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Wall Street's Naked Swindle
Rolling Stone ^ | Oct. 14, 2009 | Matt Taibbi

Posted on 10/17/2009 6:09:52 AM PDT by Wolfie

Edited on 10/17/2009 8:54:23 AM PDT by Admin Moderator. [history]

On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst.


TOPICS: Business/Economy; Culture/Society
KEYWORDS: bailout; bearstearns; economy; federalreserve; paulson; sec; wallstreet
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To: Attention Surplus Disorder
CBOE will create new strikes whenever A) necessary due to mkt movement, and B) a request is made (typically an order will have been entered).

Yep, I followed the Bear situation very closely. The mkt action in the oppies simply screamed 'Fix!'...but SEC showed themselves to be, as usual, thumb-fingered bureaucratic dorkasauruses. We won't EVER see any action from the supposed 'regulators' on this little caper.

However, on a happier note, when Lehman went south a bit later, I, relying on Bear's action as an example, traded for Tap City from about 26...and got it. Nice little profit, that.

101 posted on 10/18/2009 6:53:40 AM PDT by SAJ
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To: Publius6961

I supsect for some protecting the scam is also protecting their income.


102 posted on 10/18/2009 7:11:33 AM PDT by Wolfie
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To: Vn_survivor_67-68
What I THINK you want to know about is organized manipulation that is beyond the reach of we retail traders....this will explain in detail in lay terms....well worth watching, as it is the object of all that you’ve heard about “naked” short sales that has taken down the market cap of many companies:
http://www.deepcapturethemovie.com/


Vn, Thanks for the link to "Deep Capture the Movie". It is a great primer on short selling and what we have just witnessed. It is downright frightening. The scope of this thing takes a lot of intellectual courage and honesty to get around it. This is a good follow up to Taibbi's article. Both are well researched with an understandable explanation of the financial mechanics involved.

I am deeply troubled by the movie. I recall when this happened. A few days after the collapse of Bear Rush told of this huge windfall someone made shorting Bear. He was outraged at the naked robbery of America and how the culprits remained hidden and unpunished.

I encourage everyone to go to this link and see this movie. It is truly unnerving.

Mr Sol.
103 posted on 10/18/2009 11:59:17 PM PDT by Solar Wind
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To: Vn_survivor_67-68
Sorry, Correct link below:

http://www.deepcapturethemovie.com/

Mr Sol
104 posted on 10/19/2009 12:09:29 AM PDT by Solar Wind
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To: grey_whiskers
I think what we are seeing is the Auric Goldfinger principle:

"Once is happenstance. Twice is coincidence. Three times is enemy ... Three times is enemy action."

Alas, poor Auric, I knew him, G-double-u...

105 posted on 10/19/2009 12:12:21 AM PDT by snarks_when_bored
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To: headsonpikes
"If any of the above did in fact happen, I would expect the government of the United States to indict and prosecute these people."

While I fully appreciate your sentiments, surely you're joking.

"With all the people involved, I am sure there would be many plea agreements struck that would result in such a large number of senior bank officers and directors going to prison..."

Now that has a familiar ring to it, say circa 1998 +/- a couple years, & a certain administration's too numerous to mention, errrr peccadilloes?

Of course it didn't happen then and won't happen now and for the very same reason(s). Because we're essentially talking about the very same perps running the very same ruseS on the very same dolts. LOL

106 posted on 10/19/2009 12:26:37 AM PDT by Landru (If you want to perform for 15 mins, 30 mins, 1 hour, 5 days, a YEAR! Call...)
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To: Liz
"By Christopher Mayer, commercial lender for Provident Bank in the suburbs of Washington, D.C."

Sounds like ol' Christopher might've watched the same DVD I did. LOL

Thanks for the ping and the info, Liz.
Just keeps getting curiouser & curiouser. :^)

107 posted on 10/19/2009 12:36:05 AM PDT by Landru (If you want to perform for 15 mins, 30 mins, 1 hour, 5 days, a YEAR! Call...)
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To: Landru

Those were the sentiments of Bill Cara, a surprisingly naive man.

