I love watching two guys get it on. Interested?
The lobbying for the future of financial reform doesn’t end when Mr. Obama signs the law. In fact, it could be just beginning, as regulators and congressional overseers get down to the business of writing the high-stakes rules.
“This bill represents the most significant overhaul of the financial system since the 1930s. But serious work remains: the proof of the bill’s worth will come not from what is written in the bill, but how the regulators interpret the bill, write the rules and then enforce them,” says John Taylor, president and CEO of the National Community Reinvestment Coalition. “Based on the job they did for the past decade, I will believe reform is here when I see it.”
“By delegating so much to the regulators, Congress is inviting everyone interested in the outcome to make more campaign contributions, as they intervene in the regulatory process to influence the regulators,” says Thomas Ferguson, a professor of political science at the University of Massachusetts, Boston. “Nothing is settled. It’s a gold mine for members of Congress.”
#30–Awake==WHY allow leveraged trading at all?
“Why financial reform might not work as intended”
Better: “Why financial reform will work exactly as intended by mostly retaining the status quo and adding many more regulators who won’t actually regulate to the government payroll”
A bit longer, but that’s what the bankster lobbyists paid for.
LOL, so true.
Again, Obama has attempted to play fair with the asshats who have ZERO intention of playing by any useful rules, and we end up with crap legislation. I say he should create meaningful reform legislation and jam it down their goddamned throats.
It’s what they did 2000-2006.
More proof we’re all doomed. Hell, we deserve to die based on who we’ve elected into power.
#33 Bobbo,
Leveraged or margin trading serves a useful purpose in that it allows ‘regular’ people to use an asset that they own as a collateral for a loan. Most commonly the collateral is used to buy more stock, but it can also be used as a source of cash without selling the asset.
Think of a share of stock as a regular asset, like a house. It can go up or down in value. It is something that you own, and that someone is willing to lend you money against.
When used judiciously, just like a second mortgage, it can be a useful tool. When used ridiculously, irresponsibly and with no personal liability, it becomes a recipe for disaster.
If I have $100,000 fully invested in the market, and an opportunity to buy some stock comes up, borrowing some money and using the existing $100,000 as collateral is very handy. The problem is that financial institutions could borrow %700,000 against those $100,000, reap huge profits when the choices were good, pay themselves million for their brilliance, yet not be held in the least liable when the choices were wrong and ‘margin calls’ start happening.
Part of the financial reform package was a limit on institutional over-leveraging… I think that was also gutted by the Republicans because it would expose the ridiculous state of our country’s financial institutions when they would have to start cutting back on over borrowing without consequence.
Awake–buying stock by a collateralize loan is not the same thing as leveraging.
Nonetheless, either case has a strong whiff of desperation==as most gamblers do.
Again–what is the appropriate asset/risk allocation circumscribed by a valid interest in making a LONG TERM INVESTMENT got to do with mortgaging your house, with or without leverage?
Again, Again===seems like the stock market as a form of legalized gambling is so ingrained that clear thinking cannot take place. All the more to make REAL MARKET REFORMS for their valid purposes.
“You Know” it is striking how conflated “the stock market” has become with “gambling.”
An anology to make the issues clear. The stock market is about making long term capital investments in businesses you think are sound. Gambling is betting stock will go up or down in a very short period of time without regard to any long term effects.
The Analogy: sports. Sports are a contest with two sides based on physical and mental skills. Gambling: betting who wins and who loses.
Spot the similarities and differences between a defined activity and the GAMBLING that can arise “related” to it but having none of the same attributes.
Bobbo,
We might be talking semantics, but leveraging and trading on margin are pretty much the same thing.
For example me as an investor can do this by trading on margin and basically using the stock itself as collateral (in rough figures Benjamin, it is just an example!!):
I own $100,00 in stock. I can borrow $75,000 and buy stock. I now own $75,000 more in stock, for a total of $175,000. I can then buy $50,000 more based on the extra $75,000, so I do and now own $250,000 in stock. I can then borrow $30,000 against that new stock, and own $280,000 in stock.
