Global Financial Crisis (8 Viewers)
- Thread starter Dostoevsky
- Start date
OP
Screw 'em. 
Here's one more interesting article
Greenspan: Financial Crisis Likely Worst Since WWII
The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.
Home price stabilisation will restore much-needed clarity to the marketplace because losses will be realised rather than prospective. The major source of contagion will be removed. Financial institutions will then recapitalise or go out of business. Trust in the solvency of remaining counterparties will be gradually restored and issuance of loans and securities will slowly return to normal. Although inventories of vacant single-family homes – those belonging to builders and investors – have recently peaked, until liquidation of these inventories proceeds in earnest, the level at which home prices will stabilise remains problematic.
The American housing bubble peaked in early 2006, followed by an abrupt and rapid retreat over the past two years. Since summer 2006, hundreds of thousands of homeowners, many forced by foreclosure, have moved out of single-family homes into rental housing, creating an excess of approximately 600,000 vacant, largely investor-owned single-family units for sale. Homebuilders caught by the market’s rapid contraction have involuntarily added an additional 200,000 newly built homes to the “empty-house-for-sale” market.
Home prices have been receding rapidly under the weight of this inventory overhang. Single-family housing starts have declined by 60 per cent since early 2006, but have only recently fallen below single-family home demand. Indeed, this sharply lower level of pending housing additions, together with the expected 1m increase in the number of US households this year as well as underlying demand for second homes and replacement homes, together imply a decline in the stock of vacant single-family homes for sale of approximately 400,000 over the course of 2008.
The pace of liquidation is likely to pick up even more as new-home construction falls further. The level of home prices will probably stabilise as soon as the rate of inventory liquidation reaches its maximum, well before the ultimate elimination of inventory excess. That point, however, is still an indeterminate number of months in the future.
The crisis will leave many casualties. Particularly hard hit will be much of today’s financial risk-valuation system, significant parts of which failed under stress. Those of us who look to the self-interest of lending institutions to protect shareholder equity have to be in a state of shocked disbelief. But I hope that one of the casualties will not be reliance on counterparty surveillance, and more generally financial self-regulation, as the fundamental balance mechanism for global finance.
The problems, at least in the early stages of this crisis, were most pronounced among banks whose regulatory oversight has been elaborate for years. To be sure, the systems of setting bank capital requirements, both economic and regulatory, which have developed over the past two decades will be overhauled substantially in light of recent experience. Indeed, private investors are already demanding larger capital buffers and collateral, and the mavens convened under the auspices of the Bank for International Settlements will surely amend the newly minted Basel II international regulatory accord. Also being questioned, tangentially, are the mathematically elegant economic forecasting models that once again have been unable to anticipate a financial crisis or the onset of recession.
Credit market systems and their degree of leverage and liquidity are rooted in trust in the solvency of counterparties. That trust was badly shaken on August 9 2007 when BNP Paribas revealed large unanticipated losses on US subprime securities. Risk management systems – and the models at their core – were supposed to guard against outsized losses. How did we go so wrong?
The essential problem is that our models – both risk models and econometric models – as complex as they have become, are still too simple to capture the full array of governing variables that drive global economic reality. A model, of necessity, is an abstraction from the full detail of the real world. In line with the time-honoured observation that diversification lowers risk, computers crunched reams of historical data in quest of negative correlations between prices of tradeable assets; correlations that could help insulate investment portfolios from the broad swings in an economy. When such asset prices, rather than offsetting each other’s movements, fell in unison on and following August 9 last year, huge losses across virtually all risk-asset classes ensued.
The most credible explanation of why risk management based on state-of-the-art statistical models can perform so poorly is that the underlying data used to estimate a model’s structure are drawn generally from both periods of euphoria and periods of fear, that is, from regimes with importantly different dynamics.
The contraction phase of credit and business cycles, driven by fear, have historically been far shorter and far more abrupt than the expansion phase, which is driven by a slow but cumulative build-up of euphoria. Over the past half-century, the American economy was in contraction only one-seventh of the time. But it is the onset of that one-seventh for which risk management must be most prepared. Negative correlations among asset classes, so evident during an expansion, can collapse as all asset prices fall together, undermining the strategy of improving risk/reward trade-offs through diversification.