I’m with you - the whole point of the law is to keep the rabble down so that the powerful can feast, so looking to the “authorities” for “justice” is laughable.


108 posted on 10/19/2009 3:24:35 AM PDT by headsonpikes (Genocide is the highest sacrament of socialism - "Who-whom?")
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To: Solar Wind

YW.......when you add to all of this what I view as the complicity of Henry Paulson, Bernanke, Geithner (both before and after his appointment), and the whole library of Goldman-Sachs alumni along and at the tip of the many tentacles, the old Rothschild quote takes on new meaning that cannot be pooh-poohed.

here’s another piece that will interest you....

My Manhattan Project
How I helped build the bomb that blew up Wall Street.
* By Michael Osinski
* Published Mar 29, 2009
http://nymag.com/news/business/55687/


109 posted on 10/19/2009 4:52:29 AM PDT by Vn_survivor_67-68 (CALL CONGRESSCRITTERS TOLL-FREE @ 1-800-965-4701)
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To: Vn_survivor_67-68
Thanks for the links and the information. This thread has been a real education for me. By the way what is the old Rothschild quote?

Mr Sol
110 posted on 10/19/2009 7:52:27 AM PDT by Solar Wind
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To: Solar Wind

Infamous Quote from Mayer Amschel Rothschild

“Give me control of a nation’s money
and I care not who makes the laws.”


111 posted on 10/19/2009 8:48:55 AM PDT by Vn_survivor_67-68 (CALL CONGRESSCRITTERS TOLL-FREE @ 1-800-965-4701)
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To: stephenjohnbanker; FromLori; dennisw; rabscuttle385; AmericanInTokyo
This is my view of what we bailed out, from the movie Dumb and Dumber:

Ahhh -- Where's all the money?

That's as good as money sir. Those are I.O.U.s Go ahead and add it up. Every cent is accounted for.... you might want to hang onto that one.


112 posted on 10/21/2009 5:41:38 AM PDT by ding_dong_daddy_from_dumas (Joe Wilson said "You lie!" in a room full of 500 politicians. Who was he talking about?)
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To: Wolfie

Great post, Wolfie!

B T T T


113 posted on 10/21/2009 5:51:11 AM PDT by stephenjohnbanker (Pray for, and support our troops(heroes) !! And vote out the RINO's!!)
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To: Liz; Landru; All

“We know that Soros’ organization is global....is this the paper trail? No question Obama, Rahm, Soros, and FDIC’s Sheila Bair, among others, are colluding in a naked grab to gain complete control of our financial system. “

” CIRCA Sept 15, 2009 A SHOCKING DISPLAY OF OBAMA’S THIRST FOR POWER-—IT MUST BE BE RESISTED AT ALL COSTS.

FOX News’ Judge Napolitano notes: if implemented, the unconstitutional proposals Obama urged in his speech to Wall Street will amount to a final coup d’état by banksters, their technocrats and enforcers, at the Federal Reserve (*the privately-held bankster cartel that masquerades as a government agency).

Obama’s “reforms” would install a dictatorial regulatory power controlled by international bankers over the entire US economy — down to the local grocer and hot dog vendor on the corner. It will control our lives down to the smallest detail. It will require us to ask permission for the most mundane and routine of financial transactions. “

B U M P


114 posted on 10/21/2009 6:02:00 AM PDT by stephenjohnbanker (Pray for, and support our troops(heroes) !! And vote out the RINO's!!)
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To: TopQuark
It's indeed a tactic pursued by many in the past --- aligning themeselves with fascists and communists (who cares if they are a little left?) as long as that is tactically expedient.

Like big Wall Street firms who donate millions to Obama?

