Speaking of the inequality of wealth and how this is a bullshit system...
https://www.redcafe.net/threads/us-exam-cheating-scandal.445768/
https://www.redcafe.net/threads/us-exam-cheating-scandal.445768/
Wealth & Income Inequality
- Thread starter Eboue
- Start date
But not everything done with the bailouts had to do with a potential run on the banks right? And if the structure was such that a run on the banks was both so inevitable and so damaging then clearly the system is fundamentally flawed and needs to be changed not preserved.
Countrywide and the mortgage lenders wouldnt cause a run on the banks. Winding down other financial institutions like AIG-FP by not guaranteeing 100 cents on the dollar while still protecting AIG the insurer wouldnt have caused a run on the banks.
To even reduce everything to "the banks" is confusing when many local, state banks and credit unions were in zero danger at all while hundreds of other small banks were allowed to fail. The problem for me was with a lot of financial servives entities and how they could have been dealt with differently like Countrywide and how BoA just got away with not being responsible for Countrywides hustle but profited from it.
Also all of that is in addition to how they also needed to reinstitute regulations and change the structure instead of just seeking to preserve the status quo which wasn't done.
The financial system is intrinsically interlinked. AIG sold CDS to banks. If AIG failed, the corresponding hedged risk most banks have would move into being open positions....one which was pretty much disastrous given the mortgage market. Banks would have to dig deep into their capital for short term liquidity. And if there was even a whiff that BofA will go the way of Lehmann, it will trigger a withdrawal frenzy not just to BofA, but to other banks too...as the market would have lost faith in banks. Yes, the leveraged structure was flawed and it needs to be fixed....though not by tearing everything down and restarting from scratch. It's naive to even assume that is an option available. In a stable market situation it can be contained to a particular financial institution, but in a crisis...it may well turn out to a full blown panic, which needed to be prevented. And it was.
1. AIG is not the same as AIG-FP, you keep assuming they are the same along with tons of other assumptions that are just getting tiresome because all you do is repeat the same cliche bullshit with no supporting evidence.
2. Define wtf you even mean by "most banks" and provide statistical data supporting your claim since as I mentioned many community banks and credit unions had zero risk and many other smaller banks were allopwed to fail.
3. You keep bringing up the BoA example as a strawman, ignoring everything I posted and then fallaciously extrapolating your take on BoA to "other banks" again with zero evidence
4. "the market would have lost faith in banks." go ahead and provide your "data" supporting this vague assertion
5. "tearing everything" more ignorant hyperbole that isn't related to anything
6. "it may well turn out to a full blown panic, which needed to be prevented. And it was." Data, evidence supporting this doomsday claim? Data, evidence supporting your assumption that only the precise Paulson plan could have possibly prevented such a thing? Data, evidence that all these counter-parties had to be paid back 100 cents on the dollar? Data, evidence supporting your implications that even attempting to save citizens from the bottom up would have automatically triggered this doomsdat scenario as you imply?
You literally haven't offered anything but the same basic debunked PR campaign from Paulson in 2007. I mean you can't even write without packing a paragraph full of meaningless buzzwords and catch phrases.
this is true and it's why despite your efforts this is all very pointless. it's not worth your time.
The vague Ritzhold article was your debunking?
And it's not really possible to explain how financial market works. The possibility of cascade and ripple effect should be obvious to anyone who has exposure in the industry. Asking for data just shows a basic lack of understanding of the system or it's pros and cons. No person who has practical knowledge would deny that or try to argue against it.
Let's call it a truce. I doubt either of us are getting anywhere here. I'm done here anyway.
Keep discussing, I like reading the posts.
The vague Ritzhold article was your debunking?
And it's not really possible to explain how financial market works. The possibility of cascade and ripple effect should be obvious to anyone who has exposure in the industry. Asking for data just shows a basic lack of understanding of the system or it's pros and cons. No person who has practical knowledge would deny that or try to argue against it.
Let's call it a truce. I doubt either of us are getting anywhere here. I'm done here anyway.
You were done when you actually argued that you didn't need to produce any data or supporting evidence to support the exact Paulson bailout because you claim it was "maintaining the status quo" (with the implication that the status quo was in any way desirable to maintain).
A completely irrational and flat out nonsensical argument considering everyone in 2007-08 knew the status quo was irrevocably broken. Greenspan even admits the status quo was a massive failure “I made a mistake in presuming that the self-interest of organisations, specifically banks and others, was such that they were best capable of protecting their own shareholders”.
