Interesting piece in the Times looking at whether or not saving Lehman would have staved off the collapse. The author thinks it would not have mattered.
Also, how come we haven’t done anything in regards to regulating Wall Street yet? Business as usual, it seems.
demkat620
I think Barry’s giving a speech Monday announcing new regs and Atrios had that the feds are after Joe Cassano.
So maybe they are about to.
El Cid
Don’t worry, there’s plenty of time yet to come up with a centrist, industry-sponsored plan of helpful ‘regulation’, as long as we can once again get everyone to agree that those crazy wild eyed fringe types in the ‘far left’ got to understand that now’s not the right time for all this crazy big government heavy handed etc. etc. etc.
geg6
I read somewhere yesterday that they’re finally going after Cassano. Fucker needs to be rotting until he dies in the federal Supermax along with all the other dangerous enemies of America.
linda
vanity fair has a story on tarp funds and the shockingly carefree operation under which those billions were dispersed. (although the description of paulsen’s summoning of the 9 most powerful banksters to washington dc reads like a great scene for oliver stone’s just getting underway movie.) i’d somehow missed the nugget that neel kashkari had just months before the collapse had dismissed the growing concerns about the mortgage market as ‘move along, nothing to see here’…
there’s no fucking way this was nothing more than a deliberate looting of the treasury of the united states. i hope it’s true about cassano.
http://www.vanityfair.com/politics/features/2009/10/bailout200910?printable=true
Ash Can
Short answer: Despite the whining from Washington correspondents and right-wingers that the president is doing too much too fast and they can’t keep up with it all, the prez has actually been focusing on only one shitpile at a time, and taking them in order of most immediately threatening to the most people. Number one was the economy, number two is health care, number three is shaping up to be the environment, and so on. Based on what demkat620 and geg6 say above, Wall Street’s evidently on the radar screen, at least.
Doctor Gonzo
Because we always, always get it backwards: change the rules FIRST, then bail their asses out. Not the other way around.
linda
@Doctor Gonzo:
pearlstein has a pretty good column on the current state of things.
http://www.washingtonpost.com/wp-dyn/content/article/2009/09/10/AR2009091004224.html
Pablo
Now is the time for all good teabaggers to reject the tyranny of the FDIC. The government has no right to insure my bank deposits! IT AINT IN THE CONSTITUTION!
JGabriel
John Cole:
Well, the bubble had to burst sometime. I don’t think it would have crashed as hard, and maybe not as expensively had Lehman been saved. But then it would have taken longer and when the market finally crashed, it would have been blamed on Obama.
An interesting question is whether Paulson knew this would happen when he let Lehman fail? Did he refuse to save Lehman because of concerns over moral hazard, or so he could be the one in control of dispensing bailout cash when the economy crashed afterwards?
Yeah, it’s a bit tin-foily, but it’s hard to put anything past these guys after the previous eight years, and Paulson was one of the few competent people in Bush’s administration – so you really have to wonder.
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Cat Lady
Barney Frank’s committee will be responsible for drafting regulations, and I heard an interview with him this past week that they’re working on them. These things do actually take time.
The rating agencies’ first amendment defense against fraud claims from CalPERS and others was shot down by a judge last week, so they’re going to get what’s coming to them. From what I’ve read, CalPERS wants retribution and won’t settle.
azlib
It is good to hear there is some movement on financial reform. This is a huge problem. If we do not institute reform and there is another crash, we will not be able to respond as effectively with the deficit numbers being where they are.
We needed to bail out the banks or the economy would be further in the toilet. We learned that lesson from the Great Depression. However, the financial sector is a lot bigger today as a percentage of GDP and a lot more politically powerful. It is going to be a real fight to get strong and meaningful regulation.
What underlies all our current difficulties is the corporate oligarchy which was nurtured by the deregulation religion which permeated Washington over the past generation.
kay
Unemployment in manufacturing went from 4.8 pre-crash to 11.9 today.
Unemployment in insurance and finance went from 4.2 pre-crash to 5.9 today.
I’m thrilled we insulated this favored sector from the effects of their own greed and irresponsibility. Of course they learned nothing. They didn’t suffer at all.
I won’t wait around for a thank you. They’re already back to bitching incessantly about taxes.
JGabriel
kay:
Ah, the two eternal verities: death and conservative bitching.
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Leelee for Obama
As much as Lehman’s fall hurt things generally, there was a certain beauty in a bank that made it’s seed money on the backs of slaves going under that I find sadly satisfying. Same with Wachovia and many, many others. I know, I’m a witch!
