affected people just find something else to do. When a person fails, they're likely at the end of their rope. Does a civilized society just let it's destitute members die? Use them up and throw them away? Ship them off to the glue factory when they're no longer capable of supporting themselves and producing for society? I would maintain they do not. I'm not advocating welfare or agreeing with our government's welfare programs. I am certainly not in favor of maintaining a version of government and a monetary system that serves to deliberately pauper a significant portion of the population.

For our government, welfare isn't the problem, it's the solution and that includes corporate welfare and individual welfare.

So you're right. "Bailouts" can refer to government support of companies (corporate welfare?) or government support of people (individual welfare). They're one and the same.

[JPK1NH]

I'm not advocating welfare or agreeing with our government's welfare programs. I am certainly not in favor of maintaining a version of government and a monetary system that serves to deliberately pauper a significant portion of the population.

For our government, welfare isn't the problem, it's the solution and that includes corporate welfare and individual welfare.


GF, I suspect that a clarification would help greatly.

I do not oppose a temporary safety net to prevent people from falling through the cracks of society and to help them get back on their feet.

At the same time I don't think we (Taxpayers) should be supporting people that knowingly signed on the dotted line for a mortgage that they KNEW they could not afford.......

We should not be punishing people that made GOOD decisions by increasing their tax burden to pay to artificially support people that made BAD decisions.

By doing so we simply perpetuate the same behavior throughout time and the notion that if an individual makes poor decisions that there are no consequences because the Fed (Taxpayers) will step in an pay for their poor decisions.

We need to start treating people like Children and start treating them like Adults.

[George Fergusson]

Let's drag the Major Media into this. All day last Friday they were reporting how Korea Development Bank was interested in buying Lehman Brothers. ALL DAY, every major TV news network, every major newspaper carried the headline. As a result, Lehman's stock jumped big time and the "news" was generally attributed with significantly contributing to the nearly 200 point rise in the Dow yesterday. Even last night on the Wallstreet Report they were reporting the possible purchase of Lehman by KDB.

Lots of people bought Lehman stock yesterday with the expectation that it was going to go up.

The only problem? KDB announced at 9 am Friday morning that the deal was off:

South Korean banks led by Korea Development Bank (KDB) have shelved plans to buy a stake and management rights in Lehman Brothers due to concerns about its financial health, a report said Friday.
....
Problems with the accounts were more serious than initially believed, an unidentified government official was quoted as saying. "We concluded that it was too risky for KDB to take the deal.

http://afp.google.com/article/ALeqM5i-UK1Skr-oOlqHl9hQsUxCxtiskg


The story was buried. Intentionally. If that isn't market manipulation by major media, I don't know what is.

Lehman is toast.

[George Fergusson]

GF, I suspect that a clarification would help greatly.

And your clarification is appreciated. We're apparently not far apart on this but you raise a few points I need to sharpen.

I do not oppose a temporary safety net to prevent people from falling through the cracks of society and to help them get back on their feet.

Of course not. No sane, conscientious person would.

My point is that our government policies, financial and otherwise, reward laziness and incompetence and fosters reliance on government. For crying out loud, we pay farmers not to grow food! Where is the incentive to grow food? Our financial system robs working people of their wealth through the hidden tax of inflation, encourages them to spend and not save, borrow and not budget, then we pay people to not work when they run out of money! Where is the incentive to work?

I said this once before, I'll say it again: For our government, welfare isn't the problem, it's the solution. It's the goal.

When I was shopping last weekend I actually overheard someone say "I can't afford it, but I'm going to buy it anyways."

I wanted to slap them.

At the same time I don't think we (Taxpayers) should be supporting people that knowingly signed on the dotted line for a mortgage that they KNEW they could not afford.......

I quite agree, but I hasten to point out that many many people got a subprime, ARM, or ALT-A mortgage under the assumption that they would be able to refinance a year or 2 down the road before their rates reset. Lots of people did this, it was standard procedure, it wasn't crooked or dishonest. Unfortunately, by the time folks got around to refinancing, most discovered that their house value had already dropped and credit was beginning to tighten up and no bank would touch them. They were screwed.

I still don't advocate bailing out these basically honest people, not the crooked and disreputable home buyers of which there were many, and certainly not the banks.

We should not be punishing people that made GOOD decisions by increasing their tax burden to pay to artificially support people that made BAD decisions.

Our government already punishes the people that make good decisions by taxing the proceeds of their labor. Or do you think income tax is fair?

[dragonfly]

How about the ones that for whatever reasons can't bail themselves out?



I would say that's probably the exception rather than the rule.

For our government, welfare isn't the problem, it's the solution and that includes corporate welfare and individual welfare.



I'm not sure if you are saying welfare is a negative or a positive the way you worded it. ;)

[dragonfly]

.

My point is that our government policies, financial and otherwise, reward laziness and incompetence and fosters reliance on government. For crying out loud, we pay farmers not to grow food! Where is the incentive to grow food? Our financial system robs working people of their wealth through the hidden tax of inflation, encourages them to spend and not save, borrow and not budget, then we pay people to not work when they run out of money! Where is the incentive to work?

