The problem is a serious ideological problem: those who created this mess are still setting policy. So naturally the thinking is let's get back to status quo.
Slight correction: they want to get to back to what they perceive as the status quo.
It's a large distinction. What they think is the status quo is 2005-2007. The problem is that 2005-2007 was an outlier. It was a bubble economy that wasn't based around anything sustainable.
What is actually the status quo is something before 1997. Probably pre-1994. But those in power, especially those on Wall Street, don't want to go back to that.
So our politicians, at the bidding of the wealthy and powerful, are trying to recreate something that can't be recreated. They are wasting time and resources.
Midtowng, you, hit it out the park. Policy people have been focusing way too much to OUR detriment on "how do we get back to where we were". Instead, saying wait - here is an opportunity to change/restructure our economy.
The problem is a serious ideological problem: those who created this mess are still setting policy. So naturally the thinking is let's get back to status quo. Hence, all the policies to re-inflate the bubble particularly housing.
I still think we have a serious insolvency problem that we are ignoring. The approach has been overwhelming liquidity but nothing has been done to address insolvency. I guess that is part of the same tired thinking that got us into this mess.
It is a glorified redistribution of wealth. To the super rich and they also plain gave away American jobs via wage arbitrage to foreign nations too.
They double squeezed the middle class, outsourced their jobs, gave them to other nations, still act like middle class income won't cause the entire U.S. economy to implode, won't deal with outsourcing....at all and the corporate lobbyists are hard at work to increase this.
While we have people who should be financially secure, ready for retirement, between all of the age discrimination, layoffs, dot con bubble, housing bubble and wage squeeze basically do not have any retirement (oops, forget the raid on retirement generally through the 401k fake out rip off swap), and even worse are now facing massive age discrimination to get more income, which they desperately need.
Why are the Republicans sitting on the 13 week extension? Falling through the safety net is a terrifying reality to the people needing the extra 13 weeks. My brother is in construction and I know what an extra 13 weeks would mean to him and his family. There is no excuse if the republicans are making a political football out of the extension. Its cruel.
close out its position in the interest rate swap. There are a lot of questions that need to be answered. Was it too expense at the time? Did someone drop the ball and forgot about the agreement?
There is serious informational asymmetry problem in the OTC. Wow, that is a big word I just used. Goldman Sachs and other big-time derivatives dealers have the advantage over municipalities or others.
I would be curious about what the hell were the financial advisors to the fund were doing and were the financial advisors and their relationship with Goldman Sachs.
There are a lot of players in the OTC market that don't know what they are getting into.
Proctor & Gamble vs. Bankers' Trust is another example. I think P&G actually admitted in court filing that it had no idea what Bankers' Trust sold them but they were playing in the OTC market.
Financial conglomerates don't want any transparency in this market because 1) it would kill their spreads and 2) they know there are a lot of suckers out there.
One approach would be to prohibit outright gambling by banks, and link capital requirements to dertivatives exposure. Also, have Fed and Treasury articulate an "at your own risk" policy for losses from derivatives. If you are going to insure others, you had damned well better be able to cover claims without recourse to the taxpayers. We need a firewall in place.
Frank T.
IMO, we should be surprised if there were no improvement at this point. Some due to cost cutting, some due to external causes (China infrastructure, etc.) and some due to basic need-driven demand. Some distortion as we borrow from future demand -- as in cash for clunkers. Optomistic narratives being leaked from Fed and others re TARP repayment, etc. What is troublng is "new normal" expectations and absence of growing the middle class. Hell, perhaps China is the new middle class and we are the consumption proles. At this point, I must go back and re-read Vonnegut's PLAYER PIANO. Anyway, the CEO of Nucor Steel was on Cramer last night, and he did not mince words -- this will last a while and demand is not what it should be. I did like his statement that they have not done layoffs and do not intend to in the future.
Frank T.
I am not sure I agree with the title but I definitely agree with the substance of the article:
But most importantly, he came into office amidst sweeping crises in the financial sector and did not do what needed to be done, and what had been done the last time the U.S. was sent careening into a depression because of Wall Street: he failed to push for tough financial reforms. Barack Obama needed to be the FDR figure who remade the American capital markets and made them fair again, and he barely laid a finger on the whole scene.
Instead, he put the people who created the problem in charge of fixing the mess, and ended up bailing them out instead of the rest of the country, at huge current and (presumably) future cost.The total bill for the Bush-Obama bailout is certainly above ten trillion at this point — Inspector General Neil Barofsky thinks it might hit nearly $24 trillion ultimately — and this went through without much fanfare. Meanwhile, the congress is stuck in the mud, panicked at the thought of paying three or four trillion over a decade or so for a health care program.
