I love it when people who should know better say stupid things. Professor Nicholas Bloom, for example. “We still don’t know the value of the toxic assets central to the banking crisis.”
Professor, there is no market for those assets. Their value is currently zero. Hence, the word “toxic”. No one has proposed a mechanism to remove their toxicity, because that toxicity is holistically contained in the design and structure of the instruments themselves. IT CANNOT BE REMOVED. Due diligence would have to be performed on each and every loan in each and every bundle that was securitized and sliced into bonds. A new, responsible rating would have to be applied to the parts and to the whole. The bond tranches, their prices and their promised returns would have to be reassembled, using the new ratings. Even if this were theoretically possible, lawsuits would prevent it.
Derivatives are a dangerous game. Deregulated, they quickly become trash. Business school professors need to start educating their students about this fact. Read Steinherr, Partnoy and Das.
Now, Geithner is desperately trying to inflate the value of these tumors from zero to some agreed-upon future market price by GUARANTEEING AGAINST LOSSES, and subsidizing leveraged risk. Therefore, ANY value the assets acquire will be artificial, while the fundamentals of the assets remain toxic. In other words, it’s short-term game time, again. This is beyond corrupt. It’s ‘pay no attention to the man behind the curtain’ time. Geithner is a fraud, committed to fomenting lies.
Most importantly, though, what the public is being prevented from doing is even examining the assets in detail, to see the nooks and crannies, the clever little options, be they American, Bermudan, or otherwise. We don’t know how many there are, or on whose books they lurk. That’s what the bailout of Bear was intended to prevent. Transparency. The failure of Lehman threatened to provide transparency, and the market reacted with horror.
But transparency is the only thing that will restore confidence and the only path to long-term health.
Lastly, false declarations of imminent recovery, like the one made by chief dissembler Larry Summers, or deceptive stress test results or earnings reports provoke the fear of missing the profit opportunity of a market bottom, and the bump up to the strike price that sellers desire to lock in gains. Banks are desperate for capital. Bear market rallies, with the government at your side, are useful in that regard.
— joe
7.4.09
On Larry Summers
From Glenn Greenwald writing for Salon this past weekend:
White House officials yesterday released their personal financial disclosure forms, and included in the millions of dollars which top Obama economics adviser Larry Summers made from Wall Street in 2008 is this detail:
Lawrence H. Summers, one of President Obama's top economic advisers, collected roughly $5.2 million in compensation from hedge fund D.E. Shaw over the past year and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations. . . .
Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form.
That's $135,000 paid by Goldman Sachs to Summers -- for a one-day visit. And the payment was made at a time -- in April, 2008 -- when everyone assumed that the next President would either be Barack Obama or Hillary Clinton and that Larry Summers would therefore become exactly what he now is: the most influential financial official in the U.S. Government (and the $45,000 Merrill Lynch payment came 8 days after Obama's election). Goldman would not be able to make a one-day $135,000 payment to Summers now that he is Obama's top economics adviser, but doing so a few months beforehand was obviously something about which neither parties felt any compunction. It's basically an advanced bribe. And it's paying off in spades. And none of it seemed to bother Obama in the slightest when he first strongly considered naming Summers as Treasury Secretary and then named him his top economics adviser instead (thereby avoiding the need for Senate confirmation), knowing that Summers would exert great influence in determining who benefited from the government's response to the financial crisis.
Enough said.
— Hilary Collins, PA
How are Lawrence Summers' relationships with DEShaw, other hedge funds and banks, different from Dick Cheney's relationships with Halliburton, the oil companies and the defense industry?
— Robert Henry Eller, Milan, Italy
Summers is just one of the academics who both fueled this 40 year ponzi scheme to make MBAs from elite universities like Hrvard and Penn Wharton school the kings of the world.
what did this lockstep army of academics get? money, tenure book deals but adulation fo the crowds. They wanted that time on the stage
The biggest disappointment of this entire meltdown is the duplicity and greed of colege proessors.
they committed the age old sin of lying to their students for personal gain.
shame
soon the entire extent of this corruption of university faculties will come to light.
it will include their complicity in the securitization of school loans, software deals, on line universities you name it .
but it was in their books that they lied about our american history our constitution our heritage that they had the most damage.
— Publicola, Philadelphia
Why shouldn't a brilliant, superbly-connected economist monetize his intelligence?
The real issue with Larry and with too many of Barack's brilliant team is that they are financiers - not industrialists. That's the first half of their problem.
Their fixes for companies and banks are to muck with their balance sheets.
What is needed are jobs. Well-paying. Private-sector (or, at least, at the public-private interphase - like utilities).
Nothing that's being done - other than flooding the economy with money to get people and companies to buy things - is retaining or creating jobs.