I provided a lot of sources and there is literally hundreds of pages of data in the sources I already mentioned while you relied on the word of the single person who completely failed in his job to even understand what was going until it was far too late.
If anyone actually wants to learn more the info is there. Here is a letter posted on Freakonomics from 2008 for example:
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As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:
1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries “systemic risk.” The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America’s dynamic and innovative private-capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.
For these reasons, we ask Congress not to rush, to hold appropriate hearings, to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.
Why do I call this the consensus view? Well, the letter was signed by over 100 (and growing!) of the leading economists I know — including folks who have very different views about just what got us here — who vote left, right, overseas, or not at all. The core group includes folks you’ve already seen on this blog, including Anil Kashyap and Luigi Zingales, as well as the always-wise John Cochrane, Rob Shimer, and Paola Sapienza.
http://freakonomics.com/2008/09/23/economists-on-the-bailout/
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Then this piece shows the effect:
"I have a feature in the new issue of Rolling Stone called “Secrets and Lies of the Bailout,” which focuses in large part on the seemingly intentional policy of deception in the government’s rescue of the financial sector. The government didn’t just bail out Wall Street with money: It also lied on Wall Street’s behalf, calling unhealthy banks healthy, and helping banks cover up just how much aid they were getting in secret.
Proponents of the bailouts will say that whatever the government did, it worked. The economy didn’t collapse as it appeared it might in late 2008, and the stock markets are puffed up all over again, as financial companies in particular are back making huge profits.
But in the course of researching the magazine piece, we discovered definite victims of the myriad deceptions that became a baked-in feature of the bailouts. One of those victims was a southern investment broker who lost lots of his own money, lost money for family members who’d invested with him, and (maybe worst of all) lost plenty of his clients’ money, when he made investment decisions based on what turned out to be incomplete information.
If this particular broker had known exactly how far the bailouts reached, neither he nor his clients would ever have lost so much. But during the crisis it was decided, by people deemed more important than small-town investment advisers and their clients, that the full story of the bailouts didn’t need to be told."
https://www.rollingstone.com/politi...and-lies-of-the-bailout-113270/#ixzz2HIrDzuGl
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"The bailouts were certainly rammed down our throats under false pretenses.
But here’s the more important point. Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not. They were insolvent.
Tim Geithner falsely stated that the banks passed some time of an objective stress test but they did not. They were insolvent.
Both the creditors and the debtors were mortally wounded by the 2008 financial crisis. The big banks wouldn’t have survived without trillions in handouts, guarantees, loans, idiot-proof profits courtesy of the government.
The little guy hasn’t been helped since 2008. He has been left to suffer with his life-threatening wounds. See this, this and this.
So the government chose sides. The creditors were wiped out, just like a lot of Main Street was wiped out. In one sense, the government chose who would live (the giant banks and other bailed out and favored companies) and who would die (the other 99%).
But in fact, the big banks were no longer creditors after the 2008 crash. Specifically, the big banks which held the mortgages and the loans were wiped out.
The government moved the arms and legs of the big banks to pretend they were still alive … and have been doing so ever since. But they were no longer going concerns after they went bust.
https://ritholtz.com/2011/08/choosing-big-banks-over-little-guy-government-dooms-both/
Saying no to conspiracy theories also helps!
Frankly, all your posts do is convince me that capitalism doesn't work. If certain investors can take on risks without having to worry about failing because their losses will be offset by the government - that's not really capitalism. That's planned economy where certain players cannot fail.
If there was really no other option than a monumental government bailout then that's an epic failure of the entire system and it should have been scrapped and started from scratch somehow.
edgar is more effective at convincing people capitalism doesnt work than ill ever be
It doesn't matter if a bank has actual problems or not when it comes to a run, just the general thought that it does is enough to fold if clients withdraw their deposits, call more margin, etc. That was the immediate issue in the 2008 crisis, and that is the immediate issue in every banking crisis.
If you let AIG-FP die for example, and still extricate it from core AIG, then everyone has to start guessing who's the counterparty on AIG-PS's positions and what the impact will be on them. Because no one actually knows or can find out quickly enough, one decision seen as precautionary by any corporation out there might be "well, let's pull all our deposits and overnight repos that we have with major banks and just buy treasuries", and that's a run on the banks.
I know that the lead-up was rife with fraud, the solution was rife with self-dealing... but it doesn't mean that in one configuration or another, in Sept of 2008 you had to find a way to keep a majority of the banks running.
