The U.S. stock market regained some of its initial 200-point drop at the start of today’s trading following the stunning collapse of Wall Street investment bank Bear Stearns. If the market stabilizes and other big banks don’t fail, that would justify the Federal Reserve intervening to assist a takeover of Bear Stearns and provide access to cash for other investment firms. Still, a Wall Street Journal editorial noted that such bailouts can be “an invitation for everyone to behave the way Bear Stearns did in the mortgage securities market.â€
Registered?
Commenting on WE Blog now requires you to be a Kansas.com member. Use the links above to register, if you haven't already, or to log in.Contact us
Follow us
Daily Archives
-
Recent Comments
- JimJohnson on Open thread 11/23
- SolDevVB on Open thread 11/23
- donndublin on Open thread 11/23
- JimJohnson on Open thread 11/23
- JimJohnson on Open thread 11/23
- CapnAmerica on Open thread 11/23
- donndublin on Open thread 11/23
- Regular on Open thread 11/23
- ANTI on Open thread 11/23
- Blaidd_Drwg69 on Too many exemptions
97 Comments
“If the market stabilizes and other big banks don’t fail”
Keep dreaming. Our banks are in trouble and more will follow suit. Basically, the Fed is taking the mortgages as collateral in exchange for a $200 billion loan. Where does this $200 billion come from? Out of thin air. There is nothing to stop the Fed from making the same offer to the next line of banks that will fail due to innsufficient capital. These banks are failing due to the rush to lend money to home buyers who were overleveraged.
The snowball keeps on growing, inflation races higher and higher with more liquidity injected into the economy. The drunk gets his next drink. Meanwhile, if the mortgages are worthless now to the banks, who will want them when the Fed wants to sell them back? The Fed takes the bullet and passes the bill on the mark down to millions of American tax payers and consumers who have no choice but to continue to work for less.
“Moral Harard” is the term.
This is a dilemma.
The Government should not do things that make people think that they are “bullet proof” or that they will not suffer for a bad decision.
However, Bear Stearns jobs will be lost. Executive positions will go up in smoke. A very large chunk of Bear Stearns was owned by the employees of that firm. $2.00 per share is going to hurt them, but $2.00 is better than ZERO and that is where it was heading.
On balance, I am glad that this deal went through. For the most part, it protected against FUTURE losses, and it protected against “collateral damage” or harm that might have been transfered to other, innocent parties.
Actually, I do not think that Bear’s mistakes justified the panic that helped to take Bear down, to begin with.
The Government’s job is to stop a “run on the bank” or panic selling.
The Government did its job, this time, but every situation should be judged on its merits.
What we need is time.
The mortgages aren’t “worthless” — by definition, there is some real estate, somewhere, worth something, to back these loans.
We just can not have everyone running through the door at the same time to get their money!
This is just the beginning you know.
The dot com bubble taught Wall street nothing.
They STILL think an economy can exist just on paper. We are all MOST of us about to suffer for their greed.
I don’t know if I would call it a bailout. If you owned stock in Bear Stearns (employees owned 30% of company), then you saw the stock go from $30 to the $2 buyout price over the weekend, and from $150 in about two years.
outlander
AGREED
The “owners” got very little out of this deal.
It was like the Fire Department putting out a fire, on a house that was nearly destroyed, simply to prevent the fire from spreading to the rest of the neighborhood.
There is PLENTY of blame to go around, for the current mortgage problem.
However, let us all remember that this problem started as a way to get MORE people ot have a piece of the American Dream, in order to help more people own their own homes.
MOST of those borrowers, in fact, a very large majority of those “sub-prime” borrowers, are doing just fine.
Econ,
Don’t be naive. There were many many predatory lending shops that opened up. Most don’t exist anymore. They made their money selling the mortgages and disappeared. This was a direct run on the average Joe not smart enough to read the contract. They were targeted. There were very few if any that were looking out for their targets.
If the fed would keep their fingers out of the pie, we could weather this storm and recover. By trying to brace the fall, they are only deepening it and making it a harder fall. Let the market recover itself.
An ounce of regulation would have been worth the tons of cure (dollars) to correct this case of irrational exuberence greed. The REIT’s were fed by the cheap money the crooked mortgage brokers provided.
This was the bush version of the American Dream which Mad Max likes to laud from time to time.
It’s only considered “Moral Hazard” by the Republicans if it is applied directly to the little guy.
