Meltdown?

-

At the end of the day Friday, Bear Stearns’ stock market value was more than $3.5 billion. Over the weekend — today in fact — JP Morgan Chase has announced the acquisition of Bear Stearns at just $236 million. What happened?
The Fed has over the weekend just announced another surprise drop in its basic funds rate by another 25 basis points.
I just returned from Europe today where I secured for a friend 500 Euros cash because she is going on vacation to Europe in April and wants to protect herself from further deterioration of the dollar.
I had to chuckle on Friday when I saw Treasury Secretary Hank Paulson’s comment that U.S. policy is to support a “strong dollar.”
There are many things at play at once right now regarding the global economy and why an arbitrage between the nasty geopolitical situation has finally begun to seriously drag down economic realities. For a long time, these two arenas were ‘decoupled’ — but no longer.
I’m drawn to an October 20, 2003 article, “The Debtor’s Empire“, by former IMF Chief Economist Kenneth Rogoff. America is in a nasty economic mess at the moment and power is shifting to new quarters — to those with oil, gold, dollars, and Euros.
America’s power flows cynically through massive debt instruments and the Pentagon — and that’s just not enough to really be what Madeleine Albright called “the indispensable nation.” What a moment of hubris.
— Steve Clemons

Comments

50 comments on “Meltdown?

  1. s.ahmadi says:

    I asked if those who claim deregulation was the cause of this mortgage crisis or credit crunch (whatever that means) to please explain how? No answers…none. What specific regulation could have prevented this crisis and how? Mortgages securities have been selling in the secondary market for decades so what changed? How did the price of homes inflate? How did the interest rates drop to levels that blew air to this bubble? If you don’t think that the Feds and their “Barry Bonds” type of monetary policy didn’t cause this crisis, keep suckling the breast of Big Government.

    Reply

  2. JohnH says:

    Carroll: At least Armey, DeLay, Gramm and Ken Lay’s wives are not running for President! Those horses got out of the barn before we could catch them.
    Hillary Clinton, whose husband did away with Depression era protections, is still in the hunt.

    Reply

  3. acerimusdux says:

    There’s been so much deregulation it’s hard to even know where to begin. If you were buying a house 30 years ago, you likely got an FHA loan from a local Savings and Loan. Interest rates on both the mortgage and the savings accounts were capped by law. ARM’s weren’t legal. Balloon mortgages weren’t legal. Interest only mortgages weren’t legal. You had to meet certain minimum credit standards in order to get the loan. The S&L insisted these standards be met, because they needed for the loan to be insured through FHA. And if they wanted to sell the mortgage later, they could only do that through FNMA, which also had strict standards. Investment banks were kept out of the mortgage lending industry by law, to prevent conflicts of interest.
    For around 40 years we had a system that mostly worked. All of the areas that have experienced problems in the current crisis are areas of recent “innovations” made possible by deregulation, from CDO’s to SIVs, to option-ARMS. (I tried to post on this last night, and my post was apparently blocked…maybe because I had too many links backing it up? But this is it in a nutshell)

    Reply

  4. Carroll says:

    I hate to belabor the point, well actually I don’t hate it, but for any deregulation bunnies that show up I would like to remind them of how the cesspool we mistakenly refer to as the US congress actually operates by offering this flashback:
    “In 1992, when she was chair of the Commodity Futures Trading Commission (CFTC), Wendy Gramm exempted Enron’s trading in electricity futures from oversight. Enron happened to be a big funder of her husband, Texas Senator Phil Gramm (another friend of the free market who drew public paychecks almost all his working life). Six days after that ruling, Gramm left the CFTC, and five weeks later she joined Enron’s board. In December 2000, Senator Gramm helped push a bill through Congress that deregulated trading in energy. Enron’s electricity trading business swelled, and some of the firm’s only real profits were made. Without owning a single California power plant, Enron came to control the state’s market. Rolling blackouts became the norm, prices skyrocketed, and the same state racked up billions in debt. Phil Gramm blamed environmentalists for the crisis. Finally, price controls were imposed and the bubble burst. Deprived of its cash cow, Enron hit the rocks a few months later.”
    Wendy had part written an exemption for Enron from federal oversight while she was serving on the Commodity Futures Trading Commission. She then accepted a directorship at Enron. Gramm was personally involved further when it came to light that he had helped to turn the exemption into law as well as push through the deregulation of energy markets that led in part to the Enron scandal. During this period Enron was a major contributor to his campaigns
    The final step in Enron’s transformation into an unregulated commodities exchange was the Commodity Futures Modernization Act. This law, quietly tacked onto a spending bill and passed Dec. 15, 2000, allowed Enron to expand its online futures trading operations. As a result, Enron Online, a commodity exchange run out of Enron’s Houston headquarters, could compete against the Chicago Board of Trade and the New York Mercantile Exchange without submitting to the same level of oversight.
    Two powerful Republicans from Texas, Reps. Dick Armey and Tom DeLay, were instrumental in pushing the legislation through the House. DeLay’s wife, Christine, worked for a lobbying firm, Alexander Strategies, that Enron had hired for up to $200,000 a year to push energy deregulation.
    Along the way, Enron also won hundreds of millions of dollars in federal subsidies to help finance its overseas investments.
    Enron also had success lobbying the Securities and Exchange Commission. In 1994, it received an exemption from the Public Utility Holding Company Act. The Depression-era law was designed to prevent utilities from owning multiple plants in one geographic area, allowing them to jack up rates.
    In 1997, Enron won an exemption from the Investment Company Act of 1940. The exemption allowed Enron to treat foreign power plants as investments, which let it leave debt from those power plants off its books. It is now known that Enron created more than 3,000 limited partnerships and other entities, many based offshore — a revelation that led to the company’s downward slide last fall.
    >>>>>>>>>>
    For the one millionth time…
    BURN WASHINGTON TO THE GROUND AND START OVER