If we could adequately model each phase of the cycle separately and divine the signals that tell us when the shift in regimes is about to occur, risk management systems would be improved significantly. One difficult problem is that much of the dubious financial-market behaviour that chronically emerges during the expansion phase is the result not of ignorance of badly underpriced risk, but of the concern that unless firms participate in a current euphoria, they will irretrievably lose market share.
Risk management seeks to maximise risk-adjusted rates of return on equity; often, in the process, underused capital is considered “waste”. Gone are the days when banks prided themselves on triple-A ratings and sometimes hinted at hidden balance-sheet reserves (often true) that conveyed an aura of invulnerability. Today, or at least prior to August 9 2007, the assets and capital that define triple-A status, or seemed to, entailed too high a competitive cost.
I do not say that the current systems of risk management or econometric forecasting are not in large measure soundly rooted in the real world. The exploration of the benefits of diversification in risk-management models is unquestionably sound and the use of an elaborate macroeconometric model does enforce forecasting discipline. It requires, for example, that saving equal investment, that the marginal propensity to consume be positive, and that inventories be non-negative. These restraints, among others, eliminated most of the distressing inconsistencies of the unsophisticated forecasting world of a half century ago.
But these models do not fully capture what I believe has been, to date, only a peripheral addendum to business-cycle and financial modelling – the innate human responses that result in swings between euphoria and fear that repeat themselves generation after generation with little evidence of a learning curve. Asset-price bubbles build and burst today as they have since the early 18th century, when modern competitive markets evolved. To be sure, we tend to label such behavioural responses as non-rational. But forecasters’ concerns should be not whether human response is rational or irrational, only that it is observable and systematic.
This, to me, is the large missing “explanatory variable” in both risk-management and macroeconometric models. Current practice is to introduce notions of “animal spirits”, as John Maynard Keynes put it, through “add factors”. That is, we arbitrarily change the outcome of our model’s equations. Add-factoring, however, is an implicit recognition that models, as we currently employ them, are structurally deficient; it does not sufficiently address the problem of the missing variable.
We will never be able to anticipate all discontinuities in financial markets. Discontinuities are, of necessity, a surprise. Anticipated events are arbitraged away. But if, as I strongly suspect, periods of euphoria are very difficult to suppress as they build, they will not collapse until the speculative fever breaks on its own. Paradoxically, to the extent risk management succeeds in identifying such episodes, it can prolong and enlarge the period of euphoria. But risk management can never reach perfection. It will eventually fail and a disturbing reality will be laid bare, prompting an unexpected and sharp discontinuous response.
In the current crisis, as in past crises, we can learn much, and policy in the future will be informed by these lessons. But we cannot hope to anticipate the specifics of future crises with any degree of confidence. Thus it is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulation not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition.
The writer is former chairman of the US Federal Reserve and author of 'The Age of Turbulence: Adventures in a New World’
Here's one more interesting article
Greenspan: Financial Crisis Likely Worst Since WWII
The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.
Home price stabilisation will restore much-needed clarity to the marketplace because losses will be realised rather than prospective. The major source of contagion will be removed. Financial institutions will then recapitalise or go out of business. Trust in the solvency of remaining counterparties will be gradually restored and issuance of loans and securities will slowly return to normal. Although inventories of vacant single-family homes – those belonging to builders and investors – have recently peaked, until liquidation of these inventories proceeds in earnest, the level at which home prices will stabilise remains problematic.
The American housing bubble peaked in early 2006, followed by an abrupt and rapid retreat over the past two years. Since summer 2006, hundreds of thousands of homeowners, many forced by foreclosure, have moved out of single-family homes into rental housing, creating an excess of approximately 600,000 vacant, largely investor-owned single-family units for sale. Homebuilders caught by the market’s rapid contraction have involuntarily added an additional 200,000 newly built homes to the “empty-house-for-sale” market.
