Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Level 3

by Jerome a Paris Wed Nov 7th, 2007 at 05:36:14 PM EST

Today, the Dow Jones dropped by 2.6% (or 360 points), so you'll have the usual talk about volatile markets, and the just as usual dismissals that the Dow is just a few percent off its all time high.

But what's happening in the banking markets, and on the balance sheets of the banks is a lot more worrying. In particular, smart players are now focusing on so-called "Level 3" assets.



The Financial Accounting Standards Board's rule 157 will make it harder for companies to avoid putting market prices on securities considered hardest to value, known as Level 3 assets, Royal Bank's chief credit strategist Bob Janjuah in London wrote in a note today. The new rule is effective Nov. 15.

(...)

Under FASB terminology, Level 1 means mark-to-market, where an asset's worth is based on a real price. Level 2 is mark-to- model, an estimate based on observable inputs and used when there aren't any quoted prices available. Level 3 values are based on ``unobservable'' inputs reflecting companies' ``own assumptions'' about the way assets would be priced.

(link further below)

What's at stake is the value of the assets on banks' balance sheets, ie the quality of the loans they have made. The problem is that they don't hold traditional loans only anymore, they hold lots of increasingly complex and sophisticated instruments - the infamous alphabet soup of ABS (asset backed securities), MBS (mortgage backed securities), CDS (credit default swaps), CDO (Collateralized Debt obligations) and siblings.

Many of these assets (bonds, many derivatives, and some of the more liquid of the structured products) are traded on various financial markets, and are thus easy enough to value - you just use the market price, thus the "mark-to-market" moniker, and the "Level 1" label.

Level 2 are assets that are not directly traded, but whose value can be calculated indirectly from existing prices, by using more or less tandard models. Simple options and derivatives are in that category, as are various tranches of repackaged instruments whose underlying value can be understood easily enough. This is called "mark-to-model", and big chunks are likely to be innocuous (but not all models are simple, and not all have been tested in periods of stress, so there may also be troubles bits in there).

Level 3 assets are those that are so complex, or so remote from the initial underlying assets (because they have sliced, repackaged, resliced, repackaged, and combined with other bits) that there simply is no way to calculate what they are worth, because there is no market for them, and no market for the easily identifable bits. Banks are allowed to give them the value they want - but, and that's the important bit, they are now obliged to tell regulators and the markets how much stuff they have in that category.

And that's where all the gory details come out.


Banks Face $100 Billion of Writedowns on Level 3 Rule

Nov. 7 (Bloomberg) -- U.S. banks and brokers face as much as $100 billion of writedowns because of Level 3 accounting rules, in addition to the losses caused by the subprime credit slump, according to Royal Bank of Scotland Group Plc.

(...)

``This credit crisis, when all is out, will see $250 billion to $500 billion of losses,'' Janjuah said. ``The heat is on and it is inevitable that more players will have to revalue at least a decent portion'' of assets they currently value using ``mark- to-make believe.''

Wall Street's biggest firms have written down at least $40 billion as prices of mortgage-related assets dwindle because of record foreclosures. Morgan Stanley, the second-biggest U.S. securities firm, has 251 percent of its equity in Level 3 assets, making it the most vulnerable to writedowns, followed by Goldman Sachs Group Inc. at 185 percent, according to Janjuah.

(...)

Citigroup Inc., which this week said losses from subprime assets may be $11 billion, has 105 percent of its equity in Level 3 assets, Janjuah wrote.

(...)

``If you look at the writedowns just at Citi and Merrill already it's about $20 billion, so $100 billion may be on the conservative side globally,'' said Sajiv Vaid, who manages the equivalent of about $10.5 billion of corporate debt at Royal London Asset Management in London, a unit of the U.K.'s biggest customer-owned insurer.

(...)

Banks may be forced to write down as much as $64 billion on collateralized debt obligations of securities backed by subprime assets, from about $15 billion so far, Citigroup analysts led by Matt King in London wrote in a report e-mailed today. The data excludes Citigroup's own projected writedowns.

(...)

ABX indexes, which investors use to track the subprime-bond market, are showing ``observable levels'' that would wipe out institutions' capital if the benchmark's prices were used to value their Level 3 assets, according to Janjuah.

You can go see the value of the ABX indices on this page:

AAA    71.88
AA     43.44   
A     27.66   
BBB     21.53

That's the value as a percent of their face value. ie ultra-safe AAA paper (AAA is the rating of a few governments and a smaller number of corporations) have lost 30% of their value - more than half of that in the past couple days. AA paper (Japan is rated AA, as are the best banks, to give you an idea of what we're talking about) has lost more than half its value. Lower rated indices (well, all is relative - "A" used to be a pretty damn good rating) are not dropping so much anymore, but they are already so low (20 cents on the dollar...) that it no longer matters...

and the worst thing is - this is just one bit of the problems that banks may have: noty only do they have to worry about the real value of all the Level 3 paper on their balance sheet, but also:

  • what amount highly leveraged private equity or hedge funds that bought similar Level 3 paper were financed by them...
  • how many clients that purchased similar Level 3 paper (or other 'toxic sludge') from them have "guaranteed sell back" clauses in their initial agreements to purchase the stuff from the banks...
  • how much financing was provided by the banks to real estate and construction groups (and private equity funds) whose business model was underpinned by cheap credit to finance their buyers (their acquisitions)...

So we have more than enough to potentially wipe out a number of banks. Will it come to that? Nobody knows. But the question is being asked right now in the markets.

Display:
http://www.dailykos.com/story/2007/11/7/173254/484

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Nov 7th, 2007 at 05:42:40 PM EST
is a series of indices created specifically to track asset backed securities (thus the AB-X name), and provide a proxy for categories of assets, given their rating.

So presumably, if you hold AAA asset-backed paper, or a portfolio of such paper, you can hedge your exposure to some extent by selling (shorting) the ABX-AAA, which is meant to carry an equivalent risk.

