The Great Recession - post mortem

[Buccaneer]

Originally Posted by DaddyTorgo

amusing quote from one of the comment threads on mcardle's blog

We get a Naderite sighting!

They will always continue to do this, since it is political expedient to do so. With Obama's connection to Merrill and McCain connection to Lehman, they will always prop up the moneybaggers.

[DaddyTorgo]

Originally Posted by Buccaneer

We get a Naderite sighting!

They will always continue to do this, since it is political expedient to do so. With Obama's connection to Merrill and McCain connection to Lehman, they will always prop up the moneybaggers.

so cynical Bucc. I just found it funny more for the imagery and the frustration than the political commentary of it.

it's like "dude...i wanna see some damn explosions! not these piddly lil cherry bombs"

[DaddyTorgo]

At this rate we should have collectivized agriculture by Thursday.

just gonna have fun posting quotes all day

[JPhillips]

Has anyone heard what the government plans to do with the 80% share in AIG?

Also, If these companies are too big to fail, why the hell doesn't the government break them up? That seems a far better idea to me than showering them with billions borrowed from the Chinese. I'd love to have just one Congressman scream and yell that the Treasury doesn't have the authority to do this without Congressional approval.

[ISiddiqui]

I'm wondering if the government will just proceed over a slow breakup of AIG... so basically get money back for its 80% share.

[DaddyTorgo]

Originally Posted by ISiddiqui

I'm wondering if the government will just proceed over a slow breakup of AIG... so basically get money back for its 80% share.

that's the thinking

[JPhillips]

Originally Posted by ISiddiqui

I'm wondering if the government will just proceed over a slow breakup of AIG... so basically get money back for its 80% share.

Likely at pennies on the dollar.

[JPhillips]

Markets are plunging again today. Anyone think WaMu will last through the week?

[Flasch186]

The weekends seem to be black holes so maybe through the week but the weekends are days of dread.

[path12]

Originally Posted by JPhillips

Markets are plunging again today. Anyone think WaMu will last through the week?

I've been thinking they won't last the week for the past four weeks, so I'm hesitant to give any opinion this time!

[Tekneek]

Originally Posted by JPhillips

I'd love to have just one Congressman scream and yell that the Treasury doesn't have the authority to do this without Congressional approval.

Ron Paul may have, or is likely to be one of the few around today that has even got close to that type of statement.

[path12]

From one of my favorite financial blogs, I thought this was a nice summary of where we're at right now:

Calculated Risk: Comment on Crisis: Necessary Steps

[Mizzou B-ball fan]

Originally Posted by path12

From one of my favorite financial blogs, I thought this was a nice summary of where we're at right now:

Calculated Risk: Comment on Crisis: Necessary Steps

Some of the bigger city real estate markets on the coasts are the biggest portion of that property value decline. Midwest cities like Kansas City are seeing a surge in property value right now, mainly due to population movement out of the higher priced markets. The increase in demand from other markets is actually fueling prices in this area. There are homes available in this area for $120-150K that would sell for $300K+ in subarbs around places like Boston, NYC, Washington D.C., etc. People can sell those overvalued homes at a loss and still come out alright if they move into a cheaper market.

[Flasch186]

mkts are taking another big crap today and spreads widened which means that the fear ratio is 'up' after the bailout. People must be speculating that there are more bricks to fall. May be a buying opportunity within the next few wks but not right now...its a buzzsaw.

[Marc Vaughan]

I think the market will continue to seesaw for quite a while - I bet a while back the bottom would be around 10k ... so 600 pts to go

[Galaxy]

Oil is up as well.

[darkenigma510]

ruh roh

http://www.reuters.com/article/idUSN...dChannel=10112

[Flasch186]

huh, what does this mean?

[darkenigma510]

Means the Treasury is now expanding the Fed's balance sheet by printing treasuries....

highly inflationary and not a good sign as t basically says, the Fed is slowly going broke with all these bailouts....

[darkenigma510]

dola, this is likely why gold is up about $50 today....

[JPhillips]

Damnit, and I just stuck all my gold in an envelope and mailed it to some guy on TV.

[Mizzou B-ball fan]

Originally Posted by JPhillips

Damnit, and I just stuck all my gold in an envelope and mailed it to some guy on TV.

I'm putting your check in the mail as we speak. Nice doing business with you.

[Tekneek]

Originally Posted by darkenigma510

dola, this is likely why gold is up about $50 today....

$50? Our money is shit.

Will this renew the call for oil to be traded in Euros?

[Flasch186]

Dylan and Maria are crushing the spokesperson for S&P right now and if you can find the video somewhere from today it's a worthy watch from CNBC.

[DaddyTorgo]

2nd worst day of the year: -449

[Anthony]

Originally Posted by darkenigma510

Means the Treasury is now expanding the Fed's balance sheet by printing treasuries....

highly inflationary and not a good sign as t basically says, the Fed is slowly going broke with all these bailouts....

obviously all these wars aren't helping matters - i wonder if this is a great opportunity to pull troops and call it a day and label it "in the interest of preserving a sensitive American economy". it'd surely stop the bleeding. i think you'd have to be a fool to try to argue the American economy in its current state can handle footing the bill for the combined Middel East wars. i think it's time we start shifting our interests inward. i think this is a big reason why all the Iran rabble rousing rhetoric from the summer has calmed down to an inaudible whisper - going to war with Iran was already going to be a tough sell, but now? given our economy?

