Bear Stearns on The Huffington Post

Arlene M. Roberts: Fat Cat CEOs, Bailout on Wall Street and 'Say on Pay'

2008-11-17T05:54:52Z

There seems to be no end in sight to the bailouts on Wall Street as major financial institutions falter, then turn to the federal government for rescue packages. Chief Executive Officers jump ship, golden parachutes intact, while employees lower down the totem pole walk away having lost retirement accounts, nest eggs and health care coverage. As the Treasury Secretary deliberates over the $700 billion rescue plan, discussion ought to focus on restructuring executive compensation such that shareholders have a 'say on pay'.

Recently, the federal government's rescue plan has been at the center of attention. Congress has authorized the Treasury to spend $700 billion -- $350 billion immediately; $350 billion to be fast-tracked by Congress in the future. Under the terms of the plan, better known as the Troubled Asset Relief Program, the Treasury has committed about $290 billion. According to reports in the New York Times, the Treasury has allocated $125 billion to the nine biggest banks and investment banks; another $125 billion for publicly traded regional banks; and $40 billion to expand the ongoing bailout of the insurance conglomerate American International Group. Treasury Secretary Henry Paulson has made known his intention not to use bailout money to refinance the mortgages of homeowners who are at risk of losing their homes due to foreclosure.

The scope of the federal bailout must be viewed in relation to the salaries and bonuses paid to CEOs of some of the very institutions being rescued. From 2003 to 2007, Merrill Lynch & Co. paid its chief executive the most, with Stanley O'Neal taking in $172 million and John Thain getting $86 million. James Cayne of Bear Stearns made $161 million before the company collapsed and was sold to JP Morgan Chase & Co. in June. U.S. Treasury Secretary Henry Paulson, former CEO of Goldman Sachs Group Inc., received approximately $111 million between 2003 and 2006. Lloyd Blankfein, CEO of Goldman Sachs, made $57.6 million in 2007; co-presidents Gary Cohn and Jon Winkelreid each got $56 million. The $3.1 billion paid to the top five executives from 2003 to 2007 was about three times what JP Morgan spent to buy Bear Stearns.

According to data compiled from company filings, executive compensation at the five firms (Goldman, Morgan Stanley, Merrill, Lehman Brothers Holdings Inc., and Bear Stearns) increased each year, doubling each year to $253 million in 2007. Executive compensation figures include salary, bonuses, stock and stock options, and some reward for past performance.

On September 15, Lehman Brothers filed for the biggest bankruptcy in history, more than $613 billion in debt. The same day, Merrill Lynch was sold to Bank of America for $29 a share. Goldman and Morgan Stanley, the two biggest independent U.S. investment banks, were forced to convert to bank holding companies. The fate of Bear Stearns is the stuff of financial lore. As John Waggoner writes in his book titled Bailout, "In March of 2008, the world markets woke up with one of the ugliest hangovers in history. Bear Stearns, the fifth-largest U.S. investment bank, found itself in the financial equivalent of the drunk tank: Sequestered with federal regulators and pitiless bidders for the remnants of its assets." Waggoner continues by saying, "The bubble that took down Bear Stearns had three ingredients: houses, mortgages, and mortgaged-backed securities. All three, separately, aren't usually considered a bubble cocktail. Stir them together? Ummmm. Bubbly."

So where do we go from here? Current trends towards bailouts, with the federal government buying equity in banks, has been dubbed 'socialism' by some; others find it harks back to European-styled nationalization. Amid renewed calls for congressional intervention and regulation of executive compensation, some companies are moving on their own initiative toward allowing shareholders a 'say on pay', a movement well underway in Great Britain.

Several days ago, Blockbuster Inc.'s CEO James Keyes addressed the issue of 'say on pay' at a breakfast policy seminar, outlining the company's efforts to provide greater accountability to shareholders. In 2007, a majority of Blockbuster shareholders first made the call for 'say on pay'. In March 2008, Blockbuster's Board of Directors voted to grant shareholders an annual non-binding vote on executive compensation. Beginning in 2009, shareholders will directly advise the board on whether they approve of the pay levels of the company's top executives.

According to Keyes, "We are in a period of self-regulation. Companies are looking at cost sheets, analyzing and addressing what to keep and what to get rid of. In some companies the pain is shared, in others the executive is impervious." Notwithstanding speculation about whether there are sufficient teeth in the concept of 'say on pay', Keyes held firm to the belief that the move is geared towards employees who are in it for the long haul.

Fellow panelist Vonda Brunsting, Eastern Region Director of the SEIU Capital Stewardship Program, also favors a 'say on pay'. Ms. Brunsting said, "Hopefully the era of the golden coffin, or golden parachute, is dead."

The issue of executive compensation was part of the discussion and debate in the presidential election. Only time will reveal the position to be adopted by the new administration.