White House Slams Financial Industry Execs, But Benefits From Their Donations

115 posted on 10/21/2009 9:30:51 AM PDT by ding_dong_daddy_from_dumas (Joe Wilson said "You lie!" in a room full of 500 politicians. Who was he talking about?)
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To: ding_dong_daddy_from_dumas
"Like big Wall Street firms who donate millions to Obama? "

You make a mistake that is common on this forum of not differentiating firms and individuals.

Wall Street firms, just like Alcoa and others, donate not that much and do so to both Dems and Reps. Wall Street execs, acting as INDIVIDUAL, donate more to Dems.

You comment is thus disconnected from what I said.

It only shows that irrationality of hatred of Wall Street that is quite common on this forum.

116 posted on 10/21/2009 10:04:43 AM PDT by TopQuark
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To: TopQuark
Hey, those were not buildings that were sitting in $15,000 seats to hear Obama in the Mandarin Oriental yesterday.

I agree that not all Wall Street people are ideologically identical, so my text should be more precise, but consider that according to numbers from the Federal Election Commission, Goldman Sachs (20,000 employees, much smaller than other top donor organizations) was the number 2 Obama donor organization in 2008.

So I will rephrase:

"Like employees of big Wall Street firms who donate big bucks to Obama?"

You advocate a moral purity that seems very difficult for many of your Wall Street heroes to live up to.

Speaking of imprecision (on several levels), from your post 31:

It’s nice to see the unity of the leftist scum and the supposedly conservative forum...

It seems to me that Taibbi does have an ugly underlying hatred of capitalism in general, not just the Wall Street Ferengi, and unfortunately some FR posters do not seem to notice that. I think it's very unlikely I would have much in common with him or his friends. I guess I should not be too surprised with a Rolling Stone article.

The point of all this is that, even though I find Taibbi sleazy sometimes, I also find some of his enemies equally sleazy. If he were a pure marxist, why would he attack Crap and Trade so passionately?

117 posted on 10/21/2009 2:46:35 PM PDT by ding_dong_daddy_from_dumas (Joe Wilson said "You lie!" in a room full of 500 politicians. Who was he talking about?)
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To: ding_dong_daddy_from_dumas
"your Wall Street heroes to"

And where did you get that they are my heroes? You are putting words in my mouth. I don't take sides but try to stand on position of principle.

Wall Street firms are actors in a capitalist economy. They are reviled for that reason now, since they symbolize that economy. Most of accusations are moreover false, mere repetitions of the NYTimes garbage.

"The point of all this is that, even though I find Taibbi sleazy sometimes, I also find some of his enemies equally sleazy."

There are plenty of sleazy capitalists. I personally despise those Wall Streeters that, while using and profiting from capitalism, send donations to fascists like Obama. And not only Wall Streeters, of course: Warren Bufffet and Bill Gates are the same (even worse: they are not even patriotic, spending most if not all of their charity abroad --- as if some Americans did not need help). The same is true about Hollywood: all those "start" marking $30M in six weeks support every Leftist cause under the sun. There is plenty of sleeze everywhere.

The point, however, is not to look at people but at what they do and say. I agree or disagree not with people (takign sides) but with SPECIFIC things they say or do. I have not a shred of respect for Taibbi, but if he said something correctly --- even on accident --- I would acknowledge that. Likewise, when the Wall Street honchos fall before Obama and send money to Dems, I view them as immoral scum. But when the same people are falsely attacked for what they do as managers of their respective firms, I point out that that is wrong.

"If he were a pure marxist, why would he attack Crap and Trade so passionately?"

You touch here on something deep: what you say is true and not only about Taibbi. There are very few pure Marxists today. You can't sell yourself well as a Marxist after the fall of the Soviet Union and millions killed by the communists. So they call themselves by other names: "progressives," liberals, etc. In addition, it's been 150 years since Marx, and the circumstances changed. So they too adjust to these changing circumstances. Finally, not all people are consistent: the conservative president Nixon instituted fixed prices --- control of the economy advocated and practiced by socialists and fascists. Likewise, the generally leftist Taibbi may be against Cap-and-trade. People are not always consistent.