    Reply

  5. Carroll says:

    BTW….what you want to bet the Israelis have contingency plans in the event the Arabs do get enough financial clout in the US to affect them..like starting a wider war in the ME for Isr’merica in which the US ends up seizing all the assets of US Arabian interest.
    It pays to be paraniod.

    Reply

  6. JohnH says:

    Somebody ask Hillary about the repeal of Glass-Steagall in 1999. Bill Clinton signed that law, which is the enabling legislation for the sub-prime crisis and allowed Sanford Weill to merge Citibank’s operations with Travelers Insurance, making it a super-giant financial institution.
    Given the timing, was there a quid pro quo with Hillary’s run for the Senate? Did signing the Financial Services Modernization Act buy Wall Street’s acquiescence to her run for the Senate in 2000?
    Hillary was considering a run throughout 1999, leaking her candidacy in December, and making it official in February, 2000. Bill Signed the gift to Wall Street in November, 1999. Does anyone think the timing looks suspicious?
    We also know that the Citigroup PAC gave money mostly to Republicans, but also to a few Democrats, including Hillary.

    Reply

  7. Carroll says:

    Interesting.
    And also fine by me if the Arabs end up getting enough financial clout to politically influence. At least they put money in, all Israel does is suck money out. Since congress won’t allow us to have an American government, a little competition in which foreign interest controls the US would bring some balance. Buy more Dubia, the more you buy the less the taxpayers have to bail out.
    JPost.com » International » Article
    Mar 17, 2008 2:20 | Updated Mar 17, 2008 20:51
    Arab financial offensive on US companies concerns Analysts
    By YAAKOV LAPPIN
    As US shares continue to fall and the American economy reverberates with fears that a subprime-mortgage-driven recession has begun, affluent Gulf states are seizing the opportunity to increase their control of financial companies and other branches of the US economy.
    That development is leaving some analysts concerned over the prospect of Arab financial prowess manifesting itself in a political agenda, with negative consequences for Israel.
    “There is concern that the purchase of strategic assets provides the owners with the ability to intervene politically,” Prof. Gerald Steinberg, chairman of the Political Science Department at Bar-Ilan University, told The Jerusalem Post on Sunday.
    He stressed, however, that those concerns were “based on a worst-case scenario,” adding that countries such as Abu Dhabi “do not have a track record of political intervention.”
    “Although this could change, at this time it’s more a matter of watching than feeling threatened,” Steinberg said.
    Should those fears materialize, he added, there would certainly be “a strategic impact on Israel. There has been increased Arab investment and control – but these are two different things. The problem is not investment, but control. You could start to see subtle aspects of a boycott [of Israel], even though that is illegal under American law. You might find that some of these firms [that have been heavily invested in by Arab states] place obstacles to deals with Israel,” Steinberg said.
    On the other hand, the Gulf states could run their investments “just like businesses,” he said. “Abu Dhabi’s investment funds are under royal control, and the royal family is very much concerned, for good reason, about any kind of radical involvement,” Steinberg said.
    Petrodollar investment in the US economy was nothing new, Steinberg noted, but “what makes this period potentially different is if it marks a significant decline in American economic power,” leaving the door open to an Arab petrodollar buyout.
    In November, the Abu Dhabi Investment Authority invested $7.5 billion in US banking giant Citigroup. With an estimated $650b. at its disposal, the authority is one of the largest government investment funds in the world. The Abu Dhabi Investment Authority is also heavily invested in US home-builder Toll Brothers.
    Last year, the Dubai Istithmar investment holding company purchased Barneys department stores for $942.3 million, while Dubai World invested $5b. in MGM Mirage, a company that controls Las Vegas casinos.
    The US global investment bank Goldman Sachs has also seen many of its shares bought by Gulf investors. “In the Arabian Gulf countries alone, there are over 200 billionaires,” the bank’s CEO Lloyd Blankfein was quoted as saying during a banking conference in New York in November.
    Most Gulf states have set up sovereign wealth funds to handle their enormous investments, a development which leaves room for concern, senior American economist and former Treasury secretary Larry Summers said.
    A recent edition of the Middle East Quarterly quotes Summers as warning that government shareholders could be driven by motives other than pure economic factors. “They may want to see their companies compete effectively, or to extract technology, or to achieve influence,” Summers warned.
    Norbert Brinker, of Tel Aviv investment house GIFT Asset Management, pointed to another, less menacing agenda that could be driving the Arab investments.
    “One day, oil won’t be available in such quantities, and these countries are looking for replacements,” Brinker told the Post. “If you look at Dubai’s economic plan, they’re investing heavily in tourism and hi-tech.”
    Vered Dar, of the Psagot Ofek investment house in Tel Aviv, said, “Logic says they should buy these [US] shares. It seems like a sound decision. They have the petrodollars and they want the investment.”
    Capital market analyst Prof. Rafi Eldor, of the Interdisciplinary Center, Herzliya, said he would “do the same” if he were in the position of Gulf states, adding that the largest investor in shares was not a Gulf state, but rather China.