(this was asked by DoDo in the open Thread and is worth crossposting)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Nov 7th, 2007 at 05:49:52 PM EST
Level 3 assets are those that are so complex, or so remote from the initial underlying assets (because they have sliced, repackaged, resliced, repackaged, and combined with other bits) that there simply is no way to calculate what they are worth, because there is no market for them, and no market for the easily identifable bits. Banks are allowed to give them the value they want - but, and that's the important bit, they are now obliged to tell regulators and the markets how much stuff they have in that category.
What is so ironic about this is that investment banks have spent years hiring "highly numerate" people with knowledge of "vanilla derivatives" (Level 2 assets) to design new "exotic derivatives" that only the originating bank itself will know how to price, for the purpose of selling them to people at a higher value than the in-house models suggest they are worth.

In other words, a scam.

It's somewhat satisfying to see Morgan Stanley and Goldman Sachs hoisted on their own petard.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Wed Nov 7th, 2007 at 05:57:38 PM EST
It's always been a scam. Books have been written - and ignored - about the scamminess of it. The seedy reality of the business is that these banks have been run on the basis of 'Never give a sucker an even break.'

The banks thought they weren't the noobs at the table. But they've now suckered themselves, and each other. Citi, GS and the rest may well not be around a year from now. And if they are around, they won't look much like they do now.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Nov 7th, 2007 at 06:40:58 PM EST
[ Parent ]
But, but Morgan Stanley says it's "World Wise"!

All for the better.  It's about time we had a massive shake-up on the big dogs of Wall Street.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Nov 8th, 2007 at 09:27:01 AM EST
[ Parent ]
It's somewhat satisfying to see Morgan Stanley and Goldman Sachs hoisted on their own petard.

But if these banks do blow themselves up, what will be the collateral damage to the rest of society?  My impression is that the modern capitalist system is precariously dependent on the "health" of these banks.  Or is that too pessimistic an assessment?

Truth unfolds in time through a communal process.

by marco on Wed Nov 7th, 2007 at 07:19:11 PM EST
[ Parent ]
I think the impact will be marginal. GS and MS have no deposits, no mortgages, no "retail" banking division.

Citi is another matter entirely.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Wed Nov 7th, 2007 at 07:22:26 PM EST
[ Parent ]
Certainly a large (albeit a damn sight smaller than it should be) chunk of the currently "healthy" tax  revenues comes from these guys and their staff, simply because they are "people" businesses and don't have quite the same level of deductions and credits that capital intensive "productive" enterprises do.

That is about to go colossally "pear-shaped" as well documented here on ET.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Nov 7th, 2007 at 07:25:02 PM EST
[ Parent ]
the GS and MS guys (and they are mostly guys) are the 15%ers in the tax code. The productive people actually pay at income tax rates. The financial people pay at capital gains rates, even though they are intermediaries.

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Wed Nov 7th, 2007 at 08:00:03 PM EST
[ Parent ]
The executives are almost undoubtedly in the capital gains group.  The retail workers, along with the lower- and middle-managers, are in the income group.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Nov 9th, 2007 at 10:58:09 AM EST
[ Parent ]
It's not banks being impacted, though, for the most part.  Citi is being impacted, and that's potentially a big problem, but most of the businesses getting hit are large investment houses on the Street.

If Bank of America, Wachovia, Commerce, and other major residential-type banks fall, then we'll have a serious problem on our hands.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Nov 9th, 2007 at 10:55:43 AM EST
[ Parent ]
Wachovia does not look in particularly good shape.
Reuters|UPDATE 1-Wachovia, Capital One say credit conditions worsen

EW YORK, Nov 9 (Reuters) - The U.S. credit crisis deepened on Friday as Wachovia Corp reported a $1.1 billion loss on subprime mortgage-related debt in October, while Capital One Financial Corp said more customers are missing payments.

Shares of both companies fell, amid broad declines in financial stocks.

Wachovia (WB.N: Quote, Profile , Research), the fourth-largest U.S. bank said the value of so-called asset-backed collateralized debt obligations (CDOs) it holds fell to $676 million as of Oct. 31 from $1.8 billion on Sept. 30. The $1.1 billion pre-tax loss is in addition to $347 million in the third quarter, Wachovia said.

Charlotte, North Carolina-based Wachovia (WB.N: Quote, Profile , Research) also expects to boost loan losses by $500 million to $600 million this quarter, largely because of "dramatic declines" in housing values. Wachovia paid $24.2 billion last year for Golden West Financial Corp, a big California mortgage lender.

Wachovia joined a growing list of financial companies -- including Citigroup Inc (C.N: Quote, Profile , Research), Merrill Lynch & Co Inc (MER.N: Quote, Profile , Research) and Morgan Stanley (MS.N: Quote, Profile , Research) -- that have reported losses from worsening conditions in consumer credit and capital markets.



Money is a sign of Poverty - Culture Saying
by RogueTrooper on Fri Nov 9th, 2007 at 11:07:44 AM EST
[ Parent ]
And that's bad, of course, but a little perspective: $1.1bn loss barely qualifies as a small drop in the bucket with the mess we have on our hands.

I should qualify that by saying, again, that I don't know what Wachovia's overall balance sheet looks like.  It may be in deep trouble, and it's certainly going to suffer some losses, but I highly doubt we're going to see anything on the level of the investment houses.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Nov 9th, 2007 at 11:48:43 AM EST
[ Parent ]
I should qualify that by saying, again, that I don't know what Wachovia's overall balance sheet looks like

from the article...
Wachovia paid $24.2 billion last year for Golden West Financial Corp, a big California mortgage lender.

I would guess, after buying a California mortgage lender at the hight of the bubble suggests that their balance sheet might not be in the best of shape.