I said this once before, I'll say it again: For our government, welfare isn't the problem, it's the solution. It's the goal.



Oh, okay, now I see the answer to my last question. We pretty much view it from the same perspective. It's become the American way of life.

[George Fergusson]

Oh, okay, now I see the answer to my last question. We pretty much view it from the same perspective. It's become the American way of life.

Well yes, we both view welfare as undesirable except you tend to blame the people on welfare, and I blame the people writing the welfare checks.

[dragonfly]

Well yes, we both view welfare as undesirable except you tend to blame the people on welfare, and I blame the people writing the welfare checks.

You have a point there. Do we blame the parents or the children? Do we blame the children when they become of legal age or do we continue to blame the dysfunctional parent who never pushed the child out of the nest and made him do it on his own? (ie substitite government for parent and recipient for child;))

[George Fergusson]

You have a point there. Do we blame the parents or the children? Do we blame the children when they become of legal age or do we continue to blame the dysfunctional parent who never pushed the child out of the nest and made him do it on his own? (ie substitite government for parent and recipient for child;))

Well you blame the parents, right? Blame the people committing the crime, not the victims of the crime. Accepting a welfare check is not a crime. Writing the checks is the crime. You keep trying to blame the victims as if there's nothing wrong with offering a handout, it's accepting the handout that's wrong.

Your analogy isn't quite right. You're thinking the child (welfare recipient) being spoiled by the parent (government) comes of "legal age" where they're not the responsibility of the parent any longer and can instead be held RESPONSIBLE for their actions (receiving welfare) by outraged hard working members of society. THAT NEVER HAPPENS. Welfare recipients don't learn to accept welfare checks when they're children. You and many people like you are understandably blaming the victims. You need to blame the perpetrators of the crime.

[dragonfly]

Well you blame the parents, right? Blame the people committing the crime, not the victims of the crime. Accepting a welfare check is not a crime. Writing the checks is the crime. You keep trying to blame the victims as if there's nothing wrong with offering a handout, it's accepting the handout that's wrong.



George, please point out to me where I said *anything* was a crime. Did I say that and then forgot? (scratching my head).
We were talking about bailing out corporations, then I said we bail out the little guy, so why not the big guy. Where did I call either one a criminal? I'm not trying to place blame, but I do make a comparison between bailing out the little guy and the big guy. It's a national mindset that we have these days, and it's one that (imo) needs to stop.
If it is criminal to take money from one and give it to another, is it not criminal to accept that stolen money (assuming you are talking criminal behavior here).


You and many people like you are understandably blaming the victims. You need to blame the perpetrators of the crime.

see above

As an example: If you tell me you have a great car to sell me for a really good price, and I have knowledge that car was stolen, am I morally wrong to buy that car?

[Scrapfe]

As an example: If you tell me you have a great car to sell me for a really good price, and I have knowledge that car was stolen, am I morally wrong to buy that car?[/QUOTE]

No it is not morally wrong, it is a felony. Can you say hello to your new room mate for the next 7-10 years Dirty George? :eek:

[George Fergusson]

George, please point out to me where I said *anything* was a crime. Did I say that and then forgot? (scratching my head).

You didn't. I did. And I didn't mean criminal in the sense you seem to be wanting to interpret it i.e., "against the law". Welfare is not against the law though perhaps it should be. Morally it's certainly a questionable practice.

Allowing the Fed to bailout private institutions with public tax payer money may very well be illegal as I'm not sure we've authorized Congress to spend our money in that way. But then Congress pretty much does what it wants doesn't it?

So maybe there's more "crime" involved here than we're aware of.

We were talking about bailing out corporations, then I said we bail out the little guy, so why not the big guy. Where did I call either one a criminal? I'm not trying to place blame, but I do make a comparison between bailing out the little guy and the big guy. It's a national mindset that we have these days, and it's one that (imo) needs to stop.
If it is criminal to take money from one and give it to another, is it not criminal to accept that stolen money (assuming you are talking criminal behavior here).

We're not in disagreement except where to place the blame. I think you are trying to place blame squarely on the shoulders of the people cashing the checks. I think that blame is misplaced, I think it belongs squarely on the shoulders of Congress. I do not blame the recipients of government handouts for accepting those handouts. I blame the government for misappropriating those funds in the first place. You hold welfare recipients in contempt. I pity them.

As an example: If you tell me you have a great car to sell me for a really good price, and I have knowledge that car was stolen, am I morally wrong to buy that car?

This question has nothing to do with the discussion unless you want to maintain that income taxes are in fact stolen, a proposition I would be inclined to agree with. Then it puts a whole new spin on welfare and bailouts though I still think you'd be hard pressed to indict a welfare recipient as an accessory to theft, or for receiving stolen goods :)

As an example: If you tell me you have a great car to sell me for a really good price, and I have knowledge that car was stolen, am I morally wrong to buy that car?