Home prices have been receding rapidly under the weight of this inventory overhang. Single-family housing starts have declined by 60 per cent since early 2006, but have only recently fallen below single-family home demand. Indeed, this sharply lower level of pending housing additions, together with the expected 1m increase in the number of US households this year as well as underlying demand for second homes and replacement homes, together imply a decline in the stock of vacant single-family homes for sale of approximately 400,000 over the course of 2008.
The pace of liquidation is likely to pick up even more as new-home construction falls further. The level of home prices will probably stabilise as soon as the rate of inventory liquidation reaches its maximum, well before the ultimate elimination of inventory excess. That point, however, is still an indeterminate number of months in the future.
The crisis will leave many casualties. Particularly hard hit will be much of today’s financial risk-valuation system, significant parts of which failed under stress. Those of us who look to the self-interest of lending institutions to protect shareholder equity have to be in a state of shocked disbelief. But I hope that one of the casualties will not be reliance on counterparty surveillance, and more generally financial self-regulation, as the fundamental balance mechanism for global finance.
The problems, at least in the early stages of this crisis, were most pronounced among banks whose regulatory oversight has been elaborate for years. To be sure, the systems of setting bank capital requirements, both economic and regulatory, which have developed over the past two decades will be overhauled substantially in light of recent experience. Indeed, private investors are already demanding larger capital buffers and collateral, and the mavens convened under the auspices of the Bank for International Settlements will surely amend the newly minted Basel II international regulatory accord. Also being questioned, tangentially, are the mathematically elegant economic forecasting models that once again have been unable to anticipate a financial crisis or the onset of recession.
Credit market systems and their degree of leverage and liquidity are rooted in trust in the solvency of counterparties. That trust was badly shaken on August 9 2007 when BNP Paribas revealed large unanticipated losses on US subprime securities. Risk management systems – and the models at their core – were supposed to guard against outsized losses. How did we go so wrong?
The essential problem is that our models – both risk models and econometric models – as complex as they have become, are still too simple to capture the full array of governing variables that drive global economic reality. A model, of necessity, is an abstraction from the full detail of the real world. In line with the time-honoured observation that diversification lowers risk, computers crunched reams of historical data in quest of negative correlations between prices of tradeable assets; correlations that could help insulate investment portfolios from the broad swings in an economy. When such asset prices, rather than offsetting each other’s movements, fell in unison on and following August 9 last year, huge losses across virtually all risk-asset classes ensued.
The most credible explanation of why risk management based on state-of-the-art statistical models can perform so poorly is that the underlying data used to estimate a model’s structure are drawn generally from both periods of euphoria and periods of fear, that is, from regimes with importantly different dynamics.
The contraction phase of credit and business cycles, driven by fear, have historically been far shorter and far more abrupt than the expansion phase, which is driven by a slow but cumulative build-up of euphoria. Over the past half-century, the American economy was in contraction only one-seventh of the time. But it is the onset of that one-seventh for which risk management must be most prepared. Negative correlations among asset classes, so evident during an expansion, can collapse as all asset prices fall together, undermining the strategy of improving risk/reward trade-offs through diversification.
If we could adequately model each phase of the cycle separately and divine the signals that tell us when the shift in regimes is about to occur, risk management systems would be improved significantly. One difficult problem is that much of the dubious financial-market behaviour that chronically emerges during the expansion phase is the result not of ignorance of badly underpriced risk, but of the concern that unless firms participate in a current euphoria, they will irretrievably lose market share.
Risk management seeks to maximise risk-adjusted rates of return on equity; often, in the process, underused capital is considered “waste”. Gone are the days when banks prided themselves on triple-A ratings and sometimes hinted at hidden balance-sheet reserves (often true) that conveyed an aura of invulnerability. Today, or at least prior to August 9 2007, the assets and capital that define triple-A status, or seemed to, entailed too high a competitive cost.
I do not say that the current systems of risk management or econometric forecasting are not in large measure soundly rooted in the real world. The exploration of the benefits of diversification in risk-management models is unquestionably sound and the use of an elaborate macroeconometric model does enforce forecasting discipline. It requires, for example, that saving equal investment, that the marginal propensity to consume be positive, and that inventories be non-negative. These restraints, among others, eliminated most of the distressing inconsistencies of the unsophisticated forecasting world of a half century ago.
