tag:blogger.com,1999:blog-28464200.post3457016268487176936..comments2023-10-24T20:47:13.885+05:30Comments on The Spaniard In The Works: The Idiot's Guide to a Financial MessSpace Barhttp://www.blogger.com/profile/08251329008160756254noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-28464200.post-78440631902797764272008-09-27T11:01:00.000+05:302008-09-27T11:01:00.000+05:30Contrary to what the main stream media says, wall ...Contrary to what the main stream media says, wall street as a whole (capitalism) should not be blamed for the actions and policies set forth by OUR congress. There are, in fact, corrupt men in wall street who partnered with corrupt men in government to engineer a win-win situation at the expense of the taxpayer. Capitalism (and our nation or any nation) will only survive when the good and virtuous people are running it. Which means, come this November, you must vote for good men and women who stand by principle and uphold our constitution and not just give lip service to causes that seem noble and just.Nickhttps://www.blogger.com/profile/02451035820939215366noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-48539368073551720492008-09-26T13:34:00.000+05:302008-09-26T13:34:00.000+05:30The other side: Rep. Marcy KapturThe other side:<BR/> <A HREF="http://www.youtube.com/watch?v=S27yitK32ds" REL="nofollow">Rep. Marcy Kaptur</A>gaddeswaruphttps://www.blogger.com/profile/16509075029154476375noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-1328713322671617622008-09-26T13:18:00.000+05:302008-09-26T13:18:00.000+05:30Ha, it took a Bush to do the simple explanation. A...Ha, it took a Bush to do the simple explanation. Against this speech, the rest of the 'experts' sound like they are just talking between themselves.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28464200.post-67814025483378542122008-09-26T13:16:00.000+05:302008-09-26T13:16:00.000+05:30People have seen this yes ?http://docs.google.com/...People have seen this yes ?<BR/><BR/><A>http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true </A>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28464200.post-56492861751715045792008-09-26T08:41:00.000+05:302008-09-26T08:41:00.000+05:30Yes, Bush actually did a great job of putting it i...Yes, Bush actually did a great job of putting it in simple terms. I was actually very impressed with his speech (or his speechwriter)..Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28464200.post-19727875299489732942008-09-26T07:22:00.000+05:302008-09-26T07:22:00.000+05:30The link to Felix Salmon's post does not seem to b...The link to Felix Salmon's post does not seem to be working. The bit from the speech which Salmon quoted and which I think is the best (approximate) exposition of the financial crisis for laymen like me is:<BR/>"For more than a decade, a massive amount of money flowed into the United States from investors abroad, because our country is an attractive and secure place to do business. This large influx of money to U.S. banks and financial institutions -- along with low interest rates -- made it easier for Americans to get credit. These developments allowed more families to borrow money for cars and homes and college tuition -- some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.<BR/>Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit -- combined with the faulty assumption that home values would continue to rise -- led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.<BR/>Optimism about housing values also led to a boom in home construction. Eventually the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell. And this created a problem: Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected -- along with mortgage payments they could not afford. As a result, many mortgage holders began to default.<BR/>These widespread defaults had effects far beyond the housing market. See, in today's mortgage industry, home loans are often packaged together, and converted into financial products called "mortgage-backed securities." These securities were sold to investors around the world. Many investors assumed these securities were trustworthy, and asked few questions about their actual value. Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."gaddeswaruphttps://www.blogger.com/profile/16509075029154476375noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-12084181623270419912008-09-26T06:34:00.000+05:302008-09-26T06:34:00.000+05:30I found President Bush’s Speech to the Nation on t...I found President Bush’s Speech to the Nation on the Economic Crisis quite useful; about a third of it as good summary as any I have seen. Part of it is quoted in Felix Salmon's post <A HREF="http://www.portfolio.com/v:ews/blogs/market-movers/2008/09/24/didnt-panic?tid=true" REL="nofollow">Didn't Panic</A>gaddeswaruphttps://www.blogger.com/profile/16509075029154476375noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-39609437707345662472008-09-26T04:25:00.000+05:302008-09-26T04:25:00.000+05:30Alok: Even if we assume, for a moment, that financ...Alok: Even if we assume, for a moment, that financial service firms (and notice that they're organizations, not institutions) have a responsibility to the economy in general rather than only to their investors, a moment's thought will show you why such self-regulation would never work in practice. It would require dozens of competing firms (not to mention all potential competitors who haven't entered the market yet) to collaboratively agree on a norm to avoid making risky investments, in an environment where a) breaking that norm would allow the norm-breaker to realize super-normal profits b) breaking the norm would not seriously jeopardize the economy if the rule-breaker were the only one to do it c) managerial rewards are based on the achievement of profit, not on the unverifiable avoidance of potential economic collapse and d) it's unclear, ex-ante, what is or is not a economically risky investment. It's precisely because there is no way such collaborative action would ever