No it is not morally wrong, it is a felony. Can you say hello to your new room mate for the next 7-10 years Dirty George? :eek:[/QUOTE]

And you're not helping :)

[dragonfly]

Allowing the Fed to bailout private institutions with public tax payer money may very well be illegal as I'm not sure we've authorized Congress to spend our money in that way. But then Congress pretty much does what it wants doesn't it?

So maybe there's more "crime" involved here than we're aware of.


Perhaps so. I really don't think I am misinterpreting your use of the word criminal. I mean it in the context of contemptable or loathesome. I don't think of welfare recipients as criminal. I think of them as morally and ethically weak. I also pity them to a certain degree because our entire system has created this. It still doesn't excuse the abuse of the system.


I think you are trying to place blame squarely on the shoulders of the people cashing the checks. I think that blame is misplaced, I think it belongs squarely on the shoulders of Congress.



I think it belongs on both as well as on a society that looks the other way while our welfare system feeds into and encourages a lifestyle of dependence that kills the very spirit of those it thinks it is helping.

[dragonfly]

I still think you'd be hard pressed to indict a welfare recipient as an accessory to theft, or for receiving stolen goods :)


I don't wish to indict anyone. I wish them the ability to live up to their dreams and freedom from the oppressing effects of a rotten government program.

[George Fergusson]

I don't wish to indict anyone. I wish them the ability to live up to their dreams and freedom from the oppressing effects of a rotten government program.

We're on the same page here dragonfly, I think we can move on. However, I sense we're on the cusp of a significant meeting of minds on this issue so at the risk of extending this discussion further, I have to say, I am of the opinion that welfare is way more than just a "rotten government program" which we can simply eliminate, to solve the problem. Welfare is built into the system and the changes necessary to rid us of it will be fundamental, and likely painful. I think you understand this because you said earlier in relation to where to place the blame that you think it belongs (in part) "on a society that looks the other way while our welfare system feeds into and encourages a lifestyle of dependence that kills the very spirit of those it thinks it is helping."

That statement tells me that you understand on a gut level the depth and scope of the problem.

The Welfare Mindset is the inevitable result of various policy decisions our government has made over the years, and it wasn't by accident, it was by design. This is what I meant when I said earlier "For our government, welfare isn't the problem, it's the solution. It's the goal."

Kill the Fed!

[dragonfly]

Welfare is built into the system and the changes necessary to rid us of it will be fundamental, and likely painful.


I figure it will about be equivalent to ripping out the country's jugular vein while trying to keep the heart pumping.

[JPK1NH]

I figure it will about be equivalent to ripping out the country's jugular vein while trying to keep the heart pumping.

When/If that ever happens be grateful you don't live in the Baltimore/Philly/DC/NYC/Chicago/Detroit/Other major metropolitan areas.....it ain't gonna be pretty....more likely to better resemble the '68 riots than anything else.

[papa bear]

For our government, welfare isn't the problem, it's the solution and that includes corporate welfare and individual welfare.

goerge, i don't know if i read this the way you meant it. but welfare is not a solution, it is or should be a temporary fix. it is like the feeding of the bear, before long the bear gives up on gathering food and get "habitualized", forgets how. and worse it will soon be bringing the cubs along so they can learn.

a lot of this falls back to the government meddling in natural forces. this was what Adam Smith was talking about the "invisible hand". most of the over educated are atheist by nature and can't have any faith. when you subsidize an industry, you destroy the natural forces. then you are afraid to let them go back to nature ( your votes might depend on it). look at the tobacco industry and all the subsidizes they got for years.
just a question. do you consider tax breaks to be "corporate welfare" or just the government letting people keep their capital ?

[George Fergusson]

I figure it will about be equivalent to ripping out the country's jugular vein while trying to keep the heart pumping.

When/If that ever happens be grateful you don't live in the....

Yes, we're on the same page now.

goerge, i don't know if i read this the way you meant it. but welfare is not a solution, it is or should be a temporary fix.

No of course it's not a solution. I'm not saying *I* think welfare is the solution, I'm saying our government thinks it is the solution.

just a question. do you consider tax breaks to be "corporate welfare" or just the government letting people keep their capital?

I'll have to chew on that.

[papa bear]

No of course it's not a solution. I'm not saying *I* think welfare is the solution, I'm saying our government thinks it is the solution.

i thought that was what you meant. my personal opinion is that the powers who be, knows it is a form of control. "look what we did for you, shouldn't you put us back in office". and if you don't do it our way we will cut off your funding, or if you don't, you don't get that tax break.
as far as corporate corruption goes, as long as things are run by humans there are going to be businesses that are going to try and do underhanded things. i do think they are in the minority. just like society in general, there will always be some people who will do wrong. probably about 5%. most business and people try to conduct themselves with integrity. it does make it hard though, when the system is overly complex (tax code)

by the way how do you get those emotion icons at the end of a sentence?

[dragonfly]

just a question. do you consider tax breaks to be "corporate welfare" or just the government letting people keep their capital ?