But these models do not fully capture what I believe has been, to date, only a peripheral addendum to business-cycle and financial modelling – the innate human responses that result in swings between euphoria and fear that repeat themselves generation after generation with little evidence of a learning curve. Asset-price bubbles build and burst today as they have since the early 18th century, when modern competitive markets evolved. To be sure, we tend to label such behavioural responses as non-rational. But forecasters’ concerns should be not whether human response is rational or irrational, only that it is observable and systematic.
This, to me, is the large missing “explanatory variable” in both risk-management and macroeconometric models. Current practice is to introduce notions of “animal spirits”, as John Maynard Keynes put it, through “add factors”. That is, we arbitrarily change the outcome of our model’s equations. Add-factoring, however, is an implicit recognition that models, as we currently employ them, are structurally deficient; it does not sufficiently address the problem of the missing variable.
We will never be able to anticipate all discontinuities in financial markets. Discontinuities are, of necessity, a surprise. Anticipated events are arbitraged away. But if, as I strongly suspect, periods of euphoria are very difficult to suppress as they build, they will not collapse until the speculative fever breaks on its own. Paradoxically, to the extent risk management succeeds in identifying such episodes, it can prolong and enlarge the period of euphoria. But risk management can never reach perfection. It will eventually fail and a disturbing reality will be laid bare, prompting an unexpected and sharp discontinuous response.
In the current crisis, as in past crises, we can learn much, and policy in the future will be informed by these lessons. But we cannot hope to anticipate the specifics of future crises with any degree of confidence. Thus it is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulation not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition.
The writer is former chairman of the US Federal Reserve and author of 'The Age of Turbulence: Adventures in a New World’
Greenspan is the financial terrorist who caused this whole mess. Lowering interest rates after 9/11 to record levels allowed cheap money to flow through the system, causing the housing bubble, and thus causing the credit default swaps passed around by insane bankers. He's essentially like American Al Qaeda.
These bankers knew what they were doing would bring about economic collapse, but they went through with it anyway. From central bankers to investment bankers. They are fucking terrorists.
These bankers knew what they were doing would bring about economic collapse, but they went through with it anyway. From central bankers to investment bankers. They are fucking terrorists.
It seems like the crisis is worse than thought. Well, not to me, really.
Fed Plans to Buy Up Long-Term U.S. Government Debt
The U.S. Federal Reserve on Wednesday, in a surprise move, said it will buy up to $300 billion worth of longer-term U.S. government debt over the next six months and expand purchases of mortgage-related debt to help ease credit market conditions.
CNBC.com
In a statement at the end of a two-day meeting, the central bank's policy panel also said it had decided to hold its target for overnight interest rates in a zero to 0.25 percent range —the level reached in December.
It said rates would stay low for "an extended period," a more explicit vow to stay on hold for a prolonged time.
"In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability," the Fed said.
Prices for U.S. government bonds shot higher and U.S. stocks jumped on the move, with the blue chip Dow Jones industrial average moving into positive territory. The dollar fell sharply.
"This is a pretty dramatic move ... They are trying to bring down all consumer rates," said James Caron, head of global rates research at Morgan Stanley in New York.
http://www.cnbc.com/id/29755961
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Wow! We have so much debt the Fed has to buy it. That's fantastic.
Just that news caused the US Dollar index to lose 2% and almost 3% against the Euro. Just wait until the money works through the system. When the Fed says inflation risk is low after pulling this move, you know they're lying to us.
Fed Plans to Buy Up Long-Term U.S. Government Debt
The U.S. Federal Reserve on Wednesday, in a surprise move, said it will buy up to $300 billion worth of longer-term U.S. government debt over the next six months and expand purchases of mortgage-related debt to help ease credit market conditions.
CNBC.com
In a statement at the end of a two-day meeting, the central bank's policy panel also said it had decided to hold its target for overnight interest rates in a zero to 0.25 percent range —the level reached in December.
It said rates would stay low for "an extended period," a more explicit vow to stay on hold for a prolonged time.
"In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability," the Fed said.