Getting A Job After Bear Stearns, An MBA, Or A Kid

2008-11-10T10:07:07Z

1. The Bear Stearns Casualty
PIYUSH BHARGAVA
AGE: 33
RESIDES: Jersey City, New Jersey

Resume Highlights:
Moved here from India in 1993, then finished a four-year engineering degree in three years. Worked as a techie with Reuters, got a masters in computational finance from Carnegie Mellon, and spent three years as a risk consultant at Deloitte and Touche. At Bear Stearns, monitored trades for two hedge funds until they went bankrupt. Moved over to the firm's credit-trading desk and got laid off in August.

What He's Looking For:
A risk-management role at an investment bank, private-equity firm, or hedge fund. Bhargava isn't bitter about Bear's downfall and has kept busy giving tennis lessons in Jersey City. Still, he sees ex-colleagues landing jobs "pretty easily," while his own interviews have so far led nowhere.

Desired Salary: $115,000

Senior Risk Officer For Collapsed Bear Stearns Now Senior Fed Official Overseeing Banks

2008-11-05T18:54:41Z

The former chief risk officer at investment bank Bear Stearns , which nearly collapsed in March, is now a senior official of the Federal Reserve division that supervises U.S. banks.

Michael Alix, who worked at Bear Stearns for 12 years and was its senior risk manager since 2006, was named a senior vice president in the bank supervision group of the Federal Reserve Bank of New York, according to an announcement by the Fed.

Martin Nolan: The Republican Collapse: 100 Years In The Making

2008-10-30T20:26:46Z

THE REPUBLICAN COLLAPSE: 100 YEARS IN THE MAKING
Even amid the stressful heat of the campaign, the candidate could not escape the obvious. "The Republican party needs the discipline of defeat," William Howard Taft told a friend in 1912, near the end of his one term as president.
Taft had been challenged by his predecessor and political godfather, Theodore Roosevelt. Their quarrel focused on the definition of Original Sin of the Republican Party: whether and how much government should regulate business.
The argument is at least 100 years old, beginning when T.R. left the White House. Many Republicans were glad to see him go because he was, like John McCain, a maverick. Then, 100 Septembers later, Capitalism As We Know It collapsed. The most prominent political victim was not McCain. A maverick is by definition unbranded, so the heaviest damage was inflicted on the Republican brand.
McCain was never the favorite son of conservative consultants and commentators not because of his economic views, but because of his maverick status. Reacting to the Wall Street collapse, he used a word his hero, Teddy Roosevelt, might have used, a word beginning in G and ending in REED. An ominous silence ensued; greed is not a word used in polite Republican society.
In 1908, T.R.'s final year as president, Republicans had gained a reputation for keeping the promise he made in 1901: "We demand that big business give people a square deal." Roosevelt denounced "malefactors of great wealth." He attacked "the men of wealth who today are trying to prevent the regulation and control of their business." Roosevelt predicted that they "will not succeed," but added, "if they did succeed, they would find that they had sown the wind and would surely reap the whirlwind." Does that not describe the ruins of deregulation in today's economy?
Often interwoven with cultural issues, deregulation has roiled the GOP for a century. In the 1940s and 1950s, it divided the disciples of Taft's son, Sen. Robert Taft, from the apostles of Thomas Dewey and Dwight Eisenhower. The feud between Barry Goldwater and Nelson Rockefeller dominated the 1960s.
In 1980, Ronald Reagan united the party when he declared "Government is the problem." Today, as graven images of the Great God Marketplace litter Wall Street, Republicans may miss Teddy Roosevelt, McCain's hero, but not his role model. The senator's frequent praise of deregulation makes him a Taft Republican.
Since mid-September, the Karl Rove junior varsity, McCain's handlers, have discouraged talk of greed. Instead, they have dug into their tactic-of-the-day satchel for substitutes, each less credible than the next. Socialism? That won't fly because of the looming presence of the tallest, busiest socialist on the planet, Henry Paulson, commissar and chief teller for the Socialist Banking Group of North America. (Secretary of the Treasury is his honorific title.)
The GOP propaganda machine, humming efficiently for decades, is now beginning to gasp and sputter. It took a bumpy detour when its leading radio-television troubadours insisted that illegal immigrants were wrecking the economy. But no prominent Mexicans were discovered in the vaults of Bear Stearns, Lehman Brothers and AIG. The juggernaut blew a gasket trying to convert Sarah Palin into a combination of Margaret Thatcher and Madame Curie. Now it is in reverse gear, trying to blame Democrats for the Wall Street collapse. The road is rough.
Since 1854, the Republican Party's leaders, some great and some not, have pulled it out of the ditch. William Howard Taft could not do so in 1912. He carried just two states, Roosevelt won five and Woodrow Wilson won the presidency. Taft, who later became chief justice, had a large stomach, which had little room for politics. He told his wife in 1906, "Politics, when I am in it, makes me sick." Some Republicans today might echo that remark, as well as Taft's wise prescription for "the discipline of defeat."
###

David Epstein: Hitting the Trifecta

2008-10-28T17:39:37Z

Upon assuming office, President Bush promised to maintain the budget surplus that he had inherited, except in the event of recession, war or national emergency. ''Lucky me,'' he joked to his budget director Mitch Daniels shortly after 9/11, ''I hit the trifecta.''

