Bad Day On Wall Street....

[Marc Martyn]

Balloons in St. Paul are not the only thing falling--

http://www.nytimes.com/2008/09/05/busin ... ref=slogin

[joshswrench]

I read about that too. It's really to bad that both the mortgage industry is falling and the price of oil is. Now it's not just the bad loans but the home equity loans not getting paid back... Better and brighter times ahead I suppose!

[Drewp]

Apparently all you have to do though is cut taxes and drill now, and we'll have a balanced budget by 2013.

[Bisk1tSnGraV]

I think it is going to be a long and bumpy ride ... unfortunately it is going to take some time to actually get that light at the end of the economic tunnel to shine brightly again. At least when I am on the lake I don’t hear the ticker tape of Wall Street.

[Marc Martyn]

Oil prices continue to come down but it will take some time to see if that lasts. With gas prices also coming down some, maybe we can get out to the lake a little more often. I know that I have cut back on some trips up north.

[Rollin with Rolland]

Oil prices continue to come down but it will take some time to see if that lasts.

GREAT. I just put 250 gallons in the propane tank @ 2.29 /gallon last week. Now it's at 2.25/ gallon and falling...

[Gisteppo]

Sorry kids, I have to do it...

McCain's financial plan for the US:

Key is to not to bail out homeowners who speculated
Q: You gave a speech recently in which you said, "It's not the duty of government to bail out & reward those who act irresponsibly, whether they're big banks or small borrowers." What would you do to help the thousands of Americans who right now are in the process of losing their homes? Or do you feel, as you said in your speech, that's not the duty of government?

A: Look, Americans are hurting right now. They don't know if they have to get another job. The challenges are enormous right now. The key to it is not to bail out people who speculated or people who engaged in unsavory practices. The key to it is get the lender and the borrower together. We know how hard that is because of identifying the lender, but there's ways to do it. Of course there's a role for government, but it's not to reward greedy speculators. It is not to reward people who misbehave. And it certainly isn't a huge expenditure of taxpayers' dollars which, in the long run, could exacerbate the problems that exist

Followed by:

Bailing out Bear Stearns necessary to protect economy
Q: You said, "It's not the duty of government to bail out and reward those who act irresponsibly, whether they're big banks or small borrowers." What about Bear-Stearns?

A: On the issue of Bear Stearns, every financial expert I know says that if it had failed, it would have rippled throughout the entire financial community and would have caused greater problems which eventually would have come down on the average citizen if our economy continues to decline the way that it's been doing.
Source: Fox News Sunday: 2008 "Choosing the President" interviews Apr 6, 2008

Read this CAREFULLY:

FactCheck:Bridge-to-Nowhere never built; would serve 200,000
McCain's TV ad cites "$233 million for a bridge to nowhere," calling the cost "outrageous." Funding for the "bridge to nowhere," also known as the Gravina Island bridge in Alaska, was tacked on to a 2005 transportation bill.

Whether it was truly a "bridge to nowhere" is debatable: Gravina Island, while it has almost no permanent population, is also home to the Ketchikan International Airport, which processes about 200,000 passengers a year. Alaskan officials hoped that the bridge would simplify airport access and allow development on Gravina. The bridge was not the only or the most expensive project attached to the transportation bill, and it may not have been the most frivolous. But it became a symbol for government pork.

In light of the furor over the "bridge to nowhere," Alaska's governor opted to use the money for other pursuits. The bridge was never built, but McCain has been using it as his prime pork example since 2005.
Source: FactCheck.org: AdWatch of 2007 campaign ad, "Outrageous" Nov 20, 2007

ALASKA'S GOVERNOR SARAH PALIN!! Yes, they received the money and started the two on-ramps, but never have started the bridge itself.....

On the other side of the ticket:

Obama's comments on the economy...

