[Rhodes22-list] Economics/Politics - Significant Post about economic mess
Herb Parsons
hparsons at parsonsys.com
Mon Sep 22 13:04:08 EDT 2008
Sorry Ben, I don't judge anyone on "one lines". I suspect that you do so
only in select cases.
If I were to do so, I'd say the man that said "It depends on what your
definition of 'is' is" would have to be judged a "simpleton". He wasn't.
In your "assessment" you've offered nothing about Obama's economics
"expertise", other than "he's willing to listen to his advisors" (which,
I'm sure, McCain will be "willing" to do as well). I haven't seen much
encouraging from Obama along those lines.
Ben Cittadino wrote:
> Herb;
>
> I thought you might be willing to reconsider your position based upou recent
> developments. McCain's statement that he is "always for less regulation"
> reveals him as an economic simpleton and Sarah Palin's quote last week that
> that Fannie Mae and Freddie Mac had become "too expensive to the taxpayers"
> revealed her as clueless as to the source of funding for those entities. I
> thought you might be able to re-examine your previous analysis and see the
> error of your ways. Apparently not.
>
> As for Brad, I was thinking of advisors Robert Rubin (former Treas Sec,
> remember when we had a surplus?) Michael Froman (Citibank, a real radical)
> and Auston Goolsbee. Are you sure you should be flying today? You sound
> alittle feverish.
>
> Best wishes as always;
>
> Ben C.
>
> Andrew Collins-2 wrote:
>
>> Guys
>>
>> Turn on 'Meet the Press'. The fix is not to 'allow financial institutions
>> to dump their toxic assets, clean up their books, and go back to "mark
>> to market" accounting with assets of determinable value', but to prevent
>> them from creating impenetrable uncollateralized investments in the first
>> place.
>> This is called was all caused by too little regulation. In 2003 I said
>> "hedge funds will cause the end of the world as we know it", and I really
>> do
>> not understand the stock market.
>>
>> This morning we are all becoming super-socialist bail out participants, a
>> la
>> Social Democratic model adopted in Europe under the Marshall Plan. The
>> foreign press is alternately reveling in Schadenfreude that we
>> ultra-capitalists have to nationalize so many private and semi-private
>> companies, and blessing Paulson and Bernanke. And so am I.
>>
>> Andrew
>> sv Carmen
>>
>> On Sun, Sep 21, 2008 at 8:34 AM, Brad Haslett <flybrad at gmail.com> wrote:
>>
>>
>>> Ed,
>>>
>>> It will take years to unravel this whole puzzle and no doubt a lot of
>>> money will be made writing books about it, but here's what we know for
>>> now. The economy was about to grind to a stop like an engine running
>>> without oil, ie, financial institutions were about to stop lending
>>> money because no one trusted anyone. The root cause was a lot of
>>> really nasty mortgages made with horrendous lending practices. Add in
>>> some new debt instruments that no one really understood (Mr. Buffet
>>> excepted) and the problems accelerated. The "fix", if you want to call
>>> it that, is for the federal government to allow financial institutions
>>> to dump their toxic assets, clean up their books, and go back to "mark
>>> to market" accounting with assets of determinable value. What this
>>> will cost the government is unknown because the value of the assets to
>>> be dumped is unknown. Just like the RFC during the Great Depression
>>> and the Resolution Trust in the late 80's, some of these assets do
>>> have value and the taxpayer will get some of their money back. One of
>>> ideas being floated now is a reverse auction where institution bids
>>> down to a price that they are willing to sell the government the bad
>>> assets. This is truly new territory. Lehman Brothers had a chance to
>>> be acquired by Bank of Korea and CITIC bank of China months ago but
>>> thought they could get a better price. Now they'll settle for pennies
>>> on the dollar.
>>>
>>> Ever heard of a NINJA loan? Neither had I until a couple of years ago
>>> and it didn't make sense then and it sure as hell doesn't now. NINJA
>>> - no income, no job or assets. Who in their right mind would make
>>> such a loan? No one, unless they thought they could palm the risk off
>>> on someone else. Fanny and Freddie are the biggest culprits in this
>>> mess. Now here's where it gets interesting. They and most banks
>>> operated using sound lending practices until the late 70's when the
>>> Community Reinvestment Act was passed by Carter. (I'm going to use a
>>> "cheap and easy" citation here instead of financial news articles to
>>> save time)
>>>
>>> http://en.wikipedia.org/wiki/Community_Reinvestment_Act
>>>
>>> Clinton strengthened the act in 1995 and shoved more bad lending
>>> practices down bankers throats. One of the "leaders" in subprime
>>> mortgages was Superior Bank in Chicago.