    Reply

  8. Carroll says:

    Posted by DonS Mar 18, 8:09AM
    >>>>>>>>>>>>>>>>
    Yea…the public needs to wise up to this good cop – bad cop act by the politicans….it’s all the President’s fault, it’s all the repubs fault, it’s all the dems it’s all congress’s fault.
    They are all guilty of incompetence at the least.

    Reply

  9. DonS says:

    Hillary and Barack have issued some form of reaction to the bailout thus far. Naturally blaming the current administration, blah blah.
    How will the media spin this story except perhaps Wall Street versus Main Street.
    Will our dear politicians, up and down the political stripe, come in for the notoriety they deserve for abetting the Bush tax cuts, going to war and CONTINUING to finance a war, merrily applauding our China-financed economy?
    If we are headed for another 30’s stiyle depression, we need a lot of politician’s head to roll, not blaming others as they print the money to bail out Wall Street.
    There should be enough anger to rock this rotten system.
    Should be.

    Reply

  10. Mr.Murder says:

    Diebold handles the technology to do money transfers for most major banks.
    Follow the Money.

    Reply

  11. acerimusdux says:

    There’s been so much deregulation, and lax regulation, and so many ways it has contributed to so many disasters, that I almost don’t know where to begin. I already touched on a couple directly related to the current credit crisis.
    Reserve requirements have steadily been reduced over time. In 1980, Congress passed legislation overriding state caps on interest rates. In 1982, they made ARMs, balloon mortgages, interest only mortgages, and option-ARMs legal. Glass-Steagall repeal in 1999 allowed conflicts of interest between investment banks and commercial banks. You could even go back to S&L deregulation and see that that has contributed.
    And even with all that, the Fed still had some authority to regulate these institutions, but simply failed to do so.
    A few articles:
    Fed Shrugged as Subprime Crisis Spread
    The Bubble Economy
    How Congress helped create the subprime mess

