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Archive for the ‘high finance’ Category

It must be said as a proof to the political acumen of FDR after the Great Depression, the United States had 40 years of economic growth,without a single financial crisis. The financial industry was tightly regulated. Most regular banks were local businesses, and they were prohibited from speculating with depositors’ savings. Investment banks, which handled stock and bond trading, were small, private partnerships.
“In the traditional, uh, investment-banking-partnership model, the
partners put the money up. And obviously, the partners watched that money very carefully. They wanted to live well, but they didn’t want to bet the ranch on anything.”Samuel Hayes Prof.emeritus of investment banking Harvard Business School.
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In the 1980s, the financial industry exploded. The investment banks went
public, giving them huge amounts of stockholder money. People on Wall Street started getting rich. In 1981, President Ronald Reagan chose as Treasury secretary the CEO
of the investment bank Merrill Lynch, Donald Regan (1981-85).
The Reagan administration, supported by economists and financial lobbyists, started a 30-year period of financial deregulation.
In 1982, the Reagan administration deregulated savings and loan companies, allowing them to make risky investments with their depositors’ money. By the end of the decade, hundreds of savings and loan companies had failed.
(This crisis cost taxpayers 124 billion dollars, and cost many people their life savings. Perhaps one of the biggest bank heist in our history came out of the nexus between Reagan and Donald Regan (not related). You see the entire Wall Street was behind the Presidnt to a man. This was a dry run for the economic downturn of 2008 and would affect globally millions as a result.( Only the villains and fools had to strut on the stage and do their pieces.)

Law catches up with crooks sooner or later. Thousands of savings and loan executives went to jail for looting their companies. One of the most extreme cases was Charles Keating.
You got to say Keating, a smart Alec that he was, hired an economist named Alan Greenspan. His hand was so steeped in the heist that he did go to jail but luck smiled on Greenspan. President Reagan appointed him chairman of America’s central bank, the Federal
Reserve. Greenspan was reappointed by presidents Clinton and George W. Bush.
During the Clinton administration, deregulation continued under Greenspan and Treasury secretaries Robert Rubin — the former CEO of the investment bank Goldman Sachs — and Larry Summers, a Harvard economics professor. By the late 1990s, the financial sector had consolidated into a few gigantic firms, each of them so large that their failure could threaten the whole system; and the Clinton administration helped them grow even larger.
In 1998, Citicorp and Travelers merged, to form Citigroup, the largest financial services company in the world. The merger violated the Glass-Steagall Act, a law passed after the Great Depression, which prevented banks with consumer deposits from engaging in
risky investment banking activities. Here we see a President’s lack of attention to detail or long range conseqnces was writing the scenario for disaster.
Reagan and Clinton:
By the way Reagan stepping out from the entertainment business wanted to entertain and his policies all as can be seen were motivated by wowing them and leave them in stiches. He had style but never did acquire susbstance as FDR has had. (It seems he never as a President wanted his aides to brief him with memos more than a paragraph.Was it his short attention span or the Alzcheimer was in incipient stage?) Clinton the Great Communicator also failed but for different reasons. Mnica Lewinsky scandal was a distraction.
The nation was banking with fools and under the watch of men of straw. The events will run their course and in 2008 blow in the faces of the nation.(ack: Inside Job-sony Pictures,2010)
benny

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In my kindergarten days I was taught to share what I have got with others. In the corporate world I find just the opposite. One need only look at the way AIG top brass have, in 2008, given bonus themselves.

benny

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Paul Fischer was a man whom all looked with envy. Why you might ask. He checked his bank account Friday night and found his balance like the bean in the Jack and the beanstalk story had shot up to $88,888,888,888.88.

Of course, the balance was a technical error by SunTrust Bank which they fixed in a matter of five hours. If Mr. Fischer was a recipent of Sun Trust I would not be surprised if others also were picked out to their largess, which is always unmerited and uncalled for as the bonus to CEO s in AIG or any other.

The Sun for a symbol suits the finance sector: while the brilliant malefeance of financial wizard blazes skyhigh (like Bernard Madoff or the CEO of Enron) his fortune rises and falls when least expected, we have banks also showing  similar ups and downs.  Sun Trust Bank luckily saved their money for now.

No bank has yet gone under a technical error.  Perhaps if a moron of a robot ( by a mechanical error or an electrical shortcut) transfers / teleports the entire assets, liquid and other, to another robot in another galaxy well my statement will not hold.

benny

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“Worst Is Yet to Come:” Americans’ Standard of Living Permanently Changed
Posted Feb 17, 2009 12:53pm EST by Aaron Task in Investing,
There’s no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.

But “the worst is yet to come,” according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American’s standard of living is undergoing a “permanent change” – and not for the better as a result of:

* An $8 trillion negative wealth effect from declining home values.
* A $10 trillion negative wealth effect from weakened capital markets.
* A $14 trillion consumer debt load amid “exploding unemployment”, leading to “exploding bankruptcies.”

“The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car,” Davidowitz says. “A lot of that is gone.”

Going forward, the veteran retail industry consultant foresees higher savings rate and people trading down in both the goods and services they buy – as well as their aspirations.

Now let me  quote from Paul Krugman’s article,’Decade at Bernie’s’:

‘Until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing.

…It’s worth remembering …notably in right-leaning publications like The Wall Street Journal, Forbes, and National Review’ (promoted the belief that the Americans could count on capital gains forever and ridiculed those who worried about low savings and high levels of debt.)

Now it seems those who worried were right after all. The surge in asset values had been an illusion and the debts were,  not a surge but an hurricane to which Katrina is merely a sneeze.

There is a statutory warning on cigarette packs. Shouldn’t there be a similar warning on any financial pundit who paints a rosy picture on insufficient evidences,  in the interests of public safety? As for the Wall Street Journal and similar journals who do the role of a barker for dubious bankers (if found to be true) ought to be held responsible for the mischief they are doing with impunity. I think in such a case they are equally  culpable as doctors who are at present sued for malpractice.

In any case as Betty Davis says in All About Eve, a bumpy ride ahead is for all whose only fault was to believe in the system.

benny

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“Government is trying to inject some liquidity into the market and how does AIG executives take it? Wining and dining at some fancy party is how they see the bailout.”

Nero eat your heart out!

benny

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