None of this is new news. What is new is the question of what to do about it. I’m personally of the opinion that our main problem lay with the fact that the Democratic Party as currently constituted is more afraid of losing the financial support of Wall Street and the health insurance industry and the pharmaceutical industry than it is of losing progressive voters. In fact, I think I’ve put that wrong, because it implies that the Democratic Party pushes the agenda of industry insiders out of fear. That is a misread of the situation, I think.
I think they prefer those people to their voters. I think they feel more comfortable with them. I heard a story recently from a Democratic Party operative who tells me that certain members of one of the president’s cabinet departments only got wind of how hard it is out there for ordinary people to pay their bills when they invited in a major corporation to give them a presentation about their financial outlook for the holiday season — and through that report found out that this company’s prospective customers were spending less because large numbers of them had been laid off, or had huge medical bills, or had maxed out their credit, and so on.
Pres. Obama reportedly raised almost $2 million this past week at a Wall Street fundraiser. Nice chunk of change for someone who should be fighting for us. Oh yeah, what do politicians say about corporate special interest donations? I think they say it doesn't influence their decisions.
Sure. Tell that to all your middle class constituents when they are flat broke and living in tent cities because of the next crisis that you failed to prevent because you were more interested in protecting your contributors instead of your constituents.
Do people remember Long Term Capital Management? In 1998, LTCM practically brings down the financial system because of greedy and reckless bets ($1.25 trillion notional value in interest rate swaps). They get bought out - I am sure the hedge fund partners got a good chunk of change in the bail out. John Meriweather, founder of LTCM, goes one to start several other hedge funds after that.
Hell, the stock market jumped. There is something not right about these indicators. I can't quite point my finger on it. My problem is we are told ad nauseam that unemployment is a lagging indicator. But there is some level of circularity to all of this.
If unemployment levels are quite significant as they are now and we now other indicators such as household debt levels are still bad and credit is still tight this all doesn't bode well for future demand. At some point because of the significant levels of unemployment LEI don't mean shit. Right?
The recession is driving the safety net of government benefits to a historic high, as one of every six dollars of Americans' income is now coming in the form of a federal or state check or voucher.
Benefits, such as Social Security, food stamps, unemployment insurance and health care, accounted for 16.2% of personal income in the first quarter of 2009, the Bureau of Economic Analysis reports. That's the highest percentage since the government began compiling records in 1929.
In all, government spending on benefits will top $2 trillion in 2009 — an average of $17,000 provided to each U.S. household, federal data show. Benefits rose at a 19% annual rate in the first quarter compared to the last three months of 2008.
The recession caused about half of the increase, according to the report. Unemployment insurance nearly tripled in the past year. The other half is the result of policies enacted during President George W. Bush's first term.
Following the 2001 recession — when costs normally decline — social spending soared to pay for the Medicare drug benefit, expanded health care for children and greater use of food stamps.
I'd like to add to them.
#1) Domestic equity mutual fund outflows reached $25 Billion in August. This makes no sense when you consider the major market moved 7% higher that month. In fact, every week of September and so far in October has seen steadily increasing outflows, with the week of October 14 hitting a high of $5.3 Billion.
but an entire economic model. Including tax rates:
RebelCapitalist.com - Financial Information for the Rest of Us.
Slight correction: they want to get to back to what they perceive as the status quo.
It's a large distinction. What they think is the status quo is 2005-2007. The problem is that 2005-2007 was an outlier. It was a bubble economy that wasn't based around anything sustainable.
What is actually the status quo is something before 1997. Probably pre-1994. But those in power, especially those on Wall Street, don't want to go back to that.
So our politicians, at the bidding of the wealthy and powerful, are trying to recreate something that can't be recreated. They are wasting time and resources.
Midtowng, you, hit it out the park. Policy people have been focusing way too much to OUR detriment on "how do we get back to where we were". Instead, saying wait - here is an opportunity to change/restructure our economy.
The problem is a serious ideological problem: those who created this mess are still setting policy. So naturally the thinking is let's get back to status quo. Hence, all the policies to re-inflate the bubble particularly housing.
I still think we have a serious insolvency problem that we are ignoring. The approach has been overwhelming liquidity but nothing has been done to address insolvency. I guess that is part of the same tired thinking that got us into this mess.
RebelCapitalist.com - Financial Information for the Rest of Us.
It is a glorified redistribution of wealth. To the super rich and they also plain gave away American jobs via wage arbitrage to foreign nations too.
They double squeezed the middle class, outsourced their jobs, gave them to other nations, still act like middle class income won't cause the entire U.S. economy to implode, won't deal with outsourcing....at all and the corporate lobbyists are hard at work to increase this.
While we have people who should be financially secure, ready for retirement, between all of the age discrimination, layoffs, dot con bubble, housing bubble and wage squeeze basically do not have any retirement (oops, forget the raid on retirement generally through the 401k fake out rip off swap), and even worse are now facing massive age discrimination to get more income, which they desperately need.