So I only have $100,000 of my own money allowed to buy $280,000, and I ‘leveraged’ the investment 3 times.
I can do that, and my investment account shows it in the the statement. I don’t choose to do it, but I can.
The big difference is that if the market goes down, I have to keep adding my own money to maintain the collateral, while the ‘big guys’ will get bailed out without consequences, keeping any profits they have made but not being held liable for the losses.
Contrary to popular belief, the stock market is NOT a gamble. A judicious small investor can make money, lots of money, by being smart about what he does, managing gains and losses. It doesn’t change the fact that the market these days is fully manipulated and subject to institutional whim, but making good choices leads to great rewards. Sniffing out a bubble and getting out, and buying back in at some point can make you lots of money. It is going with the great unwashed masses that will eat you up. Apple is ripe for a bubble burst. US steel is ripe for a rise.
Ooops, my bad math above, but the example stands as is.
Awake==semantics or you said “…it allows ‘regular’ people to use an asset that they own as a collateral for a loan.” Now that collateralized loan can thereafter be leveraged, or buy stock on a margin, or whatever, but the collateralized loan is not the same thing as leverage. And as I said: BOTH have a whiffs of desperation as most GAMBLERS do.
Consistent you make the confusion and think you have a system to beat the odds? OK. I agree. You can beat the stock market. But what of the other 999,999 people?
Whiff? What’s that smell?
Hey, all you libs who hated the patriot act because the govt could spy on us: how come this bill is OK when it lets the govt look at every single purchase any of us makes. Would you support this exact same bill if Republicans passed it? Somehow I doubt it.
How cute – the two men at the root of the sub-prime lending mess that caused the financial meltdown are the ones coming up with the “fix”. It is so heartwarming how the Democrats give people second chances.
I find it STUPID..
that the Concepts of business, are very easy to learn. but the USA has to REGULATE/TELL/FORCE these corps to DO THE PROPER THINGS..
What OTHER country has this bad of a problem?
We can LOOK and see what went WRONG.
Auto industry, WASNT SELLING, but was STILL building vehicles.
DELTA, employees paid Low wages while those on TOP, take home ALL THE MONEY..
EXON, CEO’s saying “WE DIDNT KNOW IT WAS HAPPENING”..???
BANKS shot Themselves in the FOOT??
Corps hiding money..
Corps paying off our Representative to change Laws to Favor Corps.
The Stock market is being used to generate MONEY, not for the Individual, but for the CORPS. They WONT/DONT pay their OWN R&D with MONEY they earned, they Rasie the price of Stock abit, and that money PAYS for it.
WHY are major corps Even involved in the Stock market? There is little reason for them to be there. Unless they wish to manipulate the market.
Its not that this is NOW happening. Its been here along time.
Simplify the business TAX laws so its easier to SEE where the money is going.
#45 ascg…when I read detailed analyses of the meltdown I never see where Fannie Mae or Freddy Mac were central to anything. On the periphery, yes. The root? Never comes out that way in the honest reports. Never.
However, I see it all the time when it comes to reforming Wall Street, especially from teabaggers. Is that a coincidence?
#48 OBOB
I do not orally rape people, and if I did you probably wouldn’t know it, so I am not sure why you are insinuating I am a teabagger.
The fact is, Fannie and Freddy collapsed, as did many other financial institutions, because of subprime lending. This lending was forced onto them in the late 90s by the Clinton administration. Banks later came to realize taking advantage of people with bad credit and selling off the loans could be profitable, but at first they had to be pressured make loans to people with bad credit.
Check out Barney Frank’s quote here when Bush wanted more oversight. http://tinyurl.com/cmf3u8
Blaming the poor for the current financial crisis is the epitome of GOP bullshit.
49,
did you ever LOOK at those Loan papers?
They said something like this..
1. the interest rate will be ?? for 10 years.
