News What is wrong with the US economy? Part 2

[Art]

Yes I am aware taxes are not the only issue. I assert that financially, for many US companies, taxes are often the most significant of these issues, thus the reason for locating in Ireland vs Scotland, France, or Germany, i.e. places even closer to dense markets.

Good, you are now in agreement with my post # 550

The lower tax rate is what makes Ireland the European country of choice amongst the other EU countries

As a caveat, I should add that although this is largely true as a general rule it does greatly over-simplify the cost-benefit analysis process, particularly as many of the companies which have subsidiaries in Ireland are very high tech and so need a highly educated work force and thus an education system geared to meeting their specialist needs.

In particular it doesn't translate into heavy industries where Ireland's island status makes it uncompetitive vis-a-vis freight costs which more than cancel out the tax advantage which is why Ireland does not have heavy industry.

 

[mathwonk]

my brilliant grNDDAUGHTER has suggested that some of our economic problems may be psychological.

E.g. when asked to solve the mystery of my missing automobile, she asked if i had gone out and waved my hand where the car had been parked, as it was conceivable that it had merely been rendered invisible.

when pressed further along this line of inquiry she confessed to having been practicing for some time this art in her household.

"And how much success have you had?" well, none yet.ok, but it was a good idea. At least it puts her about on par with henry Paulson's ideas, so far, but maybe the bailout will still work , too.

 

[Art]

ok, but it was a good idea. At least it puts her about on par with henry Paulson's ideas, so far, but maybe the bailout will still work , too.

The bailout is working.

It has stopped the meltdown of the financial sector.

The markets are now responding to the recessionary outlook resulting from the credit crisis which is normal market behaviour.

At least now there should be only a normal depression lasting 18 -24 mths. Without the bailout there would have been a collapse of the world's economy.

 

[mathwonk]

hmmmm... an interesting view. i doubt if my gd will buy this assessment though, she's very sharp. i presume you followed the market today.

 

[Art]

hmmmm... an interesting view. i doubt if my gd will buy this assessment though, she's very sharp. i presume you followed the market today.

The key indicator of whether or not the bailout is working is, are the banks lending again. To which the answer is yes. Credit is beginning to flow again as evidenced by the LIBOR rate falling and so by the only measure that matters the bailout is working.

The bailout was never claimed to be a panacea to cure all, it was a necessary measure to stop the free-fall into the abyss.

As Paul Krugman said ' this is not the answer this is just to avoid disaster'

Credit freeze: Signs of a thaw
Bank-to-bank lending rates dip for the second day in a row as lenders show more confidence. The easing comes a day after the government unveils its plan to buy equity in banks.

NEW YORK (CNNMoney.com) -- The credit markets continued to show signs of relief Wednesday, a day after the U.S. government announced plans to inject capital directly into banks by buying their stock.

The overnight bank-to-bank lending rate known as Libor slipped to 2.14% from 2.18%Tuesday, according to Bloomberg.com. The measure had been as high as 5.09% last Thursday.

Lower interbank lending rates signaled an increased willingness on the part of banks to lend to each other, which eventually translates into lower borrowing costs for consumers.

Frozen credit pipelines had stalled economies around the world, pushing lawmakers to make global coordinated efforts to increase liquidity and give banks the confidence to begin lending to each other again.

http://money.cnn.com/2008/10/15/markets/bondcenter/credit_markets/

 

[Astronuc]

The Japanese Finance Minister criticized the US plan as insufficient.

If none of the financial people in government or industry saw this coming, why the heck are they all making big bucks? It would seem they are all negligent and certainly did not do the job for which they drew lavish compensation.

Southwest Airlines posts 1st loss in 17 years - because they hedged against higher oil prices and the price of oil has fallen.
http://news.yahoo.com/s/ap/20081016/ap_on_bi_ge/earns_southwest

Southwest said Thursday it lost $120 million in the three months ended Sept. 30 even as revenue jumped 11.7 percent.

The airline took $247 million in charges, mostly to write down fuel-hedging contracts that are less valuable now that oil prices have plunged by nearly half since July.

Without the charges, Southwest managed its 70th straight quarter of operating profit — $69 million, or 9 cents per share, which was 2 cents per share better than Wall Street expected, according to a survey of analysts by Thomson Reuters.

A year ago, Southwest earned $162 million, or 22 cents a share, in the third quarter.
. . .

They were doing great when the price of oil was much greater than $80/bbl.

Citigroup reported a $2.8 billion loss for its third quarter, as the banking giant took more than $13.2 billion in charges related mostly to its store of toxic mortgage assets. The quarterly loss, Citi's fourth in a row, was a stark reversal from the $2.2 billion it earned at the same time last year. Citigroup will lay-off about 10,000 people.

Merrill Lynch (NYSE: MER) today reported a net loss from continuing operations for the third quarter of 2008 of $5.1 billion, or $5.56 per diluted share, compared with a net loss from continuing operations of $2.4 billion, or $2.99 per diluted share, for the third quarter of 2007. Merrill Lynch's net loss for the third quarter of 2008 was $5.2 billion, or $5.58 per diluted share, compared with a net loss of $2.2 billion, or $2.82 per diluted share, for the year-ago quarter.
http://www.ml.com/index.asp?id=7695_7696_8149_88278_109853_111445

 

[Astronuc]

US stares at a $1 trillion deficit. How bad is that?
http://news.yahoo.com/s/csm/20081016/ts_csm/adebt

. . . .
If the deficit does reach $1 trillion this year, it would represent 7.5 percent of the gross domestic product, the highest percentage since World War II when it skyrocketed to 30 percent of GDP. "The big difference is back then we owed it to ourselves, to Americans," says David Walker, head of the Peter G. Peterson Foundation and former US comptroller general.

. . . .

Walker's focus is not just the national debt, which will grow to more than $10 trillion this year. Instead, he is looking at the national debt plus all the unfunded promises such as Social Security and Medicare, which have no future tax revenues to cover them. "At the end of the last fiscal year, that came to $53 trillion or about $550,000 per household," he says. "We may well have passed the point where the federal government's total financial hole exceeds the net worth of all Americans."

Walker estimates the US has about five years to show fiscal responsibility: "We will have to send a strong signal we can get our house in order."

That's not going to happen this fiscal year. Congress is expected to pile on new spending, such as an $80 billion reduction in taxes for individuals who would otherwise fall under the Alternative Minimum Tax (AMT) and $8 billion in hurricane Ike relief funds. So far, Congress has only appropriated $70 billion for the Iraq and Afghanistan effort, despite the fact that the wars have been costing about $150 billion per year. And revenues are likely to be considerably lower than anticipated.