Money is a sign of Poverty - Culture Saying
by RogueTrooper on Fri Nov 9th, 2007 at 11:57:47 AM EST
[ Parent ]
The other way to look at it is to note that they wrote off 2/3 of the value of their portfolio.

which suggests that other banks still have a long way to go to come clean...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Nov 9th, 2007 at 12:29:08 PM EST
[ Parent ]
I should qualify that by saying, again, that I don't know what Wachovia's overall balance sheet looks like.  It may be in deep trouble, and it's certainly going to suffer some losses, but I highly doubt we're going to see anything on the level of the investment houses.

The capital underlying Wall Street, at the top, is not all that large - a matter of a few hundred billion. Given the piling of risk upon risk that has been engaged in over the last few years, and the size of the losses in the mortgage market alone that seem probable - my own estimate last spring of $980 billion looks increasingly likely to be somewhat below the final figure - it appears almost inevitable that in a bear market in which liquidity dries up and investors become skeptical, Wall Street's capital will be wiped out. Only the commercial banks like Wachovia and Bank of America whose investment banking ambitions have been largely thwarted and whose portfolios of Level 3 rubbish are correspondingly lower, are less likely to disappear.

Level 3 Storm about to hit Wall Street

But that article was published on November 3.  The news about Wachovia came out on the 9th.

Truth unfolds in time through a communal process.

by marco on Fri Nov 9th, 2007 at 05:48:49 PM EST
[ Parent ]
The shit hasnt hit the fan yet :

"Goldman, the biggest and most profitable U.S. securities firm, set aside $16.9 billion to pay salaries, benefits and bonuses in the first nine months of 2007"

http://www.bloomberg.com/apps/news?pid=20601109&sid=aNSK6SSBn5Zc&refer=exclusive

by fredouil (fredouil@gmailgmailgmail.com) on Wed Nov 7th, 2007 at 08:37:26 PM EST
Don't confuse the financial speculation world with the real world. It's a lot like the fine art world in that respect. When a painting sells for $30 million no one outside of the art market is affected.

It is an intrinsically worthless piece of painted canvas which now goes from one wall to another. If next year it sells for $3 million the loser will be some one who had too much money in the first place.

I'm sure there are some retirement accounts that directly or indirectly invested in risky financial instruments, but (hopefully) this is a small part of their portfolio. So the impact on the average person should be slight. What we are seeing is that a bunch of wealthy people are seeing their speculations become losses. That this class includes media moguls and their lackeys means that it gets worried about more than it should.

Perhaps the average investor may see a decline in the value of some of the stocks as the panic spreads, but if they are in for the long haul then they should just sit tight and ride it out. I'm guessing that one or two prominent financial firms will have to restructure or be taken over. They will be the sacrificial lambs that everyone can point to as the "bad apples" so that actual reform of the financial community can be prevented. Notice that the reforms after the collapse of Enron and its contemporaries did nothing to prevent further bubbles. The widely hated Sarbanes-Oxley only generates paper work not changes in behavior.

Those individuals who have overextended their credit are going to take a hit, but this would have happened in any case. You can't payback $100 per month if your income is $90. The only reforms that may come out of this are slightly stronger notification rules for borrowers, but you can't stop people from making fools of themselves when they are motivated by acquisitiveness.

I'll repeat what I said the other day on another of Jerome's diaries: Don't Panic.

Just a technical criticism of the chart. The pricing of these instruments is not a sign of their declining value, but of the false risk evaluations they were given in the first place. They are now being priced by the market instead of a handful of ratings agencies which have a conflict of interest.

Anyone who buys any mortgage-backed securities has to be aware that these are always high risk, even the simple ones sold by Fannie Mae and Freddie Mac. At a minimum they have the risk of early repayment as well as default. That's why they had higher yields then corporate or government bonds.

When we look back five years from now we will see that the claims of super high returns were impossible, although there probably were some winners who got in and out at the right time. Ponzi schemes never lose their appeal.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Thu Nov 8th, 2007 at 09:58:11 AM EST
you have no idea of the actual panic now gripping banks - even boring, conservative ones like the one i work in.

This is not about painting changing walls. and this is not about some banks being taken over - we're talking about them being wiped out altogether.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Nov 8th, 2007 at 10:19:15 AM EST
[ Parent ]
Like I said elsewhere, I don't think Goldman Sachs or Morgan Stanley being wiped out will do lasting damage to the economy. It needn't even precipitate a run on the banks.

The problem is when there is risk that banking groups with substantial retail operations like Citi or Barclays will find themselves belly-up.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Thu Nov 8th, 2007 at 10:31:51 AM EST
[ Parent ]
That's because we don't work at a bank.

Empathy for Jerome, man, this can't be good for ambiance where he works...

BTW, if you're still to see the LibDems today, could you ask their views on the Growth and Stability Pact and regional investment? Oh and, how'd you like Strasbourg? (I have a very good line on a job there, and am wondering what it's like...)

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Nov 8th, 2007 at 10:44:43 AM EST
[ Parent ]
No, no, I am going to Brussels in three weeks' time.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Nov 8th, 2007 at 10:47:53 AM EST
[ Parent ]
Ah, I thought you meant the "real" Parlaiment when you said EP, and yesterday when you said Wednesday. Guess I missed the "three week's time" part.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Thu Nov 8th, 2007 at 11:23:23 AM EST
[ Parent ]
Migeru:
The problem is when there is risk that banking groups with substantial retail operations like Citi or Barclays will find themselves belly-up.

Isn't that most of them?

NR may have had the most aggressive (read - 'totally freaking insane') business model in the UK high street, but don't all of the banks and building societies do at least some of their business in the same way?

I'm finding it hard to imagine how finance will work if the main investment banks are replaced with big smoking craters.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Nov 8th, 2007 at 10:55:49 AM EST
[ Parent ]
a separation between investment banks and retail/commercial banks. That's gone. Now the risks taken by investment arms of universal banks can take down the saner "stodgy" bits.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Nov 8th, 2007 at 11:03:12 AM EST
[ Parent ]
That is what I worry about. Not the "pure" investment banks, but the vertically integrated banking conglomerates. We've seen what the GS/MS business model did to Northern Rock, which used to be an unassuming Newcastle building society with a solid charitable track record before Gordo allowed the building societies to demutualise and float on the stock market.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Nov 8th, 2007 at 11:08:53 AM EST
[ Parent ]
It not only carried on the solid charitable track record but the silver lining in its manic post demutualisation form has been that the "success" overflowed (trickled down?) through the NR foundation to the extent that it became one of the largest charitable donors around.

