Rolling US Economy Into The Shitbin Thread

this is all tom brady's fault

http://www.latimes.com/media/alternatethumbnails/photo/2008-09/42526356-23122243.jpg

Mt. Rushmore, redone.

i like Park Slope

-- gabbneb

― gabbneb

glad-handing smiley-face ... idiot consumer ...

― gabbneb

i recommend the la taqueria pablano burrito

no you should walk up a ways and go to calexico instead, it's better

calexico is nice too too but theyre not really the same type of place

I get off the F train and get Uncle Moe's veggie burrito (w. wheat) once a week.

rolling US economy into burritos

i know but mmmm enchiladas amirite

yah exactly - ill eat the taqueria burritos and the calexico enchiladas

i hope the great depression of 2008 means blue ribbon has to close, that place sucks!!!

this guy has been OTM so far...

http://www.ft.com/cms/s/0/622acc9e-8...nclick_check=1

The shadow banking system is unravelling

By Nouriel Roubini

Published: September 21 2008 17:57 | Last updated: September 21 2008 17:57

Last week saw the demise of the shadow banking system that has been created over the past 20 years. Because of a greater regulation of banks, most financial intermediation in the past two decades has grown within this shadow system whose members are broker-dealers, hedge funds, private equity groups, structured investment vehicles and conduits, money market funds and non-bank mortgage lenders.

Like banks, most members of this system borrow very short-term and in liquid ways, are more highly leveraged than banks (the exception being money market funds) and lend and invest into more illiquid and long-term instruments. Like banks, they carry the risk that an otherwise solvent but liquid institution may be subject to a self fulfilling and destructive run on its liquid liabilities.

But unlike banks, which are sheltered from the risk of a run – via deposit insurance and central banks’ lender-of-last-resort liquidity – most members of the shadow system did not have access to these firewalls that prevent runs.

---

The next stage will be a run on thousands of highly leveraged hedge funds. After a brief lock-up period, investors in such funds can redeem their investments on a quarterly basis; thus a bank-like run on hedge funds is highly possible. Hundreds of smaller, younger funds that have taken excessive risks with high leverage and are poorly managed may collapse. A massive shake-out of the bloated hedge fund industry is likely in the next two years.

---

European financial institutions are at risk of sharp losses because of the toxic US securitised products sold to them; the massive increase in leverage following aggressive risk-taking and domestic securitisation; a severe liquidity crunch exacerbated by a dollar shortage and a credit crunch; the bursting of domestic housing bubbles; household and corporate defaults in the recession; losses hidden by regulatory forbearance; the exposure of Swedish, Austrian and Italian banks to the Baltic states, Iceland and southern Europe where housing and credit bubbles financed in foreign currency are leading to hard landings.

Thus the financial crisis of the century will also envelop European financial institutions.

sorry this is the right link to read the whole thing:

http://www.ft.com/cms/s/0/622acc9e-87f1-11dd-b114-0000779fd18c.html?nclick_check=1

I AM ROUBINI, THE ANGEL OF DEATH

I know the name Roubini, but why? Did he make a massively right call on dotcoms or something?

And here is your #1 on cnn Paul vs Paulson smackdown: http://www.cnn.com/2008/POLITICS/09/23/paul.bailout/index.html?iref=topnews

one guy i talked to argued the blame should go @ greenspan's feet for lowering interest rates for such a long time in the early 00s

Greenspan was indeed deeply complicit in blowing the succession of bubbles that culminated in the housing bubble.

Greenspan's 2003 lowering of rates = DUD

Roubini was derided in '06 for being so doom-and-gloom "negative," - "we have a subprime financial system, not a subprime mortgage market," - but most of what he's said has panned out. He was on Charlie Rose the other night, repeating that we're not facing a depression, but the worst recession since the GD

http://www.timesonline.co.uk/tol/news/world/asia/article4810644.ece

Roubini has been like a sole voice of reason for years now. Peter Schiff has been more right than wrong over the last 6 or 7 years. Fred Harrison predicted this correct pretty much to the month almost 10 years ago? (and predicted the 91 recession in 82).

Its difficult not to have Greenspan right at the top of the list of culprits (plus the central bankers in every other western nation that followed his lead) but its arguable all they did was exacerbate the inevitable

lol @ "predicting" recessions 10 years in advance

lol at getting the dates correct pretty much to the month and providing detailed reasons why to back up your predictions

There'll be plenty books written on why this all happened. Many of them have been in print for a few years now

i'm curious what the guy's reasons are! but the idea that someone has some superlative future predicting powers is some scifi bullshit.