The second half of their problem is that they believe they can socially engineer. Green cars. Green energy.
Yet, they deliberately avoid looking at the most successful, economically validated, examples of each - both, actually, in Europe.
France, for nuclear energy.
All of Europe, for a simple gas tax.
Creating, on a large competitive scale, jobs where people make or do things that other people willingly buy and use requires an intelligence akin to - perhaps even beyond - investment banking.
The social engineering? They will figure out what they actually need to do shortly before the 2010 election.
Or shortly after.
— W in the Middle, New York State
All this was predicted and predictable
The insiders are still inside and the present administration policies will increasing reflect their desire to serve their real and future employers. Representation of Americans when it actually happens is just a coincidence or collateral damage to their real representation of themselves and the power elite.
During each and every American war (with the possible exception of the Revolutionary War when the new colonial government was broke) America's entrepreneurs, swindlers, thieves, crooks, connected insiders, elites, politicians and some military leaders did what they really do best: steal ill-gained wealth while America's fighting men and women sacrificed their lives for their economic benefit.
That ill-gained wealth made millionaires out of people who care little about American values, American soldier lives and less about whether America even survives. (A good example of the above is found in Chapter 18, Corruption-Stanton Replaces Cameron, Abraham Lincoln, The War Years, V. 1, Carl Sandburg, Harcourt, Brace & Company 1939.)
But similar information surfaced after WW I, during WW II and then almost continuously as the military-political complex became a major component of our economy. The war in Iraq is just the current version of those in power stealing as America's soldiers have their lives stolen.
So we will see more war cries from this administration (think North Korea and its little Freudian missile)about everything as we have done in the past. But these advisors, insiders, etc. are now double treasonous in that they seek to ensure their own economic advantage while America is at war.
The double treason is based on their their undermining the economic stability for their own self-interest of America as they undermine America's military success by allowing and permitting waste and corruption in the provision of war materials, poor contracting quality and no-bid contracting to favorites and friends.
Senator Henry Charles Van Wyck said during the Civil War:
"The soldier who, bourne down by disease and overcome with fatigue, is found sleeping at his post, you punish with death, while the miscreant who holds his festival at this carnage of blood, you treat with deferential respect. Do you say Government cannot banish treason and punish crime?"
His statement came after a detailed study of multiple cases of fraud, delivery of guns that misfired and blew off thumbs, of delivery of horses that were so sick and diseased that they had to be shot, both examples being sold to the government at above market or any reasonable competitive prices, where no one identified as being part of the fraud, misrepresentation and providers of unacceptable goods was punished. Little of the ill-gained wealth was recovered.
The innocent died and the phony patriots got rich.
Sound familiar? This particualr individual's economic self-interest and future is being guaranteed every day. But instead of a subway pass to get to Wall Street, he gets paid a fabulous salary and the deferential treatment mentioned by Senator Van Wyck.
In the past, America could afford a little inefficiency and waste. Now that pattern is putting the last nails in our coffin. 1% of the population owns over 35% of the total wealth of America and the top 25% owns over 85%. Not much left for the 80% who are losing their homes, jobs, medical care insurance and opportunties to go to college. And yet the greed goes unchecked and America's position falters.
Who is America's Nero? Who can even afford fiddle lessons? How many fires, floods, hurricanes and wars do we need to wake up?
Or do we just roll over and let the thieves have it all?
America's history is replete with commissions, studies and reports of this unpatriotic, immoral, illegal, undemocratic and damning practice during and after each war.
The Civil War was the turning point
— ed g, Warwick, NY
During each and every American war (with the possible exception of the Revolutionary War when the new colonial government was broke) America's entrepreneurs, swindlers, thieves, crooks, connected insiders, elites, politicians and some military leaders did what they really do best: steal ill-gained wealth while America's fighting men and women sacrificed their lives for their economic benefit.
That ill-gained wealth made millionaires out of people who care little about American values, American soldier lives and less about whether America even survives. (A good example of the above is found in Chapter 18, Corruption-Stanton Replaces Cameron, Abraham Lincoln, The War Years, V. 1, Carl Sandburg, Harcourt, Brace & Company 1939.)
But similar information surfaced after WW I, during WW II and then almost continuously as the military-political complex became a major component of our economy. The war in Iraq is just the current version of those in power stealing as America's soldiers have their lives stolen.
So we will see more war cries from this administration (think North Korea and its little Freudian missile)about everything as we have done in the past. But these advisors, insiders, etc. are now double treasonous in that they seek to ensure their own economic advantage while America is at war.
The double treason is based on their their undermining the economic stability for their own self-interest of America as they undermine America's military success by allowing and permitting waste and corruption in the provision of war materials, poor contracting quality and no-bid contracting to favorites and friends.