[BishopMVP]

Originally Posted by JPhillips

Also, If these companies are too big to fail, why the hell doesn't the government break them up? That seems a far better idea to me than showering them with billions borrowed from the Chinese. I'd love to have just one Congressman scream and yell that the Treasury doesn't have the authority to do this without Congressional approval.

The McArdle blog at The Atlantic points out why placing a cap on how big these companies can get isn't a good idea - it's pretty much only highly successful ones that get that big (Fannie and Freddie Mac being the exception) and placing a cap on how big they can get will only lead to them moving countries once they start approaching the cap. Needless to say, it's not a good long-term strategy to chase your biggest, most successful companies overseas.

Originally Posted by JPhillips

Likely at pennies on the dollar.

The thinking behind the bailout/buyout is that now AIG doesn't have to sell at pennies on the dollar, and can at least break apart in a more orderly, non fire-sale fashion. It will still probably be for dimes on the dollar though.

[Marc Vaughan]

Originally Posted by Anthony

obviously all these wars aren't helping matters - i wonder if this is a great opportunity to pull troops and call it a day and label it "in the interest of preserving a sensitive American economy". it'd surely stop the bleeding. i think you'd have to be a fool to try to argue the American economy in its current state can handle footing the bill for the combined Middel East wars. i think it's time we start shifting our interests inward. i think this is a big reason why all the Iran rabble rousing rhetoric from the summer has calmed down to an inaudible whisper - going to war with Iran was already going to be a tough sell, but now? given our economy?

(sarcastic - but has some basis in fact)
I actually think this recession was a fantastic ploy by the American goverment, the middle east (esp. Saudi Arabia) now owns a large percentage of the American financial institutes which makes them doing anything negative against the country much less likely.

[Tekneek]

Originally Posted by Anthony

obviously all these wars aren't helping matters - i wonder if this is a great opportunity to pull troops and call it a day and label it "in the interest of preserving a sensitive American economy".

It would certainly help to steady the government's financial condition, which is getting worse every single day. Just demonstrates pretty clearly how W has made many mistakes over time. He has ended up on the wrong side of many things, and the American people are going to be paying for it for a long time...perhaps in ways that we never expected to happen in America.

[Edward64]

Originally Posted by Tekneek

It would certainly help to steady the government's financial condition, which is getting worse every single day. Just demonstrates pretty clearly how W has made many mistakes over time. He has ended up on the wrong side of many things, and the American people are going to be paying for it for a long time...perhaps in ways that we never expected to happen in America.

I'm not sure if you are attirbuting blame to W for the current financial mess we are in? I disagree if you are.

[Surtt]

Originally Posted by Tekneek

It would certainly help to steady the government's financial condition, which is getting worse every single day. Just demonstrates pretty clearly how W has made many mistakes over time. He has ended up on the wrong side of many things, and the American people are going to be paying for it for a long time...perhaps in ways that we never expected to happen in America.

I don't know how you can blame W individually for the Wall Street problems.
The whole industry got greedy and stupid, passing out mortgages like candy.

[Buccaneer]

To follow up with my comment in the other thread about good/bad economy depending where you look and what to look at, not 10 minutes later, I heard something on NPR about building construction (including housing and commercial). It made a point about the East and Midwest being down 14% (compared to last year?) and the South down 7%. Later, I followed up to find out about the West. We are actually UP.

[Tekneek]

Originally Posted by Edward64

I'm not sure if you are attirbuting blame to W for the current financial mess we are in? I disagree if you are.

No, not at all. I blame him for invading Afghanistan and Iraq in half-assed ways, that have cost us billions and billions of dollars at a time when we can ill afford to be paying it. They tried to go light with industry and let them find their own way, only to have it cost all of us more money in the long run. I am not blaming him for the crisis on Wall Street, I am blaming him for his contributions to this financial 'perfect storm', if you will, that is likely going to devalue our currency in a major way.

[Tekneek]

Originally Posted by Surtt

I don't know how you can blame W individually for the Wall Street problems.
The whole industry got greedy and stupid, passing out mortgages like candy.

I am sorry if it read that way, because I didn't think it did. I blame him for invasions of Iraq and Afghanistan that have no clear sign of ending, costing us billions and billions that we can ill afford to keep spending, while Osama bin Laden and the Taliban are regaining power and influence. Sure, we deposed Saddam and killed him, but he wasn't posing an immediate threat and that surely has not been worth the amount of money spent thus far in Iraq.

