Rolling US Economy Into The Shitbin Thread

HBOS price tumbled because it was in danger of dying this week, not because of short selling

banning short selling is the whiff of panic covering the asses of a strong lobby

and incompetent pension fund managers shifting blame because they couldn't see this shit coming. Money market mutual fund for institutional customers only had to be shuttered because they were all making a run:
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/18/AR2008091801792.html?hpid=topnews
Fucking ludicrous. I remember the first time Calculated Risk reported on a state pension plan - I think CA's - buying real estate securities. Utter, utter incompetence.

LOL @ this skunk still writing a column that literally asks "Are things really that bad?"

http://article.nationalreview.com/?q=NWNjZjZkZWQ0NzkxNDAwNzNjMWUzYmMzY2M4YWU2ODU=

(He was also the one that espoused chanting "drill, drill, drill" as the simple mantra that would solve ALL OUR PR0BLEMS!!)

I heard a snippet on the radio early today how the Federal Reserve was now loaning money to huge European & Asian banks that have been affected by the US crisis. Looks like we're getting closer and closer to a one-world currency/one-world government by the hour!

http://i5.photobucket.com/albums/y176/edwardiii/protect_and_survive.gif

Perhaps someone can help me understand the short-selling ban. I mean in theory it seems like speculative short-selling should be no worse than speculative buying. So is it:

1) Cynical scapegoating to make it look like the SEC is actually doing something OR

2) Unlike the irrational exuberance that drives stocks up, the irrational (if it is irrational) panic that can drive stocks down can wind up needlessly contributing to the wiping out a company by making it harder for them to raise capital.

a little of A a little of B

So I guess I sort of see the rationale if B is part of it. Drive a stock price up too far and you just get some egg on your face. Drive it down too far and you destroy the company. Efficient markets are supposed to correct this, but markets ain't always efficient.

Wouldn't a ban on short selling allow an overvalued stock to remain so for longer? So once investors decide to bail there's pretty much the same effect, especially in a climate of complete panic.

Not really, as investors can still sell their stock if they think it's overvalued. They just can't lend it to traders who then sell it, promise to buy it back at a later date, at (they hope) a cheaper price, pocket the difference and give it back to the investor.

I have two questions: does there have to be someone taking a long position for every trader taking a short position? a counterparty?

What good does any of this do the system when it's working properly? What is the downside in banning it?

Actually, a third question: are all the speculators who have short positions going to be really burned by the surge in prices today (partly as a result of the ban)? And should we laugh?

i hate fools that bet the no pass line.

the SEC is basically announcing that it functions at the behest of institutional investors, now that godfather I-bank is in the hospital on a ventilator.

Unfortunately most will have closed out positions as soon as news of the ban happened.

Possibly so they could take new long positions in expectation of a rise. These douchebags always win.

this is the most fucking disgusting shit. You don't fire the SEC chief after this, Mr. McCain, you take him out behind the shed and shoot him, double tap.

or, you know, terrorists.

http://bigpicture.typepad.com/comments/2008/09/terror-attack-o.html

Have goldman dodged the bullet again? Ok so they have been the strongest investment house through all of this ( less invested in mortgage backed securities than most). but surely they must be thanking their lucky stars and fairy godfathers.

one of my classmates works at goldman he said they weren't worried.

he also keeps trying to recruit me and everyone else in the class to work there because he gets a $5000 referral bonus.

and they aren't thanking anyone, they are the most arrogant bank for sure

Why not make a rule that prohibits selling a stock for a price lower than the last trade. We'd stop losses altogether.

The programmers of Super Mario Galaxy will generate more profit this year than the average Goldman Sachs banker has ever managed. According to calculations by the Financial Times, the average employee at Japanese video games maker Nintendo is on track to earn more for their company this year than the average Goldman Sachs employee did in 2007, the investment bank’s best ever year. Nintendo also makes more per employee than internet group Google.

STOP MAKING RON PAUL LOOK LIKE A GENIUS

Between the budget deficit and all the new obligations taken on by the Federal Reserve, the US government and its quasi-governmental bank have taken on close to $1 trillion of new debt this year alone. BUT... yesterday the stock indexes rebounded to the tune of about 4%, so we should all start whistling Don't Worry, Be Happy again.

It seems like every time the financial sector discovers that what they told themselves were assets were in fact frauds and baseless illusions, the Fed comes along and bankrolls the illusions back into money again. Yet, the word 'inflation' rarely appears in the news stories about these inspired acts of kindness.

The public must take on $1 trillion of debt to protect the public from the losses made by Wall Street; this makes sense because the public gains from the profits of Wall Street.

