Financial News

[southsider2k5]

Let banks be "too big to fail" and so interwoven that we're forced to choose between global economic meltdown or bailing them out for their ineptitude, what a great idea!

 

Speaking of ineptitude, if the government did half of the regulating that it promised over the last 80 years, we wouldn't be anywhere near the problems that we have had.

[StrangeSox]

I am glad you recognize the need for some amount of regulation.

[southsider2k5]

I am glad you recognize the need for some amount of regulation.

 

We are wasting billions of dollars a year on it, it would be nice to get SOMETHING out of it.

[NorthSideSox72]

We are wasting billions of dollars a year on it, it would be nice to get SOMETHING out of it.

Well let's not get over the top here. Also, the problem isn't so much the regulations themselves, as the enforcement or lack thereof, due to problems of scope, departmental competition, etc. You know this.

 

As for Glass-Steagall, I am actually on the fence. Not sure what I think. I mean, part of the reason you WANT banks to be in multiple lines, is that it helps their stability. That is, as long as they are using reasonably risk management practices, and properly showing risk when valuing their books. If they are doing that, then being in multiple lines is actually better for everyone involved. The problem is if they aren't doing risk management correctly, then when they fail, its a much bigger impact with these enormous firms than it otherwise would be.

 

 

[southsider2k5]

Well let's not get over the top here. Also, the problem isn't so much the regulations themselves, as the enforcement or lack thereof, due to problems of scope, departmental competition, etc. You know this.

 

As for Glass-Steagall, I am actually on the fence. Not sure what I think. I mean, part of the reason you WANT banks to be in multiple lines, is that it helps their stability. That is, as long as they are using reasonably risk management practices, and properly showing risk when valuing their books. If they are doing that, then being in multiple lines is actually better for everyone involved. The problem is if they aren't doing risk management correctly, then when they fail, its a much bigger impact with these enormous firms than it otherwise would be.

 

Sorry if I count enforcement as a part of regulation. What is the part of having rules, if you aren't going to enforce them. It is the same as the parent who repeats the same idol threat 50 times to their kid. After about the 3rd or 4th time, the kid figures out the parent isn't serious.

 

As for the second part, people aren't thinking at all of the liquidity of stocks, and the massive stock sell that it will take to get banks out of stocks. But hey, what is a 401K anyway, right? I am sure the government will come out with another bailout to cover up for their failures, again...

[NorthSideSox72]

Sorry if I count enforcement as a part of regulation. What is the part of having rules, if you aren't going to enforce them. It is the same as the parent who repeats the same idol threat 50 times to their kid. After about the 3rd or 4th time, the kid figures out the parent isn't serious.

 

As for the second part, people aren't thinking at all of the liquidity of stocks, and the massive stock sell that it will take to get banks out of stocks. But hey, what is a 401K anyway, right? I am sure the government will come out with another bailout to cover up for their failures, again...

First part - of course I agree, I was just pointing out that the difference is critical in how you address it. More laws may not be the answer.

 

Second part - that is part of what I was getting at. But I am less concerned about a mass sell-off (which I do not think would occur, there would just be a lot of EFP's and bulk transfers going on between entities), than I am about the inability to handle risk across asset types. That would force units to use less capital in the markets, as well as be at more market risk, thus resulting in a bad combination of higher volatility and lower volumes. That, indeed, would hurt everyone.

 

[Jenksismyhero]

Along the lines of enforcing the regulations that have been in existence, is there a reason we can't enact criminal penalties for the heads of these gigantic financial institutions who take tens of millions of dollars a year as bonuses/salaries, yet manage to lose billions in the process? Why hasn't the government gone after these people at least on the theory of breaching their fiduciary duty to their shareholders? I mean, clearly you can't go around indicting people for poor management, but over leveraging so much that everyone and their mother thinks "wtf are you doing?!" Wouldn't the threat of criminal penalties be enough to at least make these institutions think twice about what they do? At this point what's the check on them? They can completly f*** up again in 5 years and they know the government will be there with a blank check.

 

Also, does it sicken anyone else that Obama (and McCain....everyone really) promised a gigantic change of how Wall Street does business in order to protect "main street," yet not a damned thing has been done in this regard? There's absolutely nothing stopping financial institutions from doing exactly what they did 3-4 years ago.