“too big to fail”
Remember that term? That is the delimma as Paul notes.
What I WOULD like to see is some of the executives pay a price – can anyone here spell F R A U D?
hmmmm well seems it would be a good idea for us citizens to borrow money from China / Chinese banks – we’d be bringing American dollars back into the economy? . I’m more likely to pay them than the US government, and I won’t bomb em if I have to default — where’s that 3% money I deserve …..
I seem to remember that some ex-Wichita guy is or was a big shot at Bear Sterns. Don’t remember his name. Anyone else remember it?
I think JP Morgan got a sweet deal, not sure if it was as sweet as the one Onex got though.
The mortgages aren’t “worthless” — by definition, there is some real estate, somewhere, worth something, to back these loans.
-Econ101
True, you can expect that after foreclosure on a property you will get a return of about half of the original loan amount. Due to this type of bank saving action by the Fed, the US consumer eats the other half with an inflated dollar.
Every action by the fed right now to save our banks continues to fan inflation and kill the dollar. However, to do nothing means seeing banks fail, stock markets fall precipitously and a “real” economic collapse ocurring. I am too young and naive to imagine what that may be.
It is probably better to save the banks.
rfl – very true. Lets add a bit more reality to this: we have an over-inflated appraisal behind a 100% loan. So, when THAT gets factored we are at say 70% or so. Let the house deteriorate or get torched. Now we are at 50% – MAYBE.
I read a great piece a while ago about an appraiser in CA who was black-listed because she refused to issue bogus (read FRAUDULENT) inflated appraisals. Her lawsuit will be another fun to watch.
Isn’t Bear Sterns going at about 1 penny and a half on the dollar of what it was priced at a year ago.
The appraisal industry helped prod up values of homes and no doubt many committed fraud and over-appraised homes to appease the home sellers. But when people are jumping to make offers days after the house hits the market, such irriational buying is going to do something to property prices. (Note: I did NOT say property values).
In the rush to buy, people lost track of whether
1. it is worth the price.
2. I can afford it for the long haul.
I wouldn’t blame the appraisers but bascially the idea (held by many guilty parties) that it is okay to be WAY over-leveraged in any investment. When millions of people can secure say a $200,000 priced property with only a few thousand of their own money in play, a disaster is in waiting.
same offer to the next line of banks that will fail due to innsufficient capital. These banks are failing due to the rush to lend money to home buyers who were overleveraged.
Don’t forget the banks which are failing because of credit card consumer loans. They are now canibalizing their best customers in order to stay afloat. Bank of America is among the worst offenders, and is probably under pressure.
I went looking for a loan on a very modest house, more than a year ago.
The mortgage broker quickly tried to sell me more house than I needed, and said it would be no problem because we could get an appraisal to show it was worth more than the mortgage.
I backed out.
Yes, I agree, many of my fellow Americans did NOT back out.
And, many of them did not understand the contracts that they got themselves into.
Still, lets not over react.
We should punish those who broke laws that are already on the books, and we should do more, in the form of disclosure and educaction to the public.
In the case I noted above, there was an ovious “conflict of interest” — a “lender” probably trying to push a troubled property onto my back.
But, if we do not allow lenders to sell property out of their “own book” of business, do we cause more problems?
By the way
The market is betting on a full 1% Cut by the Fed, tomorrow.
Wish bond traders were not expecting as much, if we get .5 or .75 — tomorrow will be a rough day!
100 point cut? WOW!
Thing I wonder about though – will it be perceived as a panic move by the Fed?
Much of the blame can be put directly on local and state governments on overinflating real estate in order to get more tax-buck gain out of it. The whole thing was/is a perfect example of why perpetual motion don’t work. It runs out of energy. In this case, it ran out of money.
That is where government should step in. There are too many examples of business stretching the law, and getting the results we are seeing now. Greed and business don’t do well together.
I just want to say that this scares the hell out of me.
These days we have banks that can’t get loans. . .because they’re regarded as bad risks. Think about that a moment.
You can only plunder from the economy for so long before the infrastructure collapses.
135 bil. tax rebate to be spread over all taxpayers is SOCIALISM! 200 bil. to be spread out among a select few, CAPITALISM! Socialize the cost;Privatize the profit- it’s the Republican way.
Granted, it may be a necessary evil at this stage, but because of poor oversight, we’ve gotten to this stage.
I don’t like this either.
However, this is a FUNCTION of government: to be the lender of last resort in a financial crunch, in order to support the banking system.