I don't think its anything like amazing future prediction powers! and he was hardly the only one! His books are on amazon, you could read

http://www.amazon.co.uk/Boom-Bust-Prices-Banking-Depression/dp/0856831891/ref=sr_1_5?ie=UTF8&s=books&qid=1222223422&sr=8-5

there are plenty other books on this subject by others over the last decade, im sure many are poor!

Its only really a theory based on 18 year cycles, i'm not going to try condense it too much, especially as many of the reasons are self-evident now it is happening. (in retrospect i think there has been quite a lot of predictions of an 08-10 crash from the last decade or so, but maybe didnt get so much coverage as we convinced ourselves we were all richer?)

I'm interested in how much of this could be attributed to Nixons closing of the gold window for foreign nations in 1971, as this global financial system is only 37 years old (havent read so much on this, but would like to!)

Anyway all I'm saying is, of course you might think hes full of bullshit, but his (and others) books are there for the reading, and surely it would be more interesting to read something and then call it out! i mean, no-one just writes a book with "I think this will happen" and nothing else in it!

Whoa ho ho - what a surprise considering Hank's GS past!

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUj_9.k13q7s&refer=home

Paulson Debt Plan May Benefit Mostly Goldman, Morgan (Update2)

By Jody Shenn

Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid, according to Bank of America Corp.

``Its benefits, in its current form, will be largely limited to investment banks and other banks that have aggressively written down the value of their holdings and have already recognized the attendant capital impairment,'' Jeffrey Rosenberg, Bank of America's head of credit strategy research, wrote in a report dated yesterday, without identifying particular banks.

So warren buffet is putting 6bn into goldman. Champagne, cocaine and bonuses all round.

Xpost

Well there's a surprise, as if it hasn't already.

I shall start queuing up for my goldman saving account because clearly my money is safer there than in fort knox.

Okay so just to play more schizo:

Investment Mgt fundie (another kind of fundie!) writes "The Treasury proposal will not be a bailout of Wall Street but a rescue of Main Street"

How Main Street Will Profit (lol)

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/23/AR2008092302322_pf.html

" Critics call this a bailout of Wall Street; in fact, it is anything but. I estimate the average price of distressed mortgages that pass from "troubled financial institutions" to the Treasury at auction will be 65 cents on the dollar, representing a loss of one-third of the original purchase price to the seller, and a prospective yield of 10 to 15 percent to the Treasury. Financed at 3 to 4 percent via the sale of Treasury bonds, the Treasury will therefore be in a position to earn a positive carry or yield spread of at least 7 to 8 percent. Calls for appropriate oversight of this auction process are more than justified. There are disinterested firms, some not even based on Wall Street, with the expertise to evaluate these complicated pools of mortgages and other assets to assure taxpayers that their money is being wisely invested. My estimate of double-digit returns assumes lengthy ownership of the assets and is in turn dependent on the level of home foreclosures, but this program is, in fact, directed to prevent just that.

In effect, the Treasury will have the fate of the American taxpayer in its hands. The Resolution Trust Corp., created in the late 1980s to deal with the savings and loan crisis, dealt with previously purchased real estate, which was flushed into government hands with a "best efforts" future liquidation. Today, the purchase of junk mortgages, securitized credit card receivables and even student loans will be bought at prices significantly below "par" or cost, and prospectively at levels allowing for capital gains. This is a Wall Street-friendly package only to the extent that it frees up funds for future loans and economic growth. Politicians afraid of parallels to legislation that enabled the Iraq war are raising concerns about a rush to judgment, but the need for speed is clear. In this case, there really are weapons of mass destruction -- financial derivatives -- that threaten to destroy our system from within. Move quickly, Washington, with appropriate safeguards.

while over here you have this (if you can indulge the source):

Banks race to profit from US bailout
http://www.wsws.org/articles/2008/sep2008/fren-s23.shtml

By Barry Grey
23 September 2008

The announcement of a virtually open-ended government bailout of Wall Street has set off a frenzied competition among the biggest banks and financial firms to grab the lion’s share of the super profits to be reaped from the program.

Banks, brokerage houses, insurance firms, mortgage lenders, private equity companies and asset managers are furiously lobbying the Bush administration and Congress to make sure that the legislation authorizing the bailout gives them the biggest possible share in the spoils. Behind the public speech-making and posturing by administration officials, presidential candidates and congressmen, a sordid campaign of influence-peddling and vote-buying is under way, which will determine the details of the bailout law that is expected to be passed either this week or next.

Tens of billions of dollars in corporate profits and billions more in personal windfalls for senior executives and big investors are at stake. The plan drawn up by Treasury Secretary Henry Paulson not only allows the biggest financial firms to rid themselves of virtually worthless assets that are driving down their stock and slashing their profits, it provides vast opportunities for the winners in the money race to realize huge gains from the management of the program and the ultimate resale of the assets by the government.

