The Unnanounced Class War

[Canuckistani]

Some of the major industries (notably construction and car manufacturing) depend on consumers having access to financing-- if automakers and homebuilders could only deal with customers who could buy with cash out of pocket, those industries would collapse overnight. Just about any new enterprise or expansion or investment or major project is done using financing rather than cash out of pocket. If business ventures and major projects only happened when somebody had the cash in the pocket to pay for it up front, hardly anybody would be able to start anything.

Businesses depend on financing for day to day operations, even if they are running in the black. In Too Big to Fail, with actors portraying the real people involved, the CEO of GE calls up Bernake, Volker et al and says his business is about to come to a screeching halt because he can't get short term financing for his day to day operations - can't pay his people etc. He says "we make washing machines for God's sake, what's that got to do with the mortgage business?" But credit was drying up, and the economy runs on credit. This really brought it home to me that a bailout was needed. But the govt should have nationalized the banks, stopped all bonuses for management, fired and prosecuted the ones that were guilty of malfeasance, and restructured the banks so they are no longer too big to fail before privatizing them. Unfortunately in the US, nationalizing is just deemed too commie, so they went 3/4 of the way, but kept management in place and even let them get obscene bonuses after the bailouts.

[bush_cheney2004]

...No, they aren't. But if they were, then perhaps said system should be redesigned.

Good luck with that.....most people are more concerned about their money than getting a pound of flesh from fat cat bankers.

[bush_cheney2004]

.... Unfortunately in the US, nationalizing is just deemed too commie, so they went 3/4 of the way, but kept management in place and even let them get obscene bonuses after the bailouts.

All banks were not culpable or insolvent, yet the government still forced them to drink the TARP Flavor-Aid (it wasn't Kool Aid.).

[kimmy]

I think you're greatly underestimating the significance of these mega-banks if you think they can be replaced in a week with no harm to the economy. "Too big to fail" wasn't just a catch-phrase invented by politicians, it was also a conclusion reached by analysts. As I said before, I agree with whoever it was who said "Too Big To Fail is Too Big To Exist". They should have broken them up.

Regardless, I'm not interested in defending the bailout. I'm more interested in confronting the lies that people like Shady continue to spread. Especially because it's not just Shady saying this crap, it's future presidential candidates. Marco Rubio is apparently among those trying to rewrite the history of the financial crisis to blame everybody except the banks. This response to Rubio summarizes who he and those who believe him are in denial of reality.

-k

[bush_cheney2004]

...Regardless, I'm not interested in defending the bailout. I'm more interested in confronting the lies that people like Shady continue to spread. Especially because it's not just Shady saying this crap, it's future presidential candidates.

Why is this important to you now ? Presidential candidates say a lot of things, including "lies". Sitting presidents "lie" as well. Were you expecting high profile indictments and witch trials just to satisfy some sense of "justice" ? If no laws were broken, it's pretty tough to go that route. Government also collected tax revenue from the real estate transactions and other gains.

[Argus]

Exactly, a slap on the wrist. HSBC should have been given the corporate death sentence for what they did, and so should S&P. But they didn't, and won't be. A slap on the wrist for appearances, that's all.

Personally, I would have taken over the banks and kept them running and lending, then cut them up, and sold off the new smaller institutions.

We should not allow any 'too big to fail' institutions to exist. Break them up.

[Argus]

Regardless, I'm not interested in defending the bailout. I'm more interested in confronting the lies that people like Shady continue to spread. Especially because it's not just Shady saying this crap, it's future presidential candidates. Marco Rubio is apparently among those trying to rewrite the history of the financial crisis to blame everybody except the banks. This response to Rubio summarizes who he and those who believe him are in denial of reality.

Rubio is a typical Republican. That is, he's in it for the money. And there's a lot of money to be had on Wall Street. He's a smart guy, but don't mistake anything he says for anything he actually believes. He's a political whore whose tendency to exchange favors for political action will probably make it very hard for him to get into the White House, as some are suggesting is his destiny.

http://www.huffingto...hp_ref=politics

BTW, Goldman Sachs was one of his top campaign contributors, and he took in a lot of money from the securities and investment industry. Mark this guy bought and paid for.

http://www.opensecre...0612&cycle=2012

Edited February 14, 2013 by Argus

[Bonam]

I think you're greatly underestimating the significance of these mega-banks if you think they can be replaced in a week with no harm to the economy. "Too big to fail" wasn't just a catch-phrase invented by politicians, it was also a conclusion reached by analysts.