Can't do anything at home with $12 billion a month on Iraq
The fact that we're spending $12 billion every month in Iraq means that we can't engage in the kind of infrastructure improvements that are going to make us more competitive, we can't deliver on the kinds of health care reforms that Clinton and I are looking for. McCain is willing to have these troops over there for 100 years. The notion that we would sustain that kind of effort and neglect not only making us more secure here at home, more competitive here at home, allow our economy to sink.
Source: 2008 Democratic debate at University of Texas in Austin Feb 21, 2008

Lack of an energy policy is a financial burden
Part of the reason that Kuwait and others are able to come in and purchase, or at least bail out, some of our financial institutions is because we don't have an energy policy. We are sending close to a billion dollars a day. A realistic plan is going to reduce our dependence on foreign oil, and to invest in solar & wind & biodiesel. That would make a substantial difference in our balance of payments, and that would make a substantial difference in terms of their capacity to purchase our assets.
Source: 2008 Democratic debate in Las Vegas Jan 15, 2008

Return to PayGo: compensate for all new spending
We were told by our President that we could fight two wars, increase our military budget by 74%, spend more on education, initiate a prescription drug plan, have tax cuts, all at the same time. We were told by Congress that they could make up for lost revenue by cutting government waste.

The result is the most precarious budget situation we have seen in years. We now have an annual budget deficit of almost $300 billion, not counting more than $180 billion we borrow every year from the Social Security Trust Fund.

It is not the debt that is most troubling. The bulk of the debt is a direct result of the President's tax cuts, 47.4% of which went to the top 5% income bracket.

We can eliminate tax credits that have outlived their usefulness & close loopholes that let corporations get away without paying taxes. We can restore a law that was in place during the Clinton presidency--called Paygo--that prohibits money from leaving the treasury without some way of compensating for the lost revenue.
Source: The Audacity of Hope, by Barack Obama, p.187-189 Oct 1, 2006

And this is prioritizing spending. Where should the cuts be?

Voted NO on $40B in reduced federal overall spending.
Vote to pass a bill that reduces federal spending by $40 billion over five years by decreasing the amount of funds spent on Medicaid, Medicare, agriculture, employee pensions, conservation, and student loans. The bill also provides a down-payment toward hurricane recovery and reconstruction costs.
Reference: Work, Marriage, and Family Promotion Reconciliation Act; Bill S. 1932 ; vote number 2005-363 on Dec 21, 2005

Where do you think the markets will go with either of these candidates?

E

[Marc Martyn]

http://www.cnbc.com/id/26310886/for/cnbc

[Gisteppo]

Wonderful.....

And who says conservatives don't believe in welfare!

E

[joshswrench]

I hope that whichever way it goes, the market gets better. I have to agree with Obama on the Iraq war spending. We do spend a lot of money there every month. But I disagree when he says "mccain will have us there for 100 years". There's already a time line for withdrawl agreed on and it's supposed to start as soon as next year. I like Mccains ideas the energy situation. While we do need to invest more into alternative energy, oil is not going anywhere. Drill here, drill now. There's no reason not to. Critics of the plan say that it could take 10 years for the first barrel of oil to reach the states, but even if it does take 10 years all that means is we were 10 years late in doing this. Back on subject, I beleive both parties have a firm economic plan for the country, they just have different ways of going about it. With Obama we will see probably the highest tax rate we have seen in a long time in this country with most the money going toward social programs. With Mccain we will see an increase in security spending, which for folks like me who work for the DOD isn't a bad thing.

[Gisteppo]

With Obama we will see probably the highest tax rate we have seen in a long time in this country with most the money going toward social programs. With Mccain we will see an increase in security spending, which for folks like me who work for the DOD isn't a bad thing.

Someone has been spending too much time listening to the righties.

Highest tax rates in history on the middle classers? Mid 1980s, coupled with the highest inflation rates and interest rates in our nation's history.

I think that there will be an adjustment that increases the income of the IRS, but slack jawed yokels like myself aren't going to be the ones footing the bill. His plan is more closely tied to two groups: Those making more than $250,000 a year and corporate taxes. Both areas have exceptional loopholes that you and I do not qualify for. Being the son of a small business owner, Ive seen the way the taxes fall for the company and for my parents. The small businesses eat a major tax burden because the largest companies (Exxon/Mobil is a great example) get BILLIONS in breaks.

On the income side, look at Warren Buffet. He pays 17.7% of his income to tax. You and I pay between 28-34% based on income. My tax rate is something like 31%. If you spend some time reading about Obama's plan, the focus will be on reducing the layers of the tax system, peeling away some of those monster loopholes and shifting the MASSIVE debt that Bush raised with the war.