"We have fewer people working, lower corporate profits, and losses in the markets," says Mr. Collender, who says one of the implications of the huge deficit will be that any of the plans by the presidential candidates for tax cuts or new spending programs will be put on hold.
. . . .

So the interest on the federal debt will exceed $450 billion or so.

 

[edward]

It is an ironic situation with Southwest Airlines. During the period of high fuel prices they were the only airline making money because they had hedged and were paying less for fuel.

 

[Gokul43201]

Southwest Airlines posts 1st loss in 17 years - because they hedged against higher oil prices and the price of oil has fallen.
http://news.yahoo.com/s/ap/20081016/ap_on_bi_ge/earns_southwest

This is still good news as far as the fundamentals of the company are concerned. So I don't think that should worry the market too much, despite the "historic" sounding nature of the report.

 

[Astronuc]

It is an ironic situation with Southwest Airlines. During the period of high fuel prices they were the only airline making money because they had hedged and were paying less for fuel.

But now the fuel prices have dropped, they'll be paying higher prices than others. I'm not show one protects against a price spike. They could have made some money selling fuel to other airlines.

We have seen gasoline prices drop in our area - now approaching $3.11 from a high near $4.59 for regular grade about 3 months ago. We have fairly high state taxes and distribution costs.

Back in the 90's and early 00's, aluminum companies in the NW had bought low-cost electricity contracts based on hydropower. When the price of electricity went way up, they decided to shutdown the production lines (and layoff people) and sell the electricity to California (or they sold it their contracts back to generators or to utilities who then sold the electricity to Ca). They could make more money re-selling electricity than from selling the aluminum they produced with cheap electricity. Once an aluminum line is shut down, it's difficult to restart it (so I was told). I would guess it has to do with the cost of starting up a cold furnace and having to scrap the first batch (?).

 

[mheslep]

Here's the data showing percentage of mortgages held by Fan/Fred vs private players. By 2003 they bundled or owned half of all US mortgages, after two decades of steep growth. Starting in ~2003/4 private entities took ~5% of their market share away. In that period Fan/Fred started grievously abusing their charter with their 'auto documentation' practices and the like to take back market share with lousy loans (bundled); they started increasing market share again by '07
http://www.econbrowser.com/archives/2008/07/gse_to_gdp_jul_08.gif
Source is an OFHEO (the regulator) report.

 

[turbo]

Gas here is back down to $2.86, for the time being.

 

[Astronuc]

Here's the data showing percentage of mortgages held by Fan/Fred vs private players. By 2003 they bundled or owned half of all US mortgages, after two decades of steep growth. Starting in ~2003/4 private entities took ~5% of their market share away. In that period Fan/Fred started grievously abusing their charter with their 'auto documentation' practices and the like to take back market share with lousy loans (bundled); they started increasing market share again by '07
http://www.econbrowser.com/archives/2008/07/gse_to_gdp_jul_08.gif
Source is an OFHEO (the regulator) report.

Source for figure: http://www.econbrowser.com/archives/2008/07/did_fannie_and.html#more


I found the OFHEO report:

Report to Congress
http://www.ofheo.gov/media/annualreports/ReporttoCongress2008.pdf
April 15, 2008

Risk and Risk Management

The weakening of Enterprise underwriting standards and the contractual impediments to guarantee fee increases as market conditions worsened contributed to poor financial performance. The Enterprises also experienced substantial deterioration in the market values of their subprime- and Alternative A (Alt-A)-backed private-label securities portfolios, although the portfolios remained overwhelmingly AAA-rated and have not recorded substantial impairment losses. The credit quality of the Enterprises’ principal counterparties—seller-servicers,derivative issuers and mortgage insurance companies—also deteriorated, increasing counterparty risk. Both Enterprises have taken steps to better manage credit risk, modifying risk management and business practices, but continuing house price declines and market turmoil will impact 2008 results.

OFHEO found interest-rate risk management at both Enterprises generally to be satisfactory, although Fannie Mae’s risk management strategy is somewhat aggressive in light of higher and increasing credit-related losses. OFHEO identified shortcomings with certain risk measurement systems at both Enterprises. Liquidity risk management was satisfactory at both Enterprises.

Both Enterprises significantly improved their model risk management in 2007, but rapidly changing market conditions significantly increased model risk, particularly for credit and prepayment models. Given the lack of historical precedent for current conditions and the fact that models are estimated based on historical experience, Enterprise models have become less reliable and require greater management judgment, increasing the potential for error in pricing and other metrics.

I really have to wonder about there assessment of risk!

http://www.econbrowser.com/archives/2008/07/did_fannie_and.html#more
The fact that the volume of mortgages held outright or guaranteed by Fannie or Freddie grew so much faster than either total mortgages or GDP over this period would seem to establish a prima facie case that the enterprises contributed to the phenomenal growth of mortgage debt over this period. Krugman nevertheless concludes that the GSEs aren't responsible for our current mess:

But here's the thing: Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.& L. fiasco. In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble.

Partly that's because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn't do any subprime lending, because they can't: the definition of a subprime loan is precisely a loan that doesn't meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income.

http://www.nytimes.com/2008/07/14/opinion/14krugman.html

 

[mheslep]

T. Boone on falling oil/gas prices:
"It's temporary, I guarantee that,'' Pickens said of the price drop while speaking in Chicago on Tuesday. "This time next year (oil) will be back to $150 a barrel."
http://www.southtownstar.com/news/1221654,101508pickens.article

 

[Astronuc]

Executives saw conditions worsening before crash
http://news.yahoo.com/s/nm/us_businesscouncil_survey

KIAWAH ISLAND, South Carolina (Reuters) – Top U.S. executives were bracing for a downturn even before the financial markets collapsed late last month, according to a survey conducted in September by the Business Council.

Nearly three-quarters of the CEOs surveyed last month saw global conditions eroding over the next two quarters and 91.6 percent said U.S. conditions were worse in September than they had been six months earlier.

The results were released at the Council's biannual meeting at a South Carolina resort on Thursday. The survey, which compiled results from 71 chief executives at some of the largest U.S. companies, was conducted between September 5 and September 17.

"Most of the responses reflected in our data are from just before the most recent precipitous stock market declines which would have certainly further contributed to the already very downbeat perspective that came through," James McNerney, chairman of the Business Council and chief executive of Boeing Co, said at a press conference.