work that we need government oversight. <BR/><BR/>It only makes sense to feel 'outraged' if someone betrays your trust / acts in ways that are inconsistent with prior expectations. But from my perspective, at least, Wall Street has in no way done that. Are there seriously people who have believed all along that I-bankers were motivated by the good of the economy and were working together towards (to use rahul's phrase) the common good? Seriously? How totally naive do you have to be to believe that? It's silly to feel outrage over the fact that financial service firms didn't act in ways that they were not designed to and could not be reasonably expected to.Falstaffhttps://www.blogger.com/profile/09791162324919462038noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-52576599916612632682008-09-26T03:14:00.000+05:302008-09-26T03:14:00.000+05:30falstaff: i broadly agree with what you are saying...falstaff: i broadly agree with what you are saying. there is definitely a problem with our culture where relentless greed is seen as normal and money is thought to be the sole arbiter of value but wall street still deserves special condemnation because it is basically an institutionalization of all these impulses. I do belive that people (even greedy, money minded ones) can act as moral agents, it is only when they become part of an organization and culture like wall st that things get worse. (All those concepts about alienation and responsibility from sociology or organization theory...) That's why I thought it was encouraging to see that people were finally raising their voices expressing outrage.<BR/><BR/><I>it's patently ridiculous to make financial service firms responsible for safeguarding the economy </I><BR/><BR/>I don't understand this. These financial institutions do have responsibility towards all of us, even the ordinary person on street, who doesn't know or care what options futures and other derivatives are. the final blame will go on the govt or whoever signs on the paper currency but once you have billions of assets it is your responsibility to see to it and protect it wisely.Alokhttps://www.blogger.com/profile/12947383354732747209noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-51949702337887925592008-09-26T03:00:00.000+05:302008-09-26T03:00:00.000+05:30Its all about the Federal Reserve System.Its all about the Federal Reserve System.Jasonhttps://www.blogger.com/profile/11707747781007743555noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-89102257554984324042008-09-25T23:26:00.000+05:302008-09-25T23:26:00.000+05:30For those who are interested, the Freakonomics blo...For those who are interested, the Freakonomics blog on NYT carried a terrific analysis in the same FAQ format, minus the value judgments, of course :)(No links, google it.)kmhttps://www.blogger.com/profile/16040339235134145847noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-62252413906116768432008-09-25T22:28:00.000+05:302008-09-25T22:28:00.000+05:30Agree entirely with falstaff that making Wall Stre...Agree entirely with falstaff that making Wall Street out to be the devil incarnate and borrowers as baa lambs is a bit much. <BR/>swar: <A HREF="http://www.brasschecktv.com/page/187.html" REL="nofollow">This</A> might give you a better idea :-)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28464200.post-48120368045646930882008-09-25T22:22:00.000+05:302008-09-25T22:22:00.000+05:30spacebar - nice summary, thanks. falsie and others...spacebar - nice summary, thanks. <BR/><BR/>falsie and others: <A HREF="http://www.washingtonpost.com/wp-dyn/content/article/2008/09/16/AR2008091602877.html" REL="nofollow">here</A>'s a piece by Robert Samuelson, someone who's hardly a leftie anti-capitalist, squarely blaming the Wall Street culture (and in particular the change in that culture since the 1980s) for the mess. (The short reason: the focus on short-term gains, plus the reliance on "leverage", i.e. borrowed money. As I understand it, if one single regulation would have helped, it would have been limiting leverage ratios. But as long as the money was coming in, who worried?)<BR/><BR/>Another aspect, apparently, is that the modern "instruments" are so complicated that nobody understands how it works.<BR/><BR/>Yes, greed is everywhere, but the big guys and the governments should have caught it and controlled it, especially after the Barings Bank collapse in 1995 and the Société Générale incident this year, both of which involved astronomical losses run up by speculating on borrowed money -- exactly what hit Lehman and others.<BR/><BR/>I think Husain's article was too balanced, if anything -- it could have fingerpointed more aggressively. The entire point of capitalism is that people (and corporations) are selfish and greedy, and you need to leverage that selfishness and greed for the common good -- not let it go out of control. Milton Friedmanism isn't capitalism.Rahul Siddharthanhttps://www.blogger.com/profile/04809667965184094636noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-35664996557496952982008-09-25T20:10:00.000+05:302008-09-25T20:10:00.000+05:30alok: I don't disagree that we need more outrage, ...alok: I don't disagree that we need more outrage, but I see no reason why it should be targeted exclusively, or even primarily, at Wall Street. Wall Street is simply the ultimate embodiment of a market society - if you live in a society where money is the arbiter of status and individualism and consumerism are feted, you inevitably end up with a system that is 'unscrupulous'. It's not as though bankers are greedier / more wealth crazed than the people who want to own homes they can't afford - they're just smarter and more successful. And it's patently ridiculous to make financial service firms responsible for safeguarding the economy - if for not other reason than the fact that that kind of collective action by firms that are essentially competitors would be impossible anyway. As for not letting the experts make our decisions for us - it's a pretty sentiment, but who would