A “run on the banks” is what we are trying to avoid.
No institution is strong enough to survive a run.
And — this money is a “loan” made with good reason to assume it will be repaid.
I RELUCTANTLY agree with Paul on this – the consequences of a failure are just too great. That said, however, I still want to see prosecution. Also, no whining about government regulation when we try to keep our billion-dollar welfare cheats in line.
Ben
I do not disagree with you, however this is a “target rich” environment.
Who gets “shot” for this?
The borrower, who fudged income and net worth, perhaps?
The Appraiser, who, perhaps, inflated values?
The mortgage broker, who might have assisted the Appraiser or the Borrower in fudging some numbers?
The lenders, for not requiring more documentation?
Still, those who did wrong should be punished.
My experience is that, soon, the industry will be affraid of its own shadow and credit will dry up, to some extent.
Lets not over-react.
Lets look for real abuse and punish accordingly.
Greed is going to be the downfall of this country..everything that has hurt America is because of greed.
Fear and Greed must be kept in balance.
Nothing wrong with the goal of making more money.
Nothing wrong with trying to protect what you have.
There is something wrong in making other people take all the risks, for YOUR own profit.
This scares me too. Who allowed our economy to get this bad and who is using desperate limited “fixes” that may work? May work to do what? For how long? Until the idiot in charge isn’t in charge?
And, to think you bushbots argued over when the mild recession that formally began in March of 2001 actually began and who could be blamed. Always you held that it certainly couldn’t be the fault of your idol bush and had to be the fault of your nemesis Clinton.
And what are you doing now? Well, defending your idol bush, of course. It was all someone else who did something else and it certainly wasn’t anything bush did or didn’t do or…
What a bunch of sorry apologists you bushbots are. The current idiot in charge has ruined more than we even know at this point and you still find ways to come to his defense. You should be ashamed. You should be Americans, but you obviously can’t overcome your worship of your idol long enough to think.
Paul, please do not give me your line of explanations. I’ve heard them for years and they make less sense today than ever before when they made none. There honestly are people who understand beyond your limited understanding.
Between this, our slavish dependence on foreign oil, and the outsource of American manufacture, this country is like a punchdrunk prize fighter staggering along just about ready for the roundhouse punch that will drop him. Just a matter of time now before China or someone throws that punch. Then America is gonna change fundamentally and maybe forever.
America needs a new New Deal.
Linda
You do live in a Capitalist Democracy.
The MARKET is in charge, and the MARKET is correcting.
And Linda
I suggest you move to a country controlled by one, single tyrant, if you actually want one person to be “in charge” of the entire economy for the entire country.
Try China or Cuba.
Yes well
Clearly “the market” needs some government oversight and regulation.
The recent administration has been moving away from that. Now, we will move back toward it.
You suggest where Linda should go paulie?
Where will YOU go?
Got a time machine to take you back to Feudal Europe do you?
JR
The “New Deal” ??
The Social Security system, and the Medicare system, were designed for a population that was not expected to live this long.
A couple, both age 65 today, will soon have a 25% chance that one will live to age 92, the way mortality tables are moving forward.
We are living under the Social Security, Medicare, Medicaid and other promises made by many, many Presidents and many Congresses.
We are having trouble with CURRENT obligations, and you want to stack MORE obligations on the taxpayers?
Get out of the wagon and push, or shut up.
You will not be shutting me up paulie.
We can keep at this and I can make you a fool as usual.
We can’t “afford” a seven billion dollar per year expansion of SCHIP but we “have to” spend $200 billion to bail out Bear Stearns.
Only in a Bush America.
Republicans – all for free markets – except when they are not.
Econ, the Socialist sees no reason not to ask for more.
Who is on a wagon paulie is you.
You make your living making already rich people more money.
What we are gonna need is to get you AND that investor class OFF the wagon.
Shoulder to the wheel and nose to the grindstone and SHARED sacrifice. That is what America needs. And that is what we will have.
LOL
JR
A LEGEND IN HIS OWN MIND!
Ok, you are correct, you can sit in the wagon and bitch all you want.
However, our government already has programs for those who can’t make it on their own.
You CAN make it on your own.
You just don’t want to.
But, Free Speach advocate that I am, I was only wishing you would shut up.
Unlike you, I would never force that wish upon anyone.
So, continue to never risk a dime of your own money, on your own education.
Continue to never invest a dime of your own money, in a profit making venture.