The entire program is so rife with “conflicts of interest” that the term does not begin to capture the level of corruption and criminality it entails.

so of course i just re-read this to feel good that some ppl don't have any moral hazards

http://www.wsws.org/articles/2008/sep2008/fren-s23.shtml

Trader Makes a Quick $1.25 Million on Rescue, Then Slams It

SEPTEMBER 24, 2008
Trader Makes a Quick $1.25 Million on Rescue, Then Slams It
By MICHAEL M. PHILLIPS

William O. Perkins III says he turned a $1.25 million profit trading Goldman Sachs Group Inc. stock last week.

You would think that would count as a pretty good paycheck for the Houston energy trader. Instead, the experience left him so angry about the demise of capitalism that he says he has decided to spend his profits on advertisements attacking President George W. Bush's planned $700 billion Wall Street bailout.

The president has run into a wall of skepticism over his plan. Troubled voters are calling their congressmen. Academic economists are churning out sound bites. Democratic lawmakers are demanding that the plan include perks for the working classes, while Republicans are saying the plan interferes with the invisible hand of the free market.

But the 39-year-old Mr. Perkins is putting cash behind his anger. He commissioned an African-American arts collective to draw a cartoon depicting Mr. Bush, Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke trampling on the graves of private enterprise and capitalism. Then he paid $139,104 to run the drawing as a full-page ad in the Tuesday editions of the New York Times. And he promises to spend a million more on ads before he is done.

http://s.wsj.net/public/resources/images/P1-AN026_ANGRY__G_20080923155642.jpg

not bad for "African-American arts"

Interesting:

Experts offer alternatives to bailout approach

Leading economists argue that other solutions could address financial crisis

http://www.msnbc.msn.com/id/26861562

To hear Henry M. Paulson Jr. and Ben S. Bernanke tell it, there is only one plan to save the economy -- use $700 billion in taxpayer money to take the worst of Wall Street's assets off its books.

But leading economists and financial thinkers argue that there are a host of alternatives that would reduce taxpayers' liabilities and perhaps more effectively address the urgent crisis in financial markets. Although these experts concede that the clock is ticking, they say different approaches have been dismissed too quickly.

While the government's plan is built around buying troubled assets, other options offer sharply different visions.

One approach seeks to reduce taxpayers' liability by offering collateral-backed loans to troubled banks, leaving them to work out their own solutions. Another idea is to have the government set up a profit-driven investment fund with the aim of infusing the financial system with cash without taking on bad debt. Still others suggest radically different tactics of directly helping homeowners by reducing mortgage principal or bolstering banks by suspending capital gains taxes.

especially this part:

Mortgage breaks

Liberal thinkers say the government could intervene in the financial system by addressing the ailing mortgages at the heart of the crisis. Under this approach, the government could reduce the amount of principal that struggling homeowners owe.

"It's about foreclosures, stupid," said John Taylor, chief executive of the liberal National Community Reinvestment Coalition.

One idea is for the government to take control of some mortgage-backed securities -- most likely by buying them from financial firms -- and then work to restructure the underlying loans into something homeowners could afford. The value of the securities, both those bought by the government and those in private hands, could improve as foreclosures and late payments drop. If so, financial firms holding mortgage-backed securities could see a recovery in their balance sheets.

To make it fair for homeowners who keep up with their payments, borrowers who receive federal help would be required to give the government some of their gains if they eventually sell their homes for a profit.

but I don't know about repealing the capital gains tax by itself - what would that do? If these are enacted in conjunction with each other it's more fathomable

I wonder who's going to be returning the favor...

Fed plows $30 billion in money markets overseas
Wednesday September 24, 1:42 am ET
By Jeannine Aversa, AP Economics Writer

http://biz.yahoo.com/ap/080924/fed_credit_crisis.html

Federal Reserve plows $30 billion into money markets overseas to ease credit stresses

WASHINGTON (AP) -- The Federal Reserve, in coordinated action with foreign central banks, plowed $30 billion into money markets overseas Wednesday, part of an ongoing effort to fight a global credit crisis.

The Fed's action -- taken at 1 a.m. EDT -- sets up temporary "swap" arrangements to supply dollars to the central banks of Australia, Denmark, Norway and Sweden in exchange for their currencies.

"These facilities, like those already in place with other central banks, are designed to improve liquidity conditions in global financial markets," the Fed said in a brief statement.

"Central banks continue to work together during this period of market stress and are prepared to take further steps as the need arises," the Fed added.

The new swap arrangements will provide up to $10 billion each to the central banks of Australia and Sweden and $5 billion apiece to the central banks of Denmark and Norway.