I've never supported the system or said it was not flawed. It needed a big overhaul and that really cannot be denied by anyone.
All I'm arguing is against the scrap/restart theory that somehow keeps finding its way in. You know there is no way to scrap the system, right? People who don't really know anything about the system are the ones who believe it can be torn down and rebuilt from scratch with no impact.
It just needs to be better regulated, possibly broken down to avoid the 'too big to fail' scenario again. Numerous measures have been taken since the crisis to prevent recurrence, but it still is not sufficient or properly targeted against the guilty parties. Lots more is needed here.
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1. Yes
2. You can't just scrap it. Same way you can't just scrap the US healthcare system.
Don't have time to get further into this atm but as the letter I posted from over a hundred of economists in 2008 says " Not every business failure carries “systemic risk.” The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise."
Do you disagree with that statement?
Its not guessing. Gov. could have provide guarantees on a number that was less than 100% but still greater than zero.
Again, I will simply go back to the letter signed by over 100 economists (and others I talked to that didn't even sign).
"For these reasons, we ask Congress not to rush, to hold appropriate hearings, to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come."
Do you disagree that appropriate hearings taking into account the collective information and opinion of dozens of the top economists would have been better than just pushing through the specific Paulson plan?
Lehmann was left to fail. Bear was forced to find a buyers. And in reality, not every institution was bailed out. Only those who were deemed to carry a systemic risk were bailed out.
It doesn't really matter. For investors, the only question would be "will there be a impact" If yes, they are likely to pull out money from banks. Nobody can really debate if the impact would be 10% or 40% and how that factors in. If I was a Bank of America customer and knew the bank was in trouble (doesn't matter how much or how significant) I'd move to get my money out. Same with other banks too. People know Lehmann collapses and BofA in trouble and not sure which other banks may or may not be impacted....safes to just their money out, right? It's a binary situation (to panic or not to panic).
I'll give you, this is debatable.
The short term lending rate shot up multifold drastically immediately post Lehmann collapse. There was acute and real possibility of a short term freeze which would be catastrophic and that needed to be avoided at all costs. And they only had limited time to fix it. Paulson and Bernanke believe there was a time sensitive element to the fix. The short term rates have to be bought down asap. The decision was taken for Federal funding to boost the immediate short term credit market.
Ultimately even after all these years and hindsight and rehashing, the market is still divided on TARPs effectiveness. It worked well in some way and failed in other objectives. A mixed bag of results, at best. Calling it a organized plan to defraud the poor should just be restricted to conspiracy websites.
Second time you said this crap. Completely disrespectful to respected Wall Street journalists like Kate Kelly and William Cohan who documented first hand what happened during Bears collapse and Larry Mcdonald who wrote a self-deprecating book about what he witnessed during Lehman's collapse and the government action. Yet you, mighty Edgar Pillow just dismisses these peer reviewed and respected accounts with your shit talking.
Tell you what, I dare you to put your real name ,title and the Wall Street entity you work behind this shit talk. Go tag them on twitter with your real name and title if you are going to engage in this Trump supporter level bullshit.
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I said that in response to your comment that Paulson did TARP to protect his pals in Goldman.
If we we're just debating pros and cons of TARP, I wouldn't have said that.
FFS go read those books before you talk shit. Paulson literally got on the phone with Dimon and some of the Goldman boys a few others and that is who came up with the bailout plan. They devised a plan that was intended to best protect their self-interest.
That is historical fact documented in the books I referenced. There is a reason that hundreds of economists were writing letters to Congress ffs because the bailouts were not some census plan of the nations best economists but rather a direct result of decisions made by people like Paulson, Dimon and others. Go read those books. And don't be trying to pull your strawman shit by reframing what i am saying as "intentionally trying to defraud the poor". If you can't understand the difference between what I am saying and your ridiculous red herring reframing then you really shouldn't even be debating this issue.
"As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan...
For these reasons, we ask Congress not to rush, to hold appropriate hearings, to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.
Why do I call this the consensus view? Well, the letter was signed by over 100 (and growing!) of the leading economists I know — including folks who have very different views about just what got us here — who vote left, right, overseas, or not at all. The core group includes folks you’ve already seen on this blog, including Anil Kashyap and Luigi Zingales, as well as the always-wise John Cochrane, Rob Shimer, and Paola Sapienza." -
"But in the course of researching the magazine piece, we discovered definite victims of the myriad deceptions that became a baked-in feature of the bailouts. One of those victims was a southern investment broker who lost lots of his own money, lost money for family members who’d invested with him, and (maybe worst of all) lost plenty of his clients’ money, when he made investment decisions based on what turned out to be incomplete information."