In fact the NR Foundation has quite an interesting position in any solution, because although they "only" got 5% of the profits, they are entitled upon a takeover to 15% of the votes (I think that's how it works).

Uncanny echoes here of the Barings fiasco and the resulting demise of much of the Baring Foundation's "wealth".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Nov 8th, 2007 at 11:27:43 AM EST
[ Parent ]
A good thing for us up here is that that transformation hasn't really happened in Scandinavia.

Banks, except investment banks, should have pretty much zero exposure to all this subprime crap.

Still, the bank stock just keep falling. Trading at p/e around 8-9 last time I checked.

This would all have been academic to me if I hadn't inherited a small amount of SE-bank shares, bought by my grandmother somewhere back in the mists of time.

Selling is out of the question due to the accumulated capital gains tax and the bureacracy of selling shares bought before 1990, so I shouldn't really care about the stock losing about 30 % of its value since the peak. It can never be more than a little dividend printing press.

Still, it's a bit irritating.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Nov 8th, 2007 at 03:33:28 PM EST
[ Parent ]
A good thing for us up here is that that transformation hasn't really happened in Scandinavia.

Banks, except investment banks, should have pretty much zero exposure to all this subprime crap.

Still, the bank stock just keep falling. Trading at p/e around 8-9 last time I checked.

When the price gets ridiculously low just buy some.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Nov 8th, 2007 at 04:50:27 PM EST
[ Parent ]
ThatBritGuy:
LY:
In retrospect it was a mistake to let Citibank and Goldman Sachs define what a good market or a good regulation might be.  

Well - who'd have thought, etc? If you hand the hen house over to the foxes, it's not as if they're golng to eat everything and leave a bloody mess.



We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Nov 8th, 2007 at 11:13:15 AM EST
[ Parent ]
have become a large chunk of the "real" economy


Fears rise of `earnings recession'

Wall Street analysts are rapidly losing faith in US companies' ability to rekindle profit growth before the end of the year, raising the prospect of the first "earnings recession" - two consecutive quarters of falling profits - in more than five years.

Mounting troubles in the financial sector have led analysts to reduce sharply their forecasts for earnings growth in the final quarter of the year.

(...)

The deterioration in the profit outlook is mainly due to the bigger-than-expected write-downs by large financial groups such as Citigroup and Merrill Lynch as a result of the turmoil in the credit markets.

The energy and consumer discretionary sectors have also experienced a sharp decline in third-quarter earnings. Analysts, however, still expect a rebound in the fourth quarter.

In contrast, the financial sector, which comprises 20 per cent of the S&P 500, saw a decline of 16 per cent in year-on-year profits during the third quarter, and now faces a slide of 9 per cent for the last three months of the year.

Other numbers suggest that finance and housing provided 40-50% of total growth in the US and the UK in recent years. These sectors just slowing down is enough to throw the economy overall into a nasty spin.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Nov 8th, 2007 at 10:57:09 AM EST
[ Parent ]
Maybe.  But, Jerome, do you not see that this argument is the very basis for Wall Street begging for a bailout from the Fed -- that these businesses are so important to the real economy, that when Wall Street coughs we all catch a cold?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Nov 9th, 2007 at 11:19:56 AM EST
[ Parent ]
and life may be a bitch.  But we shouldn't deny the veracity of something and put our heads in the sand just because it happens to fit into our adversary's narrative.

Having said that, in your other comments you and rdf have me back on the fence wondering if things won't turn out as catastrophically as they seemed at first.

Still, two things worry me: how much of the damage is unkown and hiddeen and the lack of separation between investment and retail/commercial banks.

Truth unfolds in time through a communal process.

by marco on Fri Nov 9th, 2007 at 04:43:59 PM EST
[ Parent ]
It's not even that I consider Wall Street to be an adversary.  I'm not rooting for Wall Street to make stupid decisions.  (Quite the contrary, I'm suspicious of these rate cuts precisely because I'm afraid it will simply lead to more stupidity.)  I'm simply saying that bad decisions shouldn't be supported by the central bank unless there is a genuine risk of a collapse in the nation's banking system.  I could be wrong, I suppose, but I just don't see that risk.

The global economy was flooded with liquidity, but that's not an excuse for these large investment houses handing out mortgages to people wanting to buy million-dollar condos in Malibu on middle-class salaries.

And, really, why should we slash rates to get more money into the hands of Morgan Stanley?  Welfare is apparently Satanic in America, unless it comes in the form of rate cuts to the stock dealers or agricultural subsidies to the flyover states.  (Somehow those two groups still find the balls to blame welfare on inner-city blacks.)

This latest rate cut was Ben Bernanke being bullied out of his lunch money.  The economy grew at 4% last quarter.  Well above trend growth.  Unemployment is at 4.7%.  Even if the former is revised down, and even if we suffer a recession, this is hardly an issue of the sky falling, and it does not warrant nearly a full percentage point in cuts over a period of a month and a half.  A lot of investment houses are going to lose their asses.  Well, I'm sorry, but that's capitalism.  It ain't always pretty.

It's not going to be a catastrophe.  It's going to be a nasty decline in house prices, involving a lot of foreclosures and bankruptcies.  But it's also going to be a period in which the dollar falls and the world economy rebalances quite a bit.

Look, quite a few of the suits on Wall Street are going to lose it all.  What does that mean?  It means quite a few of the suits on Wall Street are going to lose it all.  It doesn't mean production everywhere else immediately shuts down.  It doesn't mean we're all out of work.  At worst, it will mean a pretty rough recession, but even this seems unlikely to me.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Nov 9th, 2007 at 08:10:17 PM EST
[ Parent ]
OTOH, if they were bailed out, wouldn't that be moral hazard?

