This is financial incompetence writ on a scale far grander than anything seen for centuries. As a nation, our institutions have failed us: Under Alan Greenspan, the Federal Reserve slept through the most reckless and irresponsible expansion of bank lending in history for reasons of ideological purity. His opposition to the Fed's regulatory role reached the point of malfeasance long ago. History is unlikely to be kind to the Maestro. There is a choice to be made: Either we regulate the Banks, or leave it to the vagaries of the free markets to punish those who trade with, or place their assets in the wrong institutions. But for God's sake, do not give us the worst of both worlds -- do not allow banks the freedom to make horrific but preventable mistakes (i.e., only lending money to those who can pay it back), but then expect the taxpayers to foot the trillion dollar bill. That's not capitalism, its not socialism, its not regulation, and its sure as hell isn't what free markets are. Our language is insufficient to describe this hodge-podge system, other than to call it a random patchwork of quasi-capitalism, quadrennial-socialism, and politics as usual. Ideological idiocy is the only phrase I can muster that has any resonance with the daily insanity. We have entered into a fit of Orwellian madness: The American Capitalists, long the globe's leading advocates for free markets, have become near Socialists. Halfway around the world, the Chinese Communists have picked up the baton, and are moving rapidly towards a form of Capitalism. Ironically, it is the once largest communist nations -- the Chinese and the Russians -- who holds much of Fannie and Freddie's paper. Hey comrades, who's selling the rope to whom? Perhaps the rescue of "Phony and Fraudy" are not so much a bail out of American homeowners as it is a desperate attempt to stay in the good graces of our friendly global bankers. We are the world's largest debtor nation, and as such, we depend upon the kindness of strangers -- be they Japanese or Europeans or Abu Dhabians -- or even former communists. Back in the States, something beyond cognitive dissonance is occurring -- this is full blown case of dementia unfolding in the public sphere. When this era of excess and absurdity is treated by historians in the future, the question I expect to be asked most is not why many of these people weren't jailed for their financial felonies. Rather, I expect them to wonder why so many of these folk weren't placed in protective custody, and heavily medicated, for the only rational explanation for their statements and behaviors is that they have gone so far beyond the bend as to be completely and totally insane. Massively over-leveraged companies? Blame short sellers. Wildly under-capitalized financial firms? Blame rumors. Heinously poor corporate management? Blame a Senator. It is as if someone is running around Washington D.C. with a ball-peen hammer, smacking senior government officials on their skulls. If you find the standard finger pointing hard to fathom, perhaps blunt head trauma is a better explanations for the absurdities proferred. Books will be written about this period of time, and our descendants will wonder in awe as to how this was allowed to happen. Tulips got nothing on us! Its not just the total dollar value of the losses that have exceeded all other global fits of financial madness combined, but rather, how so many warning signs were so blithely ignored by so many and for so long. What was wrong with these people, the authors and historians will wonder. Did the antibiotics in the food supply drive them mad? Did the High Fructose Corn Syrup compromise their ability to think? Some form of viral plague? Roid rage? What else could have created such a mass delusion amongst not just the populace, but their leadership and institutions? Indy Mac goes belly up, having lost $900 million this year alone. Its shares fell 87% in 2007 and then its value dropped (on top of last year's collapse) another 95% this year-to-date. The stock fell to 28 cents yesterday. Some estimates of the total bad loans made by this somewhere in the neighborhood of $30 billion dollars -- and the Office of Thrift Supervision blames a senator who is investigating how much of the FDIC's $53 Billion this is going to eat up, with Wall Street estimates ranging from 15% to 30%. The towering incompetence of OTS is incomprehendable, but it is their colossal gall that is truly stupefying. From beyond the grave, Adam Smith does not know whether to weep or retch. >
This is financial incompetence writ on a scale far grander than anything seen for centuries.
As a nation, our institutions have failed us: Under Alan Greenspan, the Federal Reserve slept through the most reckless and irresponsible expansion of bank lending in history for reasons of ideological purity. His opposition to the Fed's regulatory role reached the point of malfeasance long ago. History is unlikely to be kind to the Maestro.
There is a choice to be made: Either we regulate the Banks, or leave it to the vagaries of the free markets to punish those who trade with, or place their assets in the wrong institutions. But for God's sake, do not give us the worst of both worlds -- do not allow banks the freedom to make horrific but preventable mistakes (i.e., only lending money to those who can pay it back), but then expect the taxpayers to foot the trillion dollar bill.
That's not capitalism, its not socialism, its not regulation, and its sure as hell isn't what free markets are. Our language is insufficient to describe this hodge-podge system, other than to call it a random patchwork of quasi-capitalism, quadrennial-socialism, and politics as usual. Ideological idiocy is the only phrase I can muster that has any resonance with the daily insanity.