Go call all these people conspiracy theorists to their face or provide some evidence backing whatever your argument is but this is just ridiculous. Seriously Edgar, have you ever even taken a university level course in logic?
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Heck. So many families could have had their homes saved if the huge fines Goldman Sachs paid for example had been diverted to help them.
Perhaps this might provide more context. A first person summary of the meeting, I presume you're talking about.
http://archive.fortune.com/2008/12/12/magazines/fortune/3days_full.fortune/index.htm
I think after the Lehman bankruptcy we soon found out that there was no orderly way to fold and liquidate these banks, and that when people realized next that other banks all over were in the firing line (UBS, Merrill, RBS, Wachovia, and numerous others smaller globally) it added an urgency to the notion of just shoring it all up rather than facing multiple Lehmans at the same time.
It does seem that they could've squeezed the bank equity a lot more (because in many cases it was 0), but between Paulson and Geithner they were too buddy-buddy with the banks. That's obviously a failure.
As I've said before though, I'm just arguing here because a lot of people were suggesting that it would've been better to just let a bunch of the banks fold, and I don't think that works out the way some people are imagining. And trust me I have no love for the banks. My first reaction to hearing that a bank with bad assets is going under is "good, feck em". But if it looks like the system might fail I'd just rather just save them now, and find a way to feck them later. They missed the later fecking (the equity took no hits in many cases, and there wasn't enough investigation about fraud).
(I'd just note here also that as much as we might sometimes wish it was otherwise, being bad at business isn't a crime. So I don't think any deeper investigation would've found as many people guilty of fraud as some would wish)
Very fair post. Cheers. Regarding your first point, really we have to look at each individual case and analyze them separately instead of just grouping them all together no? I know the most about the Wachovia situation as I talked to people involved with that at the time and I think its illustrative of the broader problem with self-dealing as you put it.
Citi saw a way to get a backdoor bailout from taxpayers with Wachovia. They wanted Wachovia's assets and they were going to use FDIC to guarantee this deal. Very bad deal for taxpayers and Wachovia shareholders but absolutely great for Citi. But then Wachovia found a better solution - Wells Fargo stock swap deal - that required no government assistance. But Citi was so attached to the benefits they would realize they actually sued the government and Wachovia to try to force Wachovia to take a deal that was bad for both themselves and taxpayers. This really illustrates the problem with the bailout, these entities were still trying to find angles to profit no matter at whose expense - taxpayers, other shareholders, etc. So in the simply language of that letter, we really could have insured a well oiled financial system without bailing out all the bad actors and institutions. Also like the Rolling Stone article shows, there were actually a lot more victims of the bailout structure to benefit the elites than mot people realize.
Regarding the second bold, this is the awesome benefit of massive de-regulation and financial services influencing the laws with self-regulation bollocks - there simply aren't laws on the books to break because they pre-eliminated the regulations that should have existed in the first place (Thanks FSMA and CFMA). But even if we can't convict all of the crooks we can certainly make sure the goddamn taxpayers aren't responsible for their irresponsible and shady actions.
Not really but nice try (I am not talking about a single meeting but the extent of advice Paulson received almost exclusively from the C-level of the biggest Wall Street firms and thats it - they weren't listening to Levy's list of over a hundred top economists). You would already know this if you actually read sources before presuming and commenting
But hey you did reference an article by Cohan, the person you called a conspiracy theorist earlier.
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Not really. After Bear, Lehmann was already expected to be next in line to fail. Post Lehmann it would have been Merrill (expected to fail) and then JP Morgan (expected to take a big hit). Nobody could really predict how far or strung out this domino will fall, making it harder to consider it on case by case basis. It was a market wide event covering banks and other FI's.
We keep coming back to the same argument here. Were banks/FIs at fault? Yes. Can those banks/FIs be allowed to fail at that time? No
https://jacobinmag.com/2019/03/billionaires-political-influence-donations-conservatism
Fairly interesting piece on how the views of billionaires often tend to be distorted by a few prominent liberally-minded ones who prefer to be in the public eye, when most are in fact incredibly conservative and selfish.
Fairly interesting piece on how the views of billionaires often tend to be distorted by a few prominent liberally-minded ones who prefer to be in the public eye, when most are in fact incredibly conservative and selfish.
https://www.theguardian.com/us-news/2019/mar/28/san-francisco-gofundme-homeless-shelter-embarcadero
What a bunch of absolute cnuts
What a bunch of absolute cnuts
I'd like to thank this absolute piece of shite for making these public lies and false statements today. I will never shop at Home Depot ever again.