Same analysts that thought MBSs and CDOs were a great idea. Same analysts that thought the price of housing would keep going up forever. Forgive me if I don't put much credence in such analysts.

As I said before, I agree with whoever it was who said "Too Big To Fail is Too Big To Exist".

I agree.

Regardless, I'm not interested in defending the bailout.

And yet, unfortunately, that's what your position entails.

[kimmy]

Why is this important to you now ? Presidential candidates say a lot of things, including "lies". Sitting presidents "lie" as well. Were you expecting high profile indictments and witch trials just to satisfy some sense of "justice" ? If no laws were broken, it's pretty tough to go that route. Government also collected tax revenue from the real estate transactions and other gains.

If this idiocy takes hold in America again, we'll feel it in Canada again.

-k

[kimmy]

Same analysts that thought MBSs and CDOs were a great idea. Same analysts that thought the price of housing would keep going up forever. Forgive me if I don't put much credence in such analysts.

For sure. Still, I think you're greatly underestimating the economic consequences of one of these giant entities going down. They were obviously unwilling to risk it at a time when the economy was already losing hundreds of thousands of jobs every month.

And yet, unfortunately, that's what your position entails.

I don't see why. I believe that proper regulations and application of existing regulations would have prevented the meltdown in the first place. I believe that individuals and institutions could have been punished. I believe that the fiction being presented about the causes of the collapse has to be confronted. I believe that the truth should be known so that people don't elect a guy like Willard or Rubio to repeat the same mistakes. I don't see how any of those positions implies support for bailouts.

-k

[bush_cheney2004]

If this idiocy takes hold in America again, we'll feel it in Canada again.

"This idiocy" has always been part of the USA. It is a country for risk takers, with big gains and big losses. Playing it safe in Canada results in far less domestic capital and a lot more foreign ownership.

[bush_cheney2004]

....I believe that proper regulations and application of existing regulations would have prevented the meltdown in the first place.

Nope....the U.S. specifically removed such precautions as a matter of public law, which President Clinton signed, not just "Republicans".

I believe that individuals and institutions could have been punished.

Punished for what ? The Law According to Kimmy ?

I believe that the fiction being presented about the causes of the collapse has to be confronted. I believe that the truth should be known so that people don't elect a guy like Willard or Rubio to repeat the same mistakes. I don't see how any of those positions implies support for bailouts.

Believe as you wish...but others believed differently, and will act accordingly in the future. The impact on Canada is not a major or even minor consideration.

[Pliny]

...and many here are following some kind of fantasy version that doesn't correspond to facts, which is what I am arguing against. I continue to be amazed at the extent to which some people on this message board are psychologically incapable of accepting the reality that the financial crisis was of the banks' own making.

You aren't asking a fundamental question, "WHY?" Or perhaps you are and answering it with "Greed"

Everyone is looking for opportunity and when they find it they will take advantage of it. Wall St. must have seen an opportunity. While it is true they stupidly did all you say. You have to understand the psychology behind it. If the door on an armoured truck flew open and money started spewing forth all over the ground what do you expect people would do? Most of them would start scooping up as much as they could carry and run off with if they figured no one was keeping tabs on them. Would you just stand there or stop people from scooping up the money or scoop up some money yourself with the idea of returning it to the armoured car company (Maybe there would be a reward?)? What would be the right thing to do?

Wall Street banks didn't do the right thing, most certainly, and they did all you say. Was it greed? From where did the opportunity arise? What did they see? Did they see that government wasn't punishing anyone for creating sub-prime mortgages? What did they see?

I disagree that I am following a "mainstream interpretation". The mainstream has not talked nearly enough about the behavior that created the subprime crisis in the first place.

As you quote from the Washington Post? Paul Krugman would heartily agree with you. Keynesian economists dominate the economic market and they would agree with you. If you are going to listen to the Government side of the story you will surely be vindicated in your convictions.