Prices for U.S. government bonds shot higher and U.S. stocks jumped on the move, with the blue chip Dow Jones industrial average moving into positive territory. The dollar fell sharply.
"This is a pretty dramatic move ... They are trying to bring down all consumer rates," said James Caron, head of global rates research at Morgan Stanley in New York.
http://www.cnbc.com/id/29755961
______________
Wow! We have so much debt the Fed has to buy it. That's fantastic.
Just that news caused the US Dollar index to lose 2% and almost 3% against the Euro. Just wait until the money works through the system. When the Fed says inflation risk is low after pulling this move, you know they're lying to us.
China... what are they doing? Ben Bernanke is out their saying nananana boohoo, you have reserves in our currency but I'm just going to devaluate them even more. Why they don't get out of this Ponzi scheme/financial terrorism, I don't know. They're the biggest country in the world but also seemingly the biggest bitch.
The Size of Derivatives Bubble = $190K Per Person
Tom Foremski
Silicon Valley Watcher
March 17, 2009
The Invisible One Quadrillion Dollar Equation — Asymmetric Leverage and Systemic Risk
According to various distinguished sources including the Bank for International Settlements (BIS) in Basel, Switzerland — the central bankers’ bank — the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion. The main categories of the USD 1.144 Quadrillion derivatives market were the following:
1. Listed credit derivatives stood at USD 548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:
a. Interest Rate Derivatives at about USD 393+ trillion;
b. Credit Default Swaps at about USD 58+ trillion;
c. Foreign Exchange Derivatives at about USD 56+ trillion;
d. Commodity Derivatives at about USD 9 trillion;
e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.
______________________
Tom Foremski
Silicon Valley Watcher
March 17, 2009
The Invisible One Quadrillion Dollar Equation — Asymmetric Leverage and Systemic Risk
According to various distinguished sources including the Bank for International Settlements (BIS) in Basel, Switzerland — the central bankers’ bank — the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion. The main categories of the USD 1.144 Quadrillion derivatives market were the following:
1. Listed credit derivatives stood at USD 548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:
a. Interest Rate Derivatives at about USD 393+ trillion;
b. Credit Default Swaps at about USD 58+ trillion;
c. Foreign Exchange Derivatives at about USD 56+ trillion;
d. Commodity Derivatives at about USD 9 trillion;
e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.
______________________
another view on the financial crisis (more conspiracies leaning)
The Federal reserve is calling all shots and setting its own agenda
"the federal reserve which set the econonmy policies , is not part of the government but a purely private operation,private owned companies, a private banking cartel , it is controlled by an unelected bankers who meet in secrecy
loyal not to the american people but to wall street bankers (where most of them come from) ".
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The Federal reserve is calling all shots and setting its own agenda
"the federal reserve which set the econonmy policies , is not part of the government but a purely private operation,private owned companies, a private banking cartel , it is controlled by an unelected bankers who meet in secrecy
loyal not to the american people but to wall street bankers (where most of them come from) ".
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If you use the Dow Jones Industrial Average as an indicator of economic activity:
We are at major resistance as far as the stock market is concerned. The price action has bumped up against its down-trend resistance line and also the lows of the market from previous years, dating back to 1998. These levels are important both psychologically and technically as they indicate business growth cycle correction and have a lot of bearing in statistical computer program trading. After hitting that price resistance at the said levels, we have fallen down lower during the past couple of days and even broke past some major statistical support levels that many people focus on to indicate where prices will go (20, 50 and 200 day moving averages).
This chart reeks of a market that will go lower, thus proving that the recent rally was simply a bear market rally that doesn't mean much, as I already alluded to in previous posts. For there to be any stock market recovery we would have to break through the resistance levels on this chart - they are just too strong psychologically and technically to be beaten easily.
The economy continues to spiral out of control and that is proven by the Federal Reserve buying U.S. debt. We are in quite a lot of trouble and that news is certainly demonstrated in this chart. I'm afraid we're going lower in the stock market and going through the 6500 level on the Dow, which means we could go down to the 5000 level. If we break through 5000 then 3000 could be imaginable. If we break 5000 that could be the point in the economy where civil unrest starts to appear.