Sanka
Because Wall Street isn’t in trouble anymore and doesn’t need the cold hard cash of the US taxpayer to keep it afloat. Low interest rates are a boon to the financial industry, resulting in gangbuster quarterly profits for the
friends of Obama and various Democrats on Wall Streetfirms that are left.Wait until the CRE implosion gathers full steam and the ARMs begin to reset.
Then, of course, it will somehow be Republicans fault that these proposed regulations don’t sail through a Democratically-controlled Congress and White House. Just like health-care.
And oh yeah, Sarah Palin!
kay
@JGabriel:
Unemployment rate
4.9% 5.2% 5.7% 5.9%
Poor babies. That’s just brutal. 17% of the workforce where I live are currently laid off, but we manufacture here.
Next time, I think I’ll let them jump.
Sanka
There are thousands of middle class, former Lehman employees, who worked in operations, as secretaries, support staff, accounting staff, etc., who’d take exception with your ignorance and idiocy.
Stay classy.
Leelee for Obama
@Sanka: Yes, I know that, hence the sadly, They would have been hurt no matter what, though, because those folks would have been the first to go. There are thousands just like them from other companies that were bailed-out, who also lost their jobs. Perhaps if Lehman had made some intelligent use of their people, instead of once again going for the easy money, this wouldn’t have happened to them.
Bill H
I’m actually glad regulation hasn’t been done yet, because the faster Congress does something the worse it fucks it up; see “stimulus bill” and “health care reform.” Of course, they will fuck it up regardless, but…
JGabriel
@Sanka:
For a wingnut, you sound remarkably like Atrios. We know about the option ARMs, that’s why so many of us on the left have been pushing for cramdown provisions so people can force banks to negotiate better terms in bankruptcy proceedings.
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Comrade Darkness
@Sanka: I missed something here. You are saying that the Dems should have changed course from the precedent of the Bush admin 800 billion bailout and potentially toppled a fragile system built *entirely* on the social construct of confidence.
I just want to make sure I read you right.
As to the far future. Yeah. I’m going to be right pissed if the Obama admin does not at some point get around to hammering some banker ass to the wall. He can’t do it until there is a serious distraction.
As to the close future of bank capital getting undermined by higher loss rates in mortgage securities… That’s not going to cause the destruction you are hoping for. Reasons? The banks and the treasury are not hiding their head up their asses *in the same way they were.* (I realize all denial are still rife…) and, secondly, five of the largest banks which will be impacted are already walking zombies that the FDIC would have closed if they could figure out how to do it. If the system is happy running with zombie banks, then confidence will not be undermined this round by opening the discount window wider to make them a tad more zombie. Consumers don’t care anymore. And that’s what matters.
Robertdsc-iphone
Somehow I don’t feel very confident in having Larry Summers as a proponent of regulatory reform.
Leelee for Obama
I am convinced that the regulations have to take into account that the consumerism that built the house of cards is over. Therefore, banking and financial services will have to be regulated based on real savings, and real money instead of bubble-gum scented air. This kind of thing has been done before, and so, we know how to do it. It will hurt like hell and every other thing that Obama wants to fix, as in health care reform will help take the artificial pressure off the general population to prop up an economy that never really existed in the first place. If it takes Barney, et al a bit of time, that’s OK. We’re gonna live with the results for decades.
JGabriel
@Robertdsc-iphone:
Yes, that’s admittedly unsettling. I wish Obama would get some academic economists in there as advisers who aren’t quite so tied to the financial world. Maybe he has, and it’s on the qt to keep Wall St. from getting prematurely alarmed.
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Fulcanelli
The Fallacy Of Financial Reform, or, How to bait right wing teabagging Trollz…
I believe the French method of financial reform will be far more effective in the long haul. Not so many troublesome regulations, less expensive to implement and we now have the technology to make the little cookies in a wide variety of flavors and colors other than green, and in lo-calorie, lactose intolerant and sugar-free varieties for diabetics.
You guys think I’m kidding. What goes on over on Wall St. and elsewhere is a disease, a virus, an addiction, a character defect, irrefutable evidence of a poisoned soul and a hopelessly corrupt and broken system. You ARE NOT going to regulate it out of existence, only perpetuate the cat and mouse game right on into the future until the next economic collapse happens.
The problem is that Capitalism is a great system, but it requires the players to have a fairly high degree of honesty, integrity and a sense of fairness towards others less fortunate than ourselves to function properly. Law of the Jungle works in business, the Circle of Life and all that… But Capitalism has devolved into conscience-free economic cannibalism.
Wall Street has pulled so much money out of the system and put it in the hands of so few, while millions and millions of us scramble around and fight over the rest. I feel so… Serf-like?