Since September 17, when the council received its last responses to the survey, the Standard and Poors' 500 index has lost more than 18 percent of its value.

"There's a definite sense that if we're not already in a recession it will be virtually impossible to avoid one," McNerney said.

When the survey was conducted, 7 percent of CEOs expected the U.S. economy to decline in 2009 and over 80 percent expected it to grow between 0 percent and 2 percent.

. . . .

Recession looms despite global interventions
http://news.yahoo.com/s/nm/20081016/bs_nm/us_financial5

I guess we'll see.

 

[mheslep]

A short while ago the editors of VOX EU, an economics portal for professionals launched in 2007, recognized a need to get in depth information on the subprime crisis out to decision makers. They consequently solicited VOX EU members for essays on the subject which they compiled into an online book. According to The Economist, the essays are being widely read by the central bankers.

http://www.voxeu.org/index.php?q=node/1352"

 

[Jimmy Snyder]

When the survey was conducted, 7 percent of CEOs expected the U.S. economy to decline in 2009 and over 80 percent expected it to grow between 0 percent and 2 percent.

Actually, Astronuc didn't say that, he was quoting Reuters. But the NBER may be reluctant to declare a recession if the economy grows between 0 and 2 percent. It seems that the overwhelming majority (over 80%) of CEOs don't think there is going to be a recession. And only 7% think the economy will decline at all, let alone go into recession. Does the 7% tail wag the 80% dog? Am I missing something? Perhaps I am, so don't give up hope.

 

[Jimmy Snyder]

The stock market runs mostly on emotion, typically and famously fear and greed.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_p0g99V7HUg&refer=home"
Right now Warren and I are the only two investors who are buying, everyone else is selling. But prices will not continue cheap forever. What I need for you people to do is to continue bad mouthing the market and the economy while we still have uninvested cash. This will take a few weeks for me, probably a little longer for Warren. Thanks in advance for your cooperation.

 

[mheslep]

The stock market runs mostly on emotion, typically and famously fear and greed.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_p0g99V7HUg&refer=home"
Right now Warren and I are the only two investors who are buying, ...

I am doing my part in the shadows - buying late at night when nobody is looking.

 

[Astronuc]

Actually, Astronuc didn't say that, he was quoting Reuters. But the NBER may be reluctant to declare a recession if the economy grows between 0 and 2 percent. It seems that the overwhelming majority (over 80%) of CEOs don't think there is going to be a recession. And only 7% think the economy will decline at all, let alone go into recession. Does the 7% tail wag the 80% dog? Am I missing something? Perhaps I am, so don't give up hope.

Just remember - the fundamentals of the economy are strong. Bush and McCain have declared is so.

On the other hand, David Walker, former Comptroller General of the United States and head of the GAO, has mentioned that the aggregate debt (including future obligations) exceed the net worth of the US.

But don't worry - it's only money.


I'd say we've been in a recession for at least 1 year - kind of like one would have cancer and feel fine for years, until it starts hurting and parts of the body start failing, and one requires surgery, radiation or chemotherapy in order to survive, but with diminished health for some time.

 

[kronon]

Economic booms and busts have been occurring regularly for centuries; either through excessive loans and consequent bankruptcy, or by creating and circulating an excess of money.

At the same time though, the economy has managed grow from a few bags of flour that the Settlers brought with them, to today being able to have whatever you could possibly need or want, and then some (garden ornaments or fluffy steering wheel cover anyone?). To of reached this level of prosperity so quickly is to me just staggering.

So the system appears to work, despite the fluctuations, and despite other negative consequences like unfair income disparity. Credit-induced Booms and busts just seem to be a part of the economic development process. But if that’s what it takes, then fine, because the outcome is worthwhile.

The deeper issues with the US economy are I believe related more with inefficient and wasteful use of finite resources. Do we really want to use finite fossil energy on things like plastic fake rocks that cover the water meter on the lawn? I think that's madness.

Just because someone is willing to pay, it does not mean that society should produce it. That is what I think is wrong with the US economy.

 

[mheslep]

More distractions from the want to be recession as the third quarter earnings reports start coming in:
Google 26% profit rise
IBM 22% profit rise
Honeywell net income 16% rise
Intel 25% profit rise
Exxon $9B/3rd qtr, still increasing from last years all time record.

 

[Astronuc]

More distractions from the want to be recession as the third quarter earnings reports start coming in:
Google 26% profit rise
IBM 22% profit rise
Honeywell net income 16% rise
Intel 25% profit rise
Exxon $9B/3rd qtr, still increasing from last years all time record.

That's great, but what's behind the numbers. How much of that profit is purchased on credit - some of which will not be paid? How does this compare to the $billions lost by the banks and financial institutions?

I learned recently about a deal between NYS and IBM that keeps people employed through the end of 2008. It is expected that the employees covered by the agreement will be laid off come Dec 31.

New York May Pay IBM To Not Fire Workers
http://www.informationweek.com/blog/main/archives/2008/07/new_york_may_pa.html
Posted by Paul McDougall, Jul 8, 2008

IBM and subsidies - http://www.recordonline.com/apps/pbcs.dll/article?AID=/20080727/BIZ21/80725017


NYS and local counties have given IBM huge tax reductions and subsidies. So IBM and their stockholders benefit from corporate welfare. So Republicans and Conservatives don't mind accepting welfare - as long as they don't pay taxes?

IBM cut wages to workers and gave bonuses to management.
http://www.ibmemployee.com/Highlights080719.shtml


NY like Ca is running substantial deficits, partly from reduced revenues (which just got bigger with layoffs on Wall Street), partly from corporate subsidies, partly from entitlements (the generosity disputable), and partly from borrowing to cover the decline in revenues. This is also what the federal government has done and is still doing.

 

[Jimmy Snyder]

That's great, but what's behind the numbers.

Yes, it is, and here is what is behind the numbers. If you borrow money to plant an apple tree, then your children and grandchildren will have to pay for it. Perhaps they can sell some of the apples. If you don't plant the tree, your children and grandchildren will have to pay for that too, but with what?

 

[mheslep]

...NYS and local counties have given IBM huge tax reductions and subsidies. So IBM and their stockholders benefit from corporate welfare. So Republicans and Conservatives don't mind accepting welfare - as long as they don't pay taxes?

Eh? You happen to know that 'IBM and their stockholders' are Republicans and Conservatives? How? Certainly NY state government leadership is not, that's land of the blue up there.

