Hello:

Now, I don't know what that means to YOU. But, to ME, it means that IF we let corporations get that big, and they fail, WE the TAXPAYERS get hurt. Seems to me that if we stopped them just short of getting too big to fail, and they fail, it's THEIR stockholders that get hurt - NOT us. That seems right to me.

Therefore, financial reform should include downsizing corporations that are too big to fail, to just the RIGHT size where it doesn't hurt us if they do fail. And, we need to prevent ANY corporation from ever getting that big again.

Is that wrong?

excon

Ah, just which particular companies are you theorizing about Exie? So many small businesses have already gone belly up in the last few years it's scary.

I can see clearing away some dead wood in the companies that are too big and also cutting back or totally eliminating a lot of the perks they get such as bonuses for just being the CEO, etc. I never saw that kind of yearly pat yourself on the back anyway. Why give Mr. Big the bonus and totally skip over the people who actually DO the work for the company? Why not just pay the people who actually work (and not just sit in an office pushing paper around all day for a few hours like Mr. Big does) the money they deserve for doing a good job.

Ah, just which particular companies are you theorizing about Exie? So many small businesses have already gone belly up in the last few years it's scary. G'morning, twink:

Well, I was just going to include banks, but AIG isn't a bank. So, the criteria I'm using is just "too big to fail", rather than what they, particularly, do. GM, for example, was deemed by some as too big to fail. Or, maybe we should just give up on the notion of "too big to fail" and just let ANY of 'em drop dead. But, I don't think THAT'S a good idea either.

I'm not talking about destroying them - just breaking 'em up. We broke the Standard Oil Trust up into about 37 companies, and they ALL did quite well.

excon

We already have antitrust laws on the book. They are enforcable .So I don't see a need for further law in that regard.

If the zombies were allowed to fail then we would not have been hurt any worse than we were when the GS exec embedded in the government decided it was a good idea to scare Congress into bailing the zombies out .

Sen. Dudd's new legislation would institutionalize too big to fail and all it's related moral hazards . Not only that ;but the bill allows the government to designate companies as too big to fail whether they are or not.What they will succeed in doing is creating the equivalent of Fannie and Freddie in every sector of the economy.

It will be a self fulfilling prophesy . Who would invest in a private company not backed by the gvt. When a much safer bet is investing in the gvt backed company ? And what would prevent these gvt backed companies from taking on recklessly risky positions when the gvt is backing them ? In fact;the gvt. Mandated Fannie and Freddie to take on risky business and that contributed directly to the whole financial system crisis.

What is needed instead is distressed institutions that are sinking to become consumed by private enterprise. That is why there are bankruptcy laws and courts.

We know it works because in a moment of rare sanity Lehman Brothers was allowed to collapse during the bailout craze.. its businesses and assets were all sold off to four different buyers within weeks of the filing of its petition for bankruptcy .Life goes on .

Hello again, tom:

I wasn't asking about the bill, because I don't think bill calls for what I'm calling for. I just asked your opinion on MY proposition. MY proposition has nothing to do the government owning or backing anything.

excon

Companies usually become too big because interconnectiveness creates monopolies .And as I said in my response anti-trust laws are already in place to deal with that .

I don't believe in too big to fail so I would not put artificial restraints on the size of companies based on some legislator's criteria of what is too big to fail.

The market will weed them out quite well on it's own . I think the real hazards are in not letting them fail . Failing businesses are just as vital to a free market as successful businesses are . The failures creates new opportunities.
That is naturally occurring and doesn't need central planners in Washington to decide which businesses succeed and which fail ;or which are too big for their own good.
Instead of thinking failure is not an option we should think in terms of failure being necessary component of the market.

I don't believe in too big to fail Hello tom:

That's the key. I do.

excon

Lehmans failed even as the government desperately tried to save it because they thought it was too big to fail... you the taxpayer wasn't hurt. Zombies got bailed out (and in the case of Chase got government money even when they told them they didn't want it),and the taxpayer got hurt.

So it's only when there is a perception that something is too big to fail when there is the panic response in Washington .

The only people we should give a damn about is people who made bank deposits in investment banks . The solution then is to protect them through FDIC which the investment banks should be happy to fund ,and to hell with the rest of the investors (except GS investors who were apparently defrauded according to recent news ) .

Lehmans failed even as the government desperately tried to save it because they thought it was too big to fail .....Hello tom:

That isn't what happened at all. They LET Lehman fail because they believed like you do, it won't hurt, But, immediately after Lehman failed, the credit markets LOCKED up threatening to take down the entire economy. It SCARED Paulson and Bush, and all of a sudden they became BELIEVERS in too big to fail, and bailed 'em out.

Now my libertarian self agrees with you except for one regard. We, at one time, had regulations in place that would have prevented banks, and ultimately the insurance companies, from getting as big as they got. They only way they GOT too big to fail, is through LOBBYING congress for repeal of those laws instead of competing in the marketplace for market share. That ISN'T the free market at work. That' MONEY at work and the corruption it buys. Therefore, I'm all for regulations that will break up any company that is too big to fail, and prevent it from ever happening again.

excon

Sorry the credit market did not freeze because of Lehman. Letting Lehman go was the best thing that happened in 2008 .
It was incoherent government reaction that brought on the crisis.

Libor was down for a total of 24 hours before it rebounded after the Lehman announcement .

But after Paulson went nuts and drafted the 2 1/2 page draft of TARP ,which gave him total power on what to do with bailout money ,then the credit markets froze. It was his chicken little act that convinced everyone that the banks were in worse shape then they were. Subsequent events have proven this narrative the correct one as miracle upon miracle ;banks are capitalized up the kazoo and are not lending much of it because working with the government is a much better deal .They are given gvt debt for nothing and invest it in safe gvt bonds. I wish someone would offer me that deal!!

Hello:

Now, I dunno what that means to YOU. But, to ME, it means that IF we let corporations get that big, and they fail, WE the TAXPAYERS get hurt. Seems to me that if we stopped them just short of getting too big to fail, and they fail, it's THEIR stockholders that get hurt - NOT us. That seems right to me.