“Making Money is a Patriotic Act,” is notable for the self-refutation embodied in the rest of that opening paragraph. Its second sentence reads, “We have earned more money than we could have imagined and more than we can spend on ourselves, our children and grandchildren.” Then comes sentence 4: “But we have nothing to apologize for, and we don’t think the government should have more of our profits.”
https://www.latimes.com/business/story/2019-08-15/billionaires-oppose-taxes?
“Making Money is a Patriotic Act,” is notable for the self-refutation embodied in the rest of that opening paragraph. Its second sentence reads, “We have earned more money than we could have imagined and more than we can spend on ourselves, our children and grandchildren.” Then comes sentence 4: “But we have nothing to apologize for, and we don’t think the government should have more of our profits.”
https://www.latimes.com/business/story/2019-08-15/billionaires-oppose-taxes?
Why were you shopping there before?
EDIT: Also I checked the shareholders list and didn't find any shares under his name personally at this point. Maybe he uses an LLC or something, but not a giant holder at this point. Dunno if that assuages you, that you're giving money to the same pulverized group of shareholders that own most of the big corporations in the world, instead of Mr. Marcus.
Wouldnt it be funny if he died of heart disease
Because it was the closest store of that nature after a mom and pop store shut down. I'll just drive further now to avoid giving my money to them.
And if I knew the below about Home Depot previous I wouldn't have ever shopped there when they invaded the neighborhood. This is why its important for the business practices of these corporations to be exposed so conscientious consumers can stop giving them our money.
Also it would be nice if people like yourself actually read the entire article before commenting on it with things that are already covered in the article itself. It's why I post the links in the first place
"That brings us to Home Depot, the legacy of Bernard Marcus, who co-founded the company and from which he retired as chairman in 2002. Home Depot was a beneficiary of the Republican tax cut of December 2017, which was supposed to bring prosperity to all Americans. The company followed the tax cut with one of the biggest stock buybacks in corporate America, a $15-billion handout to shareholders.
Employees, not so much. The company said the tax cut allowed it to pay bonuses of up to $1,000 to its workforce, but these turned out to be largely chimerical. Only workers with 20 years of service at the company would get the full $1,000, which would work out to about 48 cents an hour for full-time work. Others would receive as little as $200. And it’s proper to note that one-time bonuses are no substitute for raises, which keep on giving."
You should probably not believe that.
Why?
The way they present their data doesn't really match other sources (e.g. CBO). In their research they made deliberate choices to get the result they wanted (e.g. they left out EITC). Its not that one can't justify these choices, but its unusual. There are also questions about their data for 2018. The official data isn't released, so they constructed this and so far its not entirely clear how they did that and how useful this is. That ignores more complicated discussions e.g. what effective tax rates had the US in the past. It is striking, just in line with their other recent work, that all these decisions align in a way to get the "perfect" result, that matches their political ideas.
They published all this buy spoon feeding it to sympathetic journalists and currently nobody can check their data/methodology in detail. That makes sense if your goal is advocacy, because the message is out and the public wont care about any qualifications/nuances that might follow in the future. It is rather poor form in terms of scholarly work. All of that is fairly common when politics and economics come together, but its still very questionable.
Saez and Zucman are political activists (they advise Warren) and they should be seen as such. There is nothing wrong with that, but they should be upfront about it and what it means for their work.
Fair enough.
I don't really have the time to devote to this post but in short
1. I hope you employ this same level of detailed scrutiny to all the biased papers that come out from Cato, the Kochs, the Hoover Institute, AEI and all the other ton of biased market fundamentalist think tanks and universities.
2. Please link where you got the information your post is based on so I can examine where you are getting your info from since you are not based in the US correct?
3. What is your point on the EITC?
When I was a single working parent also putting myself through University to earn my first degree I received EITC. I can assure you my full tax and fee burden (counting the impact of sales tax and other fees like DMV relative to income) was higher than Mitt Romney's in his published Presidential run years when I checked it - see when the biased conservatives ignore things like FEEs to the DMV or sales tax for working class and poor people they are obfuscating the true burden on the poor and working class to skew data to get their 'perfect result' as well.
So while there might be a few things to debate, its definitely not as problematic as the research coming out the other end and the heavily biased critique from selfish quarters that has made a habit over decades of skewing the public perception to benefit the superrich