I figure they have another name for moral hazard when it applies to the wealthy, to investment bankers and their money. It's called "good for the economy..."

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Nov 8th, 2007 at 10:46:06 AM EST
[ Parent ]
The moral hazard argument, beloved of economists, is based upon a false premise. The premise is that you can teach the "market" a lesson. It is rooted in a Puritanical belief system that greed must be punished. It's one of the seven deadly sins, after all.

The fallacy is that the "market" is not a person. It is an ever changing collection of people. Those who learn the lesson will not be those making the same mistakes in the future.

The way to prevent excess in the future is to incorporate the lessons learned into new regulation. That this effective can be seen in that the latest financial problems only occurred after the previous regulations were gutted by a succession of business-friendly administrations. The two biggest changes were the abandonment of anti-trust enforcement and the repeal of the Glass-Steagall act (which prohibited banks from owning investment services).  

Once the restrictions were lifted, history repeated itself. Will "punishing" those responsible prevent future folly. No, but restoring regulation will.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Thu Nov 8th, 2007 at 11:04:59 AM EST
[ Parent ]
Those who learn the lesson will not be those making the same mistakes in the future.
True, but one would assume they'd study some history.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Nov 8th, 2007 at 03:39:39 PM EST
[ Parent ]
Let's look at what we know...
Jerome a Paris:
Citigroup: $134.8 billion in 'level 3' assets

From MarketWatch: Citigroup reports $134.8 billion in 'level 3' assets

Citigroup Inc. ... said its so-called level 3 assets as of Sept. 30 were $134.84 billion. Level 3 assets are holdings that are so illiquid, or trade so infrequently, that they have no reliable price, so their valuations are based on management's best guess.

Jerome a Paris:
Citi net equity
is $128bn...
C: Key Statistics for CITIGROUP INC - Yahoo! Finance
Market Cap (intraday): 165.65B
Enterprise Value (8-Nov-07): 80.18B
Okay, that doesn't look too good...
afew:
Goldman Sachs has disclosed its Level 3 assets, two quarters before it would be compelled to do so in the period ending February 29, 2008. Their total was $72 billion, which at first sight looks reasonable because it is only 8% of total assets. However the problem becomes more serious when you realize that $72 billion is twice Goldman's capital of $36 billion. In an extreme situation therefore, Goldman's entire existence rests on the value of its Level 3 assets.
GS: Key Statistics for GOLDMAN SACHS GRP - Yahoo! Finance
Market Cap (intraday): 84.29B
Enterprise Value (8-Nov-07): -366.85B
Yi-fucking-kes, minus 366 billion Enterprise value?
Enterprise value (EV), Total enterprise value (TEV), or Firm value (FV) is a market value measure of a company from the point of view of the aggregate of all the financing sources; debtholders, preferred shareholders, minority shareholders and common equity holders. Because EV is a capital structure-neutral metric, it is useful when comparing companies with diverse capital structures.
Okay, now the question is: if you look at the whole banking sector, how does the aggregate Level 3 asset value compare with the total market cap and the total "enterprise value"?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Nov 8th, 2007 at 10:58:44 AM EST
[ Parent ]
It would be interesting to know what your collegaues are saying to you today, as you have been warning about this for years.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Nov 8th, 2007 at 03:26:29 PM EST
[ Parent ]
You're right, but what do the boring banks' actual balance sheets look like?  We all know Morgan and Sachs are getting tied up in this.  We all know Washington Mutual is hip-deep in shit.  What do the real banks look like?

I certainly don't see a collapse in the banking system resulting from this.  Many firms are going to go under.  Many already have.  (I know the hedge funds are shutting their doors all over town here.)  When stupid firms make stupid decisions, they're supposed to go under.  We have the FDIC to protect depositors, although I'll be God-damned if I'll trust my savings to the federal government.

My sense is that Robert's painting analogy is not way out in left field.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Nov 9th, 2007 at 11:14:53 AM EST
[ Parent ]
I'll repeat what I said the other day on another of Jerome's diaries: Don't Panic.

Or as this Asia Times article concludes, hold on and sit tight, because

Given the size of the overall figures involved and the excessive earnings that Wall Street's participants have enjoyed over the last decade, a taxpayer-funded bailout of Wall Street's titans would seem politically impossible, however loud the lobbyists scream for it.

In the long run, that is probably a blessing for the US and world economies.

Level 3 storm about to hit Wall Street



Truth unfolds in time through a communal process.
by marco on Fri Nov 9th, 2007 at 05:43:32 PM EST
[ Parent ]
Man, it's pretty hard to believe so-called A paper is worth only 27 cents on the dollar. That's not A paper, that's a ratings agency or two about to go belly-up from a rash of lawsuits.

I have to say I find this all somewhat amusing. I know it's not serious to feel such a thing, but nonetheless I do find this a bit funny.

And after all, endlessly pushing credit while making it harder to discharge debts, all the while pushing the underlying cause of the risk of bankrutpcy ever higher, this is what passes for serious these days on this side of the Atlantic.

I'll take unserious, for now.


The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Nov 8th, 2007 at 10:41:30 AM EST
Ratings agencies will be collateral damage.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Nov 8th, 2007 at 10:49:35 AM EST
[ Parent ]
Okay - allowing for the fact that we all tend to doom porn here, how bad can this actually get?
by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Nov 8th, 2007 at 10:56:50 AM EST
[ Parent ]
Hey, I don't like doom porn, doom porn turns me off.

Instead of looking at disaster scenarios as the end of the world, we could look at them as opportunities. Look at what Kirchner has done in Argentina. And not just deeds, look at how that Overton window has shifted, and not just in Argentina, but throughout South America in the past generation.