Last week, the Fed and other foreign central banks pumped as much as $180 billion into money markets overseas. The European Central Bank, the Bank of Japan, the Bank of England, the Swiss National Bank and the Bank of Canada participated in that maneuver.

The global credit crisis poses a danger not only to the U.S. economy but also the world economy.

Finance officials from the world's major economic powers pledged this week to do all they can to provide relief.

The Group of Seven countries said they welcomed the extraordinary steps by the United States to stem the crisis, including a plan for the Treasury Department to buy $700 billion in bad mortgages and other toxic assets held by banks and other financial institutions. Those dodgy debts are at the heart of the crisis. Besides the United States, the Group of Seven is made up of Japan, Germany, France, Britain, Italy and Canada.

So who's all buying Goldman shares today?

I don't understand that last story. What does swapping several billion in cash with another country do?

im curious to what degree this argument is viable:

http://frum.nationalreview.com/post/?q=MjE0YTA5NWRhM2M0Njc1ZjQ3YjkyZjU0OTVkZTNiZjg=

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

to what degree is this complicity? What should have been done to protect affordable housing, if this was a real threat to the national/global economy?

There's a good article by David Leonhardt in the NY Times about why executive compensation is a side-show, and lawmakers should be focused on exacting the best return for taxpayers:

One of the fashionable ideas of the week, supported by both Democratic leaders in Congress and John McCain, is to limit the pay of top executives at any Wall Street firm that sells assets to the government. In effect, this is an attempt to tell Wall Street how to split up a government subsidy among its various employees and shareholders.

Personally, I couldn’t care less how much of the subsidy goes to Wall Street’s chief executives and how much goes to Wall Street’s shareholders. I care about the size of the subsidy that we taxpayers are paying. And in a frenzied week, any time spent on talking about C.E.O. pay is time not spent on designing the toughest possible bailout package.

Issue Is Payback, Not Bailout
http://www.nytimes.com/2008/09/24/business/24leonhardt.html?_r=1&hp&oref=slogin

I think that the terms of the Buffett deal with Goldman should serve as a template for what taxpayers should insist on in return for any bailout.

jobs with justice action plan for citizens:

http://www.unionvoice.org/campaign/step_up/idui7664y75dnmnw?

Oh for dumb:

President Bush was considering whether to address the nation about the financial meltdown, which has wiped out all Wall Street's investment banks and resulted in government rescues of Fannie Mae, Freddie Mac and insurer AIG.

"This is a huge moment America," said White House Press Secretary Dana Perino, who did not specify when Bush might address the nation. "And if we don't take decisive and bold action, we could be facing financial calamity."

HUGE MOMENTS.

Also this:

"Although the retrenchment in household spending has been widespread, purchases of motor vehicles have dropped off particularly sharply," Bernanke said.

Wow, I'm crushed.

I think that the terms of the Buffett deal with Goldman should serve as a template for what taxpayers should insist on in return for any bailout.

^^^ otm

After Enron, WorldCom, AIG, Lehmen Brothers, and Bear Sterns, every thinking person should be seized by uncontrollable hilarity the next time they hear anyone claim "government ought to be like a business."

I think that the terms of the Buffett deal with Goldman should serve as a template for what taxpayers should insist on in return for any bailout.

Word. It's 10% return deal on his investment, isn't it? i don't mean to play rote conspiracist (though if you want their line, here: ) but it still makes me uncomfortable that Paulson was a GS guy

Max Kaiser is a terrible actor but apparently also an anchor on Al-Jazeera. I first saw that vid linked from a Ron Paul oriented discussion - who to make matters worse, has just endorsed the Constitution Party's fundie. Great, Ron, couldn't leave the Southern Evangelism at home, could you?

Whatever cuts into McCain's vote though is good for me

http://www.villagevoice.com/2004-08-31/news/passionate-conservatism/2

lmao @ GOP 2004 convention including bragging about minority home ownership:

Similarly fantastic, and repeated by nearly every speaker: that homeownership, and especially minority homeownership, is at an "all-time high." The number of homeowners has grown every year on record. Every year is an "all-time high." The relevant number is the rate of growth.

Word. It's 10% return deal on his investment, isn't it?

More actually. He gets 10% per year on the preferred until Goldman redeems at a premium of 10% to Buffett's purchase price. In addition he gets warrants struck below the current stock price valued conservatively at about $2.8 billion. So the effective yield is closer to 20%.

Details here:
http://bigpicture.typepad.com/comments/2008/09/a-very-expensiv.html

MANAGE YOUR GODDAM AMYGDALAE PEOPLE
http://www.businesspundit.com/amygdalae-management-key-to-avoiding-another-great-depression/