Also, guess who proposed the following:

...So here's the deal we can make with the auto companies. It's a piece of legislation I introduced called "Health Care for Hybrids," and it would allow the federal government to pick up part of the tab for the auto companies' retiree health care costs...

 

[Astronuc]

Eh? You happen to know that 'IBM and their stockholders' are Republicans and Conservatives? How? Certainly NY state government leadership is not, that's land of the blue up there.

Also, guess who proposed the following:

I know quite a few IBMers and quite a few conservatives and republicans who are stockholders of IBM as well as other companies. In my area, the population is about 2/3's republican/conservative, and in the nuclear industry, we have a lot of conservative/republicans, particularly in the south.

George Pataki (Rep) gave a lot of goodies to IBM during his tenure.


Meanwhile -

Prosecutors Said to Subpoena Lehman Executives

Federal prosecutors have issued subpoenas for a dozen Lehman Brothers executives in connection with three grand jury investigations of the investment bank's collapse, The New York Post's Zachery Kouwe reported.

At a hearing Thursday, Lehman's bankruptcy lawyer, Harvey Miller of Weil, Gotshal & Manges, said that United States attorneys in New York and New Jersey have subpoenaed 12 people. Among them, The Post said, was Richard S. Fuld Jr., the firm's chief executive.

The investigations appear to be centering on whether or not executives made false comments about the firm's health before it crumbled, the newspaper reported, citing unnamed sources.

Lehman executives including Fuld subpoenaed: report
http://www.reuters.com/article/ousiv/idUSTRE49G2X920081017

Well - we shall see.

 

[mheslep]

That's great, but what's behind the numbers. How much of that profit is purchased on credit - some of which will not be paid?

What would be a good number? Zero debt? Intel numbers for instance:
http://www.intc.com/intelAR2007/financial/balance/index.html
2007: $142M short term debt, $1.9B long term debt against ~$7B net income, not to mention $55B in assets covering everything from cash to plants.

 

[Astronuc]

What would be a good number? Zero debt? Intel numbers for instance:
http://www.intc.com/intelAR2007/financial/balance/index.html
2007: $142M short term debt, $1.9B long term debt against ~$7B net income, not to mention $55B in assets covering everything from cash to plants.

Actually, I was thinking about how much of IBM's products and services are purchased by customers on credit - some of which will or have filed bankruptcy. If IBM tried to sell a plant now, I imagine they would not get the book value. In fact, locally, they probably would not get a buyer.

 

[mheslep]

I know quite a few IBMers and quite a few conservatives and republicans who are stockholders of IBM as well as other companies. In my area, the population is about 2/3's republican/conservative, and in the nuclear industry, we have a lot of conservative/republicans, particularly in the south.

George Pataki (Rep) gave a lot of goodies to IBM during his tenure.

And this all stopped under Executive Club Spitzer and now Patterson?

 

[mheslep]

...Lehman executives including Fuld subpoenaed: report
http://www.reuters.com/article/ousiv/idUSTRE49G2X920081017

Hopefully that will be followed by a subpoena for Senator Dodd.
http://www.nytimes.com/2008/06/18/washington/18dodd.html?partner=rssnyt&emc=rss

 

[Astronuc]

And this all stopped under Executive Club Spitzer and now Patterson?

Spitzer didn't last long enough. When comes to corporate inducements (and deficit spending), it's hard to tell a difference between dems and reps.

I certainly would like to learn more about Dodd and others who benefitted from loans from corporations in which they are supposed to be regulating. I wonder if it is possible for Congress to investigate itself. At the time Dodd took the loan, the republicans controlled both houses and the executive branch. AFAIK, the dems were locked out of the legislative process. Dodd didn't become chair of the Senate Banking committee until Jan. 2007. By then, the damage had been done. The government should take a look at benefits received by Lott, Frist, Hastert and others, as well.


Hosed by Hank: The Bailout's Seven Biggest Victims
http://finance.yahoo.com/tech-ticker/article/97631/Hosed-by-Hank%3A-The-Bailouts-Seven-Biggest-Victims

While it's too soon to declare who the bailouts' winners might be, Portfolio.com has already compiled a list of its seven biggest losers. In the accompanying video, Portfolio.com managing editor Dan Colarusso joins Henry and me to discuss why and how the following people and constituencies got hosed by Hank (Paulson, that is):

Jamie Dimon
John Thain
Lloyd Blankfein
Dick Kovacevich
Dick Fuld
American homeowners
Short sellers

 

[mheslep]

Spitzer didn't last long enough. When comes to corporate inducements (and deficit spending), it's hard to tell a difference between dems and reps.

Amen

I certainly would like to learn more about Dodd and others who benefitted from loans from corporations in which they are supposed to be regulating. I wonder if it is possible for Congress to investigate itself. At the time Dodd took the loan, the republicans controlled both houses and the executive branch. AFAIK, the dems were locked out of the legislative process. Dodd didn't become chair of the Senate Banking committee until Jan. 2007. By then, the damage had been done

They were not locked out in the Senate, where the sill D's had the power to kill things. S. 190 went to the banking committee where Dodd, the ranking member at the time, and fellow D's unanimously voted against the bill in committee. A pure partisan committee vote effectively kills a bill in a non-super majority Senate. So Dodd and crew own the GSE side of the mortgage bust, they owned the entire GSE philosophy. I still fault the Senate Republicans for not raising more of a fuss, perhaps even forcing a doomed floor vote just to highlight the issue.

 

[Astronuc]

Amen

They were not locked out in the Senate, where the sill D's had the power to kill things. S. 190 went to the banking committee where Dodd, the ranking member at the time, and fellow D's unanimously voted against the bill in committee. A pure partisan committee vote effectively kills a bill in a non-super majority Senate. So Dodd and crew own the GSE side of the mortgage bust, they owned the entire GSE philosophy. I still fault the Senate Republicans for not raising more of a fuss, perhaps even forcing a doomed floor vote just to highlight the issue.

I'd like to see the record of that. Based on Elizabeth Dole's website and the fact that McCain, who was not on the banking committee, became a co-sponsor, it seemed to me that the bill went to the floor. I wondering why it is so difficult to find out what happened to a specific bill, when or whodunit!

What's puzzling when it came back as S.1100 in 2007, McCain didn't jump on it, but Mel Martinez (R - FL) did. The House apparently introduced their own bill.

Nevertheless, I hope someone like Bob Woodward gets to the bottom of this mess.


