A quick Bailout Nation excerpt:

The decision to allow Lehman Brothers to go belly up has been roundly criticized by many people as a mistake that cost AIG dearly. That turns out to be an incorrect conclusion, a classic causation versus correlation error. It is much more accurate to observe that the same factors that drove Lehman into bankruptcy also drove AIG to the brink.

It began with rates so low that everyone in the nation decided they wanted a house (and the bigger, the better). This included many people who could not afford one. So these folk applied for mortgages from a new kind of lender, one that operated with little regulation and even less supervision. These lenders were able to give loans to these people – bad credit risks, too little income, no equity – due to their unique business model. They could ignore traditional lending standards because they did not plan on holding these mortgages very long; They could specialize in higher commission sub-prime loans because they were “lend–to-securitize” originators. They made higher risk loans, then flipped them to Wall Street firms, who repackaged them into complex mortgage backed securities. These same investment banks had too little capital and used too much leverage, but that didn’t stop them from buying too much of this paper from each other. It didn’t matter much anyway, since it was rated triple AAA rated by S&P and Moody’s, so there wasn’t anything to worry about. Underlying all of these transactions was the assumption that home prices in the USA never went down. Oh, and, this entire series of events took place at a time when the dominant political philosophy was that it was impossible for this to go wrong . . . the self-regulating markets, you understand, would see to that.

What bad could possibly come of that?

Indeed . . .

Category: Bailouts, Credit, Dividends, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

91 Responses to “Understanding Lehman & AIG”

  1. ottovbvs says:

    BR: I don’t think a lot of people have said the Lehman failure was the direct cause of the govt averted AIG failure although it probably cost them dearly as you say, but then Lehman’s failure cost a lot of people dearly. The point about the Lehman failure surely was it’s knock on effect on the CDS and other markets and then on credit and wider confidence generally……I will however buy your book I’m sure writing it was a challenge

  2. blackjack says:

    BR – not sure if you’ve already started printing, but I thought I’d point out a typo:

    “They were able to ignore traditional ending standards because they had no plans on holding onto these mortgages like most banks due”.

    ending should be lending.

    Will definitely be buying your book.

    ~~~

    BR: Nah, this is my rough copy — it goes to my editor (Aaron Task), than to Wiley’s editor, than we all review PDF proofs.

  3. jc says:

    Tiny Tim, the Toxic Avenger’s plan is up to $1 Trillion now with maybe only 3% private funds? I mean why bother, the vultures will carry off all the profits and leave the losses to the US like everyone else has…Awww what the hell just run up the tab as high as possible and then devalue the dollar by another order of magnitude. We’re royally fucked, we’ll be paying for this forever or until we default. It’s just gonna be tough living on fixed incomes during hyperinflation

    http://news.yahoo.com/s/ap/20090322/ap_on_go_pr_wh/bank_rescue

  4. dallas1 says:

    In the sentence, “They were able to ignore traditional ending standards because they had no plans on holding onto these mortgages like most banks due.”

    The last work “due” should be “do”?

  5. blackjack says:

    Barry – I completely agree with your analysis. Everyone is quick to blame the govt for letting Lehman fail, but very few focus on the real problems – irresponsible lending, lax regulation.

    I’m not sure if you’ve already started printing yet, but I thought I’d point out a few typos:

    “These folk applied for mortgages from a new kind of lender that operated with little regulation and even less supervision.”

    ‘folk should be ‘folks’ (this one might be debatable)

    “They were able to ignore traditional ending standards because they had no plans on holding onto these mortgages like most banks due.”

    ‘ending’ should be ‘lending’ and ‘due’ should be ‘do’

    “but since it was rated triple AAA rated by S&P and Moody’s, there wasn’t anything to worry about.”

    you should get rid of the second ‘rated’

  6. dallas1 says:

    Also, “traditional ending standards” that “ending” is “lending”. Minor things……….

  7. Mortimus says:

    Thanks McGraw Hill

  8. buzzp says:

    Hey, BR, as the guy who located Sherrfius for you, do I get a signed copy?

    http://www.ritholtz.com/blog/2008/12/socialism-for-the-rich/#comment-129743

  9. Blissex says:

    I am surely going to buy the book, hope that you mentioned the yen carry trade too…

    «It began with rates so low that everyone in the nation decided they wanted a home»

    That’s not quite accurate — everyone decided that they wanted several homes, as the more homes the more speculative capital gains they could reap. After all, if you get a loan at 100% LTV with a negative real interest rate, why not buy several opportunities to make money fast, instead of just one?

  10. AGG says:

    Bennet Sedacca, money manager who blew credit alarm, diesBLOOMBERG NEWS
    March 20, 2009
    Bennet Sedacca, a money manager credited with being one of the first to warn that Bear Stearns Cos. – and, by extension, the U.S. economy – would be run over by a credit crisis, has died. He was 49.

    Sedacca, chief executive of Atlantic Advisors Llc in Winter Park, Fla., died Tuesday of a brain injury suffered in a fall at his Orlando home, according to an e-mail from Chelsea Valencia, a colleague at the firm.

    On the financial Web site Minyanville.com, Sedacca posted a red-flag announcement on March 5, 2008, that “the great credit unwind is upon us.”

    The posting, which focused on Bear Stearns, constituted “the first murmurings of impending doom for the financial world,” William D. Cohan wrote in his new book, “House of Cards.” Sedacca had monitored the credit default swaps of Lehman Brothers Holdings Inc. and Bear Stearns for months and had noted the rising cost of insuring their short-term debt, Cohan wrote.

    “I’ve been talking about it for years,” Sedacca told Cohan. “Because if you think about it, if you have all this nuclear waste on your balance sheet, what are you supposed to do? You’re supposed to cut your dividends, you’re supposed to raise equity, and you’re supposed to shrink your balance sheet. And they did just the opposite. They took on more leverage.”

    Hi otto and dead hobo. What’s for dinner? It wasn’t personal. Just business.

  11. Bill Werner says:

    The self-regulating markets require transparency… no transparency no self-regulation.
    Actually anthing or anyone (internal, external, market or government) doing the regulating has to see what is going on in order to effectively regulate it.

  12. karen says:

    “The shafters of the universe have been treated with such kid gloves that they remain obnoxiously oblivious.” Maureen Dowd in today’s NY Times. http://www.nytimes.com/2009/03/22/opinion/22dowd.html?em

    Apparently Pandit is “pulling a Thain” and spending $10 million to renovate his Park Ave offices…

    I would just add to BR’s post that a truly vicious circle was created with untraditional lending standards stimulating demand for real estate, which resulted in exponentially rising real estate prices that further fueled the “creative lending process” until standards were none existent. (Sorry for the run-on sentence.) It was a given this circle would run off a cliff eventually. And the compounding issue, the home equity ATM machine, drove consumption of EVERYTHING into the stratosphere. What goes up, must come down…

  13. AGG says:

    Societe Generale Executives Bow to Pressure, Drop Stock Options
    By Laurence Frost

    March 22 (Bloomberg) — Societe Generale SA said senior executives will hand back stock options in response to public “indignation” over bonus awards made by France’s third-largest bank as it draws on emergency state aid.