We are at major resistance as far as the stock market is concerned. The price action has bumped up against its down-trend resistance line and also the lows of the market from previous years, dating back to 1998. These levels are important both psychologically and technically as they indicate business growth cycle correction and have a lot of bearing in statistical computer program trading. After hitting that price resistance at the said levels, we have fallen down lower during the past couple of days and even broke past some major statistical support levels that many people focus on to indicate where prices will go (20, 50 and 200 day moving averages).
This chart reeks of a market that will go lower, thus proving that the recent rally was simply a bear market rally that doesn't mean much, as I already alluded to in previous posts. For there to be any stock market recovery we would have to break through the resistance levels on this chart - they are just too strong psychologically and technically to be beaten easily.
The economy continues to spiral out of control and that is proven by the Federal Reserve buying U.S. debt. We are in quite a lot of trouble and that news is certainly demonstrated in this chart. I'm afraid we're going lower in the stock market and going through the 6500 level on the Dow, which means we could go down to the 5000 level. If we break through 5000 then 3000 could be imaginable. If we break 5000 that could be the point in the economy where civil unrest starts to appear.
U.S. Stock indices up 7% on the news of the Treasury plan for toxic assets. Unfortunately, though, it includes a loophole.
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If I, as a "financial institution" can participate as a bidder in these auctions I can foist off my loss onto the taxpayer. Here is how I can rig the game so as to avoid an otherwise-inevitable loss:
-I become a "bidder" and "bid" on my own assets at 75 cents.
-I am providing 5 or 10% of the money. The rest is covered by Treasury, The Fed and the FDIC via guaranteed bond issuance.
-The loan, ex my contribution, is non-recourse. That is, I can lose 5 or 10% of the total portfolio purchased, but nothing more.
-Now the "assets" (a passel of CDOs?) turn out to be worthless. I lose 5% of $75 billion, or $3.75 billion that I put up, plus the other nickel on the original mark, but that's all.
The taxpayer gets hosed for the remaining $71.25 billion dollars.
This can and will be done if the "sellers" of these assets are allowed to bid either directly or indirectly as it provides a means for banks to intentionally dump bad assets at a certain loss that is much smaller than their expected realized loss over time, shifting the rest of the loss to the taxpayer.
This program has the potential to shift literally $500 billion or more in losses onto the taxpayer, not through the operation of "bad luck" but rather through what amounts to a bid rigging operation.
Be aware that I, along with many others, have figured this out. Also be aware that as taxpayers and your ultimate boss, we do not intend to sit still and allow the public treasury to be looted in such a fashion.
The FDIC's job is to prevent that sort of looting operation by prohibiting the sellers of these assets from having any financial interest in the bidding side of the equation, directly or indirectly, and I along with many others intend to hold you to that obligation.
http://market-ticker.denninger.net/
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If I, as a "financial institution" can participate as a bidder in these auctions I can foist off my loss onto the taxpayer. Here is how I can rig the game so as to avoid an otherwise-inevitable loss:
-I become a "bidder" and "bid" on my own assets at 75 cents.
-I am providing 5 or 10% of the money. The rest is covered by Treasury, The Fed and the FDIC via guaranteed bond issuance.
-The loan, ex my contribution, is non-recourse. That is, I can lose 5 or 10% of the total portfolio purchased, but nothing more.
-Now the "assets" (a passel of CDOs?) turn out to be worthless. I lose 5% of $75 billion, or $3.75 billion that I put up, plus the other nickel on the original mark, but that's all.
The taxpayer gets hosed for the remaining $71.25 billion dollars.
This can and will be done if the "sellers" of these assets are allowed to bid either directly or indirectly as it provides a means for banks to intentionally dump bad assets at a certain loss that is much smaller than their expected realized loss over time, shifting the rest of the loss to the taxpayer.
This program has the potential to shift literally $500 billion or more in losses onto the taxpayer, not through the operation of "bad luck" but rather through what amounts to a bid rigging operation.
Be aware that I, along with many others, have figured this out. Also be aware that as taxpayers and your ultimate boss, we do not intend to sit still and allow the public treasury to be looted in such a fashion.