Meanwhile - back at the farm:

Bush says successor must overhaul finance rules
http://news.yahoo.com/s/afp/20081017/pl_afp/financebankinguspoliticsbush

WASHINGTON (AFP) – US President George W. Bush said Friday that "it's going to take a while" for his economic rescue plan to bear fruit and charged his successor with carrying out an overhaul of US financial rules.

"The actions will take more time to have their full impact. It took a while for the credit system to freeze up; it's going to take a while for the credit system to thaw," he said in a speech to the US Chamber of Commerce.

With just 18 days before the November 4 elections, Bush said whoever enters the White House in late January will have to "ensure that this situation never happens again" by updating US regulations on banking.

Citing US Treasury Secretary Henry Paulson's overhaul proposal and "good suggestions" from others, Bush declared: "Enacting these ideas into law must be a top priority for the next president and the next Congress."

Amid deep unease over the US government buying stakes in US banks -- notably on the right flank of his Republican party -- Bush defended the move as a "last resort" and denied that he had taken "a step toward nationalizing banks."

"This is simply not the case. This program is designed with strong protections to ensure the government's involvement in individual banks is limited in size, limited in scope, and limited in duration," he said.
. . . .

All I can do now is wonder - how the heck did we get into this mess? Why weren't reforms done prior to this point - as early as 1998, or even sooner? I imagine in the late 90's it was the desire 'not to regulate' and folks were giddy with the stock market run up - irrational exhuberance - and Clinton and Gingrich/Delay/Hastert and Lott/Frist were not inclined to regulate. Then when the bubble burst - wel that would have been a good time to look into the financial industry. But Bush and the reps in Congress were not inclined to regulate - and then we had 9/11 and the invasion of Iraq.

I would like to see some reasonable regulation - something without a lot of loopholes - and something which is fair. Is that too much to ask for?

 

[OmCheeto]

Hosed by Hank: The Bailout's Seven Biggest Victims
http://finance.yahoo.com/tech-ticker/article/97631/Hosed-by-Hank%3A-The-Bailouts-Seven-Biggest-Victims

Good video.

to quote the guest:

http://finance.yahoo.com/tech-ticker/article/97631/Hosed-by-Hank%3A-The-Bailouts-Seven-Biggest-Victims
Dan Colarusso's (managing editor portfolio.com) comments:

... the American people have learned a valuable lesson; use other peoples money until the government steps in...

re: short sellers:
..they were bringing balance and rationality to the market
...their business was pulled out from under them
... there wasn't that play in the market

so it was just a game after all.

and all the while a smirk on his face.

I'm sorry. But as an old person, I don't think playing games with peoples retirement funds is funny.

 

[mheslep]

I'd like to see the record of that. Based on Elizabeth Dole's website and the fact that McCain, who was not on the banking committee, became a co-sponsor, it seemed to me that the bill went to the floor. I wondering why it is so difficult to find out what happened to a specific bill, when or whodunit!...

I can not quickly find direct link to the CR, but have this
http://www.allbusiness.com/government/532756-1.html

 

[Astronuc]

F.B.I. Struggles to Handle Financial Fraud Cases
http://www.nytimes.com/2008/10/19/washington/19fbi.html
By ERIC LICHTBLAU, DAVID JOHNSTON and RON NIXON, October 19, 2008

WASHINGTON — The Federal Bureau of Investigation is struggling to find enough agents and resources to investigate criminal wrongdoing tied to the country’s economic crisis, according to current and former bureau officials.

The bureau slashed its criminal investigative work force to expand its national security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties. Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes.

The pressure on the F.B.I. has recently increased with the disclosure of criminal investigations into some of the largest players in the financial collapse, including Fannie Mae and Freddie Mac. The F.B.I. is planning to double the number of agents working financial crimes by reassigning several hundred agents amid a mood of national alarm. But some people inside and out of the Justice Department wonder where the agents will come from and whether they will be enough.

So depleted are the ranks of the F.B.I.’s white-collar investigators that executives in the private sector say they have had difficulty attracting the bureau’s attention in cases involving possible frauds of millions of dollars.

Since 2004, F.B.I. officials have warned that mortgage fraud posed a looming threat, and the bureau has repeatedly asked the Bush administration for more money to replenish the ranks of agents handling nonterrorism investigations, according to records and interviews. But each year, the requests have been denied, with no new agents approved for financial crimes, as policy makers focused on counterterrorism.

According to previously undisclosed internal F.B.I. data, the cutbacks have been particularly severe in staffing for investigations into white-collar crimes like mortgage fraud, with a loss of 625 agents, or 36 percent of its 2001 levels.

Over all, the number of criminal cases that the F.B.I. has brought to federal prosecutors — including a wide range of crimes like drug trafficking and violent crime — dropped 26 percent in the last seven years, going from 11,029 cases to 8,187, Justice Department data showed.
. . . .
But Justice Department data, which include cases from other agencies, like the Secret Service and Postal Service, illustrate the impact. Prosecutions of frauds against financial institutions dropped 48 percent from 2000 to 2007, insurance fraud cases plummeted 75 percent, and securities fraud cases dropped 17 percent.

Statistics from a research group at Syracuse University, the Transactional Records Access Clearinghouse, using somewhat different methodology and looking only at the F.B.I., show an even steeper decline of nearly 50 percent in overall white-collar crime prosecutions in the same period.

In addition to the investigations into Fannie Mae and Freddie Mac, the F.B.I. is carrying out investigations of American International Group and Lehman Brothers, and it has opened more than 1,500 other mortgage-related investigations. Some F.B.I. officials worry privately that the trillion-dollar federal bailout of the financial industry may itself become a problem because it contains inadequate controls to deter fraud.
. . . .

 

[Astronuc]

AP IMPACT: Mortgage giant, GOP firm targeted Republican senators for defeat of regulatory bill
http://biz.yahoo.com/ap/081019/the_influence_game_housing.html

WASHINGTON (AP) -- Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse.

In the cross hairs of the campaign carried out by DCI of Washington were Republican senators and a regulatory overhaul bill sponsored by Sen. Chuck Hagel, R-Neb. DCI's chief executive is Doug Goodyear, whom John McCain's campaign later hired to manage the GOP convention in September.

Freddie Mac's payments to DCI began shortly after the Senate Banking, Housing and Urban Affairs Committee sent Hagel's bill to the then GOP-run Senate on July 28, 2005. All GOP members of the committee supported it; all Democrats opposed it.

In the midst of DCI's yearlong effort, Hagel and 25 other Republican senators pleaded unsuccessfully with Senate Majority Leader Bill Frist, R-Tenn., to allow a vote.