    Chairman Daniel Bouton, CEO Frederic Oudea and his two deputies will inform staff in a letter tomorrow of their decision to give up the options, spokeswoman Laura Schalk said.

    The announcement came hours after Finance Minister Christine Lagarde appealed publicly to the senior managers’ “responsibility and moral sense” during a radio interview, in which she also said the payouts could prompt legislation on the broader use of stock options.

    What a shame, huh, otto. Such worthy people bowing to the rabble. After all, public indignation is no big deal right? We shouldn’t get “emotional” about RHIP. Unfortunately for the highly paid crooks who equate class with money RHIP is headed for RIP.

  14. AGG says:

    This from the New Republic on Public Indignation.

    The problem is that no magic villain exists whose punishment will neatly mollify Americans who are reeling from job losses, foreclosures and a sense that the middle class was essentially ripped off by a modern plutocracy based in Washington and New York. The inevitable jailing of Bernie Madoff will be just one stitch in a gaping national wound, especially when Madoff’s wife is still enjoying a life in a posh Palm Beach, Florida, home.

    I believe the problem is much deeper. When GAAP are legally fraudulent vehicles of wealth accumulation which the ottos of this world just consider business as usual, the people eventually find out. Then the fun starts. Just because you can have a whole class of rich crooks calling themseves honest businessmen, it doesn’t mean we can’t have mass hangings. The few really honest among them may get flushed too but when you work in money massaging, sometimes you get a pinched nerve.

  15. AGG says:

    Another great article on AIG that you should read but you won’t, will you, otto?
    Does it have something to do with me suggesting it?
    My, my. Where’s all that majestic aplomb and objectivity, otto?
    Really! I thought you had better upbringing. Harumph!
    http://www.counterpunch.org/green03202009.html

  16. Thanks, Barry.

    This is an excellent summary that anyone can understand. Reminds me of Tracy Kidder in Soul of a New Machine.

  17. Underlying these transactions was the assumption that home prices never went down.

    This sentence can never be stated too often. It is critical to understanding how so many people could get it so wrong.

    Remember how the Internet was supposed to abolish the business cycle?

    A golden oldie from the late 1960s-early 1970s was that nuclear power plants would make electricity “too cheap to meter.”

  18. Marcus Aurelius says:

    Accounting principles and practices have been around for a long, long time. It’s math, for god’s sake. Anyone who didn’t see this coming had their head up their ass – that includes neophytes and laymen.

    Here’s a tip: any time anyone wants to change the way money is accounted for, or wants to institute secret or overly complex mechanisms in order to “make” money – hold on to your wallet (and if the soap falls on the shower floor, leave it there).

    The answer is that we are broke. There is more debt than there is money.

    The only way out is to distribute a bailout (in taxable cash, of an absurd quantity), directly to the man in the street, with a freeze on prices (not including intellectual property or new products) for a relatively long period (2 years or so). Yes, the dollar will devalue. OTOH, we’ll pay down our personal and national debt. If fiat currency is your money, and quantitive easing is the solution, why not use both to their fullest extent?

  19. karen says:

    A little levity on a heavy day: conan and Louis CK http://www.youtube.com/watch?v=LoGYx35ypus

  20. ZenProfit says:

    To all those who found the grammatical and spelling errors: “Bailout Nation” is the first online-correctable book.

    Sort of like a continuous work-in-progress.

  21. Moss says:

    Spitzer had some very valid, non-partisan explanations of the mess on CNN interview that aired Sunday.

    All these financial pricks think that anything goes as long as it is not explicitly illegal.
    Moral and ethical governors were not material factors in any decision making.
    The self regulatory assumption was doomed to fail given the lack of moral and ethical underpinnings.
    Greed alone cannot explain the extent of the rot. The behavior was institutionalized and the corresponding culture took hold.

  22. AGG says:

    From Counterpunch on the altar of greed:

    Month after month of headlines detailing the latest scandal, many of them involving not just the theft of people’s savings but crashing the global economy as well, and you begin to wonder if there’s any bottom to the barrel of fiscal depravity and governmental enabling. Obama is now charting new paths in that direction. Just the concept that AIG executives who brought down the roof should get anything besides pink slips and orange jumpsuits is sickening, let alone that they should get bonuses.

    But wait, it gets better. Then we’re told that the bonuses are necessary because only these criminals can undo the mess they’ve created. So they’re paid millions to stay. As if those who know how to wreck a global economy also know how to fix it. As if these are the only folks in the world who have these skills.

    Okay, well, fine then. At least they have to earn these ‘retention bonuses’, right? Nah. That would so responsible. Turns out that a bunch of them took the money supposedly provided as incentives for them to stay and then split anyhow. One guy grabbed $4.6 million in retention bonus cash from the taxpayers, funneled through AIG, then promptly unretained himself. More than fifty others did the same, eleven of whom took over a million bucks to stay. Except they didn’t.

    Then we have Team Obama telling us that these are legal contracts that cannot be violated. As knowledgeable legal commentators have pointed out, however, that seems highly unlikely for a whole slew of reasons. There are all sorts of legitimate mechanisms recognized by the law through which contractual agreements can be bypassed in order to serve higher societal purposes.

    But even apart from all that, let’s remember that these are bonuses! Isn’t the very nature of a bonus – as opposed to salary – the idea of contingency on performance? Do the contracts say, “We’ll reduce you bonus down to eight figures if you destroy the company, and a mere several million bucks if you take down the global economy”? If not, why weren’t these people paid 23 cents in order to fulfill a legal obligation and told to go hide in Argentina or something? And count their blessings? Instead, over seventy employees of the AIG London-based unit that brought down the company and the rest of us to boot have become millionaires.

    Hey otto, better hurry up, it’s fall in Argentina, buddy.

  23. Myr says:

    BR, we should be talking about Geithner’s new scam. There are some serious problems with it.

  24. Underlying these transactions was the assumption that home prices never went down.

    Others can correct me if I am wrong, but I think the delusion went ever deeper than what Barry wrote above. The real underlying assumption was that home prices would continue to appreciate at an historically aberrant rate. A lot of mortgages and mortgage terms in the 2002-2006 era were based on an assumption that home prices would nearly double every decade. This type of outlook directly encouraged the concept of “buying the most house you can” as if buying a house was akin to buying a stock that “cannot lose.” So, people bought way too much house because they were encouraged to think of it as buying Microsoft at $10 and selling it at $50.