[NorthSideSox72]

Along the lines of enforcing the regulations that have been in existence, is there a reason we can't enact criminal penalties for the heads of these gigantic financial institutions who take tens of millions of dollars a year as bonuses/salaries, yet manage to lose billions in the process? Why hasn't the government gone after these people at least on the theory of breaching their fiduciary duty to their shareholders? I mean, clearly you can't go around indicting people for poor management, but over leveraging so much that everyone and their mother thinks "wtf are you doing?!" Wouldn't the threat of criminal penalties be enough to at least make these institutions think twice about what they do? At this point what's the check on them? They can completly f*** up again in 5 years and they know the government will be there with a blank check.

 

Also, does it sicken anyone else that Obama (and McCain....everyone really) promised a gigantic change of how Wall Street does business in order to protect "main street," yet not a damned thing has been done in this regard? There's absolutely nothing stopping financial institutions from doing exactly what they did 3-4 years ago.

With regard to criminal liability for business conduct, this is a difference between the US and Europe that has always existed. Corporations insulate individual employees, including executives, from losses of the firm, or bad conduct, unless it is a per se law violation on the part of that individual. Some have suggested we move to the European model, where executives have a lot more at stake if their company acts badly. Its complex.

 

Also, a lot has changed in the financial world already, and a lot more will. Not sure where you get the idea that everything is the same.

 

[Jenksismyhero]

Even if it's not criminal there should be personal liability on those people. I can't imagine that some of the heads of those institutions would get off if someone brought a suit for breach of their fiduciary duties, but it hasn't happened yet, and I'm not sure why.

 

Well you guys certainly follow this stuff closer than I do, but in my passive reading about the economy I just don't see any active response to what happened. What has the government done to make sure this won't happen again? All I see is proposed legislation like this McCain thing. Has anything actually been passed? Did the SEC get more funding to actually enforce it's own laws? Are they taking anonymous and non-anonymous tips of wrongdoing seriously?

 

In a general sense it just seems like "Wall Street" made billions, lost billions, were bailed out, and now are back to business as usual.

[southsider2k5]

Who needs the federal government for official statistics, we have google!

 

http://www.voxeu.org/index.php?q=node/4385

 

Using Google trends is a trend in itself. In a recently published article, Ginsberg et al (2009) develop a simple model forecasting physician visits due to influenza-like illness using only the related query fraction on total queries as recorded by the Google search engine data, available weekly with a short delay.

 

Following the popularity of the internet as a means for searching for jobs (Stevenson, 2008), this approach has recently been extended to unemployment forecasting. In particular, the Google Index – the incidence of Google job-search related queries over total queries – proved to have predictive power in forecasting unemployment in Germany and Israel (see Askitas and Zimmermann 2009 and Suhoy 2009). Choi and Varian (2009) use the Google Index to predict the initial unemployment claims in the US.

New insights in predicting unemployment in the US

 

The impact of the crisis on internet job-search activities is clear in Figure 1. This shows the development of the index for the US before and after the onset of the current economic crisis. In two articles focussing on the US (D’Amuri and Marcucci, 2009) and Italy (D’Amuri, 2009), we show that the precision of unemployment forecasts is dramatically improved when the Google job search index is used as a leading indicator.

[Balta1701]

Even if it's not criminal there should be personal liability on those people. I can't imagine that some of the heads of those institutions would get off if someone brought a suit for breach of their fiduciary duties, but it hasn't happened yet, and I'm not sure why.

 

Well you guys certainly follow this stuff closer than I do, but in my passive reading about the economy I just don't see any active response to what happened. What has the government done to make sure this won't happen again? All I see is proposed legislation like this McCain thing. Has anything actually been passed? Did the SEC get more funding to actually enforce it's own laws? Are they taking anonymous and non-anonymous tips of wrongdoing seriously?

 

In a general sense it just seems like "Wall Street" made billions, lost billions, were bailed out, and now are back to business as usual.

A few of the things you ask about are actually in the bill the House just passed in some way, but the odds are that the bankers have already found ways around the language. There is supposed to be added whistle-blower rewards, an agency designed to evaluate and rate consumer financial products in the way that other products on the shelf at the store get checked for safety, an ability for the government to unwind these to big to fail institutions, and a systemic risk regulator.