    Reply

  12. Carroll says:

    Here.
    Paulie has been right more than…in fact he is seldom wrong.
    March 17, 2008
    Op-Ed Columnist
    The B Word
    By PAUL KRUGMAN
    O.K., here it comes: The unthinkable is about to become the inevitable.
    Last week, Robert Rubin, the former Treasury secretary, and John Lipsky, a top official at the International Monetary Fund, both suggested that public funds might be needed to rescue the U.S. financial system. Mr. Lipsky insisted that he wasn’t talking about a bailout. But he was.
    It’s true that Henry Paulson, the current Treasury secretary, still says that any proposal to use taxpayers’ money to help resolve the crisis is a “non-starter.” But that’s about as credible as all of his previous pronouncements on the financial situation.
    So here’s the question we really should be asking: When the feds do bail out the financial system, what will they do to ensure that they aren’t also bailing out the people who got us into this mess?
    Let’s talk about why a bailout is inevitable.
    Between 2002 and 2007, false beliefs in the private sector — the belief that home prices only go up, that financial innovation had made risk go away, that a triple-A rating really meant that an investment was safe — led to an epidemic of bad lending. Meanwhile, false beliefs in the political arena — the belief of Alan Greenspan and his friends in the Bush administration that the market is always right and regulation always a bad thing — led Washington to ignore the warning signs.
    By the way, Mr. Greenspan is still at it: accepting no blame, he continues to insist that “market flexibility and open competition” are the “most reliable safeguards against cumulative economic failure.”
    The result of all that bad lending was an unholy financial mess that will cause trillions of dollars in losses. A large chunk of these losses will fall on financial institutions: commercial banks, investment banks, hedge funds and so on.
    Many people say that the government should let the chips fall where they may — that those who made bad loans should simply be left to suffer the consequences. But it’s not going to happen. When push comes to shove, financial officials — rightly — aren’t willing to run the risk that losses on bad loans will cripple the financial system and take the real economy down with it.
    Consider what happened last Friday, when the Federal Reserve rushed to the aid of Bear Stearns.
    Nobody expects an investment bank to be a charitable institution, but Bear has a particularly nasty reputation. As Gretchen Morgenson of The New York Times reminds us, Bear “has often operated in the gray areas of Wall Street and with an aggressive, brass-knuckles approach.”
    Bear was a major promoter of the most questionable subprime lenders. It lured customers into two of its own hedge funds that were among the first to go bust in the current crisis. And it’s a bad financial citizen: the last time the Fed tried to contain a financial crisis, after the collapse of Long-Term Capital Management in 1998, Bear refused to participate in the rescue operation.
    Bear, in other words, deserved to be allowed to fail — both on the merits and to teach Wall Street not to expect someone else to clean up its messes.
    But the Fed rode to Bear’s rescue anyway, fearing that the collapse of a major investment bank would cause panic in the markets and wreak havoc with the wider economy. Fed officials knew that they were doing a bad thing, but believed that the alternative would be even worse.
    As Bear goes, so will go the rest of the financial system. And if history is any guide, the coming taxpayer-financed bailout will end up costing a lot of money.
    The U.S. savings and loan crisis of the 1980s ended up costing taxpayers 3.2 percent of G.D.P., the equivalent of $450 billion today. Some estimates put the fiscal cost of Japan’s post-bubble cleanup at more than 20 percent of G.D.P. — the equivalent of $3 trillion for the United States.
    If these numbers shock you, they should. But the big bailout is coming. The only question is how well it will be managed.
    As I said, the important thing is to bail out the system, not the people who got us into this mess. That means cleaning out the shareholders in failed institutions, making bondholders take a haircut, and canceling the stock options of executives who got rich playing heads I win, tails you lose.
    According to late reports on Sunday, JPMorgan Chase will buy Bear for a pittance. That’s an O.K. resolution for this case — but not a model for the much bigger bailout to come. Looking ahead, we probably need something similar to the Resolution Trust Corporation, which took over bankrupt savings and loan institutions and sold off their assets to reimburse taxpayers. And we need it quickly: things are falling apart as you read this.
    http://www.nytimes.com/2008/03/17/opinion/17krugman.html
    >>>>>>>>>>>>>
    Déjà vu anyone? The more things change the more they stay the same. Let me tell you about the S&L disaster. A lot of us in RE development sounded alarms about them getting into the RE loan business. Joe Blow’s little S&L in New Jersy financing a 50 million development on the Outer Banks for a 2 man local New Jersy builder? Is that a clue? The funniest conversation I ever had during that time was calling a New Jersey S&L to get the status on a local development because the developers local office was closed too long for it to be normal. After being told no one was available at the S&L in the RE loan office and after inquiring about every other office there, I finally demanded to speak to whoever there was in the bank at the moment that might possibily be in charge of anything. I was patched thru to the basement where the Feds were packing up all the S&L files and one was kind enough to go thru the boxes and find the info I needed before it was hauled off. I won’t even describe how the RTC did not auction off all the seized property “to get the best price for the taxpayers footing the bill”. Let’s’ just say there were a lot of JP Morgan like buyers who got a private and good deal way in advance of any competitive bidding process that would have resulted in higher prices for the assets. The public ends up being the sucker of both first and last resort for both run of the mill incompetents and white collar criminals every time. And every time it’s the same excuse…the incompetents and criminals and politicans messed up but if we don’t rescue them we will all go down.

    Reply

  13. acerimusdux says:

    There’s been so much deregulation, and lax regulation, and so many ways it has contributed to so many disasters, that I almost don’t know where to begin. I already touched on a couple directly related to the current credit crisis.
    Reserve requirements have steadily been reduced over time. In 1980, Congress passed legislation overriding state caps on interest rates. In 1982, they made ARMs, balloon mortgages, interest only mortgages, and option-ARMs legal. Glass-Steagall repeal in 1999 allowed conflicts of interest between investment banks and commercial banks. You could even go back to S&L deregulation and see that that has contributed.
    And even with all that, the Fed still had some authority to regulate these institutions, but simply failed to do so.
    A few articles:
    Fed Shrugged as Subprime Crisis Spread
    The Bubble Economy
    How Congress helped create the subprime mess
    Looking at the big picture, we essentially had a system that worked pretty well for over 40 years before all of this deregulation came in. A system designed in response to the Great Depression, which was precipitated by lending practices more similar to what we’ve had now in recent years.
    See:
    FDR, Some Cultural History, and the Sub-Prime Crisis
    “The New Deal contained three elements of a solution to this problem. First, the division of Banking into two segments, Commercial and Investment, with only small accounts in the commercial segment insured. In addition, the Savings and Loan segment was created, which advantaged small savers with insured accounts, and a small advantage in savings interest rates, but a clear restriction on lending — limited to local housing that met FHA standards.
    What FHA offered was pretty simple, an inspection system that validated whether the construction of a house met all codes, local, and their own, and insurance to the lender if buyers met credit standards.”