But in case of Taibbi, I believe it to be simpler: he is a charlatan that spends little time reflecting on things and getting to the heart of matters. My impression is that he'll writever seems provocative --- just to get attention and feel important.

118 posted on 10/21/2009 4:40:43 PM PDT by TopQuark
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To: TopQuark
Thanks for the detailed reply.

And where did you get that they are my heroes? You are putting words in my mouth. I don't take sides but try to stand on position of principle.

I apologize for putting words in your mouth. Some of the things you write sound a little short of being objective, but I don't know, you might be using hyperbole for effect, e. g. "It’s nice to see the unity of the leftist scum and the supposedly conservative forum..." I admit I need to step back and look at myself too.

Likewise, when the Wall Street honchos fall before Obama and send money to Dems, I view them as immoral scum. But when the same people are falsely attacked for what they do as managers of their respective firms, I point out that that is wrong.

A very good approach.

You touch here on something deep: what you say is true and not only about Taibbi. There are very few pure Marxists today. You can't sell yourself well as a Marxist after the fall of the Soviet Union and millions killed by the communists. So they call themselves by other names: "progressives," liberals, etc. In addition, it's been 150 years since Marx, and the circumstances changed. So they too adjust to these changing circumstances. Finally, not all people are consistent: the conservative president Nixon instituted fixed prices --- control of the economy advocated and practiced by socialists and fascists. Likewise, the generally leftist Taibbi may be against Cap-and-trade. People are not always consistent.

Exactly. I think Taibbi has a following here because he attacks some who have a role in the capitalist system but may be doing harm to capitalism and all this nation is supposed to stand for.

But in case of Taibbi, I believe it to be simpler: he is a charlatan that spends little time reflecting on things and getting to the heart of matters.

I would not go that far, but the linked article seems weak in some parts. He says

"As such, Prime Brokers have tended to be lax about making sure that their customers actually possess, or can even realistically find, the stock they've sold. That point is made abundantly clear by tapes obtained by Rolling Stone of recent meetings held by the compliance officers for big Prime Brokers like Goldman Sachs, Morgan Stanley and Deutsche Bank."

What tapes? Where is the link or reference? I did a web search for such tapes on Rolling Stone but was not successful. He may be right, but this is hardly a good way to convince. The lack of proof here may a tease for his next article.

119 posted on 10/21/2009 7:52:57 PM PDT by ding_dong_daddy_from_dumas (Joe Wilson said "You lie!" in a room full of 500 politicians. Who was he talking about?)
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To: ding_dong_daddy_from_dumas
Regarding my words: "It’s nice to see the unity of the leftist scum and the supposedly conservative forum..."

Under vast majority of circumstances, such words are highly inappropriate. My emotions --- and I apologize for expressing them so strongly -- stem from the constant battles on this forum --- against the defamation of innocent people and blind repetition of leftist propaganda on this forum. Just enter --- on any thread --- the words "CEO" or "Goldman Sachs" or "bonuses" and watch the NYTImes repeated here verbatim, with much gusto and hatred. When I point out that most of such vitriol is unsubstantiated, I am outed as a bond trader for Cantor Fitzgerald (I am not kidding), a director at Goldman Sachs, one of those "fat cats" who does not care about "regular people."

FOr months now I have been patiently showing that the substance of most such posts is lacking. My patience apparently has grown thin, which showed in the sentence you quote. I am sorry for that.

TQ: "But in case of Taibbi, I believe it to be simpler: he is a charlatan that spends little time reflecting on things and getting to the heart of matters."

ding_dong_daddy_from_dumas: "I would not go that far"

My opinion was based on more than one article. His previous one, on the same topic (evil Wall Street) was referenced on this thread:

http://www.freerepublic.com/focus/news/2301629/posts?page=49#49

My analysis of it may be found here:

http://www.freerepublic.com/focus/news/2301629/replies?c=49

I simply have no time to provide a detailed debunking of what he says in the latest article.