"If effective regulatory reform legislation ... is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole," the senators wrote in a letter that proved prescient.

Unknown to the senators, DCI was undermining support for the bill in a campaign targeting 17 Republican senators in 13 states, according to documents obtained by The Associated Press. The states and the senators targeted changed over time, but always stayed on the Republican side.

In the end, there was not enough Republican support for Hagel's bill to warrant bringing it up for a vote because Democrats also opposed it and the votes of some would be needed for passage. The measure died at the end of the 109th Congress.

McCain, R-Ariz., was not a target of the DCI campaign. He signed Hagel's letter and three weeks later signed on as a co-sponsor of the bill.

By the time McCain did so, however, DCI's effort had gone on for nine months and was on its way toward killing the bill.
. . .

The Republican senators targeted by DCI began hearing from prominent constituents and financial contributors, all urging the defeat of Hagel's bill because it might harm the housing boom. The effort generated newspaper articles and radio and TV appearances by participants who spoke out against the measure.

. . . .

Yes some Democrats opposed it, but Frist didn't allow it on the floor, and "DCI was undermining support for the bill in a campaign targeting 17 Republican senators."

And McCain's campaign hired Doug Goodyear to manage the GOP convention.

Hmmmm.

 

[Astronuc]

What are you getting for your bonus this year?

Wall Street banks in $70bn staff payout
Pay and bonus deals equivalent to 10% of US government bail-out package
http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking
Simon Bowers The Guardian, Saturday October 18 2008

Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted criticism. The government's cash has been poured in on the condition that excessive executive pay would be curbed.
. . .
At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.

In the first nine months of the year Citigroup, which employs thousands of staff in the UK, accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.

At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP Morgan $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the total accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of August by 3% to $3.7bn.

Days before it collapsed into bankruptcy protection a month ago Lehman Brothers revealed $6.12bn of staff pay plans in its corporate filings. These payouts, the bank insisted, were justified despite net revenue collapsing from $14.9bn to a net outgoing of $64m.
. . . .

Hmmm. I wonder if Congress is paying attention.

 

[OmCheeto]

What are you getting for your bonus this year?

I haven't been laid off yet.

Wall Street banks in $70bn staff payout
Pay and bonus deals equivalent to 10% of US government bail-out package
http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking
Simon Bowers The Guardian, Saturday October 18 2008

Hmmm. I wonder if Congress is paying attention.

Astro... you need to stop pointing fingers. That's not polite.

http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking
Many critics of investment banks have questioned why firms continue to siphon off billions of dollars of bank earnings into bonus pools rather than using the funds to shore up the capital position of the crisis-stricken institutions. One source said: "That's a fair question - and it may well be that by the end of the year the banks start review the situation."

Christmas is just around the corner. We wouldn't want to spoil if for the grinchs by not letting them steal all the money we just handed them.

Actually, if the article is factual, I may want to write my two senators.

Btw, do you think Fox news will pick up the story?

 

[Astronuc]

Possible scenario for 2009 - Rolling Layoffs could hit millions (AOL)
http://money.aol.com/investing/rolling-layoffs-could-hit-millions

Where Things Look Bleakest
The unemployment rate was 6.1% in September. If unemployment rises to nearly 10%, another six million or more people would be out of work. There are already signs that industries well beyond autos and airlines (two typical early victims of a slowdown) have begun to take out jobs.

http://www.247wallst.com/2008/10/credit-crisis-i.html

The early victims of a slowdown, especially when there has been inflation in fuel and other energy costs are almost always the auto and airline industries. Virtually every carrier has already cut its flights by 10% or more and laid-off thousands of people. Detroit has been going through a systematic downsizing for more than two years, cutting tens of thousands of positions. Daimler laid off more people this week and a GM (GM) merger with Chrysler could cost more jobs.

The unemployment rate was 6.1% in September. In the deep recession of 1973/1974, the unemployment rate reached almost 9%. There are currently about 148 million people in the US civilian workforce. If unemployment rises to nearly 10%, another six million or more people would be out of work.

There are already signs that industries well beyond autos and airlines have begun to take out jobs. Pepsi (PEP), which is supposed to be in the "recession proof" consumer goods sector, reported weak earnings and said it would cut 3,300. SAP (SAP), the No. 2 enterprise software company in the world, said it would miss numbers and cut staff. Global conglomerate Philips is lowering its headcount after its medical systems business hit a bad patch. Supermarket chain Supervalu (SVU) cuts its estimates again. It did not mention pushing out employees, but as a $40 billion business, it will not be able to keep all of its people as earnings fall. Even white shoe law firms are letting people go. Clifford Chance just fired a number of lawyers in its M&A operations.
. . . .
The layoffs are still coming at parts of Lehman, Washington Mutual, Wachovia (WM), and Merrill Lynch (MER). The head of Citigroup has pledged to cut operating costs. Citi could easily cut another 20,000 jobs. The Wachovia and Merrill deals merging them into larger partners could cause closer to 30,000 lay-offs
. . . .
Supermarkets and Fast Food - Food retail, both at the supermarket and restaurant level, is extremely vulnerable to cuts. Food prices are up. Add that to tight credit and concerns about employment and people will cut back on eating out and buying anything more than the essentials for eating at home. Aside from Supervalu, which has already said it is struggling, Kroger (KR) and Safeway (SWY) could be affected as well. These three largest chains have more than 750,000 workers. If same store sales drop sharply and a large number of outlets are closed watch for as many as 50,000 people being out of work.This does not take into account the scores of smaller chains and tens of thousands of individual food retailers around the country.

Serious unemployment always affects the ability of people to spend money on eating out. Starbucks (SBUX) has already let more than 10,000 people go.
. . . .

Internet - Google, Yahoo!, Ebay (EBAY), and Amazon (AMZN) employ 75,000 people among them. Rumors are that Yahoo! could take out 20% of its people, about 3,000 jobs. Ebay just let go 1,000 workers, 10% of its staff.
. . . .

Software - The other part of the tech business which has had very few job cuts over the last half decade is software. Microsoft (MSFT), Oracle (ORCL), SAP, and IBM (IBM) have done consistently well.

In the closely related hardware business, HP (HPQ) just fired almost 25,000 workers. This is a disease which will spread.
. . . .