Someone has to pay for it sometime, so don't listen to the rhetoric about lowering taxes. Bush Sr painted that picture clearly when he campaigned on a no-new-taxes platform, which lasted exactly 9 months into his campaign. The debt must be paid, and the burden should be placed on those able to afford it. Obama's plan hinges on that idea, and keeps the taxes for those of us out here working 40+ hrs a week exactly where they are.

E

[Marc Martyn]

On the subject of Buffet, it reminded me of a comment he made last year. Interesting....

http://money.cnn.com/2007/06/26/news/ne ... 2007062700

[Marc Martyn]

Bad Day (cont.)

Wow! Sept. 15th will be remembered for some time. For those that may be a bit confused as to how this all came about, this article dated January 22, 2008 pretty much explains the causes in a nut shell. I find it hard to believe that no one in the government didn't see this coming.

http://www.huffingtonpost.com/robert-we ... 82639.html

[Gisteppo]

Kinda smells like the S&L collapse due to deregulation in the 80's, eh Marc?

E

[Marc Martyn]

Kinda smells like the S&L collapse due to deregulation in the 80's, eh Marc?

E

Gee, do you think?:-s I thought that I smelled something rank. I dug down into the political rhetoric slop bucket and guess what I found rotting in the bottom:

Who was it that used aggressive efforts when he was chairman of the Senate Banking Committee to deregulate the banking and financial services industry. That culminated in passage in 1999 of a sweeping financial services law that tore down the Depression-era Glass-Steagall wall separating regulated commercial banks from largely unregulated investment banks. And little regulation was put in to replace it. "We are here today to repeal Glass-Steagall, because we have learned that government is not the answer," "We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom."-- Phil Gramm, co-chair of McCain’s campaign

Who was it that lobbied Congress on behalf of the Tennessee Savings and Loan League to pass the Garn-St Germain Depository Institutions Act of 1982, which deregulated the Savings and Loan industry. A large congressional majority and President Ronald Reagan supported the act but it was said to be a factor that led to the savings and loan crisis. He received $1,600 for communicating with some congressional staffers on this issue. He also held the position of Chairman of the Senate Committee on Governmental Affairs. He was preceded by non other than, Senator Ted Stevens. --Former Tennessee Senator, Fred Thompson. Speaker at the 2008 RNC convention.


Hmmm. I wonder what kind of "reform" Mr. McCain is going to bring to Washington D.C. and Wall Street?

[Anonymous]

That would be the act signed into law by Bill Clinton in 1999, right?

Here is a nice overview paper which talks about this act:

GLB Act history

and (per Wickpedia referenced below):


On November 12, 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act of 1933. One of the effects of the repeal was to allow commercial and investment banks to consolidate. Some economists have criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.[7][8]

The repeal enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the "finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors [in 1999]. They laid out more than $200 million for lobbying in 1998, according to the Center for Responsive Politics..." These industries succeeded in their two decades long effort to repeal the act.[9]

The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980's. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.

The argument for preserving Glass-Steagall (as written in 1987):

1. Conflicts of interest characterize the granting of credit – lending – and the use of credit – investing – by the same entity, which led to abuses that originally produced the Act

2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments.

3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.

4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).

The argument against preserving the Act (as written in 1987):

1. Depository institutions now operate in “deregulated” financial markets in which distinctions between loans, securities, and deposits are not well drawn. They are losing market shares to securities firms that are not so strictly regulated, and to foreign financial institutions operating without much restriction from the Act.

2. Conflicts of interest can be prevented by enforcing legislation against them, and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms.

3. The securities activities that depository institutions are seeking are both low-risk by their very nature, and would reduce the total risk of organizations offering them – by diversification.

4. In much of the rest of the world, depository institutions operate simultaneously and successfully in both banking and securities markets. Lessons learned from their experience can be applied to our national financial structure and regulation.[10]


