Financial News

[lostfan]

a look at what to do with greece:

http://baselinescenario.com/2010/04/06/gre...-an-imf-rescue/

 

my vote: they should default and leave the eurozone

It's not that easy for Greece (or any European country for that matter) to leave the EU.

Edited April 14, 2010 by lostfan

[southsider2k5]

I think my argument is...they're not breaking rules. They've whittled away at the Depression-era regulations so much that they're able to keep these things off their balance sheets legally, without breaking any of the rules. IMO, the only way that arguing we're in 2010 and not in the great depression is important is that the banks have found more high-tech ways to follow the letter of the law while still being able to get around the intent...and a key element of that is that they've been writing their own rules for 30 years to allow themselves to.

 

You can argue that I've distorted your words in places and I'll disagree, but you've explicitly argued in many places that the compensation/bonus culture is totally unimportant and I shouldn't care about it, and I don't think you can disagree with that. But right here, as far as I can tell, you just made the argument for how important it really is. Each of the companies has been wiped out. The shareholders got killed, the workers got killed. The only people who didn't get killed are the people who took their bonuses and got out early to leave the government holding the bag for the mess they made. There's a huge downside in a corporation acting like that; it destroys the corporation. There's no downside for people getting paid entirely based on short-term gains to act like that, though.

 

Anyway, thanks for replying. I found it quite edifying.

 

Yet they wouldn't be able to get away with it if the government hadn't have set up a system to subsidize and encourage the risks they were taking. They also wouldn't have been able to get anywhere if regulators actually served a purpose in this country in any piece of the financial sector. The problem is that your focus is pinpoint narrow when it comes to regulation, which is exactly the problem with the system now.

[bmags]

It's not that easy for Greece (or any European country for that matter) to leave the EU.

 

Eurozone /= EU.

 

I think they will allow Greece to leave it, but not Spain or Portugal even though being allowed to devalue their currency would help them a lot.

[lostfan]

It would help Greece a lot if they could devalue their currency. That would only be a band-aid fix though, they basically have to take a sledgehammer to their government and start over.

[bmags]

It would help Greece a lot if they could devalue their currency. That would only be a band-aid fix though, they basically have to take a sledgehammer to their government and start over.

 

defaulting tends to do that. However...argentina is the key example here. The IMF let them float along for a while and finally they defaulted. They went through hell, but they did recover rather quickly.

 

If Greece defaults while being under the Euro...damn, their people are f***ed.

[HuskyCaucasian]

last-ditch lobbying push from big Wall Street firms:

Wall Street giants Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley had been pressing hard in recent days to dilute provisions of the bill that would change the rules for derivatives trading. But the Obama administration, which has made this one of its priorities for the financial-regulatory bill, has pushed back hard and appears to be succeeding. That's drawing Republican complaints that the pending rewrite of the rules of finance will put the economy at risk.

 

 

The battle is the latest clash between Wall Street and the White House as the administration pushes for the most sweeping revamp of financial regulation since the Great Depression, following the recent crisis. Wall Street firms, among other interests, are scurrying to protect their franchises and profits.

 

Simon Johnson: Latest GOP Proposals Are 'Downright Scary'

At one level, it is good to see the Republican Senate leadership finally express clear positions on the financial industry and what we need in order to make it safer. At another level, what they are proposing is downright scary.

 

In a Senate floor speech yesterday, Senator Mitch McConnell (Senate Republican leader) said, ”The way to solve this problem is to let the people who make the mistakes pay for them. We won’t solve this problem until the biggest banks are allowed to fail.”

 

Do not be misled by this statement. Senator McConnell’s preferred approach is not to break up big banks; it’s to change nothing now and simply promise to let them fail in the future.

 

This proposal is dangerous, irresponsible, and makes no sense. The bankruptcy process simply cannot handle the failure of large complex global financial institutions – without causing the kind of worldwide panic that followed the collapse of Lehman and the rescue/resolution of AIG. This is exactly the lesson of September 2008.

[southsider2k5]

last-ditch lobbying push from big Wall Street firms:

 

 

Simon Johnson: Latest GOP Proposals Are 'Downright Scary'

 

He's right in one way, if the government isn't subsidizing risky behavior, it is a lot less likely to happen. Of course we as a country won't stand for their being consequences for anything.

[Balta1701]

He's right in one way, if the government isn't subsidizing risky behavior, it is a lot less likely to happen. Of course we as a country won't stand for their being consequences for anything.

If there are consequences for anything the banks do, they'll just take the economy and go home.

[southsider2k5]

If there are consequences for anything the banks do, they'll just take the economy and go home.

 

And just like any of this stuff, there are rules on the book against it, once again it is another way the government has completely failed. If banks are too big, it is because the regulators and the federal government looked the other way while it happened.

[Balta1701]

And just like any of this stuff, there are rules on the book against it, once again it is another way the government has completely failed. If banks are too big, it is because the regulators and the federal government looked the other way while it happened.

There's no rules on the book about how big banks can be?

[southsider2k5]

There's no rules on the book about how big banks can be?

 

The anti-trust laws?

[Balta1701]

The anti-trust laws?