Have goldman dodged the bullet again? Ok so they have been the strongest investment house through all of this ( less invested in mortgage backed securities than most). but surely they must be thanking their lucky stars and fairy godfathers.

fairy godfather = Hank Paulson? It doesn't hurt to have a lifelong Goldman man calling the shots at Treasury.

What good does any of this do the system when it's working properly? What is the downside in banning it?

as an FYI here's what happened when Pakistan banned shorting

http://dealbreaker.com/2008/09/post-63.php

Banning short sales is just short-term varnish over a long-term problem - exactly the sort of thing you'd prescribe if, say, you were an incumbent party with only 6 weeks to go before an election.

Why you cynic.

BAN WOLVES FROM EATING
THIS WILL HELP DEER TO BECOME FAT

hahaha

Greider calls the bailout plan a "historic swindle"...

http://www.thenation.com/doc/20081006/greider

...all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called "responsible opinion." If this deal succeeds, I predict it will become a transforming event in American politics--exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

Christopher Whalen of Institutional Risk Analytics, a brave conservative critic, put it plainly: "The joyous reception from congressional Democrats to Paulson's latest massive bailout proposal smells an awful lot like yet another corporatist lovefest between Washington's one-party government and the Sell Side investment banks."

TO HELP SAVE ON GASOLINE I PROPOSE LEGISLATION TO REMOVE THE BRAKES FROM ALL AUTOMOBILES

There's your four horsemen:

http://www.latimes.com/media/alternatethumbnails/photo/2008-09/42454452-19110815.jpg

"...and if I could ask the current GOP candidate to stop trashing the guy on the right..."

l-r: Impotence, Ignorance, Corruption, and Idleness

Greider calls the bailout plan a "historic swindle"...

The potential for historic swindling is definitely there, but it's not clear what alternatives exist, other than just waiting for the crisis to snowball further. Buying the troubled assets, while it presents moral hazard problems, at least allows for a more surgical intervention, versus AIG type rescues, where the government takes over the whole company. It seems like the best compromise might be a combination of fair-value pricing for the assets being sold (a reference point could be the recent sale by Merrill Lynch of a batch of similar assets at an average price of around 20 cents on the dollar), which would force the selling institutions to take large up-front losses, with a program of government buying of preferred stock at high rates of interest in order to shore up those institutions' capital. The high interest rates on the preferred shares could compensate taxpayers for the risk being taken on the asset purchases.

Jim Cramer on CNBC just said "we're seeing more moves from the President now than we saw from FDR..." somebody buy me drinks

It's amazing those $600 checks didn't prevent this.

while it presents moral hazard problems
to say the least

xp lol beat me to it

Well, the punitive rates of interest on the preferred (or, if you prefer, dilution of the common) would go some ways towards reducing the moral hazard.

many xposts

at least they finally found weapons of mass destruction

Well, the punitive rates of interest on the preferred (or, if you prefer, dilution of the common) would go some ways towards reducing the moral hazard.

have you been following the credit-derivatives market?

Not sure what that's supposed to mean in context.

sry i misread yr post

o nate you have been OTM a lot on this thread.

anyone who thinks that Paulson is trying to save the GOP with any of these moves is willfully ignorant. Blame can be cast widely for the source of this problem, but it doesn't get us any closer to a solution. And doing nothing will absolutely cause the crisis to snowball out of control and turn us all into serfs.

not really sure there's a fucking moral hazard to anything anymore. And where there might be one, we just ignore anyway because it's way easier to expect someone else to not only take the blame, but the responsibility for whatever fuckup happens in our lives.

also Tombot I will buy you a drink.

Blame can be cast widely for the source of this problem, but it doesn't get us any closer to a solution.

Though it might get us closer to understanding how to prevent it from happening again.

not really sure there's a fucking moral hazard to anything anymore

Fair point. I think that people are already angry enough that there is going to be a real push for reform, no matter who gets bailed out at this point. Punishing the shareholders is probably the fair thing to do, but it will only really be effective if it goads the shareholders into reforming corporate governance and compensation structures that allow CEOs to profit from taking excessive risks without adequate shareholder oversight.

An entertaining column from Nick Leeson, who probably knows a thing or two about bank collapses:

Quite simply, the banks have traded recklessly over the past 10 years and have put everybody's wellbeing at risk. Anybody and everybody could get whatever credit they wanted as recently as three years ago. I returned from Singapore in 1999, responsible for £862m worth of losses that brought down Britain's oldest investment bank, personally liable through an injunction for £100m, and yet within the space of a week had been offered five different credit cards. Ridiculous! Any central bank will tell you that the system exists on the premise of "responsible lending"; but the experiences of the past few years clearly show this is utter rubbish.

http://www.guardian.co.uk/commentisfree/2008/sep/19/banking.creditcrunch

Nick Leeson = Ewan McGregor, no?

He wishes.