Oil - Oil prices have fallen from just over $147/bbl to about $70/bbl, which cuts into profits of the oil development companies. The number of energy workers could contract just as fast as it expanded. In an industry with several million workers even a 5% cut across the sector would be especially painful. Among them, the ten largest oil and oil-related companies could let 100,000 people go.
. . . .

Media - Another stable industry over the last several years has been big media companies. Advertising revenue has been good. Now, it is not just bad, it is getting very bad, very fast. Both CBS (CBS) and Viacom (VIA) warned about earnings last week. These stocks and peers like Disney (DIS) and News Corp (NWS) are off to multi-year lows. . . . Papers are already chopping staff levels by 15% to 20%. If the recession spreads broadly across the sector it is not hard to image 100,000 or 200,000 people being out of work by the end of 2009.
. . . .

 

[Astronuc]

http://news.yahoo.com/s/nm/20081021/bs_nm/us_nationalcity

NEW YORK (Reuters) – National City Corp, the U.S. Midwest regional bank, posted its fifth straight quarterly loss on Tuesday, hurt by increased reserves for mortgage and real estate construction loan losses.

The Cleveland-based lender also plans to reduce 4,000 jobs, or 14 percent of its workforce, over three years to save $500 million to $600 million annually by 2011.

National City's third-quarter net loss was $729 million, or $5.86 per share, and compared with a loss of $19 million, or 3 cents, a year earlier.

This is becoming reminiscent of the S&L crisis. Of course, they could revise that plan if the economy turns around. On the other hand, large losses will be felt for years.

I'd like to know the reality of the losses. Presumably some folks are not paying off their debt, and there seems to be an awful lot of that.

Somewhere the needs to be accountability.

 

[Astronuc]

Merrill exec to leave with big payout; others stay
http://news.yahoo.com/s/nm/20081021/bs_nm/us_merrill_kraus

NEW YORK (Reuters) – Merrill Lynch & Co's (MER.N) head of strategy will likely leave the bank with as much as $25 million in compensation, while three other top executives are set to stay at the firm once it combines with Bank of America Corp (BAC.N), according to media reports.

The Wall Street Journal reported on Tuesday that Merrill's global strategy head, former Goldman Sachs executive Peter Kraus, will not stay on. Instead, he will pick up a paycheck worth $10 million to $25 million, the newspaper said.

. . . .

Must be nice.

How many 'average' Americans get that kind of bonus after running a company into the ground?

If a person worked for 50 years (ages 20-70), at an average $100k/yr, they'd earn $5 million. In one fell swoop, this guy could make 5 times that.

 

[Astronuc]

Wachovia reports $23.9B loss for 3Q

Merck 3Q net drops 28 percent, to cut 7,200 jobs

Boeing's 3Q profit dives 38 percent - I understand Caterpillar is hurting because of high cost of raw materials. The slow down in the global economy is hurting Boeing (because airlines are making little money, and more people cannot afford to fly), and slower growth means less exports for heavy equipment, which hurts Caterpillar. It will be interesting to see the magnitude of the trade deficit in September and October.

http://biz.yahoo.com/ap/081022/earns_wellpoint.html
Health insurer WellPoint Inc. posted a 5.4 percent decline in third-quarter net income, mostly because of losses on its investments, but the results topped analyst estimates.

Report: Toyota to post first sales drop in decade
http://news.yahoo.com/s/ap/20081022/ap_on_bi_ge/as_japan_toyota_2

Asian and European markets are down, and Dow futures fall 165 on more recession fears

 

[Astronuc]

Job losses could fuel foreclosure problem
MBA projects negative economic growth until mid-2009, another hit to housing

SAN FRANCISCO (MarketWatch) -- If 2008 was a record year for mortgages entering foreclosure, 2009 could look even worse: While home-price declines have been driving foreclosure starts recently, mounting job losses could add another layer of stress on American homeowners, the chief economist of the Mortgage Bankers Association said on Tuesday.

A recession appears to be underway, according to the MBA's annual economic forecast, which projects negative economic growth through the middle of next year. The MBA presented its forecast to reporters Tuesday at its annual convention, being held in San Francisco.
. . . .
Unemployment also will likely accelerate, perhaps reaching 7.7% by the end of next year, making it tougher for some people to stay in their homes, said Jay Brinkmann, chief economist of the MBA. He doesn't expect a rapid recovery in the jobs market, either: Unemployment won't decline until late 2010, according to MBA projections.
. . . .
No surprise, then, that he also doesn't expect home building to ramp up again soon: New-home sales will be down by 36% this year, compared with last year. Next year, new-home sales will be down by 12% -- though perhaps reaching a bottom in 2009. Sales are expected to rise 25% in 2010.

Meanwhile, existing-home sales will be down by 13% this year compared with 2007, but should increase 3% in 2009. According to MBA projections, existing-home sales could be up 6% in 2010.
. . . .

Well - we'll see.

Wall Street's 'Disaster Capitalism for Dummies'
14 reasons Main Street loses big while Wall Street sabotages democracy

ARROYO GRANDE, Calif. (MarketWatch) -- Yes, we're dummies. You. Me. All 300 million of us. Clueless. We should be ashamed. We're obsessed about the slogans and rituals of "democracy," distracted by the campaign, polls, debates, rhetoric, half-truths and outright lies. McCain? Obama? Sorry to pop your bubble folks, but it no longer matters who's president.

Why? The real "game changer" already happened. Democracy has been replaced by Wall Street's new "disaster capitalism." That's the big game-changer historians will remember about 2008, masterminded by Wall Street's ultimate "Trojan Horse," Hank Paulson. Imagine: Greed, arrogance and incompetence create a massive bubble, cost trillions, and still Wall Street comes out smelling like roses, richer and more powerful!

I don't necessarily agree with Farrell, but he does make some interesting points.

 

[fuzzyfelt]

http://www.bloomberg.com/apps/news?pid=20601087&sid=agkwnN_rOMyg&refer=home

Not good, but 2003 wasn't all that long ago.

 

[Astronuc]

Goldman Sachs to cut 10 percent of jobs: report
http://news.yahoo.com/s/afp/20081023/ts_alt_afp/useconomycompanygoldmansachslayoffs

WASHINGTON, Oct 23, 2008 (AFP) – Goldman Sachs Group Inc. plans to slash 10 percent of its workforce of 32,500 employees, in the latest sign of US economic woes resulting from the credit crisis, the Wall Street Journal said Thursday.

The cuts were expected "throughout the New York-based company," the newspaper said citing people familiar with the matter.