Imagine how much better off all of us would be if the same shift happened in the US. Imho, this is the opportunity which the possible crisis presents.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Nov 8th, 2007 at 11:16:00 AM EST
[ Parent ]
You don't get a Roosevelt every time TSHTF. Sometimes you get a Hitler.

Pierre
by Pierre on Thu Nov 8th, 2007 at 11:19:55 AM EST
[ Parent ]
Well, yes, there's that, although homocidal fascists are still pretty rare, even in America.

Which is why progressives need to be prepared, and accept what's coming and plan for it instead of sticking collecitve heads in the sand. Because sometimes you end up with a fascist, and sometimes you end up with a progressive, and sometimes you get a Roosevelt, a rich guy who means well but doesn't finish the job.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Nov 8th, 2007 at 11:28:16 AM EST
[ Parent ]
homocidal fascists are still pretty rare, even in America

How about Bush, Cheney, Wolfowitz, Rice, Rumsfeld, Perle, Prince, half of Congress ...

I don't think they are rare. Not in the places that matter anyway. Or do I have a selection bias here ?

Pierre

by Pierre on Thu Nov 8th, 2007 at 11:36:50 AM EST
[ Parent ]
Nah, those guys are just symptoms, not the disease. Their kind of criminal is dime a dozen, found primarily in the types of predatory economic systems which the US has reverted to over the past few decades.

Go back a century and you'll find plenty of their kind, all over Europe and in the Americas too.

Bad, but not the same thing.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Nov 8th, 2007 at 11:41:51 AM EST
[ Parent ]
give the war enough time to work up a good head of dolchstosslegende and the economy a weimaresque slump, and you'll have the kind of conditions where they get the popular support they need to rise to the top.

of course, a million plus dead in iraq isn't an insignificant number either, even if they've been hesitant to apply those methods at home to date.

by wu ming on Fri Nov 9th, 2007 at 04:30:28 AM EST
[ Parent ]
But the noise machine needs to start blasting the message now, not after the levees break. So that people have useful memes in their heads when the dominant paradigm is shown to be lacking.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Nov 8th, 2007 at 11:21:51 AM EST
[ Parent ]
I agree about the opportunity. A shake-out isn't just likely, it's necessary. I'm certainly not going to shed tears if the Wall St Mob finds itself out on its ear. With the predators diminished, sustainable prosperity becomes that much more possible.

But we don't - yet - have a leader able to turn the shake-out into something positive. And we don't have anything like the media access needed to push an alternative view.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Nov 8th, 2007 at 11:49:37 AM EST
[ Parent ]
I just don't see Wall Street being so important.  This whole episode is little more than Wall Street having its once-per-decade psychodrama.

I still don't believe this is going to get very bad for Average Joe.  To be sure, a recession means some people are out of work.  (I'm sticking to my recession prediction, but I'm also sticking to my view that it's not going to be a very bad one.)  Many of them will be working people who weren't engaged in the psychotic behavior of the last several years.  And that's awful.  But a lot of this is going to be little more than Wall Street bigwigs losing their asses because they were doling out $500k loans to people earning $40k per year.  "What could go wrong?"

Finance may account for a large share of GDP, but falling values in that sector will provide incentives to move one's money into other (more productive) sectors.  And that's helped by the falling dollar, which is finally moving our trade deficit in the right direction.

It's entirely feasible to me that the losses in the finance sector could be mostly offset by gains in trade.

Again, mild to moderate recession.  House prices are crashing at much faster rates than anyone seemed to guess, which is a good thing, since it suggests that homeowners who need to sell aren't hanging on for dear life hoping to turn a profit.  It means we're not prolonging the inevitable, and we'll be able to get our shit back together much quicker than one might have feared.

It's a bit weird.  My reading of everything that's happening right now is that it's roughly as I would've expected, albeit a bit late (I owe wchurchill a pint), but it's happening much faster.  (Once more, if we Yanks get credit for nothing else, we get credit for doing things big.)  Speed can make it seem more frightening, but I think it's a good thing.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Nov 9th, 2007 at 11:37:14 AM EST
[ Parent ]
This is in reference to several of your comments. You are quoting the numbers from the current federal government. They are incorrect - to put it euphemistically.

Unemployment is over 12%. They don't count the people who are not getting UE benefits. Inflation is over 10% by the CP index as it was defined before 1982. This means that all of the GDP and related data is actually negative. MP3 ran at an annualized 15% for November, all because the money machine is running overtime to bail out the investment houses via federal bank loans.

If the financial system only gets constipated by fear of the level of fraud at their erstwhile partner's establishment, it may be that there will be a mere contraction. If people go to the vault and find it empty, then there will be dire consequences for the U.S. and associated economies. In either case the people that will be hurt the worst will be the people making $40k, whether they tried to buy a million dollar condo or not. Your comments do not imply much sympathy for them.

Yes, it is happening fast. That's what happens when the dam bursts. Trade won't solve the problem. Very few people need anything that the U.S. produces nowadays. Better to look inward for solutions, and the only ones that will work are political.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sat Nov 10th, 2007 at 12:50:24 AM EST
[ Parent ]
No, my comments don't imply much sympathy for anyone in the housing market.  It was a giant Ponzi scheme.  I know the popular thing is to blame the realtors and lenders, -- and I blame them, too -- but let's stop pretending that many homeowners were anything other than greedy morons.  They were given a lot of rope, and they hung themselves with it.  Their irresponsible borrowing has pushed millions of younger workers out of the property market for what may still wind up being years to come.

Really, it's more the $80-100k/year crowd than the $40k/year crowd.

I'm not at all sympathetic to the upper-middle class, because it is a class of spoiled brats.  As spoiled and greedy as the wealthy.  These are the people -- largely Boomers -- who bought into the Reagan-Bush fairy tales of Supply-Side economics, who jumped on board when that crowd was demonizing the working class and promising that tax cuts would pay for themselves.  It's the crowd that bought into the psychotic idea of Saddam Hussein attacking us with a nuclear weapon, when any sane person knows we could blow the entire Middle East off the map if we truly wanted to.