And continue to bitch about those who have spent thousands of dollars on their educations, or invested thousands of dollars in economic ventures that benefit the economy.
Continue to demand rewards that you did not earn.
It is your right to beg.
It is our right to ignore you, and reward those who deserve it.
Excuse me.
“Max” is a ward of the state. I guess he figures he is protecting that turf from anyone else.
WS and JR, on the same side again?
Hey guys, Bill Clinton did not support SCHIP, did you realize that?
Republicans came up with the plan, in the first place.
The plan is fine the way it is.
Say “Thank You, Republicans” ??
No, I did not think that you would.
“The plan is fine the way it is.”
Forty three state governors, Republicans and Democrats, would disagree with you, along with majorities in both houses of Congress.
It is only the Idiot Son president that agrees with you.
That ought to tell you something.
I DO make it on my own paulie.
I just have not forgotten that I am a member of a society.
JR
We have ENOUGH Federal programs.
If you do not qualify for an existing program?
You probably don’t deserve any help.
It is that simple.
CONFORM to some norms JR.
Learn some “people skills” — understand that nobody in the world owes you anything and understand that nobody in the world agrees with you on everything.
Stop feeling like you have to be at war with everyone who disagrees with you.
Stop writing “Fritz and Tits call it quits” on the Black Board, when you “used to be a Republican”
Stop yelling “Baby Killer” at pregnant women, when you “used to be a prolifer”
Stop flamming everyone on this Blog, now that you are a Democrat.
Stop squirting Republicans with the garden hose when they come to your door to deliver literature. (That is a crime by the way, you had no right to do that to anyone, and it sure wasn’t me or I would have put you in jail).
In short, JR, your finances would improve DRAMATICALLY if you would get a clue, and get some class, something that you are sadly lacking.
It is not the fault of the “rich” that you have difficulty in life.
You would have difficulty anywhere.
You have an anti-social personality and you need someone to blame for your failures.
If you lived in a Communist country, you would be in a Gulag, for you behavior.
You think you are “too good” to conform to the norms of society, but you want to suck at societies tit, like some infant, refusing to grow up.
I mentioned that we needed a new New Deal.
Well part of that is gonna go after and leave folks like you on the margins paulie.
You neither toil nor spin. But you DO live on the backs of others.
That’s gonna end.
I wonder how much of their own $$$ the Socialists contribute to their cause?
I wonder how much of their own blood the warmongers contribute to their cause?
CONFORM to some norms JR.
Well gee there paulie.
I guess my memory of being a conservative is better than your practice at it.
I don’t sell out like you did paulie. I have principles. Does it cost me?
Yeah.
But I like being able to respect myself.
Instead of being like you.
How much do you have to contribute to this new deal?
“Stop squirting Republicans with the garden hose when they come to your door to deliver literature. (That is a crime by the way, you had no right to do that to anyone, and it sure wasn’t me or I would have put you in jail).”
It WAS you wasn’t it paulie?
Otherwise why the grudge?
You do know about property rights don’t you paulie?
I told you you had til I could turn the water on to get off my property.
And you ran….
There was a reason that this speculative bubble in real estate happened now and not ten years earlier.
I don’t know exactly what it is, but it makes sense that the same anti-regulation RepubliCONs who were running the gov’t for 8 years neglected the oversight of loans that were written and then re-sold as paper assets.
If capitalism didn’t need gov’t oversight, the best time to be alive in the US would have been 1880, back when patent medicine killed more people than typhoid and you could put your cranky child to sleep (often permanently) with opium.
“How much do you have to contribute to this new deal?”
The New Deal for Iraq or the New Deal for America?
Since we blew $1 trillion on Iraq, I would say that we are pretty much screwed on a New Deal for America.
OMGorsh!
Jon Stewart is showing clips of Worst. President. Ever. speaking (well . . . uttering sounds, anyway) at some kind of Economic summit type thing.
He sounds like a parody of himself. “We’ve undergone several natural dishashters . . . ”
Dude, sober up.
Bear Stearns can’t possibly be bailed out by the government because all the “free market” Republicans will be in an uproar about “socialized banking”. Not that the bank needs to be bailed out since we already have FDIC. This bailout is simply to protect the stock price of shareholders.
Oh, the New Deal must be free.
Regarding the Fed assisted buyout of Bear Stearns (soon to be equated with Enron) – this scenario is looking much like a Black Friday 1929 situation.