  25. DW,

    re: nukes, the timeframe was prior to that.

    “The second biggest, also put in its mouth, is that it promised
    nuclear power would be too cheap to meter.
    The opposite is true: in the 1950s, when plans for nuclear power
    were drawn up and the first power reactors for civilian use were being
    designed, it was clear to everybody involved that nuclear power could
    not then compete with the cost of fossil fuels. The reason why the
    venture was undertaken nevertheless was the hope that by technical
    advances and economies of size, the cost could be brought down to that
    of fossil fuels within a decade or two. (See, for example, testimony
    by H.D. Smyth, an AEC member, to the Congressional Joint Comm. on
    Atomic Energy, June 2, 1957.)
    http://www.fortfreedom.org/p06.htm

    from the ’50′s, to encourage the USGov to continue funding the R&D of ‘civilian nukes’, etc.

    there were even nuts about suggesting the ‘nukes’ could/should be used for Excavation..

    LSS: if you want things to cost more than they should, have ‘the Gov’t’ subsidize it..

  26. MEH: thanks for that clarification. I have national geographics from the late 1960s that have big feature stories predicting “cities beneath the sea” by the 1990s.

  27. DW,

    no problem, it is amazing to recall some of the stuff we’ve been exposed to.

    sometimes I’m surprised that we are able to operate as well as we do..

    though, a little more Fact, and a lot less Fiction–starts to sound like a Country Song.. (:

  28. Bruce in Tn says:

    “What bad could possibly come of that?”

    Well, I still am going to vote for deflation…..

    http://money.uk.msn.com/investing/news/article.aspx?cp-documentid=15286458

    Deflation fears set to be realised

    “Economists expect their fears of a period of deflation for the UK to be confirmed by official inflation figures next week.”

    It should prove interesting…the tug of war between the government’s massive increase in the money supply and the continued popping of the credit balloon..

  29. Bruce in Tn says:

    And if we are trying to understand the IB’s let’s continue this a little…I am not a bondholder for GM…but the bondholders don’t think Obama will save GM from bankruptcy…

    http://money.cnn.com/news/newsfeeds/articles/djf500/200903221629DOWJONESDJONLINE000318_FORTUNE5.htm

    Letter:GM Bondholders Doubt Plan Can Save Co From Bankruptcy

    So, why on earth persist in throwing more good money after bad?

    Can’t we just declare victory and go home?

  30. Winston Munn says:

    I believe it is redundant to write “rated triple AAA” – that means to me AAA cubed. I think it sufficient to say either “it was rated triple A” or it was rated “AAA”.

    @ Myr,

    I agree – Geithner’s trillion-dollar toxic waste dump appears to me nothing more than a remake of the Paulson Super SIV theme.

  31. Marcus Aurelius says:

    Bruce in Tn Says:
    March 22nd, 2009 at 5:53 pm

    Well, I still am going to vote for deflation…..
    ________

    No doubt we have deflation. The $64 billion question is: why do we have deflation WITH fiat currency AND QE? It’s not like the central banks don’t know how much they have to print and distribute (and to whom) to get out of this. Somebody is setting the middle (soon to be lower) class up, big time. I don’t think the result will be what they think the result will be.

  32. chartsandcoffee says:

    For those interested, my weekly market forecast is up – http://chartsandcoffee.blogspot.com/2009/03/sunday-night-coffee-3222009.html

  33. snapshot says:

    Marcus Aurelius @ 4:52

    “The only way is to distribute a bailout ( in taxable cash, of an absurd quantity),
    directly to the man in the street…”

    You know…that makes much more sense to me than banking on folks wanting/needing loans for anything. You want a loan? I don’t want a loan. Unless it is to refinance at a lower rate so I have more to spend each month on necessities.

    How about job retraining? We need working people with money in their pockets. Not extra bankers with money in the vaults.

    I like that personal bailout idea.

    Oh the horror, someone might pay off a credit card or a loan instead of spend it at the mall or on a new car. But then folks would have room in their budget again for a meal out…they could save for a car.
    Somebody, please reward the prudent.

  34. ottovbvs says:

    The good news is the admin will not distributing parcels of money to individuals as a substitute for stabilizing the financial system…….nor are we going to have deflation or hyperinflation both of which are regularly predicted at the TBP…..sometimes by the same posters……TWINE:the world is not ending

  35. Winston Munn says:

    “It’s not like the central banks don’t know how much they have to print and distribute (and to whom) to get out of this.”

    @ Marcus Aurelius

    The Shadow Banking System allowed credit expansion to go beyond all reasonable bounds – and being non-regulated all that debt creation was opaque. I doubt if the central banks of the world have the slightest clue how much insolvent debt there is or how much is still hidden in level 3 assets.

  36. Marcus Aurelius says:

    We already have deflation – it’s not a prediciton. Houses, stocks, autos, electronics, clothing and, gas. All down. Too many goods chasing too few dollars.

  37. AGG says:

    From RSJ at Common Dreams:

    You have to wonder what Mr. or Ms. Bailout Bonus tells the kiddies at home, on those rare occasions when they must confront their children without undocumented nannies, private academy deans, or burly bodyguards running interference. “You’ve humiliated me and your family name by always showing up in class stoned on crack, failing every course at school, and copulating with a goat in public –- here, let me buy you a new car to reward you for your performance!”

    For that matter, do aforesaid nannies receive a substantial increase in pay for leaving the infants unfed and unchanged; does the private school get a little extra in the tuition check for sending the scion home beaten and bruised; does the bodyguard net a windfall for wandering off for a few belts of Rebel Yell when they are supposed to be protecting Mr. Moneybags from the Great Unwashed?

    Perhaps if one of the millionaires who maintain a desk in our Congress, and a hand in our wallets, were to put it in these terms to the other thickheaded private-jetsetters, they would begin to comprehend why the public steams with such rage at rewarding the authors of our financial doom with additional cash when common sense, both of the Tom Paine variety and that of the average working stiff, screams that these overpaid charlatans shouldn’t have jobs at all.

    Not that it much matters: We are in a deep financial depression and a reordering of the country is in progress, a shift sure to be as profound as the altering of the national psyche that occurred during the age of apple-sellers, rail tramps and soup-line mendicants of 80 years ago.

    In the new era to emerge from the ashes, local handshake capitalism will take precedence over the betting windows of Wall Street; the markets will be full of edible vegetables rather than the kind that invest in gold-plated office bathrooms; and addiction to the ‘long green’ will refer more to the sun or wind-power of renewable energy than inflated paper piled in a bank vault.

    And, if there’s any justice, the AIG bandits and their toffy-nosed ilk will be bicycling to and from court-ordered community service jobs cleaning bedpans for the sick and serving free meals to the hungry.

    Hey, Bruce and otto! Community service is good for the soul!
    Oh…Well, send the kids to do it then.