2. AFTER 10 years the interest rate will Rise 5%.
3. It wont matter if you pay AHEAD of time, as this loan INCLUDES all interest that COULD/WOULD be paid over the 30 year loan, and must be paid Property and INTEREST for the 30 years.
Even if the Interest rate as Flexible. AND a 0% interest from the Gov. These companies were charging a FORTUNE after 10 years.
If the interest rate had STAY’D low, nothing would have happened. at least VERY little would of happened.
ASCG…sorry, didn’t mean to tie you in as a ‘bagger, but that’s who most often reflexively blames Barney.
I read the article. So there was a power play between the administration and congressional Dems in 2003. SOP, right? Frank had no power in 2003, he chaired no committees. He controlled nothing.
Part two, and to my original point, FM/FM fell because of other systemic problems, they were not the root of the collapse. In most opinions, the true root was credit default swaps and poor lending practices by the originating banks, then exacerbated by the rise in food and fuel prices. FM/FM were pulled down by external forces. That’s not to say they don’t need better oversight, but to blame them foremost seems off-base.
Fascism worked for America for nearly a century, until the time the population awoke to a country without any industry that can employ a middle class. The one per centers are so stupid or deluded with their ideology that they missed their generational destructive outcomes.
Folks and a few baarothers out there this financial leverage stuff had always worked, until the time there was no middle class, due to little employment and the massive living costs increase due to a industry to service work focus change.
There is no financial reform bill that can get us out of this. The banks will be zombies now. Even if they were organized via bankruptcies, there is no middle class to whom they would deal with. The hippie generation hath brought forth offspring unfit to work, a generation intention upon dislocation with reality in its many forms.
Perhaps one action could have saved America, and that would have been LaRouche’s home owner protection act, whereby the middle class would have been saved, but no the fascist bankers who run America will not have it.
Folks its either the bankers or survival.
Look at the economist nutters who are about to lose their minds in the coming years.
You see headlines about the need to continue stimulus and paranoia about deflation (the bursting of their asset bubbles, and lack of a new bubble to blow).
Shit is going to happen.
54,
sTIMULAS??
What are you going to Stimulate?
Give it to the corps and it will be Bonus checks at the end..
Give it tot he POOR and the Stores will raise prices to get the MOST of your buck(no sales, no discounts, YOU GOT MONEY SPEND IT). the LAST one to the poor went to pay BILLS.
So the money wont do much good either way. But, If you give it to the poor, AT LEAST bills get paid.
I would rather THREATEN the corps.
For those business that give VERY few jobs to the USA, SHIP them to the same nations they SHIPPED our jobs.
REGULATE TOP wages, NOT min wage. Everyone gets paid the SAME, except for hazardous jobs, and those jobs NO ONE WANTS/will do..
Everyone pays into Social Security. NO matter if you have a retirement fund or NOT.(many corps are taking the retirement and USING IT) Ask Delta retired persons WHAT HAPPENED. AND no TOP amount restriction/limit. AND a MAX amount you can get when you retire.
The problem with the idea of keansian (however he’s spelt) budget deficits is they are supposed to be temporary, to cover the mysterious whatever that causes these occasional economic malaise.
But it aint temporary any more, isn’t it. It is permanent, until we can earn as a working middle and working class.
The corporate owners do not empower the economy. All their fabulous profits in the last thirty years does nothing. The middle and working classes have been destroyed, knocked back 70 per cent.
This has never happened in the history of mankind. Globalisation, offshoring. Never before have we stopped people earning a living like we have done.
#52,
I agree that FM/FM were not the root of the problem in themselves. And yes, it is a combination of both the subprime lending market and the derivatives worked together. But these were the guys were the ones pushing for increased home loans to unqualified people in the 90s, with FM/FM at the forefront. After this, home values compared to historical inflation-adjusted values began to skyrocket.
http://mysite.verizon.net/vzeqrguz/housingbubble/
These unrealistic levels, combined with mark-to-market, gave people investors an unrealistic idea of what their assets were worth.