The nontracibility of his sources -- tapes in this case, as you have pointed out -- is not uncommon in his writing.

""As such, Prime Brokers have tended to be lax about making sure that their customers actually possess, or can even realistically find, the stock they've sold."

Firstly, he portrays Prime Brokers as existing to accommodate short-sellers. They make most of the money providing a myriad of other services.

Brokers should've indeed been more diligent. But many, many companies delegate entering information nowadays. If you are distributor of a manufacturer, you often can enter information on that manufacturer's site. That is what short-sellers borrowing a stock do (previously you'd call the Broker, who would then enter the same request manually, which wasted precious seconds).

I was and am still unhappy with the state of affairs in this area; "naked" short-selling bothers me a great deal. But Taibi made a conspiracy out of this. Without it, there would be no article at all.

He misunderstands and misuses some even basic terminology of finance (there is only so much one can learn from a disgruntled trader during lunch; you'd mostly learn swearing, and Taibi thinks he looks like a part of the inner circles by dropping the word "sh--loads" here and there; to me, he looks like a fool). I know, these last words are unsubstantiated, but I simply lack time to go through the article as I did last time.

Thank you too for your detailed and patient reply.

120 posted on 10/21/2009 8:48:49 PM PDT by TopQuark
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To: ding_dong_daddy_from_dumas

http://trueslant.com/matttaibbi/page/2/

Taibbi is more of a disrepector of all who is looking for honesty and fair play on Wall Street. Look at his blog and he bats against right hand pitching and left hand pitching

He is not a leftist-Marxist punk. That is absurd


121 posted on 10/21/2009 9:17:52 PM PDT by dennisw (It's not called the Wheel. It's called the Carousel)
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To: dennisw; TopQuark; stephenjohnbanker; FromLori; rabscuttle385; AmericanInTokyo; ...
Thanks Dennis.

At first I was confused about your link. Right now the top article there contains a defense of Obama (Taibbi can't understand what's wrong with Obama bad-mouthing America all over the world.)

I am guessing that you meant to post the following link in which Taibbi demonstrates a trading terminal doing naked short selling:

Caught On Tape: A Naked Swindle

122 posted on 10/22/2009 7:00:45 AM PDT by ding_dong_daddy_from_dumas (Joe Wilson said "You lie!" in a room full of 500 politicians. Who was he talking about?)
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To: ding_dong_daddy_from_dumas; dennisw

Caught On Tape: A Naked Swindle

I don’t know this guy, he may be a lefty, but this article is spot on the money.


123 posted on 10/22/2009 7:26:47 AM PDT by stephenjohnbanker (Pray for, and support our troops(heroes) !! And vote out the RINO's!!)
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To: stephenjohnbanker
I don’t know this guy, he may be a lefty, but this article is spot on the money.

Sometimes I agree with him, not always.

124 posted on 10/22/2009 7:33:15 AM PDT by ding_dong_daddy_from_dumas (Joe Wilson said "You lie!" in a room full of 500 politicians. Who was he talking about?)
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To: ding_dong_daddy_from_dumas

that was the one :)


125 posted on 10/22/2009 7:34:43 AM PDT by dennisw (It's not called the Wheel. It's called the Carousel)
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To: ding_dong_daddy_from_dumas

Taibbi was taken for a ride with that video

http://www.economicpolicyjournal.com/2009/10/matt-taibbi-reports-on-naked-short.html


126 posted on 10/22/2009 7:40:58 AM PDT by FromLori (FromLori)
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To: SAJ

http://www.economicpolicyjournal.com/2009/10/matt-taibbi-reports-on-naked-short.html


127 posted on 10/22/2009 7:41:38 AM PDT by FromLori (FromLori)
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To: ding_dong_daddy_from_dumas
So, what information is being carried out here? That it is easy to borrow shares? It is indeed too easy, but whom to blame? As I said earlier, he presents naked short-selling as a conspiracy to rob "The American People."