While George is chewing on it, I'll add my 2 cents (which is probably worth about that much;))

I don't consider tax breaks for corporations corporate welfare any more than I consider individual tax breaks individual welfare. If I earn money, all that is confiscated from my income is taxes. Letting me keep more of the money that I earn is not welfare. If I don't earn any money, and I don't pay taxes, then giving me a tax break is welfare. (earned income for example). Now, if a corporation is operating in the red and they are getting subsidized, that is welfare. Now, that being said, what I've been reading posted by you guys is that corporations don't pay taxes, so if that's the case, what *is* a corporate tax break?

[dragonfly]

by the way how do you get those emotion icons at the end of a sentence?

I don't know how to do many of them, but for a smilie, you type the colon symbol followed by the ) key. For a wink, you type the semicolon followed by the ) key. For a big green grin, you type a colon mark followed by a capitol d. At least that's what I think I've been typing.;) I'm sure that some folks on here know many more than I do, and can give you more pointers.

[JPK1NH]

Now, that being said, what I've been reading posted by you guys is that corporations don't pay taxes, so if that's the case, what *is* a corporate tax break?

Some of us don't believe that Corps pay taxes... ;)

I've worked in too many industries and small businesses where I've seen "Taxes" pushed back onto the consumer in the form of increased prices.

The bottom line is after all the bottom line and to keep the doors open they need to cover their bills.....Taxes are just another expense that the consumer picks up the tab for.

If you think about it we the consumer is taxed multiple times....our Income is Taxes.....then many/most items have a sales tax on them.....we're taxed on money that we invest/save that earn an interest rate....etc etc.....some items even have MULTIPLE taxes on them.....silliness.

There should be no more than one tax imposed on our money.....personally I'm in favor of either a flat income tax OR a consumption/sales tax.....but NOT BOTH.

[Barry]

by the way how do you get those emotion icons at the end of a sentence?

Go to your User CP (top left link on page), Edit Options, Miscellaneous Options, and set the Message Editor Interface to Enhanced Interface - Full WYSIWYG Editing. Now you will have all the "smilies" at your fingertips when composing a post.

[George Fergusson]

I don't usually post videos because I can't watch them on dialup, but here at work I do sometime, when things are a bit slow.... this one is very entertaining :)

http://www.youtube.com/watch?v=712kRqri2No

[George Fergusson]

I don't consider tax breaks for corporations corporate welfare any more than I consider individual tax breaks individual welfare. If I earn money, all that is confiscated from my income is taxes. Letting me keep more of the money that I earn is not welfare.

Couldn't have said it better myself.

Some of us don't believe that Corps pay taxes... ;)

I've worked in too many industries and small businesses where I've seen "Taxes" pushed back onto the consumer in the form of increased prices.

I thought John F beat this moronic argument to death with a stick in another thread. Now it rears it's confused head again.

The bottom line is after all the bottom line and to keep the doors open they need to cover their bills.....Taxes are just another expense that the consumer picks up the tab for.

Tell that to GM, Ford, and Chrysler why don't you :) They're having a little trouble keeping their doors open lately, perhaps they've just forgotten to PASS ON THEIR COSTS.

Companies produce something (a product, or a service) which presumably they get paid for. Hopefully also, there is money left over after paying all the expenses and costs associated with producing that something. Said left over money is called "profit". Not all companies generate profit.

The bottom line is there is absolutely no correlation between cost (of production) and price. None.

If you think about it we the consumer is taxed multiple times....our Income is Taxes.....then many/most items have a sales tax on them.....we're taxed on money that we invest/save that earn an interest rate....etc etc.....some items even have MULTIPLE taxes on them.....silliness.

There should be no more than one tax imposed on our money.....personally I'm in favor of either a flat income tax OR a consumption/sales tax.....but NOT BOTH.

A good topic for a new thread.

[dragonfly]

. Now you will have all the "smilies" at your fingertips when composing a post.

Barry, thanks a bunch. I didn't know we could do that.:)

Edited to add: Wow, I even found where to change the time display. I've been trying for months to figure that one out.;) I probably should have asked one of my young computer geek friends.

[JPK1NH]

I thought John F beat this moronic argument to death with a stick in another thread. Now it rears it's confused head again.


Tell that to GM, Ford, and Chrysler why don't you :) They're having a little trouble keeping their doors open lately, perhaps they've just forgotten to PASS ON THEIR COSTS.

Companies produce something (a product, or a service) which presumably they get paid for. Hopefully also, there is money left over after paying all the expenses and costs associated with producing that something. Said left over money is called "profit". Not all companies generate profit.

The bottom line is there is absolutely no correlation between cost (of production) and price. None.

You can beat that horse all you want but Business is going to pass the cost of taxes on to the consumer whenever it can.....it doesn't always succeed but it tries pretty darn hard and succeeds every time with Necessities unless beaten down by a competitor selling a better quality item/service at a comperable or lower price.

Nonetheless I don't think this is a topic that anyone is going to make any headway and maybe it should be left at that or taken back to the original thread that it was bludgeoned already on.

