Elizabeth Waren: We are still screwed!

the lack of massive coverage of this astonishes me. hear no evil....

WHAT recession? Let's go shopping!

Riversider - great link to MSNBC -
Jobless claims were about 550K this time and as has been spoken many times here if 550K of people file claims there are plenty others out there who own small businesses or who otherwise had jobs that don't allow them to file claims - making the real number of unemployed much higher.
Also what I'd like someone to report somewhere is how many people each month are simply falling off of the roles because some politician somewhere thought we should limit the amount of time people can be considered unemployed?
My point is the unemployment number is much worse than reported and unemployed people can only pay their mortgages so long. More foreclosures to come and lower housing prices are a certainty.

drdrd, except the people didn't! "unexpectedly" retail sales declined, .1% compared to an estimated .8% gain, and declined .6% ex-auto sales. and that was WITH the cash for clunkers program.

i did go shopping in july, i'm starting to feel countercyclical to the extreme.

I was just joking, ar. I keep asking myself how many more shoes are left to drop. I think it's smart that the US populace is finally saving; to me, that shows the fallacy of our current system, that the economy is based on 70% consumer spending. It's just nuts.....& obviously unsustainable.

whole loans/cre/private equity financed LBOs, etc.....i keep writing about it. people dont want to hear about it. markets are ignoring these items for now, time will tell whether its right or now

Urbandigs. I believe the plan is clear. Gov't is keeping interest rates low and hoping the banks earn their way out of the mess. Of course my own pet theory is that savers not getting interest on their money is contributing to the lack of consumption reflected in GDP. The idea of banks earning their way out of the mess, is just contributing to us replicating Japan's lost decade.

not only that but you can add:

1) FASB changing mark to market rules
2) FASB changing off balance sheet allowances
3) FASB changing what is classified as held to maturity.

other than I agree. Fed has engineered a bank recap environment, period. buyng time I guess.

drdrd, i knew you were joking. i was reading yet another article trumpeting green shoots the other day, and the report said something along the lines that it would be nice if the consumer could find its legs, though, and i thought, nice for whom? nice obviously if it's because the consumer now has enough discretionary money to purchase items, particularly those necessary, without credit. not so nice if it's just a resumption of overspending.

riversider, float, float, float. unless we sink, sink, sink.

completely agree re: savers getting virtually no return. just another unintended consequence.

no doubt, if you could have a real conversation with the people who are controlling this in washington, they would tell you that the alternative would be far worse. i don't think i buy that line anymore.

prof warren's response at the very end to the question of what would have happened absent the bailout was fascinating. long, long pause and then she talked about what kind of world we all want.

The longer this thing lasts, ar, the more apt we are to continue practicing personal financial responsibility; that may be the silver lining here, but consuming is addictive & we'll see how this plays out.

We should have nationalized the banks -then after the banks would have been nationalized they should have been cut up and sold at auction to the highest bidder - still plenty of capital on the sidelines. There is no reason that insolvent banks should have bond holders and equity holders who haven't lost their entire investment. Why are we bailing out the bondholders/equity holders - fine save the economy if you want but wipe out the stakeholders while you do it. (it's a bad idea to get involved at all I think)
Also the nationalization of these banks would have eliminated any gross contracts that are in place now (ie ones that pay one guy $100M for a years worth of work - in a bank you've got many different industries, each of these industries have guys making huge bets - so without fail you're going to have 1 or 2 guys each year look like geniuses simply because they happen to be in the hot industry for that year - had the guy been a real estate guy who sold all of his real estate and took the money to get short oil then I'd say pay the guy his $100M, but this guy just happened to be in the right place at the right time).

urban diggs
1) FASB changing mark to market rules
2) FASB changing off balance sheet allowances
3) FASB changing what is classified as held to maturity.

how much of 1,2&3 was because of Barney Frank. I seem to recall at least #1

There are only two arguments that make any sense at all. First is that gov flooding banks & economy with cash, everyone hold their noses and looks the other way, disaster put off hopefully 10-30 years and maybe some new technology or war or something happens to adjust back to “normal”. Other argument is that we’re living in the matrix.

matrix

you are wrong jazzman--that guy is an asset to whomever he works for--he is a brilliant trader who has added consistently and significantly to citi's bottom line for many years--citi will be weaker without him--now the suited senior "strategic managers"; most of whom have done little during their ascent beyond manage their images, careers and politics well; should not be paid and should likely be canned--the decisions they made about securitization, leverage and other businesses were awful--bizarre that so many of them are still in place

This whole discussion about somehow saying that citi is justified to pay out this trader his 100 million dollar bonus is non-sense. If citi had failed, then regardless of his skill he would get nothing. The money is coming from tax-payers. More importantly though, it is a good thing that citi has a profitable division such as phibro. but the answer is not to hold on to it, but to sell it and realize the money and pay back the gov't. Phibro is not a core business and is not strategic to citi bank long term.

once again underscores the complexity (and to my mind impossibility) of the government approach to this whole mess. if this guy is so great, how come he's not off on his own taking home 50% or more of his profits?

except that by keeping rates low, the fed is making less money than it would be which means that, once again we taxpayers are footing the bill of making the banks profitable (which profit by the way they promptly turned around and made into bonuses for their execs)... even though i like obama, it is so hard not to become a reactionary these days...