[Surtt]

Originally Posted by Tekneek

I am sorry if it read that way, because I didn't think it did. I blame him for invasions of Iraq and Afghanistan that have no clear sign of ending, costing us billions and billions that we can ill afford to keep spending, while Osama bin Laden and the Taliban are regaining power and influence. Sure, we deposed Saddam and killed him, but he wasn't posing an immediate threat and that surely has not been worth the amount of money spent thus far in Iraq.

Well, that you can certainly blame him for.

[path12]

$10 billion a month takes a toll after awhile. That said, I don't blame anyone specifically. I take much of this as a refutation of supply side economic theory though.....or at the very least an example of the excesses of that theory.

[JPhillips]

Oh shit. Anybody know what this would mean.

Pressure is building on the pristine “AAA” rating of the United States after a federal bailout of American International Group Inc, the chairman of Standard & Poor’s sovereign ratings committee said on Wednesday.

The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve “has weakened the fiscal profile of the United States,” S&P’s John Chambers told Reuters in an interview.

“Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating,” Chambers said. “There’s no God-given gift of a ‘AAA’ rating, and the U.S. has to earn it like everyone else.”

[path12]

I think it means that there's only so much money you can put out there before you substantially weaken the faith in the currency.

[CamEdwards]

That almost sounds like two different things. Saying a LACK of a pro-active stance could "put pressure on the U.S. triple-A rating"... but the U.S. was pro-active. That's a little confusing.

[Flasch186]

and the guy said the opposite on CNBC today, that the US wasnt on a negative watch.

[CamEdwards]

A little bit more information from that Reuters story:

On Wednesday, Chambers compared the U.S. rating to a lobster cooking in a pot of cold water.

"The lobster is still in the 'AAA' pot and still moving," Chambers said. "The heat is turning up, but the water is still 'AAA' stable."

Chambers also called the AIG bailout "a signal event without precedent," adding: "This will be case studied for decades to come."

Moody's Investors Service and Fitch Ratings also have top ratings and "stable" outlooks for the United States.

"The federal government's debt ratios still look comfortable, and the amounts involved in the case of AIG are small, despite their large absolute amount, in comparison to federal government's already outstanding debt of more than $5 trillion," Moody's analyst Steven Hess said in an e-mail.

[path12]

Wow. Just wow.

Calculated Risk: Report: Morgan Stanley CEO: 'Need a Partner or Not Going to Make it'

Money quote:

“We need a merger partner or we’re not going to make it,” Mr. Mack told Mr. Pandit, according to two people briefed on the talks. Mr. Pandit, a former senior investment banker at Morgan Stanley, said Citigroup was not interested.

There goes Morgan Stanley. This is getting really freaky.

[JPhillips]

Thank goodness all my investments are tied up in secure mattress technology.

[path12]

BTW, Nikkei down another 3% and Hang Seng down 4% early.

[CamEdwards]

You know, it's stories like that where you wish there were attributable sources. Two people BRIEFED on the talks? The Times is quoting anonymously quoting two people who weren't even there? Given the nervousness in the market, I think that's very poor journalism on the part of the Times.

[path12]

Originally Posted by CamEdwards

You know, it's stories like that where you wish there were attributable sources. Two people BRIEFED on the talks? The Times is quoting anonymously quoting two people who weren't even there? Given the nervousness in the market, I think that's very poor journalism on the part of the Times.

Agreed. It sure appears someone has it out for either Mack or MS in general. Reading through the comments there was a lot of speculation it came from the Citibank head himself -- apparently he was after the CEO job Mack got.

[Edward64]

Originally Posted by path12

Agreed. It sure appears someone has it out for either Mack or MS in general. Reading through the comments there was a lot of speculation it came from the Citibank head himself -- apparently he was after the CEO job Mack got.

Unfortunately, deep down, we know there is truth in this ... don't we?

[CamEdwards]

Originally Posted by Edward64

Unfortunately, deep down, we know there is truth in this ... don't we?

I'm agnostic when it comes to believing in the Times.

[st.cronin]

So, what's the fallout from all this? Who do these firms owe money to, other than each other? Isn't that what's happening? Lehman Brothers shuts down, stops paying their bills, so AIG and Morgan Stanley have to shut down, and then the next domino falls... but what industry/ies outside of finance is hurt by this?

[path12]

Originally Posted by st.cronin

So, what's the fallout from all this? Who do these firms owe money to, other than each other? Isn't that what's happening? Lehman Brothers shuts down, stops paying their bills, so AIG and Morgan Stanley have to shut down, and then the next domino falls... but what industry/ies outside of finance is hurt by this?

The main problem as I understand it is that all of this will drastically reduce credit for banks, businesses and individuals. Given that our economy has been pretty reliant on spending over our means, this is a big problem because if credit isn't available, consumer spending stops, jobs vanish -- which leads back to more people having to foreclose on their houses, etc, etc.

The other problem is the very real risk of the government being forced to drastically increase the money supply in order to service this debt. That leads to the weakening of the dollar and inflation. Though there are those who argue that a Japan style 15-year recession/depression with deflation is the net result.

I don't know how valid any of these results are because I just don't understand the ins and outs of this enough, though I'm learning some. But I'm not real confident that experts know exactly how this will all shake out either.