  38. WaltFrench says:

    It is much more accurate to observe that the same factors that drove Lehman into bankruptcy also drove AIG to the brink.

    This contradicts others’ assertions enough, that per Sagan’s “extraordinary claims require extraordinary evidence” I would appreciate seeing the logic worked out… preferably by somebody who could make an effort to justify the case the the Lehman failure drove AIG into the Fed’s hands. Seems an incredibly important distinction to unwinding this mess.

  39. Myr says:

    off topic[Geithner's new plan]:

    The plan is an obvious scam. It allows the investor to walk away with the remaining coupons payments and then leave the government holding the worthless remains once those coupons stop being paid. The key to understanding the scam is the combination of high leverage AND non-recourse financing. Just follow this example:

    Investor buys a CDO tranche at 50 cents on the dollar that is currently paying a 5% coupon. The investor puts up 20% and the govt provides the remaining 80% via a non-recourse loan. This highly leveraged CDO tranche will stay current on the coupon payments for 3 years and then default with zero residual value.

    The end result is that the investor who pays 10 cents(20% X 50 cent bid) ends up walking away with 15 cents(.05 X 3) over three years and the government ends up losing the entire 40 cents of non-recourse financing. (Note that I haven’t included the cost of the low interest financing, nor used present value discounting in order to simplify the point I’m trying to make.)

    The beauty of the scam is that the losses on the govt’s books won’t show up for 3 years.

    The fair value for the bad asset is actually just *10 cents*, but the investor will be willing to pay 50 cents because the government is willing to provide non-recourse financing. The investor makes money and the government losses 40 cents. That 40 cent subsidy will come from your pocket and go directly to the bank that gets to sell it’s toxic waste at absurdly inflated prices. The bank then turns around and pays off it’s creditor’s at 100 cents on the dollar. Yeee-ha!

  40. Winnie,

    w./this: “@ Marcus Aurelius

    The Shadow Banking System allowed credit expansion to go beyond all reasonable bounds – and being non-regulated all that debt creation was opaque. I doubt if the central banks of the world have the slightest clue how much insolvent debt there is or how much is still hidden in level 3 assets.

    see:

    Description:
    This report collects information on transaction accounts, time and savings deposits, vault cash, and other reservable obligations from depository institutions.

    Subjects:
    Deposits
    http://www.ny.frb.org/banking/reportingforms/FR_2900_(Commercial_Banks).html

    this, and many other “Reporting Requirements” well exist..

    LSS: I wouldn’t be too sure that the FedRes has ‘no idea’..
    Actually, I wouldn’t be surprised if they could trace the location of every U$D 20, they’ve passed into the ‘Economy’, within 72 hours..

    to be clear, I wouldn’t be surprised, doesn’t mean I’d be betting it..

  41. “You’ve humiliated me and your family name by always showing up in class stoned on crack, failing every course at school, and copulating with a goat in public –- here, let me buy you a new car to reward you for your performance!”

    Mel Brooks, is that you ???

  42. CNBC Sucks says:

    Ritholtz, when is the next thread coming out? I told you I was going to go, but I have to write something about this Toxic Geithner Toxic Asset Buyout Bullshit Plan. For the love of God. I just saw the 60 Minutes interview with Obama and I am not happy. Not a single liberal economist likes this plan: Krugman, Galbraith, Baker. Yves Smith doesn’t like it. The Great CNBC Sucks HATES it. This is beyond moral hazard; if this toxic thievery takes place, it will match the Voodoo Art Laffer Do Not Tax The Rich Scam that killed America.

    I am still hoping Obama set up Geithner to fail so that he can have a CYA excuse to either let the banks fail or for the USG to just nationalize these bastards.

  43. The Shadow Banking System allowed credit expansion to go beyond all reasonable bounds – and being non-regulated all that debt creation was opaque. I doubt if the central banks of the world have the slightest clue how much insolvent debt there is or how much is still hidden in level 3 assets. — Winston Munn.

    Thank you. As I understand it, the explosion of extremely complex “products” has totally outstripped the ability of anyone to fully account for all of them. This is was not a huge problem when assets were steadily appreciating. All would be accounted for at some point, presumably to the benefit of the party cashing out. Now that the souffle has fallen, it is a real problem of the Rumsfeld Type Three: “an unknowable unknowable.”

    Is the above a fair summary?

    I’m still trying to learn this stuff.

  44. cant wait for the book…wish i had it for my trip this week…oh well

  45. Mannwich says:

    Frank Rich gets to the essence of things….

    http://www.nytimes.com/2009/03/22/opinion/22rich.html?ref=opinion

  46. Marcus Aurelius says:

    Winston:

    They might not know the exact amount, but I’m sure they have a pretty good guess (even considering the opacity of the debt created). Even if they haven’t a clue (and I can’t see that being the case, but it would help them to be able to plausibly claim ignorance), I’m sure the number dwarfs the amount currently being distributed at the top of the food chain.

    The point is, we know our GDP is roughly is roughly $14 trillion (other countries know theirs, too) , and we know our national debt is roughly $10.5 trillion (again, other countries know theirs, too). Assuming a 50% tax rate on money distributed at a level that would cancel the national debt, we would certainly be able to pay down (or pay off completely) our private debt (for the vast majority of the middle class), and provide the Fed Gov enough to retire the national debt.

    I figure the number would be around $150K, but more would be better (why take half-assed measures when you have fiat and are ‘printing’ dollars any damned way). By some estimates, we’ve already spent close to that amount on bail outs (On 11/28/08, BR estimated it at $4.6165 trillion, and Bloomberg at $7.76 trillion). If that money had been sent to Joe Palooka to pay his debts, the banks, Joe, and the Federal government would be untangled and largely debt free.

    Anything less, applied anywhere else, only increases the debt in perpetuity, and pushes judgement day off – for a while. Money applied to the top is a damned stupid thing to do – as it does not retire any underlying debt. That’s why, despite all of the freekin’ money we’ve spent, we’re no better off than we were when the shit tsunami hit the fan. that’s why the middle class is getting crushed.

    The dollar gets devalued under this scenario, but that will happen anyway. The big hurt goes to those who are already wealthy. Who gives a shit about them?

  47. Mannwich says:

    Looks like my little bus tour idea might be taking off in another variation……

    http://www.nytimes.com/2009/03/22/nyregion/22working.html

  48. CNBC Sucks says:

    Jeff – fantastic reference to the Frank Rich piece. HuffPo Oprah liberals are still defending BO on the Geither Toxic Assets for America’s Grandchildren Plan. Kos seems to be trying to avoid the topic. The hardcore leftists on Democratic Underground are starting to turn on Obama.

    Ritholtz – you need a full rewrite of your book if you don’t include The Mother of All Bailouts. Hopefully for you, and for us, and for Obama, this larceny never sees the light of day.