We have entered into a fit of Orwellian madness: The American Capitalists, long the globe's leading advocates for free markets, have become near Socialists. Halfway around the world, the Chinese Communists have picked up the baton, and are moving rapidly towards a form of Capitalism. Ironically, it is the once largest communist nations -- the Chinese and the Russians -- who holds much of Fannie and Freddie's paper.
Hey comrades, who's selling the rope to whom?
Perhaps the rescue of "Phony and Fraudy" are not so much a bail out of American homeowners as it is a desperate attempt to stay in the good graces of our friendly global bankers. We are the world's largest debtor nation, and as such, we depend upon the kindness of strangers -- be they Japanese or Europeans or Abu Dhabians -- or even former communists.
Back in the States, something beyond cognitive dissonance is occurring -- this is full blown case of dementia unfolding in the public sphere. When this era of excess and absurdity is treated by historians in the future, the question I expect to be asked most is not why many of these people weren't jailed for their financial felonies. Rather, I expect them to wonder why so many of these folk weren't placed in protective custody, and heavily medicated, for the only rational explanation for their statements and behaviors is that they have gone so far beyond the bend as to be completely and totally insane.
Massively over-leveraged companies? Blame short sellers.
Wildly under-capitalized financial firms? Blame rumors.
Heinously poor corporate management? Blame a Senator.
It is as if someone is running around Washington D.C. with a ball-peen hammer, smacking senior government officials on their skulls. If you find the standard finger pointing hard to fathom, perhaps blunt head trauma is a better explanations for the absurdities proferred.
Books will be written about this period of time, and our descendants will wonder in awe as to how this was allowed to happen. Tulips got nothing on us! Its not just the total dollar value of the losses that have exceeded all other global fits of financial madness combined, but rather, how so many warning signs were so blithely ignored by so many and for so long. What was wrong with these people, the authors and historians will wonder. Did the antibiotics in the food supply drive them mad? Did the High Fructose Corn Syrup compromise their ability to think? Some form of viral plague? Roid rage? What else could have created such a mass delusion amongst not just the populace, but their leadership and institutions?
Indy Mac goes belly up, having lost $900 million this year alone. Its shares fell 87% in 2007 and then its value dropped (on top of last year's collapse) another 95% this year-to-date. The stock fell to 28 cents yesterday. Some estimates of the total bad loans made by this somewhere in the neighborhood of $30 billion dollars -- and the Office of Thrift Supervision blames a senator who is investigating how much of the FDIC's $53 Billion this is going to eat up, with Wall Street estimates ranging from 15% to 30%. The towering incompetence of OTS is incomprehendable, but it is their colossal gall that is truly stupefying.
From beyond the grave, Adam Smith does not know whether to weep or retch.
>
mighty hacks at the tree of ignorance... ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
I think Hudson is right and only by writing down the value of the mortgages on which the bubble is based by an amount close to the increase caused by the bubble can the economy be saved. Badly damaged but possibly saved. The beneficiaries of the bubble would be left with about 30-40% of their vast wealth, still far more than they and their progeny can possibly consume, and the other 99.9% of the population can conceivably clean up the mess.
Else it is the abyss. What will all of their paper assets be worth when no one can afford to pay any part of the mortgages? When government can't afford to enforce the laws? They can hire private security, but how will they pay them? There is not enough gold and silver in the world to go around. Paper money will be worthless, first in the USA and UK, then elsewhere. International trade will collapse. Where is Bruce when we need him? Perhaps he can show why I am all wet and make me feel better. Hopefully after he has read the two articles to which you have provided links. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
That's exactly what's happening, foaming b.s. by way of anesthetic on one side, the python squeeze of inflation on t'other.
will the patient wake up before his organs are harvested and his fluids run dry?
thank Guin and Guinness there are still some who dare tell the truth
(and it's our hallowed bounden duty to find and circulate their screeds...read up, lurkers, join the hunt!) ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
So here we are, at the end point of Reagan's folly, with his kitchen cabinet of whining millionaires. The credit card binge that the US never recovered from, attributed to breaking the backs of the Soviet Union, finally breaking the back of the US. I think it was that last aircraft carrier that they thought they would be so clever with, budgeting only the boat, but leaving the planes as a hole for the next administration to deal with. But there were many such excesses along the way.
They still sneer at Jimmy Carter. I wish it felt better, sneering at them back.
The only lucky part is that history is so much sped up these days. Just as empires come and go in less than decades, the recovery from all this will not have to be so extended as from the Great Depression, or rely upon war writ large to recreate a newly balanced system. 10 years from now, the US will be back, hopefully embracing wise state control of entities best served by that, and 800 fewer military bases around the world. Of course, Yellowstone and Yosemite will have been sold off for debt financing as well, but what's a few mountains and rivers? Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
the original settlers of the usa would say it doesn't belong to anyone...
if only jimmy had been more macho!
get your winter sweaters ready ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