The Democrats have the opportunity to hit a trifecta of their own this year, and a more positive one at that. US politics is roughly divided into three areas: domestic policy, fiscal policy and foreign policy. Democrats have traditionally been stronger on domestic policy and Republicans have owned foreign policy, with fiscal policy changing back and forth. But now the Democrats have a strong argument that the public trusts them more in all three dimensions. If they can state their case strongly, and more importantly follow through on it once they gain power, they can remake the face of American politics for the foreseeable future.

In domestic policy, it's not even close any more. The current administration has proven the folly of trying to make government work when you don't really believe in government to start with, when you think it's the problem, not the solution. Bush stocked administrative agencies with incompetent cronies and was then surprised when things went wrong, like with FEMA. The Republicans' idea of passing social legislation was the Medicare drug benefit (Medicare Part D), which has proven to be nothing more than a disastrous giveaway to the drug companies. If you recall, the bill featured a "donut hole" in seniors' insurance: a gap between basic coverage, which the legislation allows, and catastrophic insurance, also in the bill. But it prohibits beneficiaries from insuring themselves for medication expenses in between, on the hardly believable theory that it would give sick seniors bad incentives.

The Republican mantra that the only good regulation is no regulation has also cost them dearly in the one area of social policy they used to dominate: financial markets. The collapse of the housing market and subsequent series of meltdowns and bailouts that have been orchestrated since Bear Stearns went under in March have made the public wary of Republicans' ability to keep the economy from sinking into quicksand. The administration is finally learning - too late - that sometimes regulation and markets are not diametrical opposites: you need a certain amount of regulatory underpinnings for markets to operate at all. It is a lesson that a Democratic administration is ready to put into practice.

In fiscal policy, Democrats used to be unable to push back when Republicans chided them for being "tax-and-spend liberals," unable to resist the calls of their special interest groups for spending programs. It was on the basis of this rhetoric that the GOP branded itself the party of fiscal discipline for a generation or more. The situation, though, has reversed itself: Democrats are now the more fiscally conservative of the two parties, although leading Democrats seem not to have noticed or are for some reason embarrassed by their own success in balancing the budget.

But the numbers don't lie: Reagan and then Bush I ran up historic deficits on the back of large amounts of military spending and trickle-down economic theory. Clinton bit the bullet and convinced Congress to enact the 1993 budget, which contained $250 billion each of tax increases and spending cuts over a decade. The bill passed by one vote in the House and a tie vote in the Senate, with the Republicans, those supposed guardians of fiscal propriety, casting not a single vote for the bill, arguing that it would ruin the economy. In fact, the 1990's saw an economic boom that was not wholly created by, but was certainly abetted by, the lowering of government deficits, and Clinton left office with the largest budget surplus in history. Bush II promptly gave it all away in his first budget, and if estimates are correct the US will run its largest deficit in history next fiscal year. Bush's trifecta of disasters certainly contributed, but budget experts estimate that the turnaround in the nation's finances was roughly 1/3 due to war spending, 1/3 due to Bush's tax cuts, and 1/3 due to lower revenue because the economy slowed down (which is itself a result of larger macroeconomic mismanagement by the current administration).

In a reverse of the former refrain, now it is the Republicans who cannot resist calls from their wealthy right wing constituents for tax cuts, and they are going to lose office in no small part due to the fact that their policies have created a large increase in income inequality. Trickle down economics is now dead as a working theory, even among serious conservative economists; the last eight years have demonstrated that, given a large increase in their income, the richest 1% of the population will find plenty of ways to spend it that do not magically create jobs for middle and working class Americans.

Finally, the public is coming to distrust the Republican line on foreign policy as well. After the collapse of the Soviet Union and the end of the Cold War, there were two strategies the US could adopt. The first was to say, "We're now the only super-power: to heck with you. We will do what we want when we want. This may sometimes convene with your interests, and sometimes not. But we will act at every moment in accord with our own preferences, using force if and when necessary to achieve our goals." This is more or less the attitude taken by the Bush administration, and it's left us in a hugely expensive and unpopular war in Iraq, with our international reputation in shreds and forced to do nation building in places where we have neither the expertise nor the inclination to do so.