    Hoffer – nice little reference to the G20 discussions. I have been paying attention, too. I thought we had 20 years to get our fiscal and economic act together, but it might be a lot less time.

  49. CNBCS,

    re: Geither Toxic Assets for America’s Grandchildren Plan. apt title, btw.

    there’s a reason why it’s called “The Obama Deception”,

    past that, RGE isn’t afraid of speaking about The New World Order, or the G-20:
    “Who are the G-20? The G-20 is generally used as a proxy to represent the most inclusive list of the world’s economic leaders. It is not all encompassing — large, rich countries like Spain are not represented. However, it does bring together most of the major players. Below is a description of the organization from its own website.

    The members of the G-20 are the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America. The European Union is also a member, represented by the rotating Council presidency and the European Central Bank. To ensure global economic fora and institutions work together, the Managing Director of the International Monetary Fund (IMF) and the President of the World Bank, plus the chairs of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, also participate in G-20 meetings on an ex-officio basis.

    Therefore, a meeting of this group should be of great significance and lead to major outcomes to set us on the right path to dealing with the credit crisis. However, I am less optimistic about the prospect of a meaningful agreement toward eliminating global structural imbalances. Many nations have a vested interest in maintaining the status quo – the United States principal amongst them. Moreover, the U.S. is led by an administration that is just 2 months from its end. And, we probably have not seen enough carnage to force the relevant parties into developing a new framework. This will only happen at a figurative economic gunpoint.

    The existing global economic framework The existing economic structure came into being as a result of a 1971 decision by the Nixon administration to close the gold window ending the Bretton Woods framework that had lasted from 1944. This framework is based on floating exchange rates with the U.S. Dollar acting as the system’s effective anchor and world’s reserve currency.

    What the U.S. dollar as the world’s reserve currency has meant is that the United States Government effectively sets the standard on monetary policy. Other nations, holding most of their reserves in dollars, must follow the U.S. if they want to maintain a relatively stable currency peg to the U.S. dollar. And, that gives the U.S. government a license to print money and inflate. Therefore, the United States benefits the most from the current global system.

    Before 1971, the United States Government was constrained by a fixed peg to Gold. In fact, this peg was set at $35 per ounce and the United States pledged to redeem any dollars presented to it by foreign central banks for gold. This effectively meant that an arbitrage situation existed where foreigners could hold the U.S. dollars in reserve if they felt those dollars were worth $35 an ounce. Or they could exchange their U.S. dollars for gold. If the United States ran an inflationary monetary policy, foreign central banks would lose confidence in the dollar and redeem their dollars for gold, stripping the U.S. coffers of all its money…”
    http://www.rgemonitor.com/us-monitor/254373/a_new_world_order
    http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=new+financial+world+order

  50. Frank Rich’s column is dead on. You could also title it, “Does Obama wish to emulate Hoover or Roosevelt?” As the recession deepens, the middle ground between these two asymptotes grows thinner. For all the vaunted power of the bully pulpit and his own oratory, Obama has not used it. Instead of the nonpartisan figure of power that he has portrayed himself as, he seems more now like a deer stuck half way across the road, not sure if it is best to turn back or go forward.

  51. AGG says:

    From Business Week:
    The economic crisis is not the Holocaust but, I would argue, it derives from a business model that routinely produced a similar kind of remoteness and thoughtlessness, compounded by a widespread abrogation of individual moral judgment. As we learn more about the behavior within our financial institutions, we see that just about everyone accepted a reckless system that rewards transactions but rejects responsibility for the consequences of those transactions. Bankers, brokers, and financial specialists were all willing participants in a self-centered business model that celebrates what’s good for organization insiders while dehumanizing and distancing everyone else – the outsiders

  52. AGG says:

    Barry,
    I get it. Have a nice day and you are welcome any time.

  53. Mannwich says:

    @CNBC Sucks & DW: I fear Obama may be blowing his big opportunity. I don’t think he’s as tone deaf as he seems right now (he sure had his finger on the pulse during the campaign) but I think he’s being sucked into the powerful vortex of the elite by allowing himself to essentially be extorted by them (“give us what we want or we’ll walk and it will all blow”…..the metaphorical bomb strapped to one’s chest) to do what is in their best interests as opposed to the country’s. It’s making me very uneasy. I know otto’s still confident. I really DO hope he’s right, and will be more than happy to eat a big helping of humble pie if he is, but I just don’t feel very good about it.

  54. wunsacon says:

    Some folks are expressing a preference for giving bailout money equally to all, rather than to the banks. Here are some advantages to that:

    2. It helps everyone without regard to their culpability in creating the mess.
    3. It helps everyone without regard to their current wealth. (Remember the gap between rich and poor? So far, other plans help maintain that gap!)
    4. It repairs the consumers’ balance sheets.
    5. If consumers pay down debt, that implicitly helps recapitalize the banks. If consumers spend, that helps businesses and, in turn, helps banks again. So, by helping consumers first, everyone benefits. Think of it this way: Money given to consumers has a higher velocity than money given to anyone else, because they have to spend it to survive. (Thus, this is quite unlike giving the money to banks, who have no incentive to lend and who will just sit on their cash — at least until the specter of inflation threatens the real value of their reserves and thus forces them to lend.)
    6. It gets commerce and invention moving again. (The purpose of a business is to provide a good or service in an attempt to induce a potential consumer to part with his/her money. When businesses know consumers have money to spend, entrepreneurs form businesses and hire staff.)
    7. It helps the auto makers. Give me $50k and I’ll spend some of it to finally trade in my 20 year-old Honda for a new one (probably built in the US anyway).
    8. It helps current borrowers who can no longer afford their home payments. $50k will help many of them with payments. And, for those that want to sell anyway, I’ll spend half of my $50k on a downpayment for a home.
    9. It is — by comparison — TRIVIAL TO ADMINISTER. No alphabet soup of government programs to dole out the money. No Congressional hearings to argue over transparency. No multi-year hand-wringing in the media and around water coolers. Less social unrest.
    10. By obviating the need for so much of the government administration just mentioned, it avoids turning America into a command economy — which is what we’re quickly becoming. Surely, after all that’s been written of the USSR’s demise, it’s sad and ironic that among the proposed solutions Americans discuss is the government appointment of a “auto czar” to direct the production of consumers goods.

    http://www.unknownliberal.org/blog/?p=216

  55. Winston Munn says:

    Marcus Aurelius wrote, “Anything less, applied anywhere else, only increases the debt in perpetuity, and pushes judgement day off – for a while. Money applied to the top is a damned stupid thing to do – as it does not retire any underlying debt.”

    I am in total agreement. The only point I wanted to make earlier is that I do not believe the central bankers can know how much bad debt was created. The debt destruction thus far is well ahead of any inflationary pressures brought to bear by monetization.