    Reply

  14. JohnH says:

    Here’s analysis on how deregulation of the finance industry set the stage for the financial meltdown:
    “Two developments have played a significant role in the development of modern banking and the current crisis.
    The first was deregulation of the U.S. financial services industry with the 1999 repeal of the Glass-Steagall Act, after years of lobbying by the banks. Carefully crafted during the Great Depression to control speculation in the stock market, Glass-Steagall prevented retail banks, insurance companies and investment banks from owning each other. With the repeal of Glass-Steagall, massive financial services conglomerates were suddenly formed, combining these three types of financial institutions. Industry behemoths such as Citigroup and JP Morgan quickly came into being. This meant that retail banks seeking higher and higher profits could now dive headlong into high-risk speculative ventures through ownership of (or being owned by) investment banks, which led to disastrous consequences during the Stock Market Crash of 1929.
    The second (mismanagement of the money supply, as s.ahmadi notes) was the low interest rate policy pursued by the Federal Reserve. Low interest rates encouraged banks to target subprime customers with variable rate mortgages. Banks offered initially low interest rates (“teaser” rates), to be increased two or three years later. Because of rising house prices, customers took the bait believing they could refinance their homes at an affordable rate when the time for the reset arrived.”
    http://www.realtruth.org/articles/080229-007-abc.html

    Reply

  15. s.ahmadi says:

    De-regulation? Lax regulation?
    Please explain to me how de-regulation or lax regulation contributed to the crisis? Take your time…but just explain to me. Tell me how that contributed to 4% percent equity rates and mortgage rates at 5%…please tell me how?

    Reply

  16. bob h says:

    In putting forth a cipher like George W. Bush for the Presidency, letting him steal the first election, and then re-electing him, America has been playing Russian Roulette with its future. Is it any surprise that we have now taken a couple of bullets in the head?

    Reply

  17. acerimusdux says:

    S. Amahdi:
    Unquestionably lax regulation is the cause of the current problem.
    You point instead to dropping the gold standard and the creation of fiat money. But ask yourself what would have been different on the gold standard? Well, over the last decade, the monetary base has expanded by about 5.2% per year. The world gold stock meanwhile has been expanding at about 4.4% per year. Thus, there would be no large difference in the available supply of dollars. Monetary policy would have been only slightly tighter. The greatest difference would be that the beneficiary of any new money created under the gold standard would be gold miners, while under the current system it is taxpayers (as the money supply is expanded by buying up and retiring US government debt).
    A gold standard however would not have prevented lax regulation of credit markets. It would not have prevented deregulation, the elimination of reserve requirements on savings accounts, the lack of reserve requirements on money market accounts, the rapid expansion of lending, and the consequent rapid expansion of M3. It would not have prevented the repeal of Glass-Steagall.
    Now, only recently, with the financial crisis upon us, the Federal Reserve has actually begun to expand M0, in order to lessen the impact. This would actually be prevented by the gold standard. So not only would the crisis not be prevented, responding to it and mitigating it would be.
    So to be clear, what you would have had under a gold standard is only somewhat tighter monetary policy, and thus a stronger dollar, and with it also somewhat larger bubbles in credit markets. And then with the collapse of those bubbles, no response from the Fed. This is pretty much the recipe for large scale depression with 20%+ unemployment.

    Reply

  18. Carroll says:

    Posted by s.ahmadi Mar 17, 2:01PM
    >>>>>>>>>
    Listen I think you are too simple minded to understand the kind of regulation and oversight of publically traded companies business practices, especially in financial markets, that I am talking about.
    I am not interested in a pissing contest with a “deregulation groupie” in which you rant about socialism vrs capitalism and how regulation of any businesses is a moral sin against free enterprise.. If you don’t get it..then you don’t get it..it’s your problem.
    Good day.