Can the American economy survive based on credit alone, without an underlying base of production and manufacturing?
Perhaps not?
This would be a good time to invest in grocery futures – stock up on canned goods.
Could we be facing another Depression?
Maybe……………………….
“Oh, the New Deal must be free.”
Like the Bush War of Choice on Iraq – paid for with Iraqi oil revenues – not to cost the American taxpayer more than $40 billion.
Damn near free, right?
Say it’s not my plan. JR has a New Deal plan. I was just awaiting the great new details of the great new deal.
(JR sells cars?)
So Max, go back five years and answer this – should we invest $1 trillion on American or should we invest $1 trillion on a foreign country, let’s say, ummmmmmmmm, Iraq?
What would be a better investment – Iraq or America?
Invest in what?
“Invest in what?”
Our future.
Or are you happy that Bush has pissed $1 trillion down the toilet?
I’ll sell you our future for 1/2 that. Send me a check.
Get specific Clark.
Yawn….
Zzzzzzzzzzzzzzzz
Easy Max, should we have invested $1 trillion on America and the American people or should we have invested the same amount on Iraq and the Iraqi people?
Easy question, right?
This is good time to learn what Hour money is, http://www.ithacahours.com/
And the E.F. Schumacher Society http://www.schumachersociety.org/
The subject matter focuses on decentralism, human-scale societies, regionally based economic systems, local currency experiments, and community land trusts.
Things are not at a total lost like some groups want you to believe.
You have to realize that there are groups of people in control of our money that do not want you know that the central core power of their money is based on a centralized banking system.
The centralize system keeps you depend upon them for all your needs and deprives you of the really true freedom that you could be having.
Lender of last resort has always referred to lender for the Fed. banking system. Not for private industry, or individuals, funneled through a bank. There has been an exception like this made before, however. I believe it was in 1930.
Bush beats out Hoover.
I look for oil to soon be over 120 p.b., Euro, maybe 1.75, before it’s all over.
The Brave New World doesn’t need a manufacturing and production base, just a ’service economy’. When thigs get tough, which do you cut out first, services or goods?
“I do not disagree with you, however this is a “target rich” environment.
Who gets “shot” for this?”
ALL OF THE ABOVE.
Ab observation: if the government were to step in to pay off homeowners’ mortgages it would be labeled socialism. However, when the government steps in to bail out the banks it is called capitalism.
” should we have invested $1 trillion on America and the American people”
This is not the question. There IS no trillion dollars. It’s imaginary. Made up. Loans without a guarantee. Part of the 9 trillion some like to keep bringing up – but conveniently FORGET about when you want to spend money.
There is no money tree.
You can’t have it both ways. You can’t cry about Bush raking up a HUGE NATIONAL DEBT (which he did), and then dream about spending money we don’t have.
We should let the banks go broke. We shouldn’t bail out anyone.
It’s happened before. Then, when the dollar is worth a penny, and the poor people starve (you don’t think the rich will, do you?), America will be ripe to become a producer nation again. We can sell products built cheap here in America, where our dollar is worthless, and sell goods overseas.
Gas should rise to $5 or $6 a gallon this year. People will stop driving for pleasure, and only for work. Detroit and the big three will close up shop, and Americans will enjoy Honda’s and Toyotas which are energy efficient today! Trains may become more economical than semi trucks.
Those stupid Americans with an average of $6,000 on credit cards, will no longer be able to pay. The banks will go broke (for over-extending credit), and learn their lesson. As the people starve, new credit rules will only allow the rich or those with PROVEN financial standings to get new cards.
In short, maybe we need a good depression. Before EVERYone realizes there is no free lunch.
Okay, what I read from Paul makes no sense. We live in a capitalistic society, and the Free market is correcting itself? Then why the gov’t intervention. Doesn’t sound like free market to me. The gov’t wasn’t willing to bail out the little guys when the banks started foreclosing on their homes, but the billionaires the gov’t protects. That’s bull$hit!
Paulson admits to economy being in “a steep decline” apparently bush won’t let him use the R word!
“Bear Stearns can’t possibly be bailed out by the government because all the “free market” Republicans will be in an uproar about “socialized banking”. Not that the bank needs to be bailed out since we already have FDIC. This bailout is simply to protect the stock price of shareholders.”
————
Don’t think so Doug. Accounts at Bear Stearns do not have FDIC protection. And the stock price was the $2 per share buyout. Down from $150 bucks about a year ago. Not much of a “bailout” for shareholders. They are the big losers here.