And I'm not a supporter of how governments have handled this. It's been extremely disappointing.

Letting the banks fail would have caused total economic chaos. I would have been all for letting reckless banks get what they deserved, but not if letting that happen destroyed every other sector of the economy.

Yes it would have caused total economc chaos but we would be out of it now rather than living in a propped up economy waiting for the inevitable big collapse.

The problem is "too big to fail". I think the solution is "too big to fail is too big to exist." In the past, the US government broke up utilities and telecommunications companies. If a bank like HSBC is too important to be charged for flagrant violations of the law, then they're obviously too big, period.

So you would prefer a Canadian system? The US has many small banks that would love to see big bank competition gone. They aren't too big to fail. It's a fallacy. It's a made up phrase. The establishment just wishes to maintain the status quo. Government would not tolerate such a change - especially since a lot of well-positioned politicians are heavily invested in Wall Street themselves.

Maybe once the entire economy isn't dependent on a relative handful of mega-banks, then we can get back to a place where failure means death instead of a bailout.

-k

It won't happen as long as the Fed creates the currency.

[Argus]

Believe as you wish...but others believed differently, and will act accordingly in the future. The impact on Canada is not a major or even minor consideration.

Unfortunately the impact on Americans is also neither a major nor even a minor consideration.

Profit for the big boys is all that counts.

[Argus]

Wall Street banks didn't do the right thing, most certainly, and they did all you say. Was it greed? From where did the opportunity arise? What did they see? Did they see that government wasn't punishing anyone for creating sub-prime mortgages? What did they see

So if Wall Street bribes politicians to get rid of regulations and to keep the regulators from watching too closely, and then it breaks multiple laws to defraud people, well... uh, that's the government's fault?

[Bonam]

So if Wall Street bribes politicians to get rid of regulations and to keep the regulators from watching too closely, and then it breaks multiple laws to defraud people, well... uh, that's the government's fault?

Certainly part of the fault is with those politicians that are willing to take bribes, and with the system that enables such bribery to happen.

[bush_cheney2004]

Unfortunately the impact on Americans is also neither a major nor even a minor consideration.

Profit for the big boys is all that counts.

Not just the big boys....but those in the middle too. Government gets a piece of the action as well. The people who complained the most about Enron's crash were the employees and other shareholders who were more than happy to ride the stock price up to the top.

Wall Street is not in Canada....get over it.

[Pliny]

So if Wall Street bribes politicians to get rid of regulations and to keep the regulators from watching too closely, and then it breaks multiple laws to defraud people, well... uh, that's the government's fault?

So where are the politicians that accepted these bribes?

You make it sound like a well-orchestrated plan, a conspiracy solely out of greed. A conspiracy that was worth risking it all. No one planned, and I mean NO ONE, planned this. A set of circumstances came into existence that provided an opportunity. All players were complicit.

But if regulation means anything then where were the regulators? Off enjoying their bribes? The banks were unethical but you think they are criminal as well. The regulators bailed them out and gave them a small fine. They were indeed unethical.

What of other countries that experienced the same housing bubble and bust? Were their regulators bribed as well?

Where were the regualtors? It seems they were still at work. What were they doing? A few were scratching their head, it seems. But the bulk of them were glad-handing and back-slapping themselves over the booming economy. Was it the Bush tax cuts that created the boom? Why was it a housing boom? The previous one was the tech boom and bust? Why did money flow to housing and start to snowball? The circumstances made it so. Low interest rates, easy monetary policy and a philosophy of equality in achieving the American dream from a recently elected congress that was full of itself and was by hell or high water going to bring that philosophy to fruition.

[Argus]

Not just the big boys....but those in the middle too. Government gets a piece of the action as well. The people who complained the most about Enron's crash were the employees and other shareholders who were more than happy to ride the stock price up to the top.

Yes, people make money on the stock market. I enjoy it myself. What's your point, exactly? That expecting any kind of honesty, integrity or even abiding by the law is some quaint Canadian notion that you sophisticated Americans know shouldn't apply to big business?

[Argus]

So where are the politicians that accepted these bribes?

In their mansions, same as the wall street CEOs who bribed them.