 

But...between the fact that the bankers have really good lobbyists and the fact that it hasn't gone up against the 60 vote requirement in the Senate yet...IMO the odds of any of it actually getting through the Senate are low. Health insurance companies aren't nearly as powerful as the banks, and look how easily they've bought the Senate.

 

They're really trying to get back to business as usual as fast as possible.

[Balta1701]

The problem is if they aren't doing risk management correctly, then when they fail, its a much bigger impact with these enormous firms than it otherwise would be.

If they knew that they were too big to fail after bailouts like LTCM, then they were doing quite well in their risk management, because they knew they couldn't lose.

[mr_genius]

LOL

 

Japans cash for clunkers program: Japanese cars only.

 

CNN reporting. Would have been nice if the US would actually have stimulus programs that, you know, got US citizens employed. I guess that's asking too much.

[NorthSideSox72]

LOL

 

Japans cash for clunkers program: Japanese cars only.

 

CNN reporting. Would have been nice if the US would actually have stimulus programs that, you know, got US citizens employed. I guess that's asking too much.

I would have been happy with, car models manufactured in the US. Goes to jobs, but still allows some consumer flexibility. Seems like a good compromise.

 

[mr_genius]

I would have been happy with, car models manufactured in the US. Goes to jobs, but still allows some consumer flexibility. Seems like a good compromise.

 

yea

[Y2HH]

That's called protectionism, and it's not a very good idea. If we did that the world would cry foul -- as a matter of fact, they did when they started talking about the stimulus a long time ago.

[NorthSideSox72]

That's called protectionism, and it's not a very good idea. If we did that the world would cry foul -- as a matter of fact, they did when they started talking about the stimulus a long time ago.

I think in that case, it would have been. Its no different that the tax incentives that every country, including this one, give to businesses to set up shop there. Japanese and Korean car companies got tax incentives to set up those plants, which create jobs. This is just on the consumer side instead of the supplier side. Its also not permanent, and it would ALSO benefit those car companies from Japan, Korea, Germany and others who make cars here. No one would get overly upset about that, there wouldn't be some huge tariff war because of it, and the other countries would do the same thing anyway (and are).

 

In general, I'd agree that protectionism, can be bad. But I think you need a bit of it, at times, to protect your country from big harm.

 

[Y2HH]

I think in that case, it would have been. Its no different that the tax incentives that every country, including this one, give to businesses to set up shop there. Japanese and Korean car companies got tax incentives to set up those plants, which create jobs. This is just on the consumer side instead of the supplier side. Its also not permanent, and it would ALSO benefit those car companies from Japan, Korea, Germany and others who make cars here. No one would get overly upset about that, there wouldn't be some huge tariff war because of it, and the other countries would do the same thing anyway (and are).

 

In general, I'd agree that protectionism, can be bad. But I think you need a bit of it, at times, to protect your country from big harm.

 

Here is the problem with protectionism.

 

Say we protect these American companies, or companies doing business here in America...fine. I agree this sounds great on the surface. But let's fast forward 10 years. Let's pretend its 2019...and everything is going well, everything is recovered.

 

Now what? I'm glad you asked...so I'll tell you what...

 

The same companies we protected during a crisis will begin to raise their prices to increase their profit margins...because they can...I mean, after all...people have money again! Oh, and if that's not enough, they start shipping the jobs overseas for cheaper labor, kinda like they've been doing, because Americans get paid too much. This is the problem with protectionism in regard to privately owned businesses. This is the exact kind of crap that happens in the long term. We protect them now when they need us, but when they don't need us, BELIEVE ME, they'll do whatever they can to make more money off of you/save themselves money.

 

f*** protecting private companies.

[southsider2k5]

Here is the problem with protectionism.

 

Say we protect these American companies, or companies doing business here in America...fine. I agree this sounds great on the surface. But let's fast forward 10 years. Let's pretend its 2019...and everything is going well, everything is recovered.

 

Now what? I'm glad you asked...so I'll tell you what...

 

The same companies we protected during a crisis will begin to raise their prices to increase their profit margins...because they can...I mean, after all...people have money again! Oh, and if that's not enough, they start shipping the jobs overseas for cheaper labor, kinda like they've been doing, because Americans get paid too much. This is the problem with protectionism in regard to privately owned businesses. This is the exact kind of crap that happens in the long term. We protect them now when they need us, but when they don't need us, BELIEVE ME, they'll do whatever they can to make more money off of you/save themselves money.