[papa bear]

The bottom line is there is absolutely no correlation between cost (of production) and price. None.A good topic for a new thread.

i have been arguing this point till i am blue in the face for years! it is true when you produce a product or service, cost of operations is a factor of weather or not you make a profit. basic 101 economics supply x demand = price (think of how much honey you have by how many people will want it). you can only charge what your market will bear no mater what the cost is.
but in line with this thread i would like to point out that the reality industry is doing great. right now it is a buyers market

"he who does not ask does not learn"

[papa bear]

thanks barry, :D .


dragonfly, i've been trying to figure out the time thing too.

[George Fergusson]

but in line with this thread i would like to point out that the reality industry is doing great. right now it is a buyers market

In deed it is.

[George Fergusson]

You can beat that horse all you want but Business is going to pass the cost of taxes on to the consumer whenever it can.....it doesn't always succeed but it tries pretty darn hard and succeeds every time with Necessities unless beaten down by a competitor selling a better quality item/service at a comperable or lower price.

Nonetheless I don't think this is a topic that anyone is going to make any headway and maybe it should be left at that or taken back to the original thread that it was bludgeoned already on.

There's nothing wrong with hijacking a thread temporarily, especially one as boring as this one is so let's not shy away from good discussion when something as fundamental as the pricing of products and services comes up! I'm no economic expert so I see this as an opportunity to learn.

So how are necessities priced? Are they priced any differently than any other product? Are the laws of supply and demand suspended in the case of necessities?

[papa bear]

So how are necessities priced? Are they priced any differently than any other product? Are the laws of supply and demand suspended in the case of necessities?

george, i probably don't qualify to answer this, but everything is ruled by politics, religion and economics. the rule of supply and demand is absolute. the trouble is when unnatural forces try to meddle with it, be it gov.or traders(trying to manipulate the market). during the Yukon rush. a potato went for 5$ ea.. there is a minimum price index, certain things are not allowed to fall below a determined price. in Neil Boortz's book "someones got to say it" he points out that anti-gouging law interferes with even distribution of resources during an emergency

[dragonfly]

So how are necessities priced? Are they priced any differently than any other product? Are the laws of supply and demand suspended in the case of necessities?

Yeah, I'm in the learning stage too.:)
Aren't many of the "necessities" also products that are subsidized by the feds? Would that not alter the natural supply and demand of some products? (sorry, but I slept through economics in my jr year;))

[George Fergusson]

Yeah, I'm in the learning stage too.:)
Aren't many of the "necessities" also products that are subsidized by the feds? Would that not alter the natural supply and demand of some products? (sorry, but I slept through economics in my 3rd year of college;))

Hey I figure we're all learning dragonfly, and I never slept through any college courses though I'm sure I would have if I'd actually gone to college :)

So what's a necessity? The normal definition "the condition of being essential or indispensable" leaves something to be desired.

Is a heart transplant a necessity? I suppose it is if you need one, less so if you don't. I'm hypothyroid and have to take 125mcg of Synthroid every day for the rest of my life or else suffer the effects of a dysfunctional thyroid, which ain't pretty. I think of my prescription as a "necessity", it costs me $14 for a 90 day supply. Clearly it's not a necessity to someone with a normal thyroid. I suppose Cashmere is an absolute necessity for some people, though not for others.

So what's a necessity? What are some examples of necessities? How are necessities priced?

doesn't always succeed but it tries pretty darn hard and succeeds every time with Necessities unless beaten down by a competitor

JPK1NH said that business always tries to pass on the cost of taxes but that it "doesn't always succeed but it tries pretty darn hard and succeeds every time with Necessities unless beaten down by a competitor..." So I take away from that statement that producers of necessities can effectively charge whatever they want, covering all their costs of production including taxes and a handy profit margin to boot with the price only subject to downward pressure if there's competition in the form of a "better" necessity at the same price or a comparable necessity at a better price.

If that's the way things worked, why would anyone bother to produce anything BUT necessities?

I'm saying that's not the way it works. I'm saying that necessities, whatever they are, are priced in the same way as everything else is- through supply and demand and like everything else, price is unrelated to cost, and taxes may or may not be passed onto the purchaser.

Where is John F when you need him? For that matter, where is he when you don't need him?

[dragonfly]

I think of my prescription as a "necessity", it costs me $14 for a 90 day supply.


Yes, for you it is a necessity. Without it, you would live your life feeling like you were dead and nobody bothered to tell you.;)
The medical care necessity is a tough one, because in this day and age of medical technology, it is sometimes necessary if you want to continue living in a body. That's a tough decision, isn't it? That's probably one of the reasons so many people want health care costs subsidized, and it already is to a great extent.

So I take away from that statement that producers of necessities can effectively charge whatever they want, covering all their costs of production including taxes and a handy profit margin to boot with the price only subject to downward pressure if there's competition in the form of a "better" necessity at the same price or a comparable necessity at a better price.

If that's the way things worked, why would anyone bother to produce anything BUT necessities?



Because people who desire luxuries are normally willing to pay heavily for them. I think it works in with the need that some people have to "show" their wealth. It's an ego thing. In the luxuries market, I would think that you could make a much heftier profit with less input.