    I would like to go even one further than your assertion above – I would go on to say that any method of economic repair that does not relieve the immense hole caused by the productivity-wage gap cannot sustain itself. All we are doing with the bailouts and proposed bailouts is a Greenspan Redux, an attempt to recapture the Maestro’s luck that allowed a failed economic model to temporarily function – Greenspan’s luck was to have enough new credit and inflation available to feign national prosperity for awhile. But his and our luck has run out, as the new credit well has run dry. We cannot rebuild a functioning economy based on creation of new debt by those who neither want it nor can afford it.

    In a well-functioning economy, supply and demand should balance.

  56. Foghorn Longhorn says:

    I really don’t see why the banksters wouldn’t go for the helicopter drop on the great unwashed.
    Within a year they would have 90% of it back in their grubby little hands anyway.

  57. CNBC Sucks says:

    @Hoffer: Thanks. I do get your Constitutional and even “Constitutional intent” arguments. We have strayed far from the recipe and the stew is rotten.

    @Doug: The difference between Roosevelt and Obama is that Roosevelt paid people to dig holes and then fill them up, while Obama seems eager to overpay Wall Street by 50+ cents on the dollar for toxic assets, ostensibly so that the zombie banks can lend money for people to dig holes and then fill them.

    @Mannwich and wunsacon: Excellent points. For the same amount of money, the USG can just create The Third Bank of the United States, have it fill the credit void, make money, then get privatized in twenty years, probably for a better chance at a taxpayer profit than Geithner’s plan.

    I hope Obama is just using Geithner as a tool for Machiavellian progressive purposes, but if the Toxic Geithner Toxic Asset Buyout Bullshit Plan – which we all know will ultimately cost taxpayers several trillion dollars and not $1 trillion – comes to pass, Barack Obama could become the worst supply-side, trickle-down economics politician of all time.

    And then I will write Ritholtz Nation: How Barry Ritholtz Missed the Biggest Bailout of Them All.

  58. Winnie,

    this: “Greenspan’s luck was to have enough new credit and inflation available to feign national prosperity for awhile. But his and our luck has run out, as the new credit well has run dry.”

    is a great point, one lost on many peep, in Nov.’008, saying “the Economy was good under Clinton, I’m voting (D), to bring it back…”

  59. call me ahab says:

    Mannwich says:

    ” It’s making me very uneasy. I know otto’s still confident. I really DO hope he’s right, and will be more than happy to eat a big helping of humble pie if he is, but I just don’t feel very good about it.”

    otto is old school and thinks things will work out just like they have for all of the post war period. We are in different times. There is a very big chance that after tax cheating Geithner gives his speech tomorrow the market will tank- he instills zero confidence. Obama’s vague message about change has proven to be as empty and vapid as his impromptu speeches- he is in way over his head and is relying on “experts’ to guide him. My impression is that the “experts” do understand the desperate state we are in and will throw any amount of money at it in the hope that it will make even the smallest difference. We are in for tough times.

  60. Winston Munn says:

    For anyone expecting any real change from any administration a question: the presidential candidates ran the longest and most expensive campaign in this nation’s history – who do you think paid that bill, and with whom do you think the nominees’ allegiance lies – with We the People?

  61. also, Jeff y CNBCS,

    I had responded to your posts, only to have WP xcensorx/filter them..

    Though, past that, Machiavelli, or no, Obama will tell all you need to know with his G-20 actions, and policies like the ‘GIVE Act’, for starters..

    “The summit of the Group of 20 rich and emerging nations in London on April 2 must give the highest priority for building a new global financial architecture, German Chancellor Angela Merkel and French President Nicolas Sarkozy said Tuesday.

    In a joint letter to European Commission President Jose Manuel Barroso and Czech Prime Minister Mirek Topolanek, both leaders said, “We are deeply convinced that we must use this unique and historic opportunity to fight the causes of the global crisis.”

    “We are determined to achieve from the London summit concrete results for the reinforcement of international financial regulation,” Merkel and Sarkozy wrote.”
    http://www.rttnews.com/Content/EuropeanEconomicNews.aspx?Node=B2&Id=885997
    http://news.google.com/news?hl=en&q=g20%20summit&um=1&ie=UTF-8&sa=N&tab=wn

  62. Foghorn Longhorn says:

    We the People?
    We have been relabeled, it’s now,
    We the American Consumer.
    Now get out there and consume, dammit!

  63. Marcus Aurelius says:

    call me ahab Says:
    March 22nd, 2009 at 10:40 pm
    Mannwich says:

    “Obama’s . . . in way over his head and is relying on “experts’ to guide him. My impression is that the “experts” do understand the desperate state we are in and will throw any amount of money at it in the hope that it will make even the smallest difference. We are in for tough times.”
    _______

    I don’t think were on the charts anymore. Here be monsters. I feel for Obama – no President since FDR (and before him, Lincoln) has had to deal with such big, intractable, systemic problems. That he doesn’t know exactly what to do is not surprising, nor does it say much about him (I can’t imagine anyone else would fare better as POTUS, given the situation). I don’t like that he chose Geitner to lead Treasury, but Geitner is as poor a choice as any other, except maybe Volker. You are right, in spades, about the hard times a’comin’.

  64. Marcus Aurelius says:

    Geithner. Oy.

  65. call me ahab says:

    @ Foghorn-

    excellent point- I said it before and I will say it again- it is all about getting everyone back on the hamster wheel- but that is a tough thing to do when people are over-leveraged with negative net wealth- without an increase in credit induced spending the economy must contract.

  66. Mannwich says:

    Great point, Winston. You’re not making me feel any better though.

  67. call me ahab says:

    Marcus-

    my concern about Obama is the change mantle- sorry- just not feeling it. Where is the populist? Wher

  68. Winston Munn says:

    Jeff,

    I keep seeing myself in the movie, “The Untouchables”, and Sean Connery is asking me, “And what are you prepared to do, now?”

  69. @Mannwich: I don’t think he’s as tone deaf as he seems right now (he sure had his finger on the pulse during the campaign) but I think he’s being sucked into the powerful vortex of the elite by allowing himself to essentially be extorted by them (”give us what we want or we’ll walk and it will all blow”…..the metaphorical bomb strapped to one’s chest) to do what is in their best interests as opposed to the country’s. — Well said.

    @CNBC: FDR created the Tennessee Valley Authority, which from my freshwater mussel and brook trout loving perspective, was worse than paying people to dig holes and fill them in, but it did contribute to electrification and modernization of some of the poorest and neediest places in North America, so I must temper my love for the free-flowing riffles of the Tennessee. At least FDR focussed $$$ on the poorest people. He also appointed Bill Douglas to the Supreme Court, thereby giving my cat a name.