Therefore, financial reform should include downsizing corporations that are too big to fail, to just the RIGHT size where it doesn't hurt us if they do fail. And, we need to prevent ANY corporation from ever getting that big again.

Is that wrong?



EX

The taxpayors only get hurt when the government backs a company - like fannie and freddie - as Tom pointed out.

Take a look at the companies on the Dow Jones:

Walmart, Exxon, At and T, Mcdonalds, Microsoft : all huge companies. But if a Walmart fails, and is not backed by the government via taxpayors, then its competitors like Target will fill the void and other small businesses will fill the void. If Microsoft fails, Apple and dozens of other companies would step in. Etc.

It is when the government backs certain companies that those companies become to big to fail. GM could fail but Honda, Toyota, Ford, Hyundai, VW etc would fill the void.




G&P

Exy.. I don't understand a lot about this.. but I think your right!

Ex does not like corporations . He thinks America should be all mom and pop businesses that have no possibility to compete globally. He claims that big corporations stifle competition which is not true. Look at the banks . There were a handful of them that the government deemed too big to fail . But do these large banks really stifle competition ? No of course not ,there are thousands of smaller banks and investment companies serving all types of clients and communities. Inthebox points out major retailers that are huge . If they fail would people stop buying ? No... established and new business would take their place and people laid off from the failed business get hired by their competitor.

Yes ,if it is demonstated that a company holds a monopoly in the business then it is not a good situation. But there are already anti-trust laws to handle that ;and if Congress wanted to do something useful they would revisit those laws and see if they need tweeking ;instead of finding tax money ,or printing money we don't have ,to ensure that executives that ran their companies into trouble get rewarded .

Ex does not like corporations . He thinks America should be all mom and pop businesses Hello:

Tom likes corporations that are too big to fail. I don't know why. He has a short memory.

excon

This discussion keeps reminding me of the anti-trust breakup of Ma Bell. It took a decade or more to sort out which companies were viable, but AT&T is back up there in the top companies again.

Consumers did pay for it, however. Rates went way up but options exploded and the concept of customer service bloomed.

On the phrase "too big to fail," I think the government is sticking its nose in where it doesn't belong, again.

Consumers did pay for it, however. Rates went way up but options exploded Basic service rates went up for a while until competition set in but long distance rates went down almost immediately and have stayed that way.

But ATT again is a premier phone service making among other things exclusive deals with Apple Iphone etc. However ;if Apple were smart ,they would allow iPhone service on any available phone company . In this case exclusivity stifles business.

Totally agree tom. The iPhone users there and in Canada feel the same way. Then there's Apple locking people in to the App Store, the iPad locking-in is even worse.

Along that line, Apple has apparently declared war on Adobe (http://www.zdnet.com.au/go-screw-yourself-apple-adobe-evangelist-339302338.htm), locking you in even more. I'm one of those guys that Apple won't get a as customer because of their exclusivity.

Along that line, Apple has apparently declared war on Adobe (http://www.zdnet.com.au/go-screw-yourself-apple-adobe-evangelist-339302338.htm), locking you in even more. I'm one of those guys that Apple won't get a as customer because of their exclusivity.

That's 2 of us. The Mac OS is much better than Windows, but Jobs & Co.'s business plan is so anti-consumer that "I'm a PC."

I wasn't asking about the bill, because I don't think bill calls for what I'm calling for.

It sure sounds like it does just that (http://www.cnn.com/2010/POLITICS/04/18/congress.wall.street/) to me...


"This bill has been written specifically to end any notion of any kind of a bailout by the American taxpayer again," Dodd said Thursday. "Our bill stops bailouts by imposing... tough new requirements on Wall Street firms. Being too big and too interconnected will cost these firms dearly. And should that not be enough, our legislation, regulators can use the new powers in our legislation to break these firms up before they can take down the economy of our country."

But as tom said, we already have laws on the books for that. I think Congress is looking at it all wrong, instead of reforming a formerly private industry they need to reform themselves.

It sure sounds like it does just that to me... But as tom said, we already have laws on the books for that. Hello Steve:

Good for Dodd.

The anti trust laws AREN'T for this, though. It's a tool designed to fix a fundamentally DIFFERENT problem - monopoly's. It won't work because we ain't never had "too big to fail" before. The IDEA, of course, is the same.

You don't, like tom, believe that a company can't get too big, so that if and when it failed, would take US down with it, do you? To me, that proposition is laughable.

excon

You don't, like tom, believe that a company can't get too big, so that if and when it failed, would take US down with it, do you? To me, that proposition is laughable.

My question is who is too big to fail?

Hundreds of banks failed during the S&L crisis and it didn't take the US down .

hundreds of banks failed during the S&L crisis and it didn't take the US down .
My question is who is too big to fail?Hello righty's:

Uhhh, I don't know, but NONE of the ones tom is talking about were. Plus, we could have 100's of community banks go bust today, and they wouldn't bring us down. But, they're not the one's I'm talking about either.

Let me be specific here. There are ELEVEN banks that are too big to fail in ANYBODY'S book, even toms. Among them are BankofAmerica, Chase, Wells Fargo, Citibank and Goldman Sachs. I'll throw in AIG too, just because.

Even though one could argue whether the takeover of GM and Chrysler was a good thing or not, they weren't "too big to fail". But, BANKS, when they get THAT BIG, have a hold on our national nuts.

excon

Didn't they tell you ? With as many Goldman employees on the govt. payroll the name has officially changed to Government Sucks.

So instead of anyone "too big to fail" we'll just get everyone wanting to be big enough to be protected from risk, right?

So instead of anyone "too big to fail" we'll just get everyone wanting to be big enough to be protected from risk, right?Hello again, Steve:

This ain't rocket science. There's this line. Banks ABOVE that line are too big to fail. As it stands now, if THEY collapse, WE have to protect them cause they'll take us down with them... That's why we need to break 'em up so they're just BELOW that line.