Where is John F when you need him? For that matter, where is he when you don't need him?

I don't know. Haven't seen him lately, and he must have forgotten to leave his schedule with me.;)

[George Fergusson]

Yes, for you it is a necessity. Without it, you would live your life feeling like you were dead and nobody bothered to tell you.;)

Ayuh. I remember.

The medical care necessity is a tough one, because in this day and age of medical technology, it is sometimes necessary if you want to continue living in a body. That's a tough decision, isn't it? That's probably one of the reasons so many people want health care costs subsidized, and it already is to a great extent.

So maybe some medical stuff falls in the category of "necessities" for some people. But can you really call something a necessity if it's not a necessity to everyone, or at least, to a very large segment of the population?

Because people who desire luxuries are normally willing to pay heavily for them.

But that's luxuries, not necessities and luxuries are the first thing to go when times get tight. But I agree. So my question becomes "why would anyone want to produce something other than luxuries and necessities?"

I guess I need to research necessities from an economic stand point when I get a chance.

:)

[drobbins]

the problem with "basic" economic theory is that it makes assumptions that aren't always valid in the real world
supply/demand theory assumes there are always alternative products
if the cost of blue widgets get to high people will use red widgets
it also assumes that if the price of a product becomes to high, new producers will enter the market and start making widgets, driving the price down
but if you look at, say, for example, oil, there are alternatives but they aren't cheaper and will take many years to be available
so new producers should jump in to take advantage of the high prices
why aren't they doing that?
this brings up the concept of "barriers to entry" which is how hard it is for new producers to enter the field
in the case of oil the barrier to entry is pretty high
none of us have drilled a well in our backyard have we:)
this is true with many products, I think Intel CPU's are to expensive but it would be pricey to hire the engineers and build the fab to produce my own
that's basic supply/demand

necessities:
traditionally this is food, water, and shelter
all have many alternatives (maybe only a few for water but in most places a well is an option)
the barriers to entry are low, anybody grow their own garden?
in these cases supply/demand works pretty well
the problem is we are coming up with all these quasi-necessities where these conditions aren't valid
I consider electricity a necessity but there aren't any alternatives and building a power plant is cost prohibitive
same with phone service, it's now considered a necessity (alternatives are now becoming available)
so the government steps in and calls these "monopolies" and regulates them so they can't rake you over the coals and make excessive profits
those two were handled long ago and most folks are relatively happy with the way it is
the problem is we have new quasi-necessities
energy
health care
education
retirement funds
this is what we're arguing about
in the case of phone/lights regulation worked well because it allows the producer to achieve economies of scale which make the end product cheaper for us all
it's not so clear this would work the same way with the "new" necessities
regulation eliminates the possibly of large profits and stifles innovation
why would I invent a better widget if the government won't allow me to get rich off of it?
think of that in terms of health care treatments
how about alternative energy?
be careful in thinking the solution is regulation/subsidies from the government
some ancient Greek guy (wish I knew who) said
"the downfall of any democracy will come when the electorate wises up and votes themselves a free lunch"
be careful what you wish for

Dave

[papa bear]

the problem with "basic" economic theory is that it makes assumptions that aren't always valid in the real world
supply/demand theory


ancient Greek guy (wish I knew who) said
"the downfall of any democracy will come when the electorate wises up and votes themselves a free lunch"
be careful what you wish for

Dave

its great to see you are from NC. i respectfully disagree with the top statement, the rule of supply and demand is the real world. it will apply to everything goods, money, work, etc.. it is like newton's laws of motion you must keep it always in mind. i think you are looking at cost vs. reward when you speak of "barriers to entry", IE. look at the cotton gin.

put a high enough price on something and you will see how much of a necessity it is


its interesting that you use oil industry for an example. Al gore stated in the book he wrote after leaving office, that gas should be 5$ a gal.. the theory is that if it cost more the great unwashed would not use as much, and we would find substitutes for it. i submit that if something makes a lot of money, forces will try to keep it continuing

as for the greek guy. i am thinking of one of my favorite beekeepers Aristotle. he hated democracy(mob rule). we are a republic (law rule)
get the book "Aristotle's' children" it is very good.

[papa bear]

dave i think we agree on everything else

[dragonfly]

. But can you really call something a necessity if it's not a necessity to everyone, or at least, to a very large segment of the population?

:)

Well, I'm not sure. Food is a necessity, and for some people bread is a necessity whereas for others, filet mignon is. ;) How do you (in a economic sense) deterimine necessities?


So my question becomes "why would anyone want to produce something other than luxuries and necessities?"



Where do service industries fit in?

[John F]

the problem with "basic" economic theory is that it makes assumptions that aren't always valid in the real world

marking my place, I need to revisit this thread.

What do you consider "basic" economic theory?

Basic theory is about distribution of scarce resources; ultimately your time, and how the rest of the human race reacts to how you choose to spend your time.

Supply and demand are laws, which is to say, they are theories that we have exhausted all conceivable ways of disproving so far.