What it did do though, was protect all of those who had money with the firm from loss, mostly retirement accounts. And that’s good. JP Morgan Chase took that on with their purchase.
“Paulson admits to economy being in “a steep decline” apparently bush won’t let him use the R word!”
———–
Because Phantom, “recession” is a word with a specific meaning. This criteria must be met:
“A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters”.
Business cycles are going to happen. And some of them will bring on a recession.
AmWay cracks me up.
He thinks that everybody else in the country but he (and the rich) can be crushed in a hopeless depression, but he’ll be fine.
1.3 TRILLION dollars of “toxic paper” is the direct result of a toothless SEC and Federal Regulators.
Companies like Moody’s and S & P’s were giving AAA ratings to junk bonds. The reason is very simple–no regulation.
After the Enron melt-down, the financial market was screaming for more regulation and oversight.
G WMD Bush gave them less regulation.
2.5 million homes will be foreclosed on in addition to the 1.5 million homes already foreclosed.
This is higher than at any time since the Great Depression.
This drives the value of surrounding homes down precipitously. It drops property values which drops the tax base, directly affecting schools, roads, police, fire and other basic infrastructure.
Millions of homes in foreclosure throws construction crews out of work, one of the last high paying manufacturing job in the country.
Lastly, this entire debacle is partly caused by people flat wages. If workers could have kept the production gains that they earned, they would be able to afford the mortgages.
Sounds like Reid is going to bring back the mortgage mark down bill to aid homeowners and cut their interest. What’s good for the goose….
A perspective on the bailouts:
Why the Fed’s rate cuts won’t help you
In its efforts to keep irresponsible bankers on Wall Street afloat, the Federal Reserve is spurring inflation, crippling the dollar and cutting into retirees’ incomes. And mortgages and car loans won’t get any cheaper
http://articles.moneycentral.msn.com/Investing/SuperModels/WhyTheFedCutsWontHelpYou.aspx
In other words, the Fed action helps imprudent bankers dig out of a hole by putting prudent citizens and foreigners in one. This gives big financial businesses a shot at staving off disaster at the risk of cutting the spending and earning power of everyone else.
From the above article: It undercuts the attractiveness of the U.S. dollar, which leads to higher food, energy and gold prices.
Like I said before,inflation for food and energy disproportionately affects the struggling class and is no longer part of the ‘core inflation’ so not really a concern for the Repub. party. Just take care of the base, and all will be well.
But when bushco knew the indicators would show a recession started in March of 2001 (AFTER he took office) they were very quick to use the “R” word and every other speech talked about the recession they had inherited. See, it’s all about excusing bushco and blaming anyone and everyone else.
January 20, 2009 comes in 307 days, 6 hours and ..
What a celebration I will have on that day!
Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for any of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars which have been transfered FROM US TO THEM. All over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They just keep getting richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves ‘humanitarians’. Cashing in on the PR and getting even richer the following year. IT CAN’T WORK THIS WAY. Their bogus efforts to make the world a better place can not possibly succeed. Any ‘humanitarian’ progress made in one area will be lost in another. EVERY SINGLE TIME. IT ABSOLUTELY CAN NOT WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. So don’t fall for any of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductible contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. Crime, poverty, and suicide will skyrocket. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah Winfrey, Ellen DeGenerous, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. Now, there are commercial ties between nearly every industry and every public figure. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool. No offense fellow citizens. But we have been mislead by nearly every public figure. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Reaganomics. Their idea. Loans from China. Their idea. NAFTA. Their idea. Outsourcing. Their idea. Sub-prime. Their idea. High energy prices. Their idea. Obscene health care charges. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. The multi-million dollar endorsement deal. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. Brainwash plots on TV. Their idea. Vioxx, and Celebrex. Their idea. The MASSIVE campaign to turn every American into a brainwashed, credit card, pharmaceutical, love-sick, celebrity junkie. Their idea. All of the above shrink the middle class, concentrate the world’s wealth and resources, create a dominoe effect of socio-economic problems, and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, executives, entrepreneurs, attorneys, and politicians. IT MAKES THEM RICHER. So don’t fall for any of their ‘good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTIBLE PR CRAP. In many cases, the ‘charitable’ contribution is almost entirely offset. Not to mention the opportunity to plug their name, image, product, and ‘good will’ all at once. IT MAKES THEM RICHER. These filthy pigs even have the nerve to throw a fit and spin up a misleading defense with regard to ‘federal tax revenue’. ITS A SHAM. THEY SCREWED UP THE EQUATION TO BEGIN WITH. If the middle and lower classes had a greater share of the pie, they could easily cover a greater share of the federal tax revenue. They are held down in many ways because of greed. Wages remain stagnant for millions because the executives, celebrities, athletes, attorneys, and entrepreneurs, are paid millions. They over-sell, over-charge, under-pay, outsource, cut jobs, and benefits to increase their bottom line. As their profits rise, so do the stock values. Which are owned primarily by the richest 5%. As more United States wealth rises to the top, the middle and lower classes inevitably suffer. This reduces the potential tax reveue drawn from those brackets. At the same time, it wreaks havok on middle and lower class communities and increases the need for financial aid. Not to mention the spike in crime because of it. There is a dominoe effect to consider. IT CAN’T WORK THIS WAY. But our leaders refuse to acknowledge this. Instead they come up with one trick after another to milk the system and screw the majority. These decisions are heavily influensed by the 1% club. Every year, billions of federal tax dollars are diverted behind the scenes back to the rich and their respective industries. Loans from China have been necessary to compensate in part, for the red ink and multi-trillion dollar transfer of wealth to the rich. At the same time, the feds have been pushing more financial burden onto the states who push them lower onto the cities. Again, the hardship is felt more by the majority and less by the 1% club. The rich prefer to live in exclusive areas or upper class communities. They get the best of everything. Reliable city services, new schools, freshly paved roads, upscale parks, ect. The middle and lower class communities get little or nothing without a local tax increase. Which, they usually can’t afford. So the red ink flows followed by service cuts and lay-offs. All because of the OBSCENE distribution of bottom line wealth in this country. So when people forgive the rich for their incredible greed and then praise them for paying a greater share of the FEDERAL income taxes, its like nails on a chalk board. I can not accept any theory that our economy would suffer in any way with a more reasonable distribution of wealth. Afterall, it was more reasonable 30 years ago. Before Reaganomics came along. Before GREED became such an epidemic. Before we had an army of over-paid executives, bankers, celebrities, athletes, attorneys, investors, entrepreneurs, developers, and sold-out politicians to kiss their asses. As a nation, we were in much better shape. Strong middle class, free and clear assets, lower crime rate, more widespread prosperity, stable job market, lower deficit, ect. Our economy as a whole was much more stable and prosperous for the majority. WITHOUT LOANS FROM CHINA. Now, we have a more obscene distribution of bottom line wealth than ever before. We have a sold-out government, crumbling infrastructure, energy crisis, home forclosure epidemic, 13 figure national deficit, and 12 figure annual shortfall. The cost of living is higher than ever before. Most people can’t even afford basic health care. ALL BECAUSE OF GREED. I really don’t blame the 2nd -5th percentiles in general. No economy could ever function without some reasonable scale of personal wealth and income. But it can’t be allowed to run wild like a mad dog. ALBERT EINSTEIN TRIED TO MAKE PEOPLE UNDERSTAND. UNBRIDLED CAPITALISM ABSOLUTELY CAN NOT WORK. TOP HEAVY ECONOMIES ALWAYS COLLAPSE. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. The American dream will be shattered. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. THERE IS NO SUCH THING AS A MULTI-MILLIONAIRE HUMANITARIAN. EXTREME WEALTH MAKES WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman.. Of course, they will jump to small minded conclusions about ‘jealousy’, ‘envy’, or ’socialism’. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.
Doug and Ben
Actually, as has been said upthread, the stockholders of Bear Stearns actaully took the loss here, that is how it is supposed to work.
The government in only loaning the money for another firm to purchase Bear Stearns.
Bear Stearns was not “bailed out” — but keep in mind that thousands and thousands of Bear Stearns accounts, not OWNED by the firm but HELD by the firm, would have been at risk if NOT for this action.
Good post Truxter!
Truxter
Try Paragraphs.
Try shorter sentences.
Try shorter posts.
Nobody will read that much in one post.
It was never about protecting pensions, Nyc lost 10 mil. of their pensioner funds in the bear stearns mark down. Which is what I figured, if pensions and mutual funds were going to be impacted it would be through their investments in bear stearns stock, not in their portfolio or as creditors to bear stearns.
http://news.yahoo.com/s/nm/20080318/bs_nm/newyorkcity_comptroller_dc_1
Truxter’s post was so long and rambling I admit I didn’t read, and won’t read, the whole thing. This is a blog for gosh sake, I’m not here to read ‘War & Peace’.