If's merely a loophole. If anything, it points to the failure of the GOVERNMENT regulation. All those people who run to the gov't for the rescue should stop and think, not about Golmans and Morgans, but about where on Earth will teh government get that perfect regulation?

Regulation has unintended consequence, and naked short-selling is one of them. That's all. So much for conspiracy to rob the "people." (Even that si wrong: profits from short-selling, as any other profit, accrue to shareholders, which ARE the people).

128 posted on 10/22/2009 8:21:39 AM PDT by TopQuark
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To: TopQuark; FromLori
So, what information is being carried out here? That it is easy to borrow shares? It is indeed too easy, but whom to blame?

Indeed, even one of my fellow "conspiracy theorists" (FromLori) debunks Taibbi's "naked short selling" video linked in this thread. (Taibbi didn't bother to link it. Or maybe he had other tapes in mind? Who knows?)

I agree that the government is one of the guilty parties, but the way I see it, separating "the government" from "Wall Street" is impossible.

In 2004 the big Wall Street firms (Paulson was still at GS) pushed the government to allow much higher leverage ratios for the "big investment firms." Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley. But not for any other firms, because the SEC favored those 5 firms.

Now I expect someone will flame me for making an argument that Dems have also used, but I think we should be honest about the Bush years. Obama is much worse. I have no hope whatsoever that Obama will become an honest POTUS.

Regulation has unintended consequence

Very true. I say it is foolish to believe that regulation is always good.

I don't believe the 2008 crash had a single cause, and I would guess you don't believe that either.

129 posted on 10/23/2009 3:25:12 PM PDT by ding_dong_daddy_from_dumas (Joe Wilson said "You lie!" in a room full of 500 politicians. Who was he talking about?)
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To: ding_dong_daddy_from_dumas
"In 2004 the big Wall Street firms (Paulson was still at GS) pushed the government to allow much higher leverage ratios for the "big investment firms." Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Sterns and Morgan Stanley. But not for any other firms, because the SEC favored those 5 firms.

This selectivity is truly problematic. As much that I am against the widespread regulation (I actually did and published some work in this field in peer reviewed journal), I am absolutely appalled at the accommodation of higher leverages. Joe and Jane in Peoria, whose failure will not affect the economy at all, are allowed a 2:1 leverage on their margin accounts, but Bear Sterns is allowed 33:1? That does not make any sense to me. None whatever. The leverage had to be held in check and, in my opinion, this is yest one more example of the government failure (SEC).

Having said that and to be fair to the motives of the lobbyists, one has to remember that higher leverage provides higher returns in good times. It is intellectually dishonest, therefore, on the part of most critics to point to the disastrous events of 2008 as the result of leverage and other "unreasonable risk-taking by the execs." They said nothing of a kind when their stocks were going up as a result of that leverage.

What I said here is not an excuse --- am still adamantly against the leverages assumed by the WS banks. The (minor) point is that the banks' management were true to their mission, the job they were given to do: to provide the highest return to their shareholders. It's the government, whose job is to care about the MACROeconomic consequences, to oppose that tendency (which manifested itself as lobbying). If the managers assumed that their companies would be bailed out as too big to fail, they were UNFORTUNATELY correct: that was the message consistently given to them (until Lehman) by the government at least since the 1908s S&L bailout.

So I see here two GOVERNMENT (rather than MARKETS failure, as the Left is trying to convince the public): conveying a consistent message that the "too-big" will not be allowed to fail, and being lax on the leverage ratios.

[Actually, there is a third: the mark-to-market requirement that actually brought Lehman down, but I don't want to expand the scope of discussion. The main GOVERNMENT failure --- the ONE that precipitated the crash --- was of oourse the Community Reinvestment Act that MANDATED bad loans that could not have possibly been repaid. The rest was the reaction to that force that moved the market in search of an unsustainable equilibrium]

" I think we should be honest about the Bush years."