Once they're BELOW that line, they AREN'T too big to fail, so they ain't protected from nothing. They FAIL. It's FINE with me.

excon

If the SEC enforced the rules and regulations then these banks could not have done these things that brought the system down. Kind of like the immigration laws that are not enforced. Aren't Paulson and Rubin ex- Goldman Sach's employees? Didn't Obama get close to $900,000 from GMS during the election campaign? Is he going to give the money back with interest?


G&P


G&P

First of all, where's the line and second of all that doesn't change the premise of everyone wanting to be big enough to be protected from risk.

If the SEC enforced the rules and regulations then these banks could not have done these things that brought the system down. Hello again, in:

I don't disagree at all. But, how much regulation are you going to do when you come from a belief system that tells you that government IS the PROBLEM, and free markets are better?

I believe in a strong cop on the beat. I don't believe the cop should be an ex bad guy, or wants a job as a bad guy when his shtick as a cop is over.

excon

You see ;that line is in the ether . There is no defining line that can be proven because there has never been a case where the failure of a company ;let alone an industry had "brought the country down" .
The chicken-little act by former Sachs official Hank Paulson was more a matter of self interest I believe .

The biggest shame of it was that he convinced McCain and Boehner to go along.
But there was a significant block of Republicans like Thad McCotter that saw threw the charade.

First of all, where's the line and second of all that doesn't change the premise of everyone wanting to be big enough to be protected from risk.Hello again, Steve:

I guess it IS rocket science. Like I said, I don't know where that line is. But, I ain't a lawmaker. Once they determine WHERE that line is, they pass a law breaking up the banks to just under that size.

Here's how we can come up with a number. Take what the Democrats say, and double it. Don't worry, the Dems'll cave. They LOVE bipartisanship

Now, I agree with you. There's going to be a mad scramble for corporations to get OVER that line, because they'll know they'll be bailed out... But, if there's a COP on the beat enforcing the law, there won't BE any corporations OVER that line. As a dedicated right winger, you know about that law enforcement stuff, don't you?

excon

You don't believe the cop should be an ex bad guy, huh? Shame the White House doesn't believe that (http://the-classic-liberal.com/white-goldman-sachs-house/).

http://home.comcast.net/~lcmgroupe/2010/Tipping_Points-2010-Articles-Sultans_of_Swap/GS-White-House.jpg

Let's start with Fannie and Freddie. Those are the only banks I know of that have enough clout to bring us down. They are so interconnected with the government they are almost one in the same. Their execs come right out of the ranks of the political class so they can get their payday for being public servants .

Now that I think about it ;it was only through the regulatory process that many of these banks were able to grow in the 1st place.
The guarding against systemic risk by securtization was completely a political calculation... a reward for going along with government mandates to offer risky loans.
I say if there weren't the type of regulations imposed /awarded then the banks most likely would not have grown to the extent they did to begin with. You cannot have a free market when risk is not a major component of decision making ;and the government did everything they could to cushion the risks in exchange for the banks being the lead agencies in their social engineering .

I say if there weren't the type of regulations imposed /awarded then the banks most likely would not have grown to the extent they did to begin with. Hello again, tom:

Let me see if I understand you. If they were FREE to do whatever they chose to do, they WOULDN'T have grown that big?? But, BECAUSE they were OVER REGULATED, THAT is what caused them to get so big.

Really? Is THAT what you'd like me to believe?? Guess what?

excon

You are one coflicted dude. You switch back and forth between regulate the hell out of them to caveat emptor . Or is it caveat emptor for me but not for thee ?

Indeed the whole real estate bubble that caused the crisis was the result of social engineering schemes by clowns like Andrew Cuomo (then at HUD) with the help of Fannie and Freddie .
He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded "kickbacks" to brokers that have fueled the sale of overpriced and unsupportable loans.

Who said that ? Not FOX News ,this quote is from the ultra-liberal Village Voice.
Andrew Cuomo and Fannie and Freddie - Page 1 - News - New York - Village Voice (http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/)

It describes a system that demanded the banks do the very risky things everyone now condemns as part and partial with an environment of deregulation. In fact it was over regulation that caused the crisis.

Indeed the whole real estate bubble that caused the crisis was the result of social engineering schemes by clowns like Andrew Cuomo (then at HUD) with the help of Fannie and Freddie .Hello again, tom:

Yeah, those are the right wing talking points. They're just not true. Yes, Fannie and Freddie were mismanaged. But saying THEY brought the system down, is like saying mismanaging the gift wrapping department would bring down Nordstroms.

The bubble was caused by banks taking worthless mortgages, repackaging them into derivatives nobody understood, and then sold them to unwitting investors, like pension funds.

excon

Yes you are right in that if the banks could not bundle the crap then they would've collpased to the size you contend they should be because they would be operating otherwise at a government imposed loss. They had no choice short of losing their shirts but to create the derivative instrument once the government imposed those conditions on them.

They had no choice short of losing their shirts but to create the derivitive instrument once the government imposed those conditions on them.Hello again, tom:

Those are more right wing talking points. If Fannie and Freddie went bankrupt under the pressure of the Democrats, there would have been nothing more than a ripple in the economy. The FDIC would have paid off some stuff, and NOTHING more would have happened.

Besides, there were MANY community banks who CHOSE not to participate and didn't lose their shirts. The banks that DID lose their shirts didn't understand the collateralized debt obligations they themselves, created and got stuck with them in THEIR portfolios. They created them, sold them, and bet on them simply because of the fees they generated.

When THEY failed, we either propped them up, or we'da gone down the tubes with them.

excon

So you are saying banks that have all these defaulted subprimes did well when the bubble burts ? Or maybe some banks stood firm and refused to succumb against HUD and ACORN pressure.

Since the backbone of our economy is the mom and pop small business ,lets make the ceiling at 50 employees . Anything over that break them up !

The other obvious question is why is it OK for government to be big but not business ? I'm all in favor of breaking up big government . Maybe that's the compromise we need to break this deadlock.