Great post midtowng.
NY Times.
It really looks to me that the great middle class squeeze is coming home to roost.
hmmm....we might have to make this bank failure Saturday.
First Dupage Bank of Westmont, Illinois
Why are the Republicans sitting on the 13 week extension? Falling through the safety net is a terrifying reality to the people needing the extra 13 weeks. My brother is in construction and I know what an extra 13 weeks would mean to him and his family. There is no excuse if the republicans are making a political football out of the extension. Its cruel.
close out its position in the interest rate swap. There are a lot of questions that need to be answered. Was it too expense at the time? Did someone drop the ball and forgot about the agreement?
There is serious informational asymmetry problem in the OTC. Wow, that is a big word I just used. Goldman Sachs and other big-time derivatives dealers have the advantage over municipalities or others.
I would be curious about what the hell were the financial advisors to the fund were doing and were the financial advisors and their relationship with Goldman Sachs.
RebelCapitalist.com - Financial Information for the Rest of Us.
where GS is actually collecting fees long after the underlying asset is gone. I expect to see some lawsuits over this one.
A little different than realizing someone had dumped in a pension fund into a host of CDOs per say and lost 90%, etc.
Very good reporting by Bloomberg.
There are a lot of players in the OTC market that don't know what they are getting into.
Proctor & Gamble vs. Bankers' Trust is another example. I think P&G actually admitted in court filing that it had no idea what Bankers' Trust sold them but they were playing in the OTC market.
Financial conglomerates don't want any transparency in this market because 1) it would kill their spreads and 2) they know there are a lot of suckers out there.
RebelCapitalist.com - Financial Information for the Rest of Us.
"off-balance sheet" investment schemes for regulated entities.
RebelCapitalist.com - Financial Information for the Rest of Us.
One approach would be to prohibit outright gambling by banks, and link capital requirements to dertivatives exposure. Also, have Fed and Treasury articulate an "at your own risk" policy for losses from derivatives. If you are going to insure others, you had damned well better be able to cover claims without recourse to the taxpayers. We need a firewall in place.
Frank T.
IMO, we should be surprised if there were no improvement at this point. Some due to cost cutting, some due to external causes (China infrastructure, etc.) and some due to basic need-driven demand. Some distortion as we borrow from future demand -- as in cash for clunkers. Optomistic narratives being leaked from Fed and others re TARP repayment, etc. What is troublng is "new normal" expectations and absence of growing the middle class. Hell, perhaps China is the new middle class and we are the consumption proles. At this point, I must go back and re-read Vonnegut's PLAYER PIANO. Anyway, the CEO of Nucor Steel was on Cramer last night, and he did not mince words -- this will last a while and demand is not what it should be. I did like his statement that they have not done layoffs and do not intend to in the future.
Frank T.
I am not sure I agree with the title but I definitely agree with the substance of the article:
Pres. Obama reportedly raised almost $2 million this past week at a Wall Street fundraiser. Nice chunk of change for someone who should be fighting for us. Oh yeah, what do politicians say about corporate special interest donations? I think they say it doesn't influence their decisions.
Sure. Tell that to all your middle class constituents when they are flat broke and living in tent cities because of the next crisis that you failed to prevent because you were more interested in protecting your contributors instead of your constituents.
RebelCapitalist.com - Financial Information for the Rest of Us.
and say maybe we need to do something about OTC derivatives particularly the non-standardized ones. Nay.
RebelCapitalist.com - Financial Information for the Rest of Us.
Do people remember Long Term Capital Management? In 1998, LTCM practically brings down the financial system because of greedy and reckless bets ($1.25 trillion notional value in interest rate swaps). They get bought out - I am sure the hedge fund partners got a good chunk of change in the bail out. John Meriweather, founder of LTCM, goes one to start several other hedge funds after that.
RebelCapitalist.com - Financial Information for the Rest of Us.
Hell, the stock market jumped. There is something not right about these indicators. I can't quite point my finger on it. My problem is we are told ad nauseam that unemployment is a lagging indicator. But there is some level of circularity to all of this.
If unemployment levels are quite significant as they are now and we now other indicators such as household debt levels are still bad and credit is still tight this all doesn't bode well for future demand. At some point because of the significant levels of unemployment LEI don't mean shit. Right?
RebelCapitalist.com - Financial Information for the Rest of Us.
So this is what prosperity looks like?
I'd like to add to them.
#1) Domestic equity mutual fund outflows reached $25 Billion in August. This makes no sense when you consider the major market moved 7% higher that month. In fact, every week of September and so far in October has seen steadily increasing outflows, with the week of October 14 hitting a high of $5.3 Billion.
#2) On valuations:
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