And from the financial regulation point of view, it is not just regulating derivatives that would have stopped this. Mortgage-backed securities have been around forever and are considered to be at the top of safest investments. This assumption is baked in to all kinds of investment products. This assumption is what failed, and would have led to a huge loss of capital and credit regardless of what the rules were. Sure, banks were playing hot potato with their bad loans, but all of them owned a big stake of bad loans, regardless of who ended up owning what in the end. In some ways, derivatives actually helped by allowing big banks to hedge against the mortgages in their portfolios. People got all in a tizzy when they found that the big banks were betting against their own loans. But in the end, that was acting as insurance, and the failures would have been much worse if there wasn’t some mechanism for them to hedge their portfolios.
#55
don’t ask me. Exactly what stimulus? We all know it went straight into the bank accounts. Nothing got transferred except digits.
We have just stimulated zombie banks into wandering off into the landscape arms outstretched.
Even profitable firms cannot get short term credit for placed orders. Unbelievable. Something must be done. Nothing has just been voted into non-existence.
#57 ascg…sounds like we agree more than we disagree. The impression I got was that FM/FM encouraged mortgages to ALL qualified borrowers, the idea was to push lenders towards minorities etc. The banks themselves, especially the TV-marketed mortgage companies, gave billions to poorly-qualified borrowers without prompting, then played the hot potato game to get rid of the bad ones.
My question is that if it was all those poor people screwing the economy, how come so many middle-class people lost their homes?
About a year ago there were 5-6 articles unrelated to each other trying to objectively assess the actual financial impact of the various bad actors in this Great Recession. I’m still waiting for “someone” to pull them all together.
Even doing your best to include 3-4 factors leaves out another 5? Then, how “responsible” are the rating agencies who did no risk assessment at all giving everything a AAA rating until the day of the collapse? Who is responsible for that? The banks that knew and approved liar loans, or the rating agencies that lied, or FM/FM who guaranteed default in such cases? I think all these actors pale in comparison to the leveraged debt swap market that was in the Trillions compared to the mere billions of the other actors.
Like stars in the universe, beyond our mere human comprehension.
Think about it.
A bankster can insure against any failure. Unlimited bailout. Unlimited leverage. Creation of money out of nothing. And if you fail with the interest payments on this hard asset, you are destroyed, your real assets taken.
And then they call this ‘moral hazard’.
Who and what are these? They are not normal firms. You cannot own them. They are monsters. It is the most evil Fascism ever.
#60,
There are a lot of middle class folks with bad credit who are not responsible enough to own a home. And there have been plenty of poor people responsible enough to buy only the home they could afford. Historically, poor poeple who own homes have been responsible poor people, while the rest rent. Poor and subprime are not necessarily the same. Also, when the crash happened, I believe a lot of big companies panicked and started laying off people. There was no good reason that banking failures needed to have that much effect on large companies with cash reserves. In some regards, the economy becomes whatever people believe it will become – a self-fulfilling prophesy. The credit crunch should never have come to this if people in government had listened to those who saw this coming years beforehand.
#59, 61
Give this a read.
http://answers.yahoo.com/question/index?qid=20080918143954AAzmOMH
There are a some good points in several of the comments, though I am sure you will not agree with all of their conclusions. Bobbo, I know the thread you are referred to. I saved some of those links on my other computer. I may be able to find them.
My original point was that out of all the people in government who could be sponsoring this, Dodd and Frank are absolutely the worst. How are they still in office? I do not see much politically that was really done since changes to the Community Reinvestment Act in the late 90s that led to this. Yes, sleazy brokers did play a role. But with regards to legislation that allowed this, these guys were the closest to it of anyone in Washington.
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
The only change in law I am aware of that really may have played a role since the late 90s is the elimination of the uptick rule. But even that is highly dubious. Anyway, I believe the SEC abolished this by their own authority in 2007, so that didn’t even involve Congress. (I am sure someone will be glad to correct me if I am wrong about that.)
If I have to read any more of this financial reform analysis/crap on a Friday afternoon, at least I’m being entertained to soften the blow.