It's the Faux News crowd.  The crowd that thinks Iran is our enemy, despite Iran helped us after 9/11 (and despite Iranians holding candlelight vigils in the streets of Tehran after the attacks).  The crowd that spent three years obsessing over Bill Clinton's penis.  The crowd that thinks missing white women and talentless idiots like Britney Spears are more important than global warming and credit-market crises on the news.

I'm always reminded of Matt Taibbi's description:  The Culture of Emboldened StupidityTM.

As for your numbers on the economy, I don't know where you get them.  And, as someone who actually, you know, helps produce those numbers for a living, I'm reasonably comfortable in saying that you're wrong.  Were unemployment above 12%, it would be impossible to hide, and you'd see enough whistleblowing to deafen half of Washington from the agencies involved in it.

And let's keep something else in mind:  Growth in M2 and M3 is not at all out-of-line with other countries/areas, including Canada, Australia, Britain and the Eurozone.  I know everyone wants to see some sort of grand conspiracy in M3, but it's just not there.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Nov 10th, 2007 at 01:31:25 PM EST
[ Parent ]
Younger workers and the working class.  How the hell is an auto mechanic or a carpenter ever going to buy a house?  I have little sympathy for a reason.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Nov 10th, 2007 at 01:37:56 PM EST
[ Parent ]
Unemployment is over 12%. They don't count the people who are not getting UE benefits. Inflation is over 10% by the CP index as it was defined before 1982. This means that all of the GDP and related data is actually negative. MP3 ran at an annualized 15% for November, all because the money machine is running overtime to bail out the investment houses via federal bank loans.
Sources?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sat Nov 10th, 2007 at 02:05:03 PM EST
[ Parent ]
There are no sources, because it's all a crock of shit.

By the way, overlooked in all of the panic in our business media and stock exchanges these last couple of weeks was the fact that productivity growth in America jumped to 4.9% in Q3.  Real hourly compensation was up 3.1% overall, and 2.7% in nonfarm business.

I'm going to ask again:  Why have interest rates been cut seventy five basis points since September?

Someone's got to tell me how this possibly amounts to anything other than a much better picture than we could've expected, or else these rate cuts are complete and utter horseshit.


Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Nov 10th, 2007 at 11:18:17 PM EST
[ Parent ]
I guess paul's point is that inflation is grossly understated. This would be consistent with real GDP growth being overstated, which I think it is because I  don't believe in hedonics. Anyway, paul's source seems to be

And I think the lowering of interest rates is an attempt at jumpstarting the credit engine once again, but it doesn't seem to be working.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sun Nov 11th, 2007 at 03:21:25 AM EST
[ Parent ]
This guy also reckons the federal budget deficit is $4.6tn, which the national debt up to $54.6tn.  Come on, Mig.  You don't suppose it might be a result of John Williams trying to get people to buy his reports and advice, do you?

Why would you include future SSA liabilities in a present-day deficit figure?  (Lift the cap on payroll taxes, and that figure is wiped out.)  I, further, don't accept the premise that these are unfunded liabilities, nor do I accept the premise that the projections on these liabilities are built on solid assumptions.  This clown wants to use government stats when they suit his political and financial agenda, but call them into question when they don't.

And this is the same game the Republicans and their little prison bitch, Joe Lieberman, play when they try to convince us that Social Security is on the verge of collapse:  Take the future obligations, cram them into present-day figures, and hope it so thoroughly scares Joe Sixpack that privatization is on the table.

I can get on board with the CPI understating inflation a fair amount.  (That graph shows 6%, not 10%.  Even deducting the necessary portion of real GDP, it wouldn't qualify as a recession.)  6% is still too high.

Are there any other sources?

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Nov 11th, 2007 at 11:05:01 AM EST
[ Parent ]
the "6%" figure is "pre-Clinton" era. The 10% is not on the chart, but is figured from pre-Reagan CPI methodology.

Williams' numbers seem grotesque, but that is because we are the frogs being slowly boiled. Now the underlying issues have reached the geometric progression stage. Jerome brings up examples constantly.

Drew asked about the .75 interest rate drop in the last few months. It's a desperate attempt to keep the financial institutions working their Ponzi scheme - nothing more. It's another cycle of the virtual generation of money, and it, plus the 200 billion released by the Fed bank last month, are why M3 is jumping.

The problem with saying that removing the cap on SS contributions will lower the debt figure in short order is the political reality of actually doing that. It's true that one part of the solution to many financial issues in the U.S. is to squeeze the super-rich. Who's going to do it? Meantime, they don't know how to do anything except try to shill the system.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sun Nov 11th, 2007 at 03:24:16 PM EST
[ Parent ]
from a previous comment. Reread Williams' predictions from December 2006. Tell me where he was wrong and by how much. My recollection from nearly a year ago was that Jerome, Williams, and very few others would have predicted these kinds of problems for 2007 - maybe Fleckenstein. I won't include myself, because I'm a Marxist, and I've known that we were headed here for many years.

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Sun Nov 11th, 2007 at 03:29:31 PM EST
[ Parent ]
According to W. John Williams, an economist who runs a site called Shadow Government Statistics, here are the relevant numbers:

                  Eight Levels of Inflation
         Annual Inflation for June to September 2007
       Measure                                     Jun    Jul    Aug    Sep  
       I.1 Core PCE Deflator                   1.9%   1.9%   1.8%   n.a.
       I.2 Core Chained-CPI-U                  1.8%   1.8%   1.7%   1.7%
       I.3 Core CPI-U                          2.2%   2.2%   2.1%   2.1%
       I.4 PCE Deflator                        2.3%   2.1%   1.8%   n.a.
       I.5 Chained-CPI-U                       2.3%   2.1%   1.8%   2.3%
       I.6 CPI-U                               2.7%   2.4%   2.0%   2.8%
       I.7 Pre-Clinton CPI-U                   6.1%   5.7%   5.4%   6.1%
       I.8 SGS Alternate Consumer Inflation   10.3%  10.1%   9.9%  10.4%

"As suggested by the SGS-Alternate GDP, an annual third-quarter contraction of roughly 2.3%, the same as in the second quarter, is more in line with underlying fundamentals."