Exactly. Thank you for standing on position of principle rather than taking sides.

130 posted on 10/23/2009 5:59:12 PM PDT by TopQuark
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To: TopQuark; ding_dong_daddy_from_dumas
Thanks to the two of you for an discussion that is both enlightening and civil.

In my own view, the government is almost totally responsible for the economic reversal (whatever you might want to call it).

Sure, investment banks would nagturally push for a higher leverage factor. That's their job. If a government is going to effectively regulate that market, then it's government's job to resist that urge -- and not favor one party over another.

Then, of course, we have Fannie Mae and Freddie Mac distorting the mortgage market beyond all recognition -- removing mortgage companies from any risk by buying any mortgage they might write. Then, multiplying the problem by bundling these risky securities into derivatives and re-marketing them to the financial community to raise yet more cash. To buy more mortgages...

Finally, under the peculiar cirmcumstances, Sarbanes-Oxley was an aggravating factor that made a bad situation worse.

It took the federal government to turn The Panic of '29 into The Great Depression. This time, the federal government is the primary miscreant who started the whole thing.

131 posted on 10/23/2009 6:19:34 PM PDT by okie01 (THE MAINSTREAM MEDIA: Ignorance on Parade)
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To: okie01
"If a government is going to effectively regulate that market, then it's government's job to resist that urge -- and not favor one party over another."

Exactly right and worth repeating. Seeing your post is like a breath of fresh air.

132 posted on 10/23/2009 6:20:56 PM PDT by TopQuark
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To: okie01
"Then, of course, we have Fannie Mae and Freddie Mac distorting the mortgage market beyond all recognition -- removing mortgage companies from any risk by buying any mortgage they might write."

I completely agree here, too. It is worth clarifying, however, that Fannies and Freddie are qusi-GOVERNMENT agencies. They would never be able to stand on their own, nor would they pursue tactics they did if they were not MU to do so.

" Then, multiplying the problem by bundling these risky securities into derivatives"

It is a frequently repeated truism which is actually false. One cannot increase risk by pooling, and mortgage-backed securities (I presume you refer to them) are nothing but pooling of individual mortgages.

The markets proved this mathematical fact in the fall of 2008: when all credit and other markets froze, these securities continued trading (despite confusion about their ratings).

133 posted on 10/23/2009 6:26:00 PM PDT by TopQuark
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To: okie01
"It took the federal government to turn The Panic of '29 into The Great Depression."

That is exactly right! Liberal historians such as Schlesinger started a Roosevelt myth, according to which he saved the country. As you pointed out so well, it was the (Republican) administration that instituted idiotic tariffs in 1928-1930 and the inaction of the Fed that made the decline so rapid. But it was the FDR presidency, which, just as Obama's administration, tried to REFORM the economy into a socialist one that turned a regular recession into a Great Depression. Like Obama, Roosevelt tried not to RECOVER the economy but to REFORM it. In Obama's $700B package only about $80B stimulate recovery.

"This time, the federal government is the primary miscreant who started the whole thing."

I cannot thank you enough for your insightful and thoughtful post. It is particularly appreciated amidst the current hysteria, which unfortunately affected even some people on this forum.

Best regard, TQ.

134 posted on 10/23/2009 6:32:59 PM PDT by TopQuark
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To: TopQuark
" Then, multiplying the problem by bundling these risky securities into derivatives"

Perhaps, it would've been more accurate to say "multiplying the problem by bundling these securities into derivatives and re-marketing them, spreading the infection across the breadth of the financial markets".

If the problem had been confined to Fannie Mae and Freddie Mac, it would've been a.) more confined and b.) smaller in scope.

135 posted on 10/23/2009 6:37:57 PM PDT by okie01 (THE MAINSTREAM MEDIA: Ignorance on Parade)
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