 

f*** protecting private companies.

 

Except this would have been a temporary thing, which kind blows up the whole 10 year argument.

[NorthSideSox72]

Here is the problem with protectionism.

 

Say we protect these American companies, or companies doing business here in America...fine. I agree this sounds great on the surface. But let's fast forward 10 years. Let's pretend its 2019...and everything is going well, everything is recovered.

 

Now what? I'm glad you asked...so I'll tell you what...

 

The same companies we protected during a crisis will begin to raise their prices to increase their profit margins...because they can...I mean, after all...people have money again! Oh, and if that's not enough, they start shipping the jobs overseas for cheaper labor, kinda like they've been doing, because Americans get paid too much. This is the problem with protectionism in regard to privately owned businesses. This is the exact kind of crap that happens in the long term. We protect them now when they need us, but when they don't need us, BELIEVE ME, they'll do whatever they can to make more money off of you/save themselves money.

 

f*** protecting private companies.

Where do you get this idea that it is being done as a favor to them? Its not. Its a favor to Americans, because it creates jobs. Of course they will make a profit wherever they can - I WANT them to do that. Doing a domestically-oriented cash for clunkers program isn't corporate charity, its an economic safety net for the country. And its temporary, not 10 years long.

 

[Y2HH]

Where do you get this idea that it is being done as a favor to them? Its not. Its a favor to Americans, because it creates jobs. Of course they will make a profit wherever they can - I WANT them to do that. Doing a domestically-oriented cash for clunkers program isn't corporate charity, its an economic safety net for the country. And its temporary, not 10 years long.

 

I'm not saying it's 10 years long.

 

I'm saying we protect them NOW, in the short term, and 10 years later they turn around say "f*** you...all those jobs are gone now...", thanks for the help, suckers! And then China has a bunch of new jobs!

 

In a global economy, protectionism has no place. Hey, f*** the US trying to save the environment...that's not OUR problem. I thought we've moved past that line of thinking already. If we are going to do the same things the rest of the world does, we may as well just close the borders and tell them all to die. While you don't call it charity...I do. These companies got themselves into this mess with bad management, and even worse treatment of their employees...and now that they're in trouble, we'll save them in the guise of creating or saving jobs, which really weren't saved anyway?

 

/me points to the 10%+ unemployment rate, which is really upwards of 20% counting the people that have just given up looking for jobs.

 

Well, we didn't protect...and I think we will still be fine.

Edited December 17, 2009 by Y2HH

[jasonxctf]

someone on here had posted a question a while ago about how many weekly jobless losses would show job growth. Some had said 500,000 others 400,000. Saw this blurb in an article today.

 

But the four-week average dipped to 467,500, the 15th straight decline. By comparison, jobless claims peaked this year at 674,000 in March. The improvement is seen as a sign that job cuts are slowing and that hiring could pick up early next year, boosting the economy.

 

Analysts say initial claims for jobless aid would need to fall to about 425,000 for several weeks to signal the economy is beginning to add jobs.

[NorthSideSox72]

someone on here had posted a question a while ago about how many weekly jobless losses would show job growth. Some had said 500,000 others 400,000. Saw this blurb in an article today.

 

But the four-week average dipped to 467,500, the 15th straight decline. By comparison, jobless claims peaked this year at 674,000 in March. The improvement is seen as a sign that job cuts are slowing and that hiring could pick up early next year, boosting the economy.

 

Analysts say initial claims for jobless aid would need to fall to about 425,000 for several weeks to signal the economy is beginning to add jobs.

I find that bogus in any case. No number of UE filings tell you if the economy is adding jobs - you can only know that by, you know, seeing how many jobs have been added versus lost. So the 425k number or any other number is a bad correlation to try to rely upon for this purpose, in my view.

 

[jasonxctf]

http://finance.yahoo.com/news/36-states-re...set=&ccode=

[southsider2k5]

http://finance.yahoo.com/news/36-states-re...set=&ccode=

 

The key sentence...

 

"We're not that far from a point where job gains will outweigh job losses, but that's not enough to reduce the unemployment rate," he said

 

So in other words, people still are getting laid off more than they are being hired, plus there are all of the new people entering who aren't able to collect unemployment and be counted.