The other option is to say, "We're now the only super-power, but just because we can do anything we want doesn't mean that we should. In the long run it is cheaper and more effective to lead coalitions of countries in pursuit of our objectives. We will never compromise on fundamental issues of national security, but this approach may at times mean compromising and accepting outcomes that are not our first best, in order to win on other issues that matter to us more."

This is the vision that the Democrats are, implicitly, laying in front of the public, and with considerable success. Americans want the US to mean something again, to live up to its ideals and regain its status as world leader, relying more on soft power than military force. And it goes without saying that you can't be a leader if no one follows.

These, then, are the stakes in the current election. The Democrats seem poised to take the White House and increase their margins in the House and the Senate, possibly with a filibuster-proof majority in the latter. They will face a number of challenges, not the least of which will be the recession bequeathed to them by an outgoing administration bumbling toward the finish line. But if they can keep policy consistent with their basic principles and dare to challenge the Republicans on their home turf, Democrats can once again become the party of ideas and dominate politics for some time to come.

Danny Schechter: Why The Government Can't "Fix" the Crisis

2008-10-25T12:14:20Z

New York OCT 27: Most Americans know the phrase, "if it ain't broke don't fix it." In the good times, when the economy boomed and Wall Street prospered, it looked like nothing was broke. The free market, we were told was working like magic insuring prosperity and progress.

But then it happened, out of sight and out of mind, an upward trajectory turned in the other direction. In what was for many an unbelievable chain of events, markets started melting down, banks began writing down portfolios clogged with asset-backed securities that had no assets behind them. Confidence shattered. Suddenly, believers in unregulated transactions realized something was very, very wrong.

Alan Greeenspan was "shocked" and said he was wrong to support deregulation of financial markets. As headlines conjured up breadlines and recession, with "something worse" threatening, the government was pressed to act.

Over a year later, after eight interest rate cuts and the injection of trillions into credit markets and banks worldwide, little has changed. Markets are volatile and trending down while banks are still not lending with frequent projections of massive unemployment and stagflation.

At the same time, we live in a country that believes that whenever there are problems, there must be solutions. And in the case of the financial crisis, there are no shortage of proposals especially because the whole system -- if not capitalism itself -- seems at risk. (Even the NY Times ran an editorial on "Rescuing Capitalism.") This is not a situation that inspires confidence in token reforms and minor adjustments. There seems to be a consensus that this crisis is systemic and structural even as the candidates reduce it all to tax policy.

That hasn't stopped the government from dipping into its tool bag and throwing everything it has at the problem -- including bailouts on an unprecedented scale, including, now, of insurance companies and auto lenders There have been rule changes even partial nationalizations of banks, mortgage companies, and insurance combines.

Together, the Treasury Department and the Federal Reserve Bank are fighting on every front. They seem to be giving money away. Is it working?

"Scarcely a day goes by with out some dramatic new initiative," writes the New Yorker's financial columnist James Suriwieki, "even as market chaos makes each new idea soon seem like ancient history."

Why is that? Surely the people in command are smart, savvy and know the system well. What are they missing? They now know its broke (and many of them are broke too) but they can't seem to fix it.

Here are five views on what they are getting wrong.

l. The system needs to collapse

That's the view of a perennial bear investor Marc Fabor who "thinks the market was primed for a technical rally but is not keen on the long-term prospects for the US economy:

"The governments in this world have no other option but to print money. That will lead down the road to inflation,'' Faber said. ``You don't need to be an economist graduated from Harvard to know we're already in a recession. They will just put white paint on a crumbling building....

"To rebuild economic health in the United States, you need a serious recession that will last several years,'' he said. "The patient that got drunk on credit growth needs to go into rehabilitation. To give him more alcohol, the way the Fed and the Treasury propose to do, is the wrong medicine.''

2. Consumers are not spending

Bloomberg reports: "The big concern is that households, spooked by the turmoil in financial markets, will cut back rapidly and sharply, plunging companies into bankruptcy and deepening a recession that many economists say has already begun.

"If we did have a quick cut in spending, it could turn a pretty nasty recession into possibly the worst downturn we've seen in the postwar period,'' says Michael Feroli, a former Federal Reserve official now at JPMorgan Chase & Co.

3. Moral Hazard: They are bailing out the wrong people

There is something fundamentally wrong in rewarding the people who are responsible for the problem. Worries William Buitner, a financial historian at the London School of Economics, that this will lead to more collapses in the future: "by boosting the incentives for future reckless lending to elephantesquely large financial enterprises.

Unless not only the existing shareholders of the banks benefiting from these capital injections but also the holders of the banks' unsecured debt (junior and senior) and all other creditors of the bank (with the possible exception of retail depositors up to some appropriate limit) are made to pay a painful penalty for investing in