Economic News

[Mal_Con]

Lehman Bankrupt + Merril bought by B of A for 1/2 price = we are so fucked!!!

[olyclimber]

less competition means better prices for everyone!

[STP]

The Glass-Steagall Act of 1933 was repealed when President Bill Clinton signed the Gramm-Leach-Bliley Act.

 

Some of the current problems are believed to be a result of the consolidation of investment, commercial banking, and insurance services.

 

Looks like more consolidation with JPMorgan taking over Bear Sterns and Bank of America with Countrywide and potentially Merrill Lynch.

[olyclimber]

I don't think the consolidation is the actual problem (though it is obviously negative for the consumer)! It is more of an artifact.

 

I think the problem was poor business practices and lack of oversight to the point where the federal government is having to step in and float these businesses so our economy doesn't collapse.

[olyclimber]

Its hard to believe that a company like Merril Lynch took nose dive into the shitter. This country is truly in bad economic turmoil. Anyone who doesn't recognize it as such is full of it. Addressing this should be the central topic of the presidential debates.

[STP]

This is all over my head but my meager understanding is that the trading of collaterialized debt obligations(CDOs)was mired in complexity. Yeah, it seems simple at face value, here's some mortages bundled together so that the risk is spread out and the sum result could be a productive investment. But it's like musical chairs, when the music stops (money flow) then someone's left standing up SOL.

 

We need transparency in government and in business. Mehr licht.

[Mal_Con]

The cause was simple, you should not loan money to people who cannot pay it back. The problem was that the poor underwriting was concealed from investors by bundling a bunch of bad loans and reselling them. Worked fine so long as prices kept going up but like all Ponzi schemes it was doomed to fail. Of course the ones at fault will skate leaving the rest of us to pick up the pieces. Chickens coming home to roost.

[STP]

So the root cause is greed?

 

I have my pitchfork. Do you have yours?

[dmuja]

The cause was simple, you should not loan money to people who cannot pay it back. The problem was that the poor underwriting was concealed from investors by bundling a bunch of bad loans and reselling them. Worked fine so long as prices kept going up but like all Ponzi schemes it was doomed to fail. Of course the ones at fault will skate leaving the rest of us to pick up the pieces. Chickens coming home to roost.

 

aka, 'unrestrained greed'

 

 

 

The Great Wealth Transfer - It's the biggest untold economic story of our time: more of the nation's bounty held in fewer and fewer hands. And Bush's tax cuts are only making the problem worse

 

The entire Bush economy has been nothing but a corrupt sham destined by design to benefit the few at the top and his friends and backers. From Enron to "oil for sexgate", from Katrena to Iraq, from fake insurance to phoney energy crises to rigged elections it's all been one big lie. McCain hangs with the same crowd and we (most of us) will continue to get fucked by them as long as they control the switches.

[prole]

The Glass-Steagall Act of 1933 was repealed when President Bill Clinton signed the Gramm-Leach-Bliley Act.

 

Some of the current problems are believed to be a result of the consolidation of investment, commercial banking, and insurance services.

 

You're on the right track. Deregulation resulting in the explosion of "exotic" financial instruments is the story that's (not suprisingly) still not being told by the lobbyists and business press that championed it.

[billcoe]

 

 

The sky may be falling

 

Largest bankruptcy ever:

"Lehman Brothers Holdings Inc. (LEH) filed for Chapter 11 bankruptcy Monday in New York, listing debts of $613 billion"

[prole]

Yeah Billcoe, keep up the doom and gloom scenario and people will start to believe it. Guh.

[JayB]

When you finance highly leveraged "long" positions in illiquid instruments with short term borrowing, you're pretty much toast when your access to short-term credit dries up. When the highly illiquid instruments happen to be composed of mortgages that both exceed the borrower's capacity to repay them, and the value of the properties that they were used to purchase - that drying up was just a matter of time. Pretty much the same story for every financial firm that's gone under or been bought out thus far, including FNMA and Freddie Mac.

 

Things won't bottom out until the underlying assets - houses and condos - find prices at which the rent they can generate will cover the debt required to purchase them. We're still a ways away from reaching those price levels IMO.

[prole]

Things won't bottom out until the underlying assets - houses and condos - find prices at which the rent they can generate will cover the debt required to purchase them. We're still a ways away from reaching those price levels IMO.