>>>
>>>
>>> http://query.nytimes.com/gst/fullpage.html?res=9C05E4D71E3CF934A3575BC0A9679C8B63&sec=&spon=&pagewanted=1
>>>
>>> Superior went belly-up in 2001. Who ran Superior? Penny Pritzker, B
>>> Hussein Obama's finance 2008 finance chairman, financial sponsor, and
>>> also chairman of the successor to the Chicago Annenberg Challenge. The
>>> point is, the demo model for subprimes was Superior and it failed.
>>> Pritzker was to the sub prime mortgage what Michal Malkin was to junk
>>> bonds.
>>>
>>> In 2003 the Bush administration tried to reform Freddie and Fannie and
>>> was shot down, led by Barny Frank.
>>>
>>>
>>> http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63
>>>
>>> Some Senators saw the handwriting on the wall in 2005 and again tried
>>> to reform Fan & Fred.
>>>
>>>
>>> http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190#sMonofilemx003Ammx002Fmmx002Fmmx002Fmhomemx002Fmgovtrackmx002Fmdatamx002Fmusmx002Fm109mx002Fmcrmx002Fms20060525-16.xmlElementm0m0m0m
>>>
>>> By 2007, the problems were too big too ignore because so many
>>> homeowners were defaulting. The financial markets stayed intact
>>> because these "toxic mortgages" were hidden behind some really clever
>>> debt instruments. Then everyone got scared.
>>>
>>> I'll post more as information trickles in. Both political parties
>>> have their fingerprints all over this mess and Wall Street threw some
>>> good old fashioned GREED into mix for the final meltdown. Follow the
>>> money-
>>>
>>> http://www.opensecrets.org/industries/mems.php
>>>
>>> What interesting times we live in!
>>>
>>> Brad
>>>
>>>
>>>
>>> On Sun, Sep 21, 2008 at 6:16 AM, Tootle <ekroposki at charter.net> wrote:
>>>
>>>> Brad,
>>>>
>>>> You are the accountant on this forum. If there are others, they do not
>>>>
>>> have
>>>
>>>> courage so speak up.
>>>>
>>>> This is also an ethical question, a legal ethical question. And
>>>>
>>> lawyers
>>>
>>>> should be speaking up. But alas, they claim Marxism is good. Or they
>>>>
>>> say
>>>
>>>> their practice is limited to real estate transactions or business
>>>>
>>> matters.
>>>
>>>> What the hell caused this mess?
>>>>
>>>> In South Carolina when the state legislature is not in session, lawyer
>>>> represenatives represent clients before judges they elect. Right and
>>>>
>>> Wrong,
>>>
>>>> good and evil, when working in a gray areas, it is important that
>>>>
>>> actions
>>>
>>>> withstand the scrutiny of sunlight.
>>>>
>>>> Brad said, "Here's something you don't hear much about - I've read
>>>>
>>> exactly
>>>
>>>> two articles that discussed "mark to market" including one from Steve
>>>> Forbes. He didn't name it but he's referring to FASB 157 (Financial
>>>> Accounting Standards Board) which went into effect November 15, 2008
>>>>
>>> that
>>>
>>>> requires all assets including level 3 assets which include
>>>>
>>> collateralized
>>>
>>>> debt obligations (what Warren Buffet described as "weapons of mass
>>>>
>>> financial
>>>
>>>> destruction" in 2002) to be shown on the books at market value. There
>>>>
>>> lies
>>>
>>>> the problem, no one knows what these obligations are "worth" and when
>>>>
>>> faith
>>>
>>>> in these instruments failed, the system started grinding to a halt.
>>>>
>>>> If the people had been honest and ethical from the get go they would
>>>>
>>> have
>>>
>>>> held the actions and the paper they were written on to sunlight and a
>>>>
>>> simple
>>>
>>>> test of right and wrong. These events remind me of the lady who
>>>>
>>> spilled
>>> the
>>>
>>>> beans in the Enron situation. And the media said Enron was big?
>>>>
>>>> As you find time tell us where to find Steve's article and Warrens
>>>> admonition. And post any relevant sources.
>>>>
>>>> Yes, Marxism is at issue because of the Federal requirement of banks to
>>>>
>>> loan
>>>
>>>> in questionable situations instead of holding federally backed loans to
>>>>
>>> a
>>>
>>>> high standard. The government compelled bankers to disregard risks.