But, from what I got from skimming it sounds like the typical socialist manifesto.
Truxter seems to indicate the economy is an ‘end-sum-game’, where there is a fixed size pie, or just so much wealth, and if one has more, another by necessity has less, instead of the actual situation where wealth is created by production and if all are working all are earning. So typical, so wrong, so dangerous to a society that wants to survive and be productive and wealthy.
Phantom
Try to put your bias aside for a moment and look at facts, ok?
Those who INVESTED in Bear Stearns stock, sadly, were the people who TOOK the risk.
I feel badly for their losses, but — that is how the MARKET works! The owners of the company took the risk, and paid the price.
Now, Bear Stearns has several thousands of innocent investors who hold money market accounts, Boeing stock, Walmart stock, mutual funds and thousands of other investments “long” in their trading accounts, held by Bear Stearns.
If Bear Stearns had gone under, completely, the SIPC or Security Investors Protection Corporation would have guaranteed DELIVERY of any stock or bond certificate, out of the Bear Stearns account, but that would be mess and damage the market. Billions of dollars would be tied up, until SIPC could figure it all out. Then, you would have the “cash” or money market accounts to deal with, which are NOT directly insured but — were experiencing a “RUN” —
Frankly, lots of Brokers were pulling money OUT of clients Bear Stearns held brokerage accounts, because Brokers did not want to get “sued” over a failure by Bear Stearns.
It was a mess.
I think a horrible “run” was avoided, a “run” on all brokerage “cash accounts” — by wise and fast government and private action, in this case.
And Phantom, from your own link:
“New York City’s pension fund has a long history of suing companies it believes defrauded investors. The $110 billion fund Thompson helps run is currently the lead plaintiff in a class-action suit against top U.S. mortgage lender Countrywide Financial Corp (CFC.N)”
$10 million / $110 billion ????
Diversify and you will hedge against such things.
The New York Pension Fund will not be badly hurt by this at all.
Also, in that same link, you notice that New York officials seem GRATEFUL that the “underwriting” portion of Bear Stearns has now been saved.
“Underwriting” here means that section of the business that loans money to Cities, States, School Boards, Turnpikes, Hospitals and other municipal- bond type borrowers.
These firms that do HEAVY mortgage work? They also support lots of local government financial matters.
Paul, that’s why we have the FDIC. The bailout was just to help shareholders and business executives. As usual the taxpayers have to foot the bill for bad management decisions that arised from deregulation which “free market” people wanted. Now they are in trouble they don’t like the “free market” so much.
Maybe to compensate the taxpayers the tax rate on dividends should be increased. Ah, but the rich who don’t produce wealth will whine about having to pay into the commons which bail them out when they have problems.
Funny how quick the feds were to bail out some bankers yet the people of New Orleans are still waiting for the money they have been approved for. The rich always get the handouts they beg for.
Doug
Sorry, you are wrong there.
FDIC does NOT cover the “cash” in a brokerage account.
SIPC MIGHT handle some of it, as far as DELIVERY of Certificates, but the VALUE of a Certificate, the value of stocks, bonds or even shares in a Money Market account are NOT guaranteed by FDIC.
And, again, we are talking about “stockholders” getting $2.00 per share on a stock that was about 75 times that amount, not that long ago?
Doug
You are speaking politically and not practically.
The truth is, a Democrat in the White House would have tried hard to do, basically, the same thing as was done here.
This action was legal.
This action protected the innocent, the people who had taken NO risk, directly, on their own, but trusted Bear Stearns to hold their investment accounts, accounts which did NOT own Bear Stearns stock.
Let me again repeat:
Some bad decisions were made by Bear Stearns.
The stockholders, those who owned Bear Stearns stock, will take the hit for those mistakes.
The actual problem, the actual dollar value of bad mortgage debt, was small, in comparitive terms. The fact that Bear Stearns was “leveraging” on top of that debt, made it worse.
The actual cause of the collapse, however, was emotional and not financial.
The Government reacted to combat FEAR, not to correct the finances of Bear Stearns.
The Stockholders have been punished, and punished severely.
Nobody, but NOBODY is talking about the taxpayers making all of those stockholders “whole” or giving back all of the stock value that they have lost.