    @Winston — loud and clear about campaign financing. This can be overcome, so long as the candidate knows how to say no. Ethical campaign donors know that giving to a campaign does not mean a revolving door. Nobody is immune to this type of donor influence but I believe Obama is more immune to it than most. One benefit of a massive small donor influx (which Obama had) is that it reduces the influence of big donors. Obama had a massive # of small donors. My wife and I kicked in like $50.

    Cheers.

  70. call me ahab says:

    sorry- last sentence was cut off- but here it is:

    Where is the action against the status quo?

  71. CNBC Sucks says:

    The Great CNBC Sucks has just steered a Geithner “Public Investment Corp.” sub-thread for Ritholtz, one that will be already search engine indexed by the time Ritholtz actually gets to this topic tomorrow morning. Gentlemen, congratulations, this is the kind of self-initiative that will keep this country great.

    Ritholtz, you are asleep at the wheel. You belong in Congress or the Treasury Department.

  72. Mannwich says:

    @Winston: I love that scene. I don’t know about you, but I’m prepared to leave the country once and for all but the question I keep asking myself is, “where to go?” Nearly everyone else seems as fucked as we are or worse.

    My wife and I had little conversation on the way home from bald eagle-watching and we both kept trying to rack our brains (as we counted the “for lease” and “for sale” signs that dotted the road) on what industry(ies) would bring the U.S. out of this (e.g. with a production of real, sustainable, good paying jobs) and neither of us could come up with an answer. I then joked that we should get a divorce, marry separate foreigners in then re-unite in that country to live happily ever after. The problem is I couldn’t think of another country that isn’t at least as screwed as our is……..

    Mars anyone?

  73. Mannwich says:

    @Douglas Watts: My wife and I kicked in like $700+. I’m beginning to think I should write a request for a refund. Sucker that I am.

  74. chicagomike says:

    I’m an algorithmic, FX maket-maker. On the Sunday night that Lehman collapsed I was busy but things were manageable.

    Two nights later, however, when AIG “collapsed”, the normally very liquid FX market basically grounded to a halt. The basis on my small hedged $20mm position in USD/JPY exploded in my face, quickly giving me a $110,000 paper loss before reverting back to the small profit. The FX market was unbelievable, nothing like the previous multitude of “Sunday Night Massacres” involving Bear Stearns, FNMA, Lehman, Merrill Lynch, etc.
    colleagues to take the rest of the week off, which we happily did.

  75. In a well-functioning economy, supply and demand should balance.

    In a well functioning society, people should not be considered a hindrance.

    One of the key asymmetries of modern economies, which is rarely accounted for, is the “fossil economy.”

    The fossil economy is the rapid and total liquidation and sale of a natural resource which as taken millennia to accrue and will be exhausted within a century or two. The whaling industry is a perfect example. There was no plan to sustain whale stocks. The plan was to literally kill every single whale and convert them into saleable products.

    Most of the economies of the world are based on the exploitation of fossil resources like whales, or old growth forests, or enormous swaths of land to build plantations or hydro dams, or to extract oil and natural gas.

    These economies are not converting present labor and present productivity into a saleable commodity. They are mining fossil energy and resources that we did not create into, often, “burnable” assets (ie. whale oil and crude oil). They are literally mining the past.

    Our economists’ books have been always skewed to forget that these fossil assets are finite and are not being renewed. But in reality, our entire economic model is dependent on their continued free availability, minus extraction costs.

    What we folks are seeing now is, in some sense, that natural bank account being drawn down to dregs in the bottom of the barrel. This is not a peak oil rant. Nor is it meant to be apocalyptic. It’s an accounting question.

    I think we need to split our books between what is “newly” created value and what is value created on, basically, very old natural resources that we are mining and will not last much longer at the rate we are consuming them.

    A more honest accounting book will give us a better sense of what compass heading we need to take.

  76. DL says:

    wunsacon @ 10:12

    Absolutely agree.

  77. Winston Munn says:

    @Douglas Watts

    To me, that sounds naive. Over the years my optimism has been replaced by well-earned cynasism, so it may only be me. But I’m not betting on any change – other than change show purposes only.

    @call me ahab

    A seeming embrace of the status quo. That exactly defines my problem with this President thus far.

  78. gamingthemarket says:

    What happened to Lehman can happen to the Fed.

    Lehman Brothers used JP Morgan for tri-party repos. Two weeks before their collapse JP Morgan issued a $5 billion collateral call on Lehman, who stalled for time. The next week JPM demanded a $5 billion all cash redemption from LEH. Between Sept 11-12th Lehman refunded $8 billion in cash. On September 15th they were out of business.

    The inherent weakness of tri-party repos is that the counter-party risks of billions worth of funding agreements are shouldered by essentially two players – Federal Bank of New York and JP Morgan Chase.

    Read more…

    Our Engineered Meltdown: End of the Beginning
    http://www.gamingthemarket.com/2009/03/end-of-the-beginning.html

  79. Mutant Capitalism says:

    BR – don’t want to see you looking too foolish swallowing that same old spin on dodgy subprime borrowers wanting bigger and better houses taking full advantage of lax lending policies. While there is some truth to it, you don’t get The Big Picture until you take a look at predatory lending and predatory servicing aka Mortgage Servicing Fraud. Lehman’s BNC Mortgage, Aurora Loan Services (ALS) and Specialized Loan Servings (SLS) excelled at these. It’s long past time to reevaluate the causes of mortgage default and foreclosure. Here is an excellent tutorial on the subject of servicing fraud by Kurt Eggert – http://papers.ssrn.com/sol3/papers.cfm?abstract_id=992095
    Wall Street wants us to buy their spin on trailer trash home buyers so we don’t see past their BS and realize these subsidiary servicers were manufacturing bogus defaults in order to create ‘credit events’ for investment banks to cash in their rigged credit default swap bets on. This is why subprime ABX index became the hottest game in town. ABX was conceived by traders from the big houses. REITs in ABX indices were selected and targeted for mortgage servicing fraud. Now wouldn’t that inspire confidence with obscenely leveraged bets. You can’t lose! Safe bets. Subsidiary servicers were only following orders even though many had been playing servicing fraud game for their own profit for years. Everyone is this house of cards was doing it. Time they all get rounded up and sent off to The Big house.

  80. call me ahab says:

    @ douglass watts-

    I agree with your observation and have read elsewhere this same idea- products should be valued at their true cost- inception to disposal including all negative costs and costs to society to support them- i.e- highways to support automobiles. We’ll see if this get much traction in the new administration.

  81. proton says:

    AIG and Lehman defaults were simultaneous events as they both got exposed as large risk takers when the market’s risk appetite went down.

    The real question is why save AIG and let Lehman die? Goverment may have planned all along. Right after Bear Stearns’ collapse, they knew Lehman was the next bank to go. They also knew that how players like Goldman or Deutsche “hedged” their risk exposure through AIG.