[George Fergusson]

Now I guess the only question folks have is will the stock holders get wiped out? Well, Freddy and Franny's preferred rating has recently been lowered to BBB- which is the lowest rating in use today.

OF COURSE THE STOCKHOLDERS WILL GET WIPED OUT!

People can't see the handwriting on the wall, eh? What are they, blind?

So it's going to happen: A crime. Endorsed by Congress. And the worst of it is, it's not going to help. It has been said that Freddy and Franny are too big to fail. What it really is, they're too big to survive.

McCain is in favor of this bailout. Obama is in favor of this bailout.

Fannie and Freddie Fall After Report Treasury Is Close to Deal

By Emma Moody
Enlarge Image/Details

Sept. 5 (Bloomberg) -- Fannie Mae and Freddie Mac dropped in after hours trading on concern any rescue plan devised by U.S. Treasury Secretary Henry Paulson will wipe out shareholders.

Fannie dropped $2.25, or 32 percent, to $4.79 at 5:50 p.m. in New York Stock Exchange trading after the Wall Street Journal said the Treasury is close to completing a plan to help the mortgage-finance companies. Freddie slumped $1.40, or 27 percent, to $3.70.

The plan may involve a ``creative use'' of the Treasury's new authority to pump capital into the companies as well as changes to senior management, the Journal reported on its Web site today, citing a person it didn't name.

``The market prices of these stocks are going down on the notion that the Treasury is going to do something,'' said Charles Lemonides, the chief investment officer at Valueworks LLC in New York. ``There is reason to be concerned if they do something that hurts investors.''

Continued...

http://www.bloomberg.com/apps/news?pid=20601087&sid=a9L5St2a4GdU&refer=home

[Barry Digman]

Now I guess the only question folks have is will the stock holders get wiped out? Well, Freddy and Franny's preferred rating has recently been lowered to BBB- which is the lowest rating in use today.

George, yer having a J.D. Salinger moment. It's "Fannie", not "Franny". Franny was the sister in "Franny and Zooey".

And if this thread wanders off into The Catcher In The Rye...

[George Fergusson]

George, yer having a J.D. Salinger moment.

You are so right. Thanks Ace.

[Barry]

It's "Fannie"

Which brings a song to mind that is very fitting for our failing tender ($).

http://www.youtube.com/watch?v=_WAP9EoTPHY

[George Fergusson]

Is there any doubt that our markets are influenced if not out right manipulated by the Fed and other meddling government officials? It is clear there are major financial institutions that simply can't survive without having one hand in the American tax payer's pocket.

Fed May Expand Funding Aid to Banks in a `Mother of Year-Ends'

By Craig Torres and Liz Capo McCormick
Enlarge Image/Details

Sept. 11 (Bloomberg) -- The Federal Reserve may have to increase the cash it provides to banks and brokers, already a record, to help them balance their books at the end of the year.

Six bank failures in the past two months and rising concern about Lehman Brothers Holdings Inc.'s capital levels pushed lenders' borrowing costs to near a four-month high yesterday. They may climb further as companies rush for cash to settle trades and buttress their balance sheets at year-end.

``This could be the mother of year-ends,'' said Brian Sack, vice president of Macroeconomic Advisers LLC in Washington, who used to serve as head of monetary and financial market analysis at the Fed. ``The markets will need extraordinary actions to get through it.''

continued...

http://www.bloomberg.com/apps/news?pid=20601087&sid=aavHtPEY4aCc&refer=home

[dragonfly]

``The markets will need extraordinary actions to get through it.''

I bet I can guess just who will be performing these extraordinary actions.;) (and it's not Superman)

[George Fergusson]

I bet I can guess just who will be performing these extraordinary actions.;) (and it's not Superman)

Well, exactly right. It's not Superman, it's the Fed and the Treasury spending American tax payer dollars. I don't see how anyone can call Wall Street a "free market". The fraud and manipulation is rampant, and the vast majority of market participants are sheep, following the herd, listening to the main stream media for news and taking their investment leads from idiots like Jim Cramer. Even earnest investors get suckered by reputable brokers who lie to them and steal their money by encouraging them to invest in losing propositions. Just consider the Auction Rate Securities fiasco.

There ought to be a law.

Talk about market manipulation, here's a nice article. You would think they'd just make naked short selling illegal again, permanently, and make the law apply to ALL stocks, not just a select privileged few. But of course, there's just too much money to made with naked short selling. It's mostly hedge funds that do it, expressly for the purpose of driving down stock prices.

Hedge funds are like gangs for rich people. They should be regulated into oblivion.

Paulson, Bernanke Brave `Raptors' in Resisting Aid for Lehman

By Craig Torres and Shannon D. Harrington

Sept. 13 (Bloomberg) -- Henry Paulson and Ben S. Bernanke may have to weather more speculative attacks on financial institutions as they resist using public funds to aid the sale of Lehman Brothers Holdings Inc.