The FDIC's job is to prevent that sort of looting operation by prohibiting the sellers of these assets from having any financial interest in the bidding side of the equation, directly or indirectly, and I along with many others intend to hold you to that obligation.
http://market-ticker.denninger.net/
what a ingenious way to screw the taxpayers , the Treasury is never short of tricks
"The story is told that after he had been deported to Italy, Lucky Luciano granted an interview in which he described a visit to the floor of the New York Stock Exchange.
When the operations of floor specialists had been explained to him, he said, 'A terrible thing happened. I realized I'd joined the wrong mob'"
,,
"The story is told that after he had been deported to Italy, Lucky Luciano granted an interview in which he described a visit to the floor of the New York Stock Exchange.
When the operations of floor specialists had been explained to him, he said, 'A terrible thing happened. I realized I'd joined the wrong mob'"
,,
http://news.bbc.co.uk/1/hi/scotland/edinburgh_and_east/7962825.stm
I feel so sorry for poor old Sir Fred.
I feel so sorry for poor old Sir Fred.
OP
http://news.bbc.co.uk/1/hi/scotland/edinburgh_and_east/7962825.stm
I feel so sorry for poor old Sir Fred.
I feel so sorry for poor old Sir Fred.
umpkin: NEW YORK (AFP) — The United States will propose stronger rules on financial fraud and abuse soon as part of concerted global action to avoid another financial crisis, Treasury Secretary Timothy Geithner said Wednesday.
"In the coming weeks, we will take additional steps, among them, proposing new and stronger rules to protect American consumers and investors against financial fraud and abuse," Geithner said.
"These will help us deal in the future with threats like the practices in subprime lending that kicked off the current crisis," he told the Council on Foreign Relations in a New York speech.
Geithner said that the plan would not focus solely on financial regulations in the United States, "but -- with the help of other interested nations and strengthened international bodies -- on stronger standards globally, as well."
Geithner will accompany US President Barack Obama to the Group of 20 summit of developed and developing nations in London on April 2 aimed at devising a global system to ensure recovery and making financial reforms.
"The world needs to see America come together with a commitment that is commensurate with the deep gravity of the problem," Geithner said.
Geithner and Federal Reserve chief Ben Bernanke had asked Congress Tuesday for unprecedented powers to seize financial firms outside the banking system if needed to maintain economic stability.
The government currently has the authority to take over only banks, and the new requested powers could enable authorities to take control of large insurers, investment firms and hedge funds during a financial turmoil.
Geithner said that on Thursday, he would lay out the administration's broad regulatory framework for dealing with "the kind of systemic risk" that non-bank financial firms, such as troubled insurance giant American International Group (AIG) had posed.
The government staged an unprecedented multi-billion dollar bailout of AIG in September last year in what they said was a desperate bid to prevent global financial catastrophe.
"Because we have learned from the current crisis that destabilizing dangers can come from financial institutions besides banks, our plan will give the government the tools to limit the risk-taking at firms that could set off cascading damage," Geithner said.
"The framework will significantly raise the prudential requirements, once we get through the crisis, that our largest and most interconnected financial firms must meet in order to ensure they do not pose risks to the system."
Geithner said that the world confronted "extraordinary challenges" and needed "extraordinary actions" to combat the current financial turmoil stemming from a US home mortgage meltdown.
He chided the previous administration of President George W. Bush for borrowing too much and putting the world's largest economy at risk.
"No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk," he said.
"Those decisions have caused enormous suffering, and much of the damage has fallen on ordinary Americans and small business owners who were careful and responsible. This is fundamentally unfair, and Americans are justifiably angry and frustrated," he said.
Geithner also defended the dollar as a key global reserve currency following China's call for a new global currency as an alternative to the greenback.
"I think the dollar remains the world's standard reserve currency, I think that's likely to continue for a long period of time," he said.
"As a country, we will do as necessary to make sure that we are sustaining confidence in our financial markets" and economy," he said in response to a question.
US President Barack Obama on Tuesday defended the dollar as "extraordinarily strong."