Oh excuse me. Of course the CEOs never bribe politicians. They merely contribute to industry lobby groups which 'lobby' politicians. And, of course, they contribute money to the politicians campaigns, all legally. The fact so many politicians, particularly Republicans, wind up working for those CEOs after they leave office, at enormous salaries, is just a coincidence.

You make it sound like a well-orchestrated plan, a conspiracy solely out of greed.

Yes, and yes. The well-orchestrated plan was to bribe politicians so they voted in regulations and laws which greatly benefited Wall street, and largely exempted it from oversight. And it worked quite well.

A conspiracy that was worth risking it all. No one planned, and I mean NO ONE, planned this. A set of circumstances came into existence that provided an opportunity. All players were complicit.

There is complicit, and then there is COMPLICIT. The mafia boss and his driver are both complicit, but we know which holds the greater responsibility.

The illegality of the bankers is unquestioned. Unfortunately, their bribery of public officials, which exempts them from punishment, is harder to prove, especially since the US Supreme Court deemed corporations to be people, with all the rights to make donations and campaign on behalf of candidates.

But if regulation means anything then where were the regulators? Off enjoying their bribes? The banks were unethical but you think they are criminal as well. The regulators bailed them out and gave them a small fine. They were indeed unethical.

The regulators were being told to go easy by the politicians who were bribed by Wall Street. Plus it was their natural philosophy, being largely Republicans, that whatever is good for business (ie, whatever business wanted) was good, period.

Until the United States manages to put in place laws against bribery of public officials its democracy will continue to deteriorate into a nest of utterly corrupt satraps beholden only to their wealthy corporate masters.

[bush_cheney2004]

Yes, people make money on the stock market. I enjoy it myself. What's your point, exactly? That expecting any kind of honesty, integrity or even abiding by the law is some quaint Canadian notion that you sophisticated Americans know shouldn't apply to big business?

Nope...Canada has such corruption in spades as well, just on a smaller scale. I don't worry about Bay Street, but apparently you worry a lot about Wall Street. Honesty and integrity doesn't even apply for the suckers in Canada, so why are you holding the United States to a higher standard ?

[Argus]

Nope...Canada has such corruption in spades as well, just on a smaller scale. I don't worry about Bay Street, but apparently you worry a lot about Wall Street. Honesty and integrity doesn't even apply for the suckers in Canada, so why are you holding the United States to a higher standard ?

There will always be a small measure of corruption in any nation. The US arrests hundreds of politicians and public servants every year for corruption. And yes, that sort of thing occurs on occasion in Canada. The huge difference is the entirely legal corruption which exists in the United States in terms of campaign financing and in politicians going to work (with huge salaries) for the same people they lobbied for just before leaving their jobs. It's made the US one of the most corrupt countries on earth, and that level of corruption continues to grow. The corporations who found they could buy senators and presidents easily enough soon began buying up governors and state assemblymen even cheaper. Democracy in the US is becoming like that in Russia, where unless you are liked by the oligarchs in power you can't get on TV or advertise your candidacy, so don't stand a chance of ever getting into office. The more money that is needed to win election, the more desperate politicians are to please the wealthy. And of course, money like that comes with a lot of strings.

[kimmy]

"This idiocy" has always been part of the USA. It is a country for risk takers, with big gains and big losses. Playing it safe in Canada results in far less domestic capital and a lot more foreign ownership.

The idiocy in question was not capitalism or free enterprise.

The idiocy in question was tearing down well-proven regulations, and it was letting financial institutions invent a whole new set of rules that only they even understood.

The "Credit Default Swap" is not the same as Edison's light bulb or Ford's Model T.

Nope....the U.S. specifically removed such precautions as a matter of public law, which President Clinton signed, not just "Republicans".

Yes, deregulation that happened under Clinton was part of the problem. And the Clinton administration shares blame for failing to regulate derivatives as well.

But fast forward to present-day, and we find that it is Republicans who are advocating on behalf of the banks. Whether it is Willard during the campaign saying "Let's scrap these job-killing regulations and get America back to work!" over and over again, or Marco Rubio last week telling America that it was government policies that caused the housing crisis, it's clear that these people just didn't learn anything.

Punished for what ? The Law According to Kimmy ?

In the case of the housing bubble, fraud. In the recent HSBC case, willful breach of the law. In the ongoing LIBOR investigation, fraud.