[edit] References
^ "The Repeal of Glass-Steagall and the Advent of Broad Banking".
^ "FDIC Statement of Policy on the Applicability of the Glass-Steagall Act to Securities Activities of Subsidiaries of Insured Member Banks".
^ http://digital.library.unt.edu/govdocs/ ... crs-9065:1
^ America's History, Fifth edition by; James A. Henretta, David Brody, Lyum Dumenil, Susan Ware.
^ Developing Institutional Investors in the People's Republic of China, paragraph 24, <http://www.worldbank.org.cn/english/con ... nvnote.pdf>
^ Langlois, John D. (2001), "The WTO and China's Financial System", China Quarterly 167: 610-629, doi:10.1017/S0009443901000341
^ Kuttner, Robert (2007-09-24), "The Bubble Economy", The American Prospect, <http://www.prospect.org/cs/articles?art ... le_economy>
^ Tsang, Michael (2008-03-17), "Buy Signals Abound in U.S. Stocks Shadowed by 1970s", Bloomberg.com, <http://www.bloomberg.com/apps/news?pid= ... =exclusive>
^ Editorial (1999-11-15), "Breaking Glass-Steagall", The Nation
^ http://digital.library.unt.edu/govdocs/ ... crs-9065:1

[Gisteppo]

Mike, this is a well researched piece, and I congratulate you on a point well made. One little tidbit must be brought up, however.

This was at a time when the congressional houses were in a REPUBLICAN SUPER MAJORITY and all bills that crossed Pres. Clinton's desk were veto-proof.

Being that it was an act, it, by name, implies an act of Congress. Congress was responsible for the bill. Congress dictated (with much help from lobbyists) what was written, how it was devised, and via the senate, it was redacted and restructured into the bill you see above. I did not agree with Clinton's handling of certain industry deregulation procedures, but you can't pin this one on his lapel. A very powerful republican conservative congress wrote the act.

E

[Drewp]

McCain has said about himself that economics are not his strongest subject. http://thinkprogress.org/2008/01/18/mccain-economy/

And Palin, well, she can see Russia.

[Anonymous]

Mike, this is a well researched piece, and I congratulate you on a point well made. One little tidbit must be brought up, however.

This was at a time when the congressional houses were in a REPUBLICAN SUPER MAJORITY and all bills that crossed Pres. Clinton's desk were veto-proof.

Being that it was an act, it, by name, implies an act of Congress. Congress was responsible for the bill. Congress dictated (with much help from lobbyists) what was written, how it was devised, and via the senate, it was redacted and restructured into the bill you see above. I did not agree with Clinton's handling of certain industry deregulation procedures, but you can't pin this one on his lapel. A very powerful republican conservative congress wrote the act.

E

This has been interesting to research. As I suspected, both parties seem to be culpable, as well as Clinton. Here's an interesting piece on the subject:

Clinton and Glass-Steagall

And pertanent quotes:
The Repeal of Glass Steagall

In the background of the go-go economy, the feeling grew among some economists and the financial community that Glass-Steagall hampered America's financial competitiveness. Among the many voices favoring this was Alan Greenspan along with former Goldman Sachs partner Robert Rubin, Bill Clinton's Treasury Secretary. In a 1995 speech and testimony to Congress Rubin signaled the Clinton Administration was ready to repeal Glass-Steagall:

"The banking industry is fundamentally different from what it was two decades ago, let alone in 1933." He said the industry has been transformed into a global business of facilitating capital formation through diverse new products, services and markets. "U.S. banks generally engage in a broader range of securities activities abroad than is permitted domestically," said the Treasury secretary. "Even domestically, the separation of investment banking and commercial banking envisioned by Glass-Steagall has eroded significantly."

Anyone who thinks the repeal of Glass-Steagall was forced on an unwilling Bill Clinton need only read Rubin's testimony. A year later Sandy Weill set in motion the forces that would finally end Glass-Steagall.

---------------------------------------------------------------------

Then there's this:

So now we find outselves in the midst of a Presidential campaign in which the chief financial advisor to one candidate authored the bill that repealed Glass-Steagall and another candidate's husband acquiesced in the deal. The third candidate has already stated he would not reinstate Glass-Steagall. When asked if he would restore Glass-Steagall Barack Obama notes:

Well, no. The argument is not to go back to the regulatory framework of the 1930's because, as I said, the financial markets have changed substantially.

I would be remiss by not adding four of Obama's top six contributors include Goldman Sachs, J.P. Morgan and--guess who--Citigroup.

None of this promise the next four years will be any easier on the American consumer. And meanwhile I am still waiting after six months for some reporter to ask Hillary Clinton what she thinks of her husband's repeal of Glass-Steagall and whether she would favor rolling it back. The reason for the silence may be that for the Clintons the repeal of Glass-Steagall may prove far more embarrassing in the long run than Monica Lewinsky.