The other obvious question is why is it ok for government to be big but not business ? I'm all in favor of breaking up big government . Maybe that's the compromise we need to break this deadlock.Hello tom:

No problem here. I'll put up the DEA, the Bureau of Prisons, the Energy Department, the Education Department, and about half of our intelligent services. That'll still leave us with about 15 different spy agencies.

What's your bid?

excon

Hello tom:

No problem here. I'll put up the DEA, the Bureau of Prisons, the Energy Department, the Education Department, and about half of our intelligent services. That'll still leave us with about 15 different spy agencies.

What's your bid?

excon

I'll see those and raise the State Department umbrella organizations such as US AID and Voice of America (and there goes about four more spy agencies)

Keep going, throw in the EPA, NPR, and the National Endowment for the Arts.

Consolidate DEA ATF into homeland security . I agree with the rest of the above.

Reinstall Glass-Steagall Act or force investment banks that want to operate like commercial banks to fund FDIC .

Most important of all . End the revolving door of bankers and lawyers becoming lawmakers or government policy makers . Here are the current G.S. Obots .


* Goldman Sachs partner Gary Gensler is Obama's Commodity Futures Trading Commission head. He was confirmed despite heated congressional grilling over his role, as Reuters described it, "as a high-level Treasury official in a 2000 law that exempted the $58 trillion credit default swap market from oversight. The financial instruments have been blamed for amplifying global financial turmoil."

Gensler said he was sorry -- hey, it worked for tax cheat Treasury Secretary Tim Geithner -- and was quickly installed to guard the henhouse.

* Goldman kept White House Chief of Staff Rahm Emanuel on a $3,000 monthly retainer while he worked as presidential candidate Bill Clinton's chief fund-raiser, as first reported by Washington Examiner columnist Tim Carney. The financial titans threw in another $50,000 to become the Clinton primary campaign's top funder.

Emanuel received nearly $80,000 in campaign contributions from Goldman during his four terms in Congress -- investments that have reaped untold rewards, as Emanuel assumed a leading role championing the trillion-dollar TARP banking bailout law.

* Former Goldman lobbyist Mark Patterson serves under Geithner as his top deputy and overseer of TARP bailout -- $10 billion of which went to Goldman Sachs.

Paul Blumenthal of the Sunlight Foundation, a Washington-based think tank devoted to transparency in government, noted that, while Patterson agreed to recuse himself on any Goldman Sachs-related issues or related policy concerns, it "still creates a serious conflict for Geithner, as Treasury is being partly managed by a former Goldman lobbyist. Geithner is also placed in a tough position considering that his chief of staff is limited in the areas in which he can work (supposedly)."

* National Economic Council head Larry Summers reaped nearly $2.8 million in speaking fees from many of the major financial institutions and government bailout recipients he now polices, including JP Morgan Chase, Citigroup, Lehman Bros. and Goldman. A single speech to Goldman in April 2008 brought in $135,000.

Summers has prior experience negotiating government-sponsored bailouts that benefit private concerns. In 1995, he spearheaded a $40 billion Mexican peso bailout that bypassed Congress.

Summers personally leaned on the International Monetary Fund to provide nearly $18 billion for the package. Summers' boss, then Secretary of the Treasury Robert Rubin, was former co-chairman of Goldman -- the Mexican government's investment banking firm of choice.

Rubin continues to mentor another of his former employees with regular visits and chats -- Treasury Secretary Geithner, who was head of the New York Federal Reserve in 2008 when it ordered bailed-out AIG not to disclose its sweetheart payments to big banks including, you guessed it, Goldman Sachs.
All the President's Goldman men - NYPOST.com (http://www.nypost.com/p/news/opinion/opedcolumnists/all_the_president_goldman_men_e2n0aCBBZgC4cEBbEhqF dI)

consolidate DEA ATF into homeland security . I agree with the rest of the above.Hello again, tom:

You YELL about big government, but when it comes to government you LIKE, size doesn't matter. I understand. Really, I do.

excon

"I think we have more machinery of government than is necessary, too many parasites living on the labor of the industrious." Thomas Jefferson

Hello again, tom:

"I think we have more police agencies than are necessary for the well being of our citizens. Too many causes the opposite effect."

I said that. My name is

excon

PS> The DEA isn't a police agency anyway. It's a bureaucracy designed to affect social change with a gun.

It depends on what you define as the proper role of government I guess. Primary among them to my way of thinking is national security, enforcement of contracts, defense of property, and, protection of the right to life.
Therefore if I can justify any agency of the government it is the security ones.

Primary among them to my way of thinking is national security, enforcement of contracts, defense of property, and, protection of the right to life.Hello again, tom:

And, the DEA does exactly WHAT in support of those goals??

excon

Drug trafficking and smuggling is as much a national security issue as any other smuggling .

drug trafficing and smuggling is as much a national security issue as any other smuggling .Hello again, tom:

In other words, you learned NOTHING from our previous experience with prohibition.

excon

Even if it was legal the smuggling across the border is still a national security concern. That's part of the reason for border patrol and the Coast Guard.

border patrol and the Coast Guard.

THAT'S where you should put your DEA cowboys, and teach them some discipline at the same time.

Cats ;and that's why I said DEA should be absorbed into DHS

Cats ;and that's why I said DEA should be absorbed into DHS

DHS isn't that much better. All the civilian "agents" that I've ever had any dealings with needed adult supervision. Some of the Fibbies can put their socks and shoes on by themselves but not until they make Special Agent usually. Most of them make me think of the movie Super Troopers.

Edit: make that "socks then shoes"

Right . But we do have posse comitatus to deal with .

right . but we do have posse comitatus to deal with .

In the original meaning of the term, I consider Sheriffs to be adult supervision. They aren't "Agents," they are Officers.

Hello again, righty's:

Let's get back on track.

The Dem's have learned a thing or two lately. As I've said MANY times here on these boards, during the health care debate, the Democrats LET the Republicans WIN the talking point battle. It's STILL having major repercussions, too because a lot of people, primarily the tea partiers, still BELIEVE the lies that were told. Don't believe it? Go see the tea party video that NK posted.