In September, tycoon Warren Buffett's Berkshire Hathaway agreed to buy five billion dollars of stock in the Wall Street bank which, along with investment bank rival Morgan Stanley, has converted to a bank-holding company amid the worsening financial crisis.
. . .
Among the planned job cuts are Barclays PLC, which plans to eliminate at least 3,000 US jobs, and thousands of jobs at Merrill Lynch & Co. due to the firm's impending takeover by Bank of America Corp.
. . . .

Not looking good.


Wave of job cuts sweeps across corporate America
http://news.yahoo.com/s/nm/20081023/bs_nm/us_jobs_unitedstates

NEW YORK (Reuters) – Corporate America is bleeding jobs and wielding the ax well beyond the financial sector.

As companies look at their prospects for the final quarter of the year and begin to see increasingly grim outlooks for 2009, they are cutting jobs from many different parts of their businesses. They are also slashing capital spending and, in some cases, dividends and even wages.
. . . .
* Goldman Sachs Group Inc plans to cut 10 percent of its staff, or almost 3,300 jobs after laying off hundreds of support staff and junior bankers in June.

* Money manager Janus Capital Group Inc said it would cut 9 percent of its staff a day after rival AllianceBernstein Holding Holding LP said it would make unprecedented job cuts.

* Xerox Corp announced job cuts of 5 percent, or 3,000 positions, due to a "tough business environment."

* United Parcel Service Inc sees layoffs in 2009 as customers need less shipping due to cutbacks on holiday gift purchases.

* Merck & Co Inc announced plans on Wednesday to cut 12 percent of its workforce, citing a need to change its business model in order to survive.

* Fidelity National Financial Inc, which controls one of the largest U.S. title insurers, announced 1,000 job cuts, office closings, a 10 percent pay cut and a 50 percent dividend cut

Wall Street layoffs could surge past 200,000
http://news.yahoo.com/s/ap/20081023/ap_on_bi_ge/wall_street_layoffs

. . . .
The fallout from this year's global credit crisis has claimed jobs on all corners of Wall Street, from hedge fund managers to floor traders and beyond. More than 110,000 have lost their jobs so far this year, and some industry experts forecast it could come close to 200,000 before the year is over.
. . .

 

[mgb_phys]

So when industial companies take over their competitors and eliminate jobs they are praised and their share price rises since they are becoming more competitive in a dynamic market. When banks do it - it's the sign of an impendign apocalypse?

 

[Astronuc]

Greenspan "shocked" at credit system breakdown
http://news.yahoo.com/s/nm/20081023/bs_nm/us_financial_greenspan

WASHINGTON (Reuters) – Former U.S. Federal Reserve Chairman Alan Greenspan told Congress on Thursday he is "shocked" at the breakdown in U.S. credit markets and that he expects the unemployment rate to jump.

Despite concerns he had in 2005 that risks were being underestimated by investors, "this crisis, however, has turned out to be much broader than anything I could have imagined," Greenspan said in remarks prepared for delivery to the House of Representatives Committee on Oversight and Government Reform.

"Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief," he said.

Banks and other financial institutions need public support, such as the recently approved $700 billion bailout package, to avoid serious retrenchment, he said.
. . . .
Greenspan was hailed as one of the most accomplished central bankers in U.S. history when he retired in January 2006. However, his decision to keep interest rates low during his final years at the Fed has been blamed in part for the housing bubble and crash that has led to the current deep financial crisis.
. . . .

It's partly those with bad credit, and it's partly bad investment/financial practices by those who should have known better.

 

[Astronuc]

So when industial companies take over their competitors and eliminate jobs they are praised and their share price rises since they are becoming more competitive in a dynamic market. When banks do it - it's the sign of an impendign apocalypse?

Regarding 'bigness', Robert Reich had an interesting commentary about - Maybe 'too big to fail' is just too big

http://marketplace.publicradio.org/display/web/2008/10/22/too_big_reich/

According to Treasury Secretary Hank Paulson, the biggest Wall Street banks now getting money from the government are just "too big to fail."

Fed Chairman Ben Bernanke uses a different euphemism -- he calls them "systemically critical." The point is that if anyone of them goes down, it could take the whole financial system with it. So we taxpayers have to keep them up.

We're hearing the same argument elsewhere in Washington for saving General Motors. It's just "too big to fail." So Congress is considering a bailout that would keep GM afloat and sweeten a merger between GM and Chrysler.

Pardon me for asking, but if a company is too big to fail, maybe -- just maybe -- it's too big, period.

We used to have public policies to prevent companies from getting too big. Does anyone remember antitrust laws? Somewhere along the line policymakers decided that antitrust would only be used where there was evidence a company had so much market power it could keep prices higher than otherwise.

We seem to have forgotten that the original purpose of antitrust law was also to prevent companies from becoming too powerful. Too powerful in that so many other companies depended on them, so many jobs turned on them and so many consumers or investors or depositors needed them, that the economy as a whole would be endangered if they failed. Too powerful in that they could wield inordinate political influence of a sort that might gain them extra favors from Washington.

Maybe the biggest irony today is that Washington policymakers who are funneling taxpayer dollars to these too-big-to-fail companies are simultaneously pushing them to consolidate into even bigger companies. They've prodded Bank of America to take over Merrill Lynch and Countrywide. JPMorgan to acquire Washington Mutual and Bear Stearns. And now they're urging General Motors to absorb Chrysler.

So we're ending up with even bigger giants, with even more power over the economy and politics, subsidized by taxpayers and guaranteed never to fail because they're just -- too big!
. . . .

The government intervention is pretty bizarre, IMO. They bailout the irresponsible banks, but they don't seem inclined to bailout irresponsible lenders.

It's not clear to me that there are reasonable conditions on the bailout, so the banks seem pretty much free to continue being irresponsible, or perhaps they'll be responsible until the attention subsides and then go about their merry way the way they have been these last two years. Separately though, the congress is considering legislation for improved regulatory oversight.

 

[turbo]

Chrysler is in talks with GM AND with Nissan. Nissan might do a stock-swap of some kind, but they won't buy stock in Chrysler with cash - too risky. I've misplaced the link, but it should pop back up.

Chrysler and Nissan had (have?) arrangements to build trucks for one another, and Chrysler and Mistubishi have shared some manufacturing lines (notably Diamond Star plant in Indiana), but buying into US car makers with models that no longer thrill the consumer, and having to pay for re-tooling, re-engineering, etc doesn't seem to appeal to Japanese car makers. They would be better off to let some US companies cut back, merge, or fail outright, then snap up the production facilities.