    Reply

  19. Kathleen says:

    s.ahmadi… you are the one who is being silly, with a huge does of tunnel vision,, Socialism is what is to be feared??? By whom, the rich who benefit by unfettered capitolism? I guess Great Brittain and the Scandinavian countries are at the bottom of the heap then, by your standards?
    The Gipper’s deregulation is what created outsourcing, downsizing, homelessness…. so American…
    I agree with former Gov. of NY, Mario Cuomo when he says the Democratic candidates should get serious about explaining what they will do about the Economy in a real debates, instead of their glibness contest…
    Bloomberg TV Bloomberg Radio Bloomberg Podcasts Bloomberg Press
    Ex-Governor Cuomo Says Close Democratic Race Could Be `Ruinous’
    By Lorraine Woellert
    March 14 (Bloomberg) — Former New York Governor Mario Cuomo said the presidential race between Hillary Clinton and Barack Obama could be “ruinous” for the Democratic Party if the contest isn’t resolved before the August nominating convention.
    Cuomo, a Democrat, said the party may be able to avoid a damaging convention fight if Clinton and Obama teamed up on a party ticket, or if the media forced the candidates before then to substantively address big policy issues facing the nation, such as the economy and the war in Iraq.
    “It would be ruinous to the Democrats to get to the convention without an arrangement of some kind,” Cuomo said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” scheduled to air today.
    A ticket with one of the candidates running as vice president would give the public a chance to elect the first woman president and the first African-American president regardless of who is at the top of the ticket, Cuomo said.
    Either Obama, 46, or Clinton, 60, could serve two terms as vice president and then run for president.
    “Most people say that’s improbable, but that doesn’t mean it wouldn’t be the best solution,” Cuomo said. “And it occurs to me that you could make a ticket almost either way, with Hillary on top or Obama on top.”
    The second alternative would be to abandon “phony” debate formats and instead compel the candidates to answer detailed questions on policy issues, Cuomo said. The approach would allow voters to make a decision based on substance, he said.
    `Glibness Contest’
    “Right now, it’s being done by persona: she’s a pain in the neck; she’s too this; she’s too that,” Cuomo said. Debates, he said, have become a “glibness contest.”
    “They like that because they’re both very, very glib,” Cuomo said. “That’s what allowed them to make such a big thing about race and a big thing about gender, because that gap could be filled with specific answers to the specific questions.”
    Candidates should be grilled on their Iraq war positions and how they would improve the economy, said Cuomo, 75.
    The Iraq War, for example, is “illegal,” and candidates should be questioned on it in depth as a measure of whether they’re ready to be commander-in-chief, Cuomo said.
    “The law is that the Congress has to declare war. It didn’t in Vietnam and it didn’t here,” he said.
    “It’s relevant because the next president might feel like starting a war against Iran,” Cuomo said.
    The lack of detailed debate on substantive issues has created an opening for rhetoric on “incendiary” subjects such as race and gender, Cuomo said.
    “When you don’t deal with what I’m asking you to deal with, which is the specifics of these hard issues in an intelligent and understandable way,” Cuomo said, “you fill the space with this stupidity about race and gender.”
    Cuomo said he disagreed with former New York Representative Geraldine Ferraro’s comment that if Obama were white he wouldn’t be a serious candidate.
    “He is so skilled and so bright that I don’t think that’s true,” Cuomo said.
    To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net.

    Reply

  20. questions says:

    My limited understanding of the financial mess is that one simple regulation that might help is that the originator of a loan and any subsequent seller must carry some of the risk of the loan. If debt can’t be sold 100% then clearly credit tightens up a bit, but credit needs to tighten up. Anyone buying slices of debt should have examined the portfolio before buying and so should also be required to carry risk. If risk is sliced and held rather than passed on, then we might be in better shape. Doesn’t seem like a terrible thing for people to carry some of the risk of their transactions. And given that the administration would love to privatize retirement funds and force ordinary people to assume the risk of their investments, it seems pretty reasonable to say that insitutional investors need to carry risk. But I’m not a republican.

    Reply

  21. s.ahmadi says:

    Posted by Carroll Mar 17, 12:12PM – Link
    You are silly. You make a statement that deregulation is the problem. I respond by stating in fact it is the regulations that are the cause of problems. I cite the FEDs and their incompetent handling of our money supply and their actions to bail out the bankers. You respond with……nothing.
    Let me make this simple. Do you think it is de-regulation that caused this financial crisis?
    By the way, I am not a liberitarian.

    Reply

  22. Chesire11 says:

    The parallels between the Fed and JP Morgan’s buyout/bailout of Bear Stearns and the Treasury and JP Morgan’s response to the Panic of 1907 are eerie.

    Reply

  23. Carroll says:

    “America’s power flows cynically through massive debt instruments and the Pentagon — and that’s just not enough to really be what Madeleine Albright called “the indispensable nation.” What a moment of hubris.”
    >>>>>>>
    Hubris indeed…and exactly why none of the Albright’s, Holbrooke’s and other assorted old hacks looking for a spot in the next adm should be involved in the next adm.
    They are blinkered mules plowing the same old row over and over.
    And our FED…LOL…please show me one serious non political economist or half way intelligent person, not the corp sponsored talking head cable economist, who didn’t see Greenspan’s interest rates as micro managing inflation to stave off the deflation they were so afraid of in 2002.
    But there are signs of some bright spots in sheepdom…a rebel group of homeowners is camping out on the mortage CEO’s lawns, SWAT teams were called out on people in Fla. rioting recently over the lack of public housing applications…
    The public should start thinking of congress and government as …exactly like…Enron…then they would be on the right track.

    Reply

  24. Carroll says:

    Posted by s.ahmadi Mar 17, 10:47AM
    >>>>>>>>>>>>>>>
    Nothing in your comments make sense. It looks like you just picked a post to insert your liberatian belief in the “gold standard” and rant against ‘fiat money”.
    I am familiar with the 1944 Bretton Woods agreement and it has nothing to do with the point I was making about how we got into this current mess.
    BTW, Free enterprise and criminal capitalism are two different things. Don’t confuse them.