Nonetheless, Mitch McConnell, being the ever dutiful right wing spouter, was spouting the lie, that the financial reform package being considered contained "permanent government bailouts", repeating the Frank Luntz talking points verbatim. Read about it here (http://rawstory.com/rs/2010/0423/gop-message-maven-publicly-boasts-wall-street-clients/). I don't blame McConnell, though. Hell, it WORKED once on those dumbocrats (and the nation).

This time, however, the Democrats jumped on it, and called him out. The pres did it, specifically and the Democratic Senators did it in Washington.

Good for them.

excon

And ? The truth is that unless the provision for permanent bailout... ooops I mean “Orderly Resolution Fund”is removed from Dodd's bill then it will be a bill that promises a subsidization of moral hazard and their vision of too big to fail becomes self fulfilling... and they get to decide who falls into that category . Government Sucks gives millions $$ to their campaign... BAM! Too big to fail!

Let the Dems take that provision out and we'll see if there can be real free market reform . But they won't because the simple correct and reasonable answer is to let crappy companies fail. And don't talk about too big to fail. There wasn't a bank in America in 1929 that anyone would call too big to fail ;but we still had a financial collapse.

I'll add one more caveat.Government policies should not be the reason a company fails. When they talk of perp walking bankers they conveniently forget their own complicity .

If they want to identify an Orderly Resolution to a failing business. It's called Chapter 11 .

This is amazing to me... for all their bleating and demogoguing against business it is the Dems that carry the water for the ones they claim to despise the most.

A perfect example of this is GM. They took TARP and paid it off this week with bailout funds instead of with earnings . Everyone thinks GM must've recovered because of all the fan-fare over their announcement . But in truth they are still a zombie dependent on Gvt.

I love the GM ad, how shameless can you get?

Speaking of too big to fail, Obama said his financial reform will "put a stop to taxpayer-funded bailouts." NPR surveyed financial experts both left and right and determined (http://www.npr.org/templates/story/story.php?storyId=126203939) they "cannot find any experts -- of any party -- who are willing to agree with Obama on this one."

What, he lied?

What, he lied?Hello again, Steve:

I'm going to try it again. Don't say I ain't persistent. When he says it will put a stop to taxpayer funded bailouts, he believes it. I'm sure your man George W. Bush (I promised that I wouldn't call him dufus anymore), absolutely KNEW that HE wouldn't bail out anybody, because HE believed his own schtick...

But, when push came to shove, he caved. Was he lying to himself when he convinced himself that he's not a bail out kind of guy? Nope. He was simply mistaken. I could say he lied, if I was as mean as you, but I ain't.

excon

No, ex, Obama has a pattern of outright lies, either that or he's absolutely clueless. No, he just lies. He's still shamelessly lying about his campaign donors (http://www.politifact.com/truth-o-meter/statements/2010/apr/22/barack-obama/obama-campaign-financed-large-donors-too/). He's lying about this, he lied and lied about health care reform, he can't seem to keep from lying.

Hello again, Steve:

I'm willing to give my president the benefit of the doubt. As much as I disagreed with Bush, and as much as the evidence suggested otherwise, I NEVER said he lied, and I NEVER said I hated him.

I'm also willing to give SOME of my congressmen the benefit of the doubt too, as I did to John Lewis. You don't extend these people the same courtesy. Ok.

You don't think Republicans lie, do you?

excon

Important question.

I agree a company should be prevented from getting so big that failure requires a taxpayer bailout. But how does that play out in practice?

The Sherman Anti-Trust Act works well with a de jure monopoly like AT&T, but not so well with a de facto monopoly like Microsoft was seen to be a few years ago when it approached 90% of the market.

The people against "too big to fail" cite socialism (an exaggeration), a free market, and the need to be able to compete globally.

The in-favor crowd cite the inability of the market to self-regulate (historically true), the market distortion caused by being too dominant, and the moral hazard of eliminating risk to a large degree, thereby placing the onus on the taxpayer. (Both sides)

I think the idea of government interference (in this particular case) trumps the free-market philosophy, but exactly how this can be done is elusive.

The last thing we want is an economy too shackled by a rigid set of laws, but we also want to prevent future AIGs and Citicorps and GMs. There must be a middle ground that reasonable people can accept as necessary.

One step might be carefully regulating M&As since centralization always tends toward "too big".

No, ex, Obama has a pattern of outright lies, either that or he's absolutely clueless. No, he just lies. He's still shamelessly lying about his campaign donors (http://www.politifact.com/truth-o-meter/statements/2010/apr/22/barack-obama/obama-campaign-financed-large-donors-too/). He's lying about this, he lied and lied about health care reform, he can't seem to keep from lying.


Here is another lie ----

Health Care Cost Increase Is Projected for New Law - NYTimes.com (http://www.nytimes.com/2010/04/24/health/policy/24health.html)


G&P

Athos . I was under the impression that M&A is already subject to any number of Federal and State Regulations not limited to Sherman Anti-Trust regs . Are you saying even more oversight more regulation more control is needed ?

Also ,there are a number of financial institutions that have been deemed "too big to fail" (whatever that means) . There are also many other banking institutions in this country that aren't . All these institutions are competing globally against institutions of similar size.

During the S&L crisis the number of banks that failed were in the hundreds . This was also deemed to require a government intervention by the powers that be. None of the banks that went down could've been defined as "too big to fail" . So the problem then is how big does a corp have to get to be defined as "too big to fail" requiring government intervention ? The example of the S&L crisis ,TARP ,and GM to me is that ANY company in any industry can be the target of government takeover or intervention .

That is way too much power for the government to have.

I'm willing to give my president the benefit of the doubt. As much as I disagreed with Bush, and as much as the evidence suggested otherwise, I NEVER said he lied, and I NEVER said I hated him.

No, you just called him "the Dufus." Oh, and I've never said I hated Obama, I'd appreciate it if you wouldn't give people the impression that I have.