``The raptors test the fence for weak spots,'' said Vincent Reinhart, a former director of the Federal Reserve Board's Division of Monetary Affairs who is now a resident scholar at the American Enterprise Institute in Washington. ``The speculators think the authorities will blink, and the authorities think the speculators will run out of funds.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=aFDIGVTjrbrI&refer=home

[George Fergusson]

AIG is the country's biggest insurance holding company. They're hurting. Big time. So this Forbes article really got me going- I believe it represents an attitude/mentality and perspective towards business that is a big part of the problem with the financial markets in this country. Corruption, entitlement, and moral hazard is built in to the system.

I'll include some commentary.

AIG Overreaction
Ruthie Ackerman, 09.13.08, 6:00 AM ET

Reports of American International Group's impending demise may be exaggerated, to borrow a line from Mark Twain or Steve Jobs.

Not quite. Their impending demise is well analyzed, well documented, and well reported on. They're not making this up, the company is hurting.

AIG's shares plummeted 17.3%, or $3.04, on Friday, to $14.51, as jittery investors ditched the stock. The shares have fallen more than 70.0% since American International Group (nyse: AIG - news - people ) warned investors earlier this year that it could be hit by significant, unrealized losses on credit-default swaps it wrote to guarantee securities linked to subprime mortgages.

The Friday decline came as investors also fled Lehman Brothers Holdings, which seems destined for a takeover this weekend, and Washington Mutual, also rumored to be merger material.

But Citigroup analyst Joshua Shanker says the market is “over-concerned” about AIG. “The institutions that have failed and/or been rescued have been depositor/lending institutions,” he said. “One core risk to such institutions is that depositors withdraw their funds. As an insurance company, AIG's capital cannot be withdrawn by its clients.”

A truly idiotic statement indicative of how ignorant this reporter is of the nature of the problems finance businesses are facing. It's about capitalization, stupid.

Shanker said that AIG management has options if raising equity isn’t possible, “though many of these options will come at the expense of longer-term shareholder value.” Shanker said AIG could sell some of its businesses, for which “no less than $20 billion could be realized upon sale of these assets even under extreme duress,” though the value of the businesses is higher.

With AIG's exposure to credit default swaps and synthetic CDOs, if they sold off everything they own there still wouldn't be enough to cover their butts. This is another example of the reporter's ignorance.

Another option is for AIG to purchase a stop-loss cover, which protects it against catastrophic claims, to prevent further deterioration of its credit-default swap exposures. It could also buy credit-default swaps to protect some of its riskier investments or sell some of its riskier investments to a third-party investor if one was willing to purchase them, he said. AIG hasn’t wanted to close its credit-default swaps or sell its distressed assets because it believes their values will be depressed. “However, exchanging part of the upside for greater financial security seems like a sensible partial solution at this point,” Shanker said.

And herein lies the whole problem- the passing on of systemic risk to some other schmuck. The ultimate NIMBY- people who believe risk is great as long as it's "not in my back yard."

I've written before about Credit Default Swaps and how they're suitcase nukes of the credit derivatives market. Folks don't understand them, so they ignore them. AIG is an insurance company, the buck is supposed to stop with them. Who insures insurance companies? Bigger insurance companies? What if you're already the biggest insurance company? Suggesting that they "insure their risk" implies that......

Ultimately, Shanker says in a worst-case scenario he believes the Federal Reserve could open its borrowing window to AIG.


....exactly. Put the American tax payer on the hook. They're the ultimate patsy for these hedge funds, investment banks, and insurance companies who invest recklessly and pass the risk off onto someone else- anyone- as long as it isn't them.

Credit-default swaps on AIG shot up 38 basis points to 728 basis points, a new all-time high, according to TradeTheNews.com. Rising credit-default swap rates signal investor fears that the insurer will be unable to pay its debts.


I love it. People buying credit default swaps against a business at risk of going bankrupt because of their exposure to credit default swaps. How fitting.

They're all a bunch of jackals, just waiting to pounce on the next Wall Street carcass.

http://www.forbes.com/markets/2008/09/13/aig-insurer-closer-markets-equity-cx_ra_0912markets34.html
[/QUOTE]

[tecumseh]

johnf writes:
Basic theory is about distribution of scarce resources; ultimately your time, and how the rest of the human race reacts to how you choose to spend your time.

Supply and demand are laws, which is to say, they are theories that we have exhausted all conceivable ways of disproving so far.

tecumseh: sentence one is kinda ok... althought really you should say 'the distribution and allocation of scarse resources'. this definition is typically focused about answering basic questions of economics.... how, how much, where, how is production allocated, etc.

from this foundation you can then consider schools of economic thought which typically assumes one question is much more important that the rest (this is typically their unstated bias).

sentence 2 is of couse totally incorrect and only reflects the limited view of a neophyte in the study of economics. does supply and demand work over some limited range----> most of the time. even this most of the time is subject to it's own set of assumption. a couple of assumptions that quickly comes to mind is.... 1) large numbers of buyers and sellers 2) frictionless entry and exit from the production end of the market.

it is not so difficult to consider when even these two ASSUMPTIONS are violated (which is pretty much all the time in the current organization of society).