    Reply

  25. DonS says:

    Regulation, de-regulation, schmegulation.
    Fact is the system is not run by men of good will. It is gamed to promote income redistribution upward. Under whatever systemic guise is need to do so, and with the consequences for the hoi pollio be damned.
    Just because they can.

    Reply

  26. Nicholas says:

    Markets have spoken. They have told us that we are no longer a super power.
    The rest of the world will no longer loan us money to fund our trade deficit and our military intervention in Iraq.
    As goes the dollar, so goes are ability to influence international affairs. Our dollar is now the most serious threat to national security. We have a defense budget that we can no longer afford.

    Reply

  27. s.ahmadi says:

    Carroll
    I think you should reconsider your opinion that it is deregulation that is causing all this problem. The FEDs are a regulatory agency. The problem isn’t the deregulating it is that the Feds regulating in favor of the Big Banks. Why are the Feds pumping so much money into the financial institutions?
    If we were deregulated, then these financial institutions who made poor business decisions would be bankrupt. Our dollar would not be dropping like lead. Because of the regulation, we have agency like the FEDs who bail out these crooks out at the expense of the American people (who are taxed through inflation).
    Capitalism works and will always work, but Socialism is what should be feared. You need to read and understand how we dropped from the Gold standard and how fiat money came to be in this country. How those changes empowered the federal government beyond the limits of what was granted to it by the Constitution.
    If you want a fully regulated country, then you would have loved the USSR.

    Reply

  28. digdug says:

    “They’ve succeeded in privatizing the gains and socializing the
    losses.”
    I forget who said it, and I may be mangling the quote, but that
    pretty well sums up today’s deregulation zealots.

    Reply

  29. R. L. says:

    More to the point, James Fallows had a follow-on piece in the January/February 2008 Atlantic Monthly (here) that draws out what could happen next in a potential US debt crisis situation.
    (Additionally, he wrote a piece back in 2005 that is even more disturbing in it’s ability to create sleepless nights–see here

    Reply

  30. Carroll says:

    Well, this is what you get with “unregulated” financial markets. You can thank congress who spends most of their time deregulating every facet of US business. Think they will learn this time? I doubt it. They never have before. Every time we are faced with the results of criminal capitalism, congress’s answer is to have the corps explain their tricks in their financial reporting for stockholders and buyers, not to outlaw the tricks. The S&L’s and the Enrons and the Bears will go on and on.
    Thinking about the dollar and euro though, I read a small and under appreciated story in the FT 6 years ago..when everyone else was saying the euro would go nowhere….that Europe was busy investing in projects and doing business in the ME with euros…creating a foothold for themselves in Arabia. The euro countries made headway by..(horrors of horrors)..doing “bizness” the old fashioned way instead of threatening and invading countries.
    Imagine that.

    Reply

  31. JohnH says:

    Foreign lenders already recognize that they would be stupid to accept increasingly worthless dollar denominated IOUs: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/17/ccview117.xml
    So who will provide the bucks to fund the wars?
    Was Cheney in the ME to beg for more oil, more money for the wars, or more capital infusions (for sell-offs) of major US financial institutions? Or all of the above?
    Meanwhile the major presidential candidates have nothing to say! I guess they haven’t had time to focus group test any messages yet. Inspires confidence, doesn’t it?

    Reply

  32. PissedOffAmerican says:

    “The Creature of Jekyll Island” should be on everyone’s reading list. Period.

    Reply

  33. DonS says:

    Let’s just call it socialism for the rich and be done with it, eh?
    Now we just wait for the politicians to babble their babble and vote another $1 Billion for the goddam war. Pass the buck faster than a Bush tax cut.
    I finally transferred my puny $25K IRA (and my wife’s) out of a stock fund last Friday. Guess what? I had a loss. Maybe junior or Ben will find a way to reimburse me.
    http://www.moonofalabama.org/2008/03/bear-stearns-so.html

    Reply

  34. Mr.Murder says:

    Over a 500% loss in value compared to sell price.
    A backdoor bailout by John Q. Public.
    Insiders laugh about it. Let them eat gallows humor!

    Reply

  35. Anthea says:

    “The ability of a creative U.S. society to about-face and reverse course within months, or after the next election cycle, is what sets the U.S. apart from everybody else — the only huge ship being as agile as a speed boat if the need arises.”
    That used to be true. Is it still? What deep well of creativity or manufacturing might do we have left to draw on? Have we not outsourced nearly all of it?