Drdrd, keep in mind that Japan has a savings rate of around 25%. It's really high, and it has negative consequences for the economy.

once again underscores the complexity (and to my mind impossibility) of the government approach to this whole mess. if this guy is so great, how come he's not off on his own taking home 50% or more of his profits?

Hello! His current situation gives gave all the profit and none of the risk of having his own firm.

cc. he will be on his own shortly or working with a similar deal elsewhere..and phibro will be spun off for way less with him not there...that's the point...this guy added serious value..some at banks do..most in the executive suite add nothing, have never produced shit beyond poor guidance of their firms, and are merely the most effective of careerists

so...you're saying that his bonus and other expenses associated with phibro are such that there is no net contribution to citi?

100,000,000 plus other bonuses each year? Citi and the U.S. tax payer would undoubtably realize more if they sold it. Plus I'll say it again, Phibro is not integral to citi-bank. The companies other divisions would not be hurt without it. Considering Citi owes it's existence to the u.s. tax payer, they have a fiduciary obligation to consider selling it.

i'm not arguing with you. but, the question is--is citi more or less profitable without it? if the answer is less, then as shareholders (i.e. taxpayers) wouldn't we want them to hold onto it?

this is why is said earlier that this whole construct makes no sense.

I stick by my comments that this guy is overpaid at $100MM - there is little proof that he did anything to warrant his bonus other than be in the right place at the right time and have the guts to bet big. Had he been wrong (think Amaranth) he would just be like the real estate guys at Lehman. Often the "best traders" are the ones who trade off of "information."
If you have 100 guys betting a billion dollars on 100 different things then a few of them are going to come up roses every year, but their success doesn't necessarily mean they are any better at picking horses than anyone else.

Tough situation made possible by lack of fed foresight (or concern).

The assets of the business go home every day, making it tough to sell.

Agree that you keep it if the value is there, but what happens next year? Can you imagine if they pay the guy and his fund tanks (a la Amaranth)?

Wall street typically pays out its traders,etc on "fictional present values" of future income that never occurs. On a CDO desk it might be the present value of residaul value of a deal. This is the reason behind the outrage of the huge bonuses that were paid out to failed at Wall Street firms.

campbell soup is on sale.. im buying in bulk...

evnyc, japan also has a very low birth rate, partially driven by lack of growth the last decade or so. a nasty cycle. the US had a very high birth rate, i believe, in 2008. i wonder what 2010 will look like.

AR - the US doesn't have a high enough birth rate to sustain our population - I believe in 08 it was 1.4 (1.7 is needed to sustain population). But because of the legal and illegal immigrants our growth rate is right at 1.7.

Interesting that due to growth rates in Holland it will soon be a Muslim state - and in my lifetime so will France and Germany. Paraphrasing what the Ayatollah said - we don't need to take over these countries with bombs we will do it one baby at a time.

jazzman, yes, we are doing better with birth rate than japan, which is doubly cursed with a very low immigration rate, but we aren't at replacement. and that immigration rate has been keeping the equilibrium. it will be interesting to see what happens during the next decade.

I recently posted information from a news letter on just this topic...
http://www.streeteasy.com/nyc/talk/discussion/13723-a-bull-market-full-of-bull-
Riverside,
This is all I keep thinking about. Is there such a thing as wishing an eco crisis away? Is there a type of accounting that some how disolves these liabilities? The 'Mathamagic' of our current administration should scare every person in this country. Even if you HATED the Bush administration and wanted to blame them for every economic booboo, any fair analysis has to include the Clinton Administration for setting us up for this along Greenspan who some how felt obligated to keep the money train moving foward at all costs. What was it said? I failed to realize that financial insitutions would not auto regulate for the purposes of self interest. HOLY S*IT!!! I never took an eco class in my life but, I know plenty of Wall Streeters and any notion that they would 'DO THE RIGHT THING' is insane! Was Greenspan in an Ivory tower some place soaking in a tub getting such superb happy endings from Andrea Mitchell that he could actually think this pile of bull sh*t about the greediest people on the plant?
Did anyone ever send this guy a copy of the movie 'Wall Street'? He might have found it enlightening.
Remember??? Greed is Good......sticking you head in the sand leaves you opened to an as* f*cking. Sorry to be so graphic but it's my future he took a s*it on.

