Wall Street and where your money went
 

The problem that I see throughout this well written article is that the GREED was made legal by vote hungry politicians of both parties. Wall Street did not break any laws. They used the relaxed laws to massive advantage for sure. But who would not. You come across a bag of a billion dollars laying in the street and politicians have just made it LEGAL for you to pick it up and keep it, you're going too walk on by?
Now we expect, hope? dream, that these same short sighted politicians that are in a chronic vote feeding frenzy are going to fix the problem.
The ONLY thing we will see out of DC is another 4000 pages of gobbledygook that no one can fully understand [even the composers thereof] that would result in the Federal takeover of the financial industry just like the health care bill. Which simultaneously attempts to take over BOTH the medical CARE industry AND the insurance industry.
In the financial industry, we have the old laws that worked and worked for years. But they did not allow for potential voters to buy property that they could not afford and wouldn't pay for. The simple thing? Re-pass the old laws. But that will never even be considered, VOTES would be lost!

The article has some merit, but is overly opinionated and biased. Blaming wall street for everything bad, is weak and cowardly. Everyone is to blame for this mess...everyone.

Did the banks hold a gun to the borrower's head and make them borrow money that they couldn't pay back? Did they hold a gun to the institutional investors and make them buy the securitized loans?

I agree. There were a lot of mistakes made by many people (including Congress).

I think the largest mistake was Congress legislating lending policy. When you begin leaning on banks/lenders to make risky loans to push a social agenda, you inherently increase risk (& losses). It is unrealistic to assume that the banks investors ('Greedy Speculators' if you believe BHO) will absorb the losses created by the artificially inflated risks. Simple fact is, a lot of people who are defaulting on loans (and a lot who aren't) would never have gotten a loan without the legislative push. Want to end the crisis? Re-vitalize Glass-Stegall and sever the banks again!

No but from what I understand, they sure as hell misrepresented what it was that they were selling. They took junk, rolled it in, and packaged it as AAA.

Wayne

I believe the purpose of government is to insure that the playing field is honest and reasonably free from fraud. We had and maybe still have a situation where government was asleep at the wheel because that's what GW wanted. Greenspan believed in few controls and didn't understand the impact the sub-prime loans would have on the entire economy. It was all built on phony money. Canada's banking system is secure with fewer big banks because they have tight controls. Human nature is people will take advantage of every situation they can for personal gain. No matter if they destroy their Country, State, Church, Family, or themselves in the long run.
It is tough laws that protect us from ourselves. There must be tight enforceable laws in our finnancial system and I don't see them yet.

I hear people say "when the economy recovers". Recovers from what? Recovers from what it was, which was not real, or from what should have been reasonable. The new reality may be a lot different than most ever knew in their lifetime.

Wayne

That's the most accurate statement I've seen in this thread. If you can't afford to live within your means then don't spend money you don't have. The exceptions however are those that borrowed to put children through school, get required surgeries, and other emergencies.

Those that borrowed for the sake of moving up and living beyond their means are heavily responsible. Those that did the checking to make sure those doing the borrowing could afford to make the payback are the other side of that responsibility factor.

The problem I see with our system. Our politicians set up a rich environment for lobbyists to fill these politicians pockets. Then these elected officials write laws to advance the biggest payers. This is what is broken in America. They go to Washington seeking favoritism and not doing what is right. Then when something breaks, these same elected officials start pointing fingers. When in fact they hold all the power.

BOOT THEM ALL OUT!

I tend to agree. I am thinking never vote for an incumbent no matter what they claim.

Wayne

I agree.

Wayne,
I was once an "institutional investor". I am now retired and only manage personal funds.

The SEC (a government entity) registered 3 or 4 firms to rate bonds and other securities. It is just plain wrong to follow them. A RIA firm (which I owned) must do their own due diligence for clients that were counting on me.

We never trusted them. We knew the old saying: "Bulls and Bears Make Money; Pigs Get Slaughtered".

I studied these CDOs. CMEs, and all the other products. Some even had a squared product which leveraged the product with short term debt. I was confused so I hired a recent Wharton grad just to help me (an old MBA).

Then in early 2009, Warren Buffett in his letter to 2008 shareholders shareholders stated: "In poker terms, the Treasury and the Fed have gone 'all in'. Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome afftereffects".

We had already sold this crap. Then we shorted it.

I don't have to work anymore. A guy has to do the homework.

Yet, Buffett sold bonds, yesterday, at only a 0.02 to 0.43 premium to the London interbank rate. It was the 15th largest offering in history. It just follows the recent inflows of bond buying in the last year.

Someone, with proper homework, will profit from this (or just follow the Wall Street banks). Or trust Congress and the SEC to be your savior.

Let's see is Buffet selling bonds because interest rates may go up soon because of what's going on with the Euro? Turkey and Spain are over extended so they have to print more Euros and raise interest rates to pay for deficits. The Fed has to raise rates to keep in the bond market? Those holding existing bonds would lose? I wonder!!

It's just a theory.

First, it's called the PIGS (Portugal, Italy, Greece, and Spain). Yes, the weaker nations of the Euro Union may need help. They may default or the stronger Euro nations may bail them out. Germany is the stronger one. Since they are part of a larger European Union, they just can't devalue their currency, as we can.

How long can you suffer from 0.10% money market yields? History does tell us that these rates are very unusually low rates.

Do you know how much a guy could lose in a bond fund with just a 1% increase in long-term rates. It's a good 10% just cut off the top of your investment.

So, in this case European economics may override the political manipulations of the Fed? If the Chinese can get a better deal with Euro bonds the US will have to compete, politics or not.

Gonorrhea Lectim

The Center for Disease Control has issued a warning about a new virulent strain of Sexually Transmitted Disease. The disease is contracted through dangerous and high-risk behavior. The disease is called Gonorrhea Lectim.


And pronounced "gonna re-elect them."
Many victims contracted it in 2008, after having been screwed for the past two years. Naturalists and epidemiologists are amazed at how destructive this disease has become since it is easily cured -- by voting out all incumbents!