When's the last time any of those were used for anything? Breaking up AT&T in the 80s? Yeah, that worked great. Thank God we broke that up into multiple companies, I'd hate for AT&T to have reassembled into a behemoth that provides godawful service on everything but is the only company that provides home phone service in my area.

 

Anyway...There's an easy objection to that. Would you have considered Lehman Brothers or Bear Stearns to be a trust before they went down? Or AIG? In every market, they all had competition, there were multiple other firms doing the same thing. The problem wasn't that they were monopolistically inhibiting interstate commerce (although I'm starting to think that GS is coming close now), the problem was that they were so interconnected that when they failed it put everyone else on the verge of failing with them.

 

Basically, you can be TBTF without coming anywhere close to the anti-trust rules.

[southsider2k5]

When's the last time any of those were used for anything? Breaking up AT&T in the 80s? Yeah, that worked great. Thank God we broke that up into multiple companies, I'd hate for AT&T to have reassembled into a behemoth that provides godawful service on everything but is the only company that provides home phone service in my area.

 

Anyway...There's an easy objection to that. Would you have considered Lehman Brothers or Bear Stearns to be a trust before they went down? Or AIG? In every market, they all had competition, there were multiple other firms doing the same thing. The problem wasn't that they were monopolistically inhibiting interstate commerce (although I'm starting to think that GS is coming close now), the problem was that they were so interconnected that when they failed it put everyone else on the verge of failing with them.

 

Basically, you can be TBTF without coming anywhere close to the anti-trust rules.

 

Even if you want to ignore more laws, there were all of those great government regulators approving all of these mergers that made these companies. By the way, you are now talking about brokerages and not banks, which have a whole different set of rules in many of their products.

[Balta1701]

Even if you want to ignore more laws, there were all of those great government regulators approving all of these mergers that made these companies. By the way, you are now talking about brokerages and not banks, which have a whole different set of rules in many of their products.

So in other words, we need more stringent regulations about what mergers are allowed. I can live with that.

 

And correct me if I'm wrong...but aren't all the brokerages now considered "Bank holding companies" so that they can take advantage of the bailouts? I'm pretty sure calling them banks is now actually accurate.

[NorthSideSox72]

So in other words, we need more stringent regulations about what mergers are allowed. I can live with that.

 

And correct me if I'm wrong...but aren't all the brokerages now considered "Bank holding companies" so that they can take advantage of the bailouts? I'm pretty sure calling them banks is now actually accurate.

*breaks back into Buster*

 

No, the great majority in fact are not. There are very few bank holding companies, and very many brokerages of various types.

 

*leaves*

 

[BigSqwert]

ninja admin

[southsider2k5]

So in other words, we need more stringent regulations about what mergers are allowed. I can live with that.

 

And correct me if I'm wrong...but aren't all the brokerages now considered "Bank holding companies" so that they can take advantage of the bailouts? I'm pretty sure calling them banks is now actually accurate.

 

Not even close. I am saying that it is easier for the government to make up more rules so that it doesn't look like this happened on their watch, when not only were they complicit, they practically were responsible for it from beginning to end.

 

NSS handled the last part.

[Cknolls]

*breaks back into Buster*

 

No, the great majority in fact are not. There are very few bank holding companies, and very many brokerages of various types.

 

*leaves*

 

 

But the two biggest are, and I believe that is what Balta is referring to: MS and GS. They should have lost that ability when they apid back their money.

[Balta1701]

But the two biggest are, and I believe that is what Balta is referring to: MS and GS. They should have lost that ability when they apid back their money.

No one has a problem with investment firms unless they're TBTF. They can go bankrupt and you don't care.

[bmags]

which is why the new bank bill should create a system to deal with the failure of a tbtf bank much like we are capable of with smaller ones like FDIC

[southsider2k5]

which is why the new bank bill should create a system to deal with the failure of a tbtf bank much like we are capable of with smaller ones like FDIC

 

You mean like enforcing the laws we have now and not creating to big to fail banks? Why do we need more laws if we aren't going to enforce the ones we do have? Its a complete diversion, and people are buying this crap hook, line, and sinker.

[Cknolls]

You mean like enforcing the laws we have now and not creating to big to fail banks? Why do we need more laws if we aren't going to enforce the ones we do have? Its a complete diversion, and people are buying this crap hook, line, and sinker.

 

 

Kind of like the short sale rule that was not enforced.

[Balta1701]

You mean like enforcing the laws we have now and not creating to big to fail banks? Why do we need more laws if we aren't going to enforce the ones we do have? Its a complete diversion, and people are buying this crap hook, line, and sinker.

Where is there anything in the law that limits the size of Financial Institutions as long as some amount of competition is maintained? If you have 3 financial institutions each controlling 33% of the market, that's really not a trust/monopoly if there is genuine competition between them, but if they're borrowing money from each other then they can easily be TBTF.

[Cknolls]

Very good chance a correction starts today. Would not surprise me to see mkt down big today into Monday. SPX 1180. If 1180 fails a test of 1150. But the real selloff should occur in July.

[Balta1701]

link

The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.

 

The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.

 

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."