    This blog also talks about this:
    http://creditnotes.blogspot.com/2009/03/year-after-bear-died.html

  82. Mannwich says:

    @Mutant Capitalism: You know, I’ve wondered in recent months if this may have been gamed from the get-go. Here’s a quick story that turned this light on for me in my head even more vividly in recent days: I’m in the process of having some windows replaced in my house and have been meeting with contractors for bids. One contractor’s sales guy was previously in the mortgage biz right before the roof caved in. We got into a lengthy conversation about the mess and he said they couldn’t package enough crappy loans to satisfy Wall Street’s ravenous appetite for them. He couldn’t believe how bad some of these loans were and that Wall Street would want them. This was/is a pretty average guy and he knew it was complete bullshit. For me, that was almost an “ah-ha” moment and had me thinking (although I’m not the crazy conspiracy type) that maybe, just maybe some on Wall Street knew the housing market was going to come crashing down and were actually perpetuating it with this fraudulent activity (e.g. writing & packaging loans they knew for sure would default) so that they could subsequently cash in on it on the way down as they had on the way up.

  83. CNBC Sucks says:

    @gamingthemarket: I like your style, including how you siphoned off traffic from Ritholtz. (He hates that!) Unfortunately, you lost me when you made David Rockefeller the mastermind behind the conspiracy. This is a “left-leaning” financial blog, so why don’t you put Larry Kudlow and Art Laffer behind the conspiracy instead and you will get more traffic from us.

  84. SINGER says:

    MARK MOBIUS OF TEMPLETON SAYS: NEW LEG IN BULL MARKET HAS BEGUN…

    http://www.bloomberg.com/apps/news?pid=20601087&sid=a8m3CV_oaPE8&refer=home

    Thank God,

    Now I Can Start Buying…

  85. Mutant Capitalism goes w./: “…until you take a look at predatory lending and predatory servicing aka Mortgage Servicing Fraud. Lehman’s BNC Mortgage, Aurora Loan Services (ALS) and Specialized Loan Servings (SLS) excelled at these. It’s long past time to reevaluate the causes of mortgage default and foreclosure. Here is an excellent tutorial on the subject of servicing fraud by Kurt Eggert – http://papers.ssrn.com/sol3/papers.cfm?abstract_id=992095
    Wall Street wants us to buy their spin on trailer trash home buyers so we don’t see past their BS and realize these subsidiary servicers were manufacturing bogus defaults in order to create ‘credit events’ for investment banks to cash in their rigged credit default swap bets on. This is why subprime ABX index became the hottest game in town. ABX was conceived by traders from the big houses. REITs in ABX indices were selected and targeted for mortgage servicing fraud. Now wouldn’t that inspire confidence with obscenely leveraged bets. You can’t lose! Safe bets. Subsidiary servicers were only following orders even though many had been playing servicing fraud game for their own profit for years….”

    should be understood..

  86. “But America is at risk in other ways, especially in the technical business of setting and executing policy. The presidency of Barack Obama has set out on a course that has no precedent in U.S. history. Franklin D. Roosevelt, whose New Deal transformed the U.S. economy during the Great Depression, pushed America off on a sharply different political and ideological course. The Obama administration is different in many ways, not least in its supreme self-confidence in its methods and objectives.

    Reform of health care, environmental policy, education, energy, banking, regulation — every nook and cranny of the U.S. economy has been put on alert for major change. Expansion of government spending, plunging the U.S. into unprecedented deficits, is without parallel. In economic policy, through regulation and control of energy output, financial services and monetary expansion, the U.S. government has embarked on a fundamental reshaping of America. It is designed, in short, to bring on the end of America…”
    http://network.nationalpost.com/np/blogs/fpcomment/archive/2009/03/19/terence-corcoran-is-this-the-end-of-america.aspx

  87. Mutant Capitalism says:

    Some interesting readng on ABX Index, CDS IndexCo and Markit Group Ltd.:
    http://www.bloomberg.com/apps/news?pid=20601170&refer=special_report&sid=aA6YC1xKUoek
    http://www.forbes.com/2007/08/06/croesus-chronicles-indexes-oped-cz_rl_0807croesus.html
    http://www.counterpunch.org/martens01212008.html
    This quote from Bloomberg article got me to thinking:
    “The real question is, Are there appropriate firewalls between trading desks and captive servicing businesses,” said Josh Rosner, a managing director at Graham Fisher & Co., an investment research firm in New York. “If there are not, it would appear to pose real ethical and possibly legal risks in pitting the fiduciary responsibilities of those banks against those investors they have an obligation to.”
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aKNi7PlPCy_g&refer=home
    There are always those whose house envy will exceed their grasp as there are those who come upon financial difficulty and can no longer make mortgage payments but there are far too many others who have had their homes literally stolen from them, even when they made ALL their mortgage payments on time. So why are we bailing out the thieves?

  88. FromLori says:

    Gentlemen,

    Can anyone tell me if this is true?

    Tom Foremski claims The Size of Derivatives Bubble = $190K Per Person on Planet

  89. “The real question is, Are there appropriate firewalls between trading desks and captive servicing businesses,” said Josh Rosner, a managing director at Graham Fisher & Co., an investment research firm in New York. “If there are not, it would appear to pose real ethical and possibly legal risks in pitting the fiduciary responsibilities of those banks against those investors they have an obligation to.”

    good going yon’ Rosner, that’s the telling Q:

    all this squawk about ‘Chinese Walls’ is, merely, another faerie tale used to put children to sleep.

    it didn’t work ~80 years ago, but, given the advancements we’ve seen in Human Nature, they’ll work in Today’s environment–these things were making quantity print around the time of Gramm/Leach/Bliley..
    ~~
    Lori,

    is he accurate, to the U$D, about the size of the exposure? it’s doubtful.
    is he in right Ballpark? most probably.

    barring the old adage: “Those who know, don’t tell…” –the best way to get a handle on the scene is to find additional data points..

    you should check http://www.jsmineset.com and http://www.financialsense.com for starters..

    past that, remember, when you go a searchin’ you’ll come across a lot flack that tries to diminish the enormity of the mountain of toxicity that has been created–largely during the 21st C.–many interests are interested in keeping you stupid..

    w/that, I’m sure others will weigh in w/ their take–it’s a maketplace of goods & ideas, afterall..

  90. Truth in Numbers says:

    For a powerful visual perspective on the scale of the AIG bailout take a look at this short video. It really helps you wrap your mind around the numbers involved:

    http://www.youtube.com/watch?v=iabsIdrND8g

  91. Manhattan Jewess says:

    Everyone must read (in addition to Barry’s book)

    http://www.rollingstone.com/politics/story/26793903/the_big_takeover

    An incredible article by Mike Taibbi