Indeed, Japan has bigger problems, but ours are still pretty bad. I think there's tons of similarities though: we have an aging population, if not nearly as severe as Japan's; and I think we're shifting towards the ugly temporary employment model, which has done considerable damage particularly to Japanese youth; and of course a lot of people are not going to feel financially stable enough to have children if they're trapped in temporary jobs, leading to further birth rate declines.

I don't know how far along that path we'll get or when it will all collapse, but unless some miracle industry comes along, something's gotta give here eventually.

Greenspan was arrogant. This does not mean he was not smart, but he had too much faith in efficient markets. This belief was shared by Rubin & Summer. That said, there were basic inbalances in our economy. We spent more than we produced with foreigners financing it.
The fact that foreigners lent us the money wasn't terrible considering they always did this with u.s. dollars, but unlike past centuries the fact we borrowed for consumption and not investment is a little problematic.
The fact that politicians or media try to pin this 100% on Bush or Clinton is rediculous. Personally I like pointing out the contribution of Clinton Era figures to counter the Bush Argument. Truth is you can find plenty of Clinton Era factors, but some things did continue under Bush.
We can't have an economy baased on Financial sector. Wall Street makes most of it's profits by gaming the system. If it had to operate with the highest integrity(i'm not saying(they are techniclaly actiing illegally but immorally to a point) they would basically earn their dividend.
I think ultimately if the situation plays out and the system corrects then Wall Street will earn single digit returns. In past decades the banks earned just about as much.

With regards to Clinton a great deal of roll-back of regulation occured under his watch. Under Bush some more and the SEC was weakened. Personally I believe more damage was done under Clinton with regards to weakening safeguards on banks.

Riversider, as your favorite Spitzer said, there were plenty of regulations. Nobody was paying a bit of attention to them. Would it have been better if the weakening had not occurred? Absolutely. But that weakening did not mean that what truly started happening after 2001 needed to occur.

A.R. I agree with Spitzer's statement but what happened under both Clinton and Bush was a weakening of those regulations. This is more than ingnoring them.(i.e. removing Glass Steagal, increasing bank leverage, forbidding CFTC from regulating CDS) the list goes on. What happened under Cox is more to the issue of ignoring regulation.

Meanwhile the stock market keeps rolling on. I stay long until the charts reverse themselves. It looked like we were going to rollover in late June/early July but the market, particularly the nazz, powered higher. Nothing like a failed sell signal to catch everyone short. this rally was started by short covering but that has long since passed. there is a strong bid under this market and dips are bought aggressively. i agree the macroeconomic picture is grim at worst, precarious at best but i just trade what's in front of me. we go higher and i will look for some climactic top to trim positions and possibly go short.

With 70% of market volume from some form of high frequency trading, I would be VERY nervous here. That said if you have a long term horizon, certain sectors might be attractive. I feel like Jim Rogers... I believe in commodity plays.

columbiacounty

report abuse completely agree re: savers getting virtually no return. just another unintended consequence.

no doubt, if you could have a real conversation with the people who are controlling this in washington, they would tell you that the alternative would be far worse. i don't think i buy that line anymore.

prof warren's response at the very end to the question of what would have happened absent the bailout was fascinating. long, long pause and then she talked about what kind of world we all want.
_______________

Totally agree about savers getting the short end of the stick. Seems like interest rates are lower to stimulate the spenders, but the spenders are overspent. As a saver, if I could get a decent return on my savings, I'd be more inclined to spend a few bucks (ahem, become a spender). I know this is not exactly how it works, but boy, they can't lower interest rates any more with this strategy - maybe something "radically different" is needed to shock this patient out of bed (raise interest rates and at least get those with some savings comfortable with spending again)...

She wishes she were being screwed

helpful and insightful -- any more words of wisdom, stupid?

Friday, I think the stock market got a little taste of this...

aboutready
about 4 years ago
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Member since: Oct 2007
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Riversider, as your favorite Spitzer said, there were plenty of regulations. Nobody was paying a bit of attention to them. Would it have been better if the weakening had not occurred? Absolutely. But that weakening did not mean that what truly started happening after 2001 needed to occur.

Aboutready, did you hear about Spitzer's new gf?

c0c0, has your negativity improved in the past 4 years?

columbiacounty
about 4 years ago
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Member since: Jan 2009
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completely agree re: savers getting virtually no return. just another unintended consequence.

no doubt, if you could have a real conversation with the people who are controlling this in washington, they would tell you that the alternative would be far worse. i don't think i buy that line anymore.

prof warren's response at the very end to the question of what would have happened absent the bailout was fascinating. long, long pause and then she talked about what kind of world we all want.