I'm also willing to give SOME of my congressmen the benefit of the doubt too, as I did to John Lewis. You don't extend these people the same courtesy. Ok.

Only until the evidence show otherwise. Video is a powerful witness.


You don't think Republicans lie, do you?


Don't be ridiculous, of course they do. Meanwhile, Democrats are the liars in charge at the moment.

No, you just called him "the Dufus."Hello again, Steve:

Oh, he isn't very bright. But, being stupid and being a liar ain't the same thing.

excon

Athos . I was under the impression that M&A is already subject to any number of Federal and State Regulations not limited to Sherman Anti-Trust regs . Are you saying even more oversight more regulation more control is needed ?

Also ,there are a number of financial institutions that have been deemed "too big to fail" (whatever that means) . There are also many other banking institutions in this country that arent . All these institutions are competing globally against institutions of simular size.

During the S&L crisis the number of banks that failed were in the hundreds . This was also deemed to require a government intervention by the powers that be. None of the banks that went down could've been defined as "too big to fail" . So the problem then is how big does a corp have to get to be defined as "too big to fail" requiring government intervention ? The example of the S&L crisis ,TARP ,and GM to me is that ANY company in any industry can be the target of government takeover or intervention .

That is way too much power for the government to have.

You bring up some good points.

The M&A regs need to be enforced, not necessarily added to. During the last two administrations (Clinton and Bush), they, along with other regs, were loosened leading to two bubbles - dot com and housing. (Regs in general, not only M&A regs)

The S&L crisis was caused by eliminating govt regs - allowing the S&Ls to get into areas they had historically been prevented from getting into. The bailout in that case was due to a systemic failure - not any one single bank.

(Btw, Chrysler's bailout in the early 80's worked well).

Government "takeover" and government "intervention" are two very different terms. Surely it is the role of government to intervene in order to avoid a greater calamity or chaos. I think that describes the current government actions. Government certainly has no interest, for example, in maintaining their stock/ownership position in GM. As soon as GM recovers (if it recovers), the govt will sell that stock immediately. They have no interest in running GM.

The core of the present crisis, as I see it, is the action of the rating agencies. All of this could have been avoided if the agencies had not acted fraudulently for whopping payments from the banks to rate toxic mortgage bonds Triple AAA when everyone involved knew they were garbage. Triple AAA is the equivalent of risk-free government bonds. Buyers of these bonds - pension funds, municipalities, etc. - saw the AAA rating and assumed they were solid.

It is almost incomprehensible that Goldman knew this, sold them as excellent investments, and, at the very same time, bet AGAINST the very bonds they were touting as great investments by buying insurance (credit default swaps) that they would default!

You can't make this up.

Probably the best way to manage this stuff for the future is some serious jail time for the offenders.

So, I disagree that "this is way too much power for the government to have". The "market" obviously failed in its self-regulatory role - "self-regulation" is almost always an oxymoron.

Only the government has the power to watchdog this aberration of go-go unbridled capitalism.

Probably the best way to manage this stuff for the future is some serious jail time for the offenders.


I agree . If there is violations of the law then there should be consequences. Not sure Goldman falls into that even though their emails clearly demonstrate their contempt for their investors.

The core of the present crisis, as I see it, is the action of the rating agencies. All of this could have been avoided if the agencies had not acted fraudulently for whopping payments from the banks to rate toxic mortgage bonds Triple AAA when everyone involved knew they were garbage. Triple AAA is the equivalent of risk-free government bonds. Buyers of these bonds - pension funds, municipalities, etc. - saw the AAA rating and assumed they were solid.
If everyone recognized them as garbage then why did the brokers making the purchases continue to buy them ?
If there was genuine fraud then perp walks are in order . But that tells me (as you suggest also ) that the regulations existed and did not prevent the crisis . It was enforcement that was lacking (too much porn time ? ) .


But ,it isn't unbridled capitalism when someone wins and someone loses... and almost by definition a trade is someone betting for something and someone betting against.

There was as much greed demonstrated by the buyer.

Perhaps regulations should limit the purchase of risky investments by brokers managing pension accounts and charitable organization's portfolios.


Government "takeover" and government "intervention" are two very different terms. Surely it is the role of government to intervene in order to avoid a greater calamity or chaos. I think that describes the current government actions. Government certainly has no interest, for example, in maintaining their stock/ownership position in GM. As soon as GM recovers (if it recovers), the govt will sell that stock immediately. They have no interest in running GM.


When the IPO for GM is announced I may just do some investing . I know the government has a vested interest in their success and that is a kind of backing I wouldn't get from purchasing Ford stock. Who knows if they will be a zombie or not ? Chrysler clearly was ,even though the bailout in the 80s gave them a temporary reprieve.

The shock in the system was that Lehman was permitted to fail. If the system made it clear that the government would not pull their butts out of the fire ;perhaps they would've shown more caution when it came to risk taking . I don't like it one bit when the government gets to decide which business survive and which fail... especially when one of the chief competitors is sitting in the Treasury chair.

Edit : I wonder if the US AAA rating is the result of fraud and bribery or is it an accurate reflection of our credit??

If everyone recognized them as garbage then why did the brokers making the purchases continue to buy them ?

...


There was as much greed demonstrated by the buyer.

...

Perhaps regulations should limit the purchase of risky investments by brokers managing pension accounts and charitable organization's portfolios.


The investors bought them because the bonds carried triple-A ratings. They relied on the rating even though the underlying mortgages were sub-prime, and the ratings were wrong (later admitted to by the ratings agencies).

Buying a risk-free bond at a yield better than a US bond is not greed, it's good financial management.

The bad capitalism here lies with the sellers of fraudulent securities, not the buyers of those securities - the buyers are the victims.

If the rating agencies don't rate accurately they will soon lose credibilty and be out of business. But I think you have a legit point there;one that is easily solved by competiton... by having ratings paid for by the buyers instead of the sellers;or a competing rating system one representing buyers and one representing sellers.