"SGS-Ongoing M3 Annual Growth Tops 15%. Subject to tonight's release of the large time deposits at commercial banks for the last week in October, the SGS-Ongoing M3 estimate of October annual growth tentatively is at 15.2%, the highest level since August 1971 (closing of the gold window), up from 14.7% in September and 13.9% in August."

"SGS" figures are explained on his site, but, essentially, they mean data based on the CPI format previous to 1983.

Here are some interesting excerpts from his monthly report of December 2006:

"The U.S. economy and financial markets face significant peril in 2007, with the dollar sitting on the brink of a major collapse. The positive 2006 U.S equity markets and reasonably tranquil credit markets belie the pending turmoil that already has been set in motion by a rapidly deepening inflationary recession and exacerbated by the de facto long-term insolvency of the U.S. government.

"Financial concerns in the year ahead should become dominated by growing recognition of a severe structural recession that is beyond traditional remedies, high inflation against which the Fed will appear impotent, and a sharp loss in the foreign exchange value of the U.S. currency. In conjunction with the inflation woes, the dollar crisis will lead to significant loss in the greenback's global purchasing power.

"This environment will not be a healthy one for equity and bond prices, as the dollar's weakness increasingly will mirror the flight of foreign capital and liquidity from the U.S. markets. On a financial-weighted basis, the dollar has the potential to lose more than 30% of it value. Gaining from these difficulties will be the precious metals, particularly gold, which has the potential easily to push above $1,000 per troy ounce in the year ahead. Enhancing the demand for that safe-haven metal likely will be continued deterioration in the U.S. and global political environment.

"Ultimately, the current circumstance will evolve into a hyperinflationary depression. Although such is not likely until the end of the decade, that financial end game for the current markets will tend to come sooner rather than later and will break with surprising speed when it hits."

And some more:

"Recession Recognition Likely in 2007. The 2005 to 2008 recession is getting worse, and continues to be reflected in a number of key economic series, ranging from retail sales to the purchasing managers survey, which showed an outright decline in November manufacturing activity. The various employment indicators remain in deterioration, while payroll growth broadly remains statistically indistinguishable from contraction.

"The U.S. economy is in a deepening and protracted recession that likely will endure through 2007 and into at least 2008. With recent economic history properly accounted for, this downturn is the second leg of a double-dip recession that began with the downturn in 2000. The economic contraction is structural in nature, driven by the loss of production jobs to offshore manufacturing facilities in recent decades.

"The effect of this structural change is that most consumers are unable to sustain adequate income growth beyond the rate of inflation. The only way that personal consumption -- the dominant component of GDP -- can grow in such a circumstance is for the consumer to take on new debt or liquidate savings. Both those factors are short-lived and have reached untenable extremes.

"The federal government and the Federal Reserve also are in untenable positions, with standard economic stimuli unavailable. From the standpoint of the federal government, traditional fiscal stimulus in the form of tax cuts or increased federal spending have reached their practical limits with the actual annual budget deficit running out of control at $4.6 trillion per year (see this month's Reporting/Market Focus).

"From the Fed's standpoint, it can neither stimulate the economy nor contain inflation. Holding or lowering rates will do little to stimulate the structurally-impaired economy, and raising rates may become necessary in defense of the dollar. Similarly, raising rates will do little to contain a non-demand driven inflation, such as seen in the current circumstance that is so heavily affected by high oil prices."

And one more:

"Of some concern, annual M3 growth is accelerating, picking up to 10.8% in December from 10.4% in November. Such is enough to begin raising issues of inflationary pressures from excessive monetary growth."

I suggest that his predictions are close enough to current reality to qualify his work as worthy of a hearing.  In some previous comments I have discussed the concurrence of his model with specific examples such as the prices of postage stamps and gasoline.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sun Nov 11th, 2007 at 03:14:22 AM EST
[ Parent ]
We shall see.

The history of central bankers is that they'll do their best to bail these fuckers out. Thus the ECB and the Fed both pump billions of liquidity into the system, or a Greenspan engineers a bailout of LTCM. Hell, they'll even bail out the small fry.

Trust me, no banker at Goldman Sachs is going to have to sell his condo in Vail.

Who said there was no honor among theives?

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Nov 8th, 2007 at 11:45:41 AM EST
[ Parent ]
They sure deserve to be.

How the Hell did anyone get the idea that rating should be done by companies?

It sounds like a perfect job for government.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Nov 8th, 2007 at 03:39:50 PM EST
[ Parent ]

How the Hell did anyone get the idea that rating should be done by companies?



Money is a sign of Poverty - Culture Saying
by RogueTrooper on Fri Nov 9th, 2007 at 05:22:22 AM EST
[ Parent ]


We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Fri Nov 9th, 2007 at 05:29:58 AM EST
[ Parent ]
Don't you understand?

Companies providing ratings are an example of the Private sector creating Wealth! (literally....)

Government providing ratings imposes an unacceptable Public Sector cost burden imposed upon Wealth Creators.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Nov 9th, 2007 at 05:51:30 AM EST
[ Parent ]
Whatever Atlas is holding this financial mess, it is gonna to shrug soon .
by das monde on Fri Nov 9th, 2007 at 06:56:33 AM EST
[ Parent ]
BBC NEWS | Business | Barclays denies bad debt rumour
Barclays has denied rumours it is about to reveal a $10bn (£4.8bn) exposure to US mortgage bad debt.

The speculation saw shares in the banking giant plunge 9% during Friday trading, and they were at one point even temporarily suspended.

Barclays denied the rumours, saying they were "unsubstantiated", and its shares recovered some ground to end the day down 2.4% to 474.50p.



Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Fri Nov 9th, 2007 at 05:48:19 PM EST


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