>>>> Dictatorship, Marxism, Socialism, Progressivism, call it what you want,
>>>>
>>> it
>>>
>>>> is wrong and leads to garbage.
>>>>
>>>> Ed K
>>>> Greenville, SC, USA
>>>> attachment:
>>>> http://www.nabble.com/file/p19593492/401k.jpg 401k.jpg
>>>>
>>>>
>>>> Ed,
>>>> The subject line should probably be edited to include 'Politics' since
>>>> that is always an aspect of economics, but let's stick primarily to
>>>> economics for now.
>>>>
>>>> First, a quick personal note. My union called me this week - the wife
>>>> of one of our members is dying from cancer and he has burned through
>>>> his sick leave to be by her side. They asked me to cover one of his
>>>> trips last night, which I did. I contacted my superior in the
>>>> training department and asked that he get the word out to fellow
>>>> instructors to consider flying "back-side-of-the-clock" trips for
>>>> landing currency instead of the usual afternoon "gentlemen" trips, and
>>>> they have stepped-up to the plate. This is a great country, and I am
>>>> fortunate to work for a wonderful company and with a very professional
>>>> union.
>>>>
>>>> Now about this little "financial problem" we face, it is bad. Just as
>>>> in every major airline crash that leaves a smoking hole in the ground,
>>>> the press immediately jumps to conclusions, focuses on the horror, and
>>>> is usually wrong in their analysis. What we are witnessing here is not
>>>> a crash (despite the MSM comparisons to 1929) but more like a GPWS
>>>> (ground proximity warning system) encounter - if immediate action
>>>> isn't taken, disaster will be the result. Like every aircraft
>>>> accident, the usual suspects start their spin, "It was the pilots
>>>> fault", "It was Boeings fault", "It was the company's fault", "It was
>>>> the weather". The reality takes years to discover and the root causes
>>>> are often something completely different than the original pundits
>>>> analysis. And most importantly, there is usually plenty of blame and
>>>> responsibility to go around.
>>>>
>>>> Here's the quick and dirty on what we know. The financial markets
>>>> were about to shut down because the trust and faith in the underlying
>>>> assets that props-up the entire system were suspect.
>>>>
>>>> I'll go into a more thorough analysis tomorrow after a good nights
>>>> sleep. Here's something you don't hear much about - I've read exactly
>>>> two articles that discussed "mark to market" including one from Steve
>>>> Forbes. He didn't name it but he's referring to FASB 157 (Financial
>>>> Accounting Standards Board) which went into effect November 15, 2008
>>>> that requires all assets including level 3 assets which include
>>>> collateralized debt obligations (what Warren Buffet described as
>>>> "weapons of mass financial destruction" in 2002) to be shown on the
>>>> books at market value. There lies the problem, no one knows what
>>>> these obligations are "worth" and when faith in these instruments
>>>> failed, the system started grinding to a halt.
>>>>
>>>> I'm not very happy about the federal government nationalizing roughly
>>>> 7% of the economy but let's hope this only a temporary jolt of
>>>> medicine and the government will divest themselves of their new
>>>> "ownership" position as quickly as they acquired it.
>>>>
>>>> We'll discuss the culprits tomorrow.
>>>>
>>>> Brad
>>>>
>>>> On Fri, Sep 19, 2008 at 6:26 PM, Tootle <ekroposki at charter.net> wrote:
>>>>
>>>>> Brad just posted a significant post to the list, but its significance
>>>>>
>>> gets
>>>
>>>>> lost in subject line. All shoud read his last post:
>>>>>
>>>>>
>>>>>
>>> http://www.rhodes22.org/pipermail/rhodes22-list/2008-September/054616.html
>>>
>>>>> I am referring to the briefing to Congress.
>>>>>
>>>>> Ed K
>>>>> Greenville, SC, USA
>>>>> --
>>>>> View this message in context:
>>>>>
>>>>>
>>> http://www.nabble.com/Significant-Post-to-List-with-wrong-subject-line%21%21%21-tp19580917p19580917.html
>>>
>>>> http://www.nabble.com/file/p19593492/401k.jpg 401k.jpg
>>>> --
>>>> View this message in context:
>>>>
>>> http://www.nabble.com/Economics---Significant-Post-to-List-with-wrong-subject-line%21%21%21-tp19590875p19593492.html
>>>
>>>> Sent from the Rhodes 22 mailing list archive at Nabble.com.
>>>>
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