-------------------------------------------------------------

(note, Citigroup was the prime lobbiest in this mess, Clinton's Treasury Secretary Rubin profited handsomely from Citibank for his "service" - "Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant. The previous year, Weill had called Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, "You're buying the government." Progressive Historian")


--------------------------------------------------------------------------

HERE IS THE STATEMENT BY BILL CLINTON AT THE SIGNING OF THE "FINANCIAL MODERNIZATION BILL. (LINK TO ENTIRE SIGING COMMENTS)

AND HERE IS CLINTON'S OWN WORDS ABOUT THIS BILL:

FROM THE OFFICE OF PUBLIC AFFAIRS

November 12, 1999
LS-241




PRESIDENT CLINTON: (Applause.) Thank you very much. Thank you. Thank you. Thank you, and good afternoon. I thank you all for coming to the formal ratification of a truly historic event. Senator Gramm and Senator Sarbanes have actually agreed on an important issue. (Laughter.) I -- MR. PODESTA (?): But I'm sitting in between them. (Laughter.)

PRESIDENT CLINTON: Stay right there, John! (Laughs.) I asked Phil on the way out how bad it was going to hurt him in Texas to be walking out the door with me. (Laughter.) We decided it was all right today. Like all those before me, I want to express my gratitude to those principally responsible for the success of this legislation. I thank Secretary Summers and the entire team at Treasury, but especially Undersecretary Gensler for their work, and Assistant Secretary Linda Robertson. And I thank you, Chairman Greenspan, for your constant advocacy of the modernization of our financial system. I thank you, Chairman Levitt, for your continuing concern for investor protections and I thank the other regulators who are here. I thank Senator Gramm and Senator Sarbanes, Chairman Leach and Congressman LaFalce and all the members of Congress who are here. Senator Dodd told me the Sisyphus story, too, over and over again, but I've rolled so many rocks up so many hills, I had a hard time fully appreciating the sgnificance of it. (Laughter.)

But I do want to thank all the members here and all those who aren't here and I'd like to thank two New Yorkers who aren't here who have been mentioned -- former Secretary of the Treasury Bob Rubin, who worked very hard on this, and former chairman, Senator Al D'Amato, who talked to me about this often. So this is a day we can celebrate as an American day. To try to give some meaning to the comments that the previous speakers have made about how we are making a fundamental and historic change in the way we operate our financial institutions, I think it might be worth pointing out that this morning we got some new evidence on the role of new technologies in our economy which showed that over the past four years productivity has increased by a truly remarkable 2.6 percent. That's about twice the rate of productivity growth the United State experienced in the 1970s and the 1980s. In the last quarter alone, productivity grew at 4.2 percent. Over the past four years, productivity has increased by a truly remarkable 2.6 percent. x x x percent.

That's about twice the rate of productivity growth the United States experienced in the 1970s and the 1980s. In the last quarter alone, productivity grew at 4.2 percent. This is not just soom aloof statistic that matters only to the Federal Reserve, the Treasury and Wall Street economists. It is the key to rising paychecks and greater security and opportunity for ordinary Americans. And the combination of rising productivitiy, more open borders and trade, working to keep down inflation, the dramatic reduction of the deficit and the accumulation of the surplus and the continued commitment to the investment in the Aemrican people, research and development and new productivy () technologies has given us the most sustained real wage growth in more than two decades with the lowest inflation in more than three decades.

I can tell you that back in December of 1992, when we were sitting around the table at the governor's mansion trying to decide what had to be in this ec

[Gisteppo]

Mike, well put. I agree wholeheartedly that Clinton was responsible for some heavy hitting policy based on deregulation theory. The FCC took some serious hits around the same time period that affects Emergency responders to this day. I still disagree with the policy, but you have soundly made your point.

My point still stands that you can't pin it on the party, however.

Now bringing it back into the current context, this piece of legislation softened the markets in a detrimental and long-lasting way. Do you think continued degradation of the stop-gaps and protections put in place by acts such as the above will mitigate the problem, as put forth by McCain? His last short comment was reported as noting the way out of this economic crisis was deregulation and tax reduction, said on the stump a day or two ago. Or do you feel that we should be enforcing our antitrust legislation and preventing things like the new bankruptcy bill (also an interesting factor in this financial crisis) which is solely supporting the banks and not the consumer?

E