Senator Henry Charles Van Wyck said during the Civil War:
"The soldier who, bourne down by disease and overcome with fatigue, is found sleeping at his post, you punish with death, while the miscreant who holds his festival at this carnage of blood, you treat with deferential respect. Do you say Government cannot banish treason and punish crime?"
His statement came after a detailed study of multiple cases of fraud, delivery of guns that misfired and blew off thumbs, of delivery of horses that were so sick and diseased that they had to be shot, both examples being sold to the government at above market or any reasonable competitive prices, where no one identified as being part of the fraud, misrepresentation and providers of unacceptable goods was punished. Little of the ill-gained wealth was recovered.
The innocent died and the phony patriots got rich.
Sound familiar? This particualr individual's economic self-interest and future is being guaranteed every day. But instead of a subway pass to get to Wall Street, he gets paid a fabulous salary and the deferential treatment mentioned by Senator Van Wyck.
In the past, America could afford a little inefficiency and waste. Now that pattern is putting the last nails in our coffin. 1% of the population owns over 35% of the total wealth of America and the top 25% owns over 85%. Not much left for the 80% who are losing their homes, jobs, medical care insurance and opportunties to go to college. And yet the greed goes unchecked and America's position falters.
Who is America's Nero? Who can even afford fiddle lessons? How many fires, floods, hurricanes and wars do we need to wake up?
Or do we just roll over and let the thieves have it all?
America's history is replete with commissions, studies and reports of this unpatriotic, immoral, illegal, undemocratic and damning practice during and after each war.
The Civil War was the turning point
— ed g, Warwick, NY
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Newspapers vs. Google vs. Newspapers… Back when I was a journalism student in college park (umd), Dr. Petrick told us someday we would get our newspapers over the tube and could even talk back to it. (!!!) The loss of a physical newspaper was expected. Good things about it, right upfront. No more black ink on your fingers, no more trees going down, no more gas used to deliver it.
Of course, it’s so much more than that. We lose editors. Editors who shape content, as in what gets on the frontpage (say, 911) and what gets buried (say, the holocaust through the early 1940’s). In full health, a big strapping paper was a big strapping news gathering machine, reporters stationed in far-flung places who knew the area they covered, the culture, and how it all might fit into the grand puzzle. But those types of correspondents have been drying up for at least the last decade, boiling down to the few hardboiled, the few embedded glams.
Worse, wire services have been bought up, shamelessly spun. UPI, now a Rev. Moonie operation. But et tu, AP? Faxes from the far right have been feeding Congress since the 90’s, posing and accepted as gospel. Rupert Murdoch’s Faux News now owns The Wall Street Journal. So the crud has been eating away at journalism in a big MRSA way. And, as science warns us, corporate pork farming is dangerous to humans.
Radio: deliberately dominated by the far right. Clearchannel bought up the majority of stations and the FCC changed the rules that protected us from such vultures. Who listens to it? Truck drivers, night watchmen… The ones who turn on FOX news when they get couch-wise with a brew.
And then we have THE INTERNET. Shiny! Ruled by their own thirst and hunger, individuals used it to sort through the dark wall of the Bush years. We got it right on 13 Myths because we could search and connect directly to sources. Some even connected to us. Sure, the Free Republic has its few, ready and eager to be part of the disinformed, willing to turn from truth and fair and good just so Jaysus might return to save them (and annihilate you)… But there’s also Talking Points Memo, which brought down Gonzo and helped George Allen bring his own veryself to ruin. Buzzflash has been tireless. Wateringholes formed from e-mailers who formed into e-lists… Because folks began checking things out.
Thank the gods, Google was there to search. But those searches, imho, have been harder to negotiate, less able to help penetrate the wall of late. Interested parties buy up search words, saturate and drown information. And — the biggest potential for suffocation — who chooses what stories go up on the google news page? That’s the power google is capable of having over news. The power of an editor.
Thus we become our own editor. And just at the time that the good old liberal arts education — which is what it takes to even begin to see your way to how things might connect; to begin to understand how much there might be involved in knowing, and in knowing that you can never begin to know all of it; the humility such knowing of your own limits which that necessary enlightenment might bring — our students have been taking business degrees. MBA’s. Pure tech…
I remember reading Reader’s Digest in a doc’s waiting room, a story about a insightful man in an ER who made a casual poetical comment — something from the Bard or maybe Moby Dick or Robbie Burns — to the tech who was taking his vitals. Next thing he knew, the psychiatric staff descended on him. Ignorant of his casual insightful aside, they thought he was suicidal.
Interesting turn of plot, all this. Who will write the history? Will any of it have existed at all?
— deborah conner