If the sellers committed fraud there are criminal consequences . We had regulations sufficient enough for the SEC and Federal Reserve to regulate the investment banks. I don't see much reason for any more government action beyond enforcement of existing law.

We don't know if the brokers representing pension funds and non-profit organizations are as innocent as you say ;or as stupid .Yes the people they represent can be called victims ;but they dealt with their broker expecting them to act in their best interest.

Where government could tweek is in the bankruptcy laws in the handling of derivitives . Create a special court for firms that people describe as too big to fail. If Bear Sterns and AIG had bankruptcy protection from their derivative creditors then an orderly dismantling could've taken place (currently derivitives are exempt from bankruptcy rules).

An important example could've been set by allowing Bear Sterns to go down. When Lehman was allowed to fail the uncertainty in the market caused the credit crisis that Hank Paulson over reacted over .

If these companies know there is no government cheese waiting for them if they screw up then the moral hazard no longer exists and they act appropriately . And if they go down;a judge should be deciding their fate and not partisan politicians .It doesn't surprise me that Goldman Sachs came out of the "crisis" largely intact ;and was given a special role in the management of TARP given how many of their compatriots sit in seats of power.

I also want to go back to the basic fundamental problem that caused this crisis . The government had an agenda to increase home ownership and pressured banks of all kinds to participate in the selling of toxic debt. The goals the government aimed for would never've come close to fruition without securitization.
I posted yesterday on another OP that the government desire to promote green technology through mandates ,legislation and EPA directives will guarantee the creation of a bubble .After that;it's only a matter of time the bubble will burst ;and the rage will be against the market instead of the government that is largely responsible for it.

I also want to go back to the basic fundamental problem that caused this crisis . The government had an agenda to increase home ownership and pressured banks of all kinds to participate in the selling of toxic debt. Hello tom:

As we discussed before, and I'm sure we will again, you're analysis above is WRONG. Yes, there were some toxic mortgages created, but if that's ALL is was, the problem would have been a blip on the charts.

What caused the problem is that the derivatives the banks created based on those toxic mortgages, and sold them. Then they created some more that were based on NOTHING, and sold those too. They created a multi TRILLION dollar market for them based on NOTHING, but air.

Then the bubble burst. So, while the government regulators were asleep at the switch, it was the bankers who did it - NOT government.

excon

You left out the key part of the paragraph.

The goals the government aimed for would never've come close to fruition without securitization.

If the rating agencies don't rate accurately they will soon lose credibilty and be out of business. But I think you have a legit point there;one that is easily solved by competiton... by having ratings paid for by the buyers instead of the sellers;or a competing rating system one representing buyers and one representing sellers.

If that were true, they'd be out of business now - they're not. A buyer will never pay for a rating. The cost is prohibitive, making it impossible for the buyer to realize any gain. Rating agencies should be non-profit. That may work.


If the sellers committed fraud there are criminal consequences . We had regulations sufficient enough for the SEC and Federal Reserve to regulate the investment banks. I don't see much reason for any more government action beyond enforcement of existing law.

Obviously, the regulations were NOT sufficient enough. Note: yesterday, Justice opened a criminal investigation against Goldman.


If Bear Sterns and AIG had bankruptcy protection from their derivative creditors then an orderly dismantling could've taken place (currently derivitives are exempt from bankruptcy rules).

In that case, MORE banks would have failed - all those who were counterparties to AIG. (But, keep thinking).


An important example could've been set by allowing Bear Sterns to go down. When Lehman was allowed to fail the uncertainty in the market caused the credit crisis that Hank Paulson over reacted over .

Maybe, it's hard to say without the benefit of hindsight.


... It doesn't surprise me that Goldman Sachs came out of the "crisis" largely intact ;and was given a special role in the management of TARP given how many of their compatriots sit in seats of power.

This is one of the more bizarre developments - the guys who missed the whole problem (and, arguably, caused it) are the very ones now managing the solution.




I also want to go back to the basic fundamental problem that caused this crisis . The government had an agenda to increase home ownership and pressured banks of all kinds to participate in the selling of toxic debt. The goals the government aimed for would never've come close to fruition without securitization.

I couldn't disagree more. By promoting home ownership, (as the government traditionally has done with the GI Bill, mortgage interest deduction, CRA policy, even the 19th century Homestead Acts), the government is doing a worthy social policy. It's true that the policy was gamed by the banks, but the blame lies primarily in the hands of the "gamers" (including the rating agencies), not the government. I agree the government has SOME culpability by providing a bad environment and not seeing what was happening.

Without the banks selling garbage securities, there is no crisis. Plenty of homeowners defaulting, but no crisis.

Hello tom:

As we discussed before, and I'm sure we will again, you're analysis above is WRONG. Yes, there were some toxic mortgages created, but if that's ALL is was, the problem would have been a blip on the charts.

What caused the problem is that the derivatives the banks created based on those toxic mortgages, and sold them. Then they created some more that were based on NOTHING, and sold those too. They created a multi TRILLION dollar market for them based on NOTHING, but air.

Then the bubble burst. So, while the government regulators were asleep at the switch, it was the bankers who did it - NOT government.

excon

I think ex you have explained part of the problem. What isn't generally known is how banks manage risk and their position using derivatives and it can take huge nominal values in derivitatives to bring their statistics and position into to line with regulation etc at any time, so there is in fact a bubble at any particular time but the crisis was exacibated by the way these securities had been used to secure the position in other securities. The Ratings agencies should have be stripped of their licence for their part in this

I couldn't disagree more. By promoting home ownership, (as the government traditionally has done with the GI Bill, mortgage interest deduction, CRA policy, even the 19th century Homestead Acts), the government is doing a worthy social policy.

By creating a market for people who could not afford traditional morgages without subsidizing the purchases, the government created a bubble in a market that was bound to collape.
It wasn't the derivative market that created the bubble ;it is the fact that people were purchasing homes with no skin in the game.