 

More foreclosures followed by the rise of a new slumlord/real estate speculator class? Yay?

[JayB]

More foreclosures, yes - absolutely. The Prime ARM/Option-ARM reset cycle is just getting started, and the dollar-value of these loans equals or exceeds Teh Suprime.

 

The magnitute of the credit contraction, and the number of bank failures that the second phase of the great real-estate cluster brings about is likely to be significantly greater than Teh Subprime gave rise to, since the amount of money that the folks who hold these loans set aside to cover losses on the said loans is way smaller than what they socked away to cover the carnage in their subprime portfolios.

 

However - I don't expect the number of slumlords to increase unless someone institutes rent controls, or other measures that guarantee that rental yields can't cover the total cost of owning the units that the bottom feeders buy at foreclosure auctions. You may, however, take some comfort in the fact that the distinction between "bottom-feeder" and "knife-catcher" will be a rather fuzzy one for quite some time. The only unknown is how many billions of dollars in welfare payments that the government will shell out to homeowners in an effort to put an artificial floor under prices.

 

As far as I know, they're out there bidding-down mortgage rates in the Ginnie/Freddie debt markets at this very moment.

 

 

[tvashtarkatena]

You camped in the Icicle for a month? Did you get up into the alpine?

[Hugh Conway]

The only unknown is how many billions of dollars in welfare payments that the government will shell out to homeowners in an effort to put an artificial floor under prices.

 

And how many billions the fed will lend to other businesses. Ahh....

[Choada_Boy]

Change!

[Gary_Yngve]

The only unknown is how many billions of dollars in welfare payments that the government will shell out to homeowners in an effort to put an artificial floor under prices.

 

And how many billions the fed will lend to other businesses. Ahh....

 

Exactly.. aren't the American automakers asking for something like $50bil?

[JayB]

You camped in the Icicle for a month? Did you get up into the alpine?

 

A bit for hiking and fishing, but not for climbing. Injuries, and the fact that we've been out of the alpine-climbing-as-a-couple game for a few years made cragging a much more pleasant option for all concerned.

 

Was more of a "shake off the East Coast and relax" trip than a hard-charging climbing trip, so reading, drinking, chilling with friends and family sort of trip - with a ton of fly fishing and a few days worth of kayaking mixed in, but the cragging that we did was pretty sweet.

 

We'll probably do some moderate snow-hike type Alpine stuff in New Zealand while we're their, and get back in the NW alpine groove a bit when we get back next summer.

 

 

[JayB]

The only unknown is how many billions of dollars in welfare payments that the government will shell out to homeowners in an effort to put an artificial floor under prices.

 

And how many billions the fed will lend to other businesses. Ahh....

 

Exactly.. aren't the American automakers asking for something like $50bil?

 

The funniest thing about this is that when they claim that they *need* public money to finance their retooling, they are more or less conceding that the money that these investments generate won't be sufficient to repay the debts. If it was, they'd be able to get private financing.

[tvashtarkatena]

Nice. What areas are you planning on hitting NZ?

[JayB]

We'll be in the central plateau in NZ, and probably won't be able to get away for more than 3-4 days at a time - so the climbing will probably be confined to whatever cragging's available in those parts, and some of the local volcanoes. Probably pegs the weak-and-lame-o-meter from a climbing standpoint, but the overall rationale for the trip is about the same as the stay in the Icicle. Flowers and bunnies and rainbows...

 

 

[mattp]

There's good cragging around Lake Taupo and the volcanos in Tongariro National Park are a lot like the Three Cinders, but slightly more exciting.

[Hugh Conway]

The funniest thing about this is that when they claim that they *need* public money to finance their retooling, they are more or less conceding that the money that these investments generate won't be sufficient to repay the debts. If it was, they'd be able to get private financing.

 

BREAKING NEWS: Federal government asks Goldman, J.P. Morgan Chase to lead $70 billion-$75 billion lending facility for AIG

 

makes GM look cheap.

 

 

 

not to long a drive to Raglan, pity about the flights to the S. Island. Check out the club fields around Arthurs Pass if they are open. Good, cheap, skiing fun. Might have a guide or two floating around if you are interested