    Reply

  36. Dirk says:

    When George W Bush was inaugurated in 2001, the euro was trading at 94 cents and gold cost $266 an ounce. Now they are trading at $1.52 and $985 an ounce. That is a plain vote of no confidence in the government’s economic model, and international investors are fleeing the dollar for the best available substitute – the euro and gold.
    http://www.atimes.com/atimes/Global_Economy/JC07Dj02.html

    Reply

  37. dckrl says:

    Wall Street played hard & fast with money it didn’t have or did not create in a real sense, and it did so because the second-tier leaders there acquired the NYC tunnel vision — a Mustique retreat, a private jet at Teterboro, the unique luxury pool a first-tier neighbor already got.
    Bill Clinton and George W. Bush were enablers, but neither of them meant the James Caynes of Wall St fame to overdo it, and break the wing spans in the event. Now the check is being served to them, as it was back in 2000 when Alan Greenspan’s dotcom bubble deflated.
    But the beauty of the U.S. is, this country recovers as fast as it gets herself into a mess, you don’t even remember the last time it stumbled. No endless semi-int’l conference cycles like in the E.U. No internal power struggles beyond anybody’s reach, as in China or Russia or Riad.
    Wait until China or Russia or the E.U. are left to their devices in attempting to solve crises, say: Iran, or Darfur, or closing a WTO deal. Wait for China to get out of the dollar without paying a huge political price for it. Their power is still a collateral of the U.S. Euros are sought-after because of their relative value to the dollar, and Gold and Oil don’t make for real power save the U.S. entering the fray there.
    The ability of a creative U.S. society to about-face and reverse course within months, or after the next election cycle, is what sets the U.S. apart from everybody else — the only huge ship being as agile as a speed boat if the need arises.

    Reply

  38. easy e says:

    A little more on the pending Meltdown, the Federal Reserve and “The Men Behind The Curtain”:
    http://www.informationclearinghouse.info/article19506.htm

    Reply

  39. JohnH says:

    At this point, US lenders, such as China, Japan, and Saudi Arabia, would be stupid to keep providing us oil, consumer and industrial products in return for increasingly worthless, dollar denominated IOUs.
    If Bush/Cheney can no longer borrow abroad, where will the money come from to support the imperial foreign policy? Specifically, how will they support the Occupation or the 700 plus military bases?
    And then, how long can it be before the lenders establish an IMF-style consortium to sell off the commanding heights of US industry–oil, defense, Wall Street, television media, and all those other industries protected from foreign domination? And the prices? Bargain basement, of course–just like the IMF behaved around the world.
    If Bush/Cheney and the Republicans had set out to intentionally destroy America, they could not have come up with a better plan. But we know they are too incompetent to have pulled it off if they had really tried.
    Osama must be on cloud 9.
    The moment of accountability is here–throw the bums out, Democrat and Republican alike along with energy/security industries’ lackies in the national security and foreign policy establishments.

    Reply

  40. Robert Morrow says:

    All I have to say is RON PAUL. That’s who has been talking about this economic fiasco unfolding.

    Reply

  41. dalivision says:

    This is the reason we need a change in the White House not someone who will continue with the Bush policy.
    If McCain is to be the maverick then he should state his foreign policy and economic policy clearly. Obama and Clinton also need to do the same.
    So far, all I see is the same mess coming out of both parties, but I am patiently waiting to hear from both.

    Reply

  42. Mr.Murder says:

    As for Bear Stearns, I asked someone who watches that to get our local Fire Dep’t’ pension shares in Stearns out quite some time ago, approaching the prior annual period.
    Wonder if if they’ll need to put out the fire on that item any time soon.
    Usually the adage goes, “if you have to ask, it’s already too late” and that was my concern at that time. Certainly things are better now than they were then….

    Reply

  43. sahmadi says:

    JP Morgan acquiring Bear Stearns sounds a lot better than the Feds completely bailing out Bear Stearns which in actuality they did. The Fed will provide special financing to JP Morgan Chase in connection with the deal. The Fed agreed to fund up to $30 billion of Bear Stearns’ less liquid assets. Simply amazing.
    We are being taxed mercilessly just so that bankers, whose greed caused this debacle, can stay afloat. Milk at $5. Gas at $3.50 and going up. People in fixed incomes being robbed. I think we should pray that it is only stagflation that will hit us, because the way things are going…a depression doesn’t seem implausible…which is a scary thought.

    Reply

  44. TB says:

    What a moment of hubris.
    What a moment indeed … my real concern now is how far and how hard d we fall?

    Reply

  45. Mr.Murder says:

    “I’m drawn to an October 20, 2003 article, “The Debtor’s Empire”, by former IMF Chief Economist Kenneth Rogoff. America is in a nasty economic mess at the moment and power is shifting to new quarters — to those with oil, gold, dollars, and Euros. ”
    You perhaps refer to Cheney’s divestments and investments? For some reason the VP wasn’t very confident in the dollar and moved a lot of his worth to Euros.
    Isn’t he supposed be bound by public service to using blind trusts?
    Not that anyone would want to buy spiders all that much….
    America’s always been ruled by those with gold, oil and dollars anyways. Just ask Sen.Rockefeller(D-Standard). Anyone acting like this is a new item needs to change their light bulb.

    Reply

Add your comment

Your email address will not be published. Required fields are marked *