What is Goldman's crime ? They bet the housing market would collapse and they were right .They traded in synthetic securities with brokers who were just as willing to bet Goldman was wrong.
What did it mean that Goldman was selling these ? It meant ;by definition, that they did not want them because they believed they'd decline in value
If Goldman committed a crime then so did Fannie and Freddie ,all the regulators and clowns like Andrew Cuomo who pressured banks to loosen requirement standards,. and especially hypocrites like Chris Dodd who was bribed into looking the other way at the inherent riskes involved that he ,Barney Frank, and all the related oversight committees overlooked when they pushed the policies .

Everyone thinks these were a bunch of saps buying the securities .WRONG ! They were savvy sophisticated investors who made their bets on a large part because there was an understanding that the moral hazard they knew they were taking was underwritten by the government in case things went south. Would they have bet on the continued expansion of the housing market if there weren't a concerted effort by the government to push home ownership beyond reason ? I doubt it.

Just to point it out Greece is now officially to big to fail

Clete any real surprise there ? 1/3 of the populace on the gvt payroll with ridiculous mandated compensation deals;including a retirement age of 53 ;annual bonuses worth two months' pay,and fully 1/4 of the population that don't pay any taxes.


The nanny state in action . We are looking at the future.

Yes this is the ultimate result of democracy, it turns into mediocracy because sooner or later you have to look after that aging population. I hear one of the remedies is to advance the pension age to 67, I wonder where all those people are going to find jobs. II expect there will an exodus of all the young and talented, that is if they have any, from Greece to the rest of Europe. Goodbye EU

By creating a market for people who could not afford traditional morgages without subsidizing the purchases, the government created a bubble in a market that was bound to collape.
It wasn't the derivative market that created the bubble ;it is the fact that people were purchasing homes with no skin in the game.

No, the bubble was created by the demand for securities based on faulty AAA ratings. Without securitization, there was no market for a bubble to form.


What is Goldman's crime ? They bet the housing market would collapse and they were right .They traded in synthetic securities with brokers who were just as willing to bet Goldman was wrong.

If that was all they did, no crime. But they did more than that - they sold securities with the full knowledge the products were falsely rated.




If Goldman committed a crime then so did Fannie and Freddie ,all the regulators and clowns like Andrew Cuomo who pressured banks to loosen requirement standards,. and especially hypocrites like Chris Dodd who was bribed into looking the other way at the inherent riskes involved that he ,Barney Frank, and all the related oversight committees overlooked when they pushed the policies

Fannie and Freddie did not arrange to have the securities rated AAA. Their contribution was to encourage the no doc loans (simply to sweeten the compensation of the executives). Probably illegal, but hard to prove. Definitely sleazy and unethical. Cuomo and Frank, as you say, encouraged lower standards - stupid in hindsight, but not illegal. Dodd likewise.


Everyone thinks these were a bunch of saps buying the securities .WRONG ! They were savvy sophisticated investors who made their bets on a large part because there was an understanding that the moral hazard they knew they were taking was underwritten by the government in case things went south. Would they have bet on the continued expansion of the housing market if there weren't a concerted effort by the government to push home ownership beyond reason ? I doubt it.

With all due respect, I think you're getting things confused here. The buyers bought because the securities were rated (falsely) the same as US Government securities but with a higher yield. They did not understand that the underlying assets were junk. The very definition of a bubble is when "savvy, sophisticated investors" buy irrationally into securities that they don't understand - or that everybody else is buying driving the market up. No one, including Greenspan and Berneke, believed house prices would fall until it was too late. (A handful figured it out, and they made billions.)

Additionally, Fannie and Freddie gov-guaranteed mortgages were only a part of the securitized mortgages. The investment banks also dealt directly with subprime originators whose mortgages were not guaranteed by government. Investors in these securities were not buying with an understanding of "moral hazard" safety.

Even when the homebuyers began to default, the mortgage securities were still selling like hotcakes - so much for the savvy investor.

Ex it is time to take this to the next level or even the level above that. We have seen banks that are too big to fail, manufacturers that are too big to fail, insurance companies that are too big to fail, all bailed out by nations, now we have seen a country, a small one, too big to fail, bailed out by a consortium of countries, and the fall out continues, next we will be asking the question is the EU, or the US. Too big to fail and I am wondering, who is the lender of the last resort here? China will exhaust itself trying to stop its biggest customers failing but it is only the third biggest economy, it doesn't have the economic power to be the lender of the last resort. The IMF relies on countries to contribute, it cannot be the lender of the last resort. The answer is obvious but the world has forgotten.

The great falacy here is that some of these corporations and even Greece should have been allowed to fail. The world still hasn't learned not to buy worthless securities. This is what you get for living beyond your means and giving yourself a paid holiday and lower taxes. Whether you are socialist or capitalist it doesn't matter sooner or later the piper must be paid or in this case Schylock must get his pound of flesh

Should BP be bailed out if this Gulf of Mexico mess puts them out of business ? Why not ? This could be a straight up accident ;or it could be the result of faulty ,insufficient insight or even criminal negligence.

But if they should be allowed to fail then why not financial institutions ? What makes them so sacrosanct ?

It cracks me up that Senator Obama and others took the lead in 2008 to make a special case of Goldman ;and now are doing everything in their power to discredit it and drive it out of business.
They forced Goldman to take TARP .They forced Goldman to become a bank holding company . They were perfectly happy being an investment firm .Goldman was the 1st to pay TARP back . So of course they are the target of destruction.

The financial institutions could've and should've been allowed to sort through their problems with write downs and bankruptsies . Policy makers panicked and bought the chicken-little garbage former Goldman exec. Hank Paulson was peddling .

Should BP be bailed out if this Gulf of Mexico mess puts them out of business ? Why not ? Hello again, tom:

Uhhh, because they're NOT too big to fail. Duh! That concept, along with racial profiling, seems to escape you today. Figures.

excon

Oh yes the concept of too big to fail escapes me completely

oh yes the concept of too big to fail escapes me completelyHello again, tom:

Apparently, so.
The financial institutions could've and should've been allowed to sort through their problems with write downs and bankruptsies .

Excon