you suggest makes our decisions for us then? The same people who don't understand what's going on? <BR/><BR/>Look, I'm not saying Wall Street isn't culpable, I'm saying they're only culpable to the extent that they're part of a larger social system that we're all part of. It's convenient for society to blame this mess on Wall Street (as though they were some kind of spectral Other, rather than a sub-section of that society that has been consistently envied), but it's time that society started to accept its own responsibility for what's happened. The message we should be taking away from this crisis is not that we need to stop short-selling or that we need more regulation of banks (by, as you point out yourself, potentially inept and self-interested regulators) or that the Investment Banking model has been proven to fail, or that the whole thing is a conspiracy by the elite to snatch the food out of the mouths of African-American children or any one of the dozens of other childish myths doing the circuit. The message we should be taking away is that we need to think carefully about what we, as a society, value, and how our obsession with money and our addiction to debt leads inexorably to meltdown. <BR/><BR/>In any case, my point in the first comment was more that a piece that claims to be a primer on the financial mess should not be so overwhelmingly partisan. Because it combines factual information with random speculation and subjective value judgments, without making a distinction between the two, this piece is propaganda.Falstaffhttps://www.blogger.com/profile/09791162324919462038noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-41533304105868346532008-09-25T19:28:00.000+05:302008-09-25T19:28:00.000+05:30Unlike falstaff or lekhni, I feel there is not eno...Unlike falstaff or lekhni, I feel there is not enough moral outrage which probably is because people don't really understand what is exactly happening. Again something that is very typical of the times we live in. "Experts" telling people that they know what is good for them because they know all the fancy mathematical equations and jargons. If you speak even in low tones they will show you their equations about how mortgage backed securities are valued!<BR/><BR/>about american politics: most of these problems were started during Clinton's time. So it is not really a problem of democrat or republican. These bureaucrats who are working for the government come from wall street, i don't know if anybody thinks about things like conflict of interest when they are chosen for the job. To me this seems like the same old case of military-industrial complex which bypassed democratic processes only now add the wall street to them too.<BR/><BR/>everybody cares about money and everybody is also greedy to an extent (though that shouldn't stop us from expressing our condemnation) but it gets worse when it is institutionlized in an organization. all that stuff about diffusion of responsibility, goal displacement, moral alienation that you read in holocaust theory books are more or less applicable in these situations too.<BR/><BR/>Most of last year I was working for people who handle the so called "commodity desk". A few months back there was lot of outrage about rising prices of essential commodities and starvation and inside the bank you could see clearly that it was a case of betting and hoarding. But it didn't matter everybody was just doing what they were told to do. Nothing illegal about buying and selling things after all... if you ask people they will give you some spiel about demand and supply and price equilibrium.<BR/><BR/>In short, I believe we need more value judgements. More outrage and we shouldn't let these so called experts do the decision making for us.Alokhttps://www.blogger.com/profile/12947383354732747209noreply@blogger.comtag:blogger.com,1999:blog-28464200.post-85940769099430186062008-09-25T18:35:00.000+05:302008-09-25T18:35:00.000+05:30I agree with Falsie on the value judgements. Besi...I agree with Falsie on the value judgements. Besides, I usually start questioning the knowledge of people who cannot even spell "Bear Stearns" properly. <BR/><BR/>Or claim that "Because of a lax regulatory system, these loans were allowed to be “securitized”. (In fact, that comment alone should have made me stop reading).<BR/><BR/>The banks who lend mortgage loans are regulated. That's not the issue. Nor is Securitization - in fact, securitization of mortgage receivables is how the mortgage industry works. What securitization does is spread the risk,and allow banks to lend. Otherwise, since an individual bank in a city (and lots of banks here are local) can only make one type of mortgage (say, loans above $300,000 if it's a prosperous locality), it increases the bank's risk and limits its ability to lend. Securitization removes this risk.<BR/><BR/>I have to give your friend credit for attempting to explain, but since he doesn't have a good understanding himself, he ends up perpetuating some serious myths :(Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28464200.post-10080855422956748032008-09-25T18:19:00.000+05:302008-09-25T18:19:00.000+05:30This is an idiot's guide? I had to read it twice t...This is an idiot's guide? I had to read it twice to get a minor grasp.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28464200.post-32547283079315512812008-09-25T18:15:00.000+05:302008-09-25T18:15:00.000+05:30You know, I would have liked this much better if i...You know, I would have liked this much better if it didn't come so weighted with value judgments. This pathological need people seem to have to find a villain in the narrative bores me. All this talk about 'greed' for example - as though Wall Street had single-handedly invented capitalism, as though nobody outside of an investment bank really cares about money, as though these 'taxpayers' weren't the same people who voted for a government that believed in minimal oversight.Falstaffhttps://www.blogger.com/profile/09791162324919462038noreply@blogger.com