Private investors are bringing civil cases to trial. The State of New York is bringing a civil case to trial. Eric Holder and his crew of spineless cowards are belatedly getting in on the act by filing a civil case against S&P, which isn't a bank but at least it's something.

As these cases make their way through court, some of the evidence that the lawyers have been able to obtain has been fascinating. The one that I found particularly amusing was reading about brokers at Morgan Stanley trying to decide what to name their new CDO in 2006. The suggestions included "Subprime Meltdown", "Nuclear Holocaust", "Mike Tyson's Punch-Out", and "Shitbag." "Shitbag" was given the official name "Stack 2006-1" and sold to investors as "Better than AAA!"

Believe as you wish...but others believed differently, and will act accordingly in the future. The impact on Canada is not a major or even minor consideration.

Of course not. Canada will just be collateral damage; the primary victims will be American taxpayers again. If Rubio and his ilk get their way.

-k

[bush_cheney2004]

There will always be a small measure of corruption in any nation. The US arrests hundreds of politicians and public servants every year for corruption. And yes, that sort of thing occurs on occasion in Canada. The huge difference is the entirely legal corruption which exists in the United States in terms of campaign financing and in politicians going to work (with huge salaries) for the same people they lobbied for just before leaving their jobs. It's made the US one of the most corrupt countries on earth, and that level of corruption continues to grow.

If free speech, freedom of association, free enterprise, and lobbyist registration law are any indication, it is designed to keep growing and is not corruption at all. The U.S. is far from being one of the "most corrupt countries on earth", but I understand your need to express such hyperbole when faced with the truth about your own nation (federal contracts, provincial bribery, SNC-Lavalin, etc., etc.).

The corporations who found they could buy senators and presidents easily enough soon began buying up governors and state assemblymen even cheaper. Democracy in the US is becoming like that in Russia, where unless you are liked by the oligarchs in power you can't get on TV or advertise your candidacy, so don't stand a chance of ever getting into office.

This is exactly how the nation was founded....monied land and business owners. More money = more speech...it's not complicated. Americans don't have to live like poor Canadians !

The more money that is needed to win election, the more desperate politicians are to please the wealthy. And of course, money like that comes with a lot of strings.

I would sure hope so.

Edited February 16, 2013 by bush_cheney2004

[bush_cheney2004]

The idiocy in question was tearing down well-proven regulations, and it was letting financial institutions invent a whole new set of rules that only they even understood.

As legislated by elected representatives, including President Clinton, but you seem more focused on 'Republicans'. Why ?

The "Credit Default Swap" is not the same as Edison's light bulb or Ford's Model T.

...and the CDS made/lost a lot more money. The engines of enterprise produce more heat than light.

Yes, deregulation that happened under Clinton was part of the problem. And the Clinton administration shares blame for failing to regulate derivatives as well.

Good, but I had to force that out of you. Why ? Bias...perhaps?

But fast forward to present-day, and we find that it is Republicans who are advocating on behalf of the banks. Whether it is Willard during the campaign saying "Let's scrap these job-killing regulations and get America back to work!" over and over again, or Marco Rubio last week telling America that it was government policies that caused the housing crisis, it's clear that these people just didn't learn anything.

You must be joking. Go do some homework on the Obama administration, Wall Street, and campaign contributions.

In the case of the housing bubble, fraud. In the recent HSBC case, willful breach of the law. In the ongoing LIBOR investigation, fraud.

Then bring charges. Show us the way to TRUTH. JUSTICE, and the CANADIAN WAY !

Private investors are bringing civil cases to trial. The State of New York is bringing a civil case to trial. Eric Holder and his crew of spineless cowards are belatedly getting in on the act by filing a civil case against S&P, which isn't a bank but at least it's something.

I wish them well....the lawyers will make a mint.

Of course not. Canada will just be collateral damage; the primary victims will be American taxpayers again. If Rubio and his ilk get their way.

Some of Canada's banks took money from TARP just like all the rest. Business as usual. You want a piece of the biggest market on Earth then you must play the game. When I buy and sell stocks, I don't worry about what will happen to the people in Canada who worry so much about what happens in the U.S.A.