When you have firms like Goldman Sachs (and others), the largest financial firm in the country making thousands of trades PER SECOND with high speed computers enabling them to manipulate the market and thus line their pockets with obscene bonuses while they take advantage of offshore tax laws which results in them paying a mere ONE percent Federal Income Tax in 2008, then stick a fork in the Capitalist economic system, and by extension the idea that the US Government can effectively regulate business. It’s history, done.
How can your employers’ 401/IRA fund manager compete with that? Want to put all of YOUR hard earned retirement money in a system like that? Sucka?
There’s no denying that the French are heavy-handed when it comes to keeping business under it’s thumb with it’s unions and the outright fear the people are able to instill in corporations, business owners and the government, but look back in time… It took 200 years. I’m hoping for a shorter time frame, at least for my kid’s sake. I believe we can do better.
If we want social benefits like health care, efficient public transit and other stuff in exchange for our tax dollars and maybe more vacation time so we don’t die off from stress, exhaustion and disease trying to work enough hours to survive and put a few bucks away to retire on then we better start bustin’ heads, and real fucking soon.
The sad part is how these sorry-ass teabagger idiots believe they have it all figured out, so they rear up on their hind legs and scream SO CK ALI SM!, we’re not gonna take it!, I’m taking my country back!. Freedom!
Yeah, right. Freedom to starve, get sick and die while your economic betters step over your sorry-ass on their way to the country club. These simple minded jackasses have no fucking idea of how the cards are stacked against them, all while the astroturf lords whip them into a frenzy.
If you can still count how much money you have at any given time then it ain’t your country anymore Jethro, and it hasn’t been for years. Chumps.
ThatLeftTurnInABQ
@Ash Can:
Ash Can nails it.
Also note that there is strong path dependence in which crisis gets tackled first which affects all the others.
I expect banking re-regulation (emphasis on the re-, we used to have a regulated banking system until Phil Gramm and friends decided otherwise) to have a short term negative impact on the economy. We aren’t going to be able to nail down the banks without causing collateral damage to the liquidity that is still sloshing around in an unsupervised fashion, and getting from where we are now to an era when lots of liquidity is sloshing around in a responsible and supervised fashion is going to require going thru a period when credit is tighter than it is now. Which means more economic contraction, job losses, etc.
Methinks that making sure that people won’t lose their healthcare insurance during the resulting downturn is a very good idea. Hence the ink has to be dry on healthcare reform before banking reform can be tackled.
OriGuy
@Leelee for Obama: I though you were being literal. Henry Lehman started out dealing in cotton before the Civil War. Wachovia, though, was founded later.
Leelee for Obama
@OriGuy: Wachovia released an apology about their involvement in slavery a few years ago. I read about it in a local paper here in FL.
OriGuy
@Leelee for Obama: Now that you mention it, I remember that too. Interesting that the Wikipedia entry doesn’t mention that.
Leelee for Obama
@OriGuy: I know there are more, but Lehman was mentioned on BookTV by an author of a book about what modern society, whites particularly, had gained because of the slave economy. The basic thread was that our modern system would never be anything like it was w/o those beginnings in cotton trade. Of course, this was a few years ago, so long before the feces hit the ventilator.
bago
@JGabriel: Are you saying you would prefer some academic crank who wouldn’t press the “million dollars for me” button over someone who would when debating regulatory policies?
In computer hacking the prodigies tend to get divided into two groups. White hats will reverse engineer an exploit, and black hats will infiltrate the attack network under false pretenses.
89million
I think we’re in the eye of the storm right now. Fewer jobs are being lost each month, the markets are reaching highs that haven’t been seen since the crash last year, lower-end house prices have gone up a bit over the spring and summer. If you interpret these things superficially then the economy seems like its doing fine. But the same structural problems from 2007 and 2008 are still in place. Mortgage backed securities didn’t seem like such a good idea, did they? oh well, lets just re-package, re-rate and re-sell them. While we’re at it lets securitize life insurance too! We can literally make money off the tragic and early death of other humans!
People are able to pretend the catastrophic, unprecedented damage to our economy never happened. As long as someone is able to say “it wasn’t that bad” or “it was pretty bad, but it’s all over now, everything is better” no meaningful and long lasting reform will be able to take place. We will need a wide spread investigation, along the lines of the Pecora Commission. Also notice that Pecora investigated wall street in 1932- not 1929 or 1930. Until people wake up every morning and ask themselves “this is terrible, how did this happen?” we won’t see anything.
postmodernprimate
How many hints does our brain-dead media need that this is a solvency crisis and not a liquidity crisis. Of course they gave the money out without conditions, that was the freaking point. Great f*ing scoop on the “shockingly carefree” $700 billion “operation” to provide small businesses, students and grandma with access to credit. So “shockingly carefree” in fact that there were no requirements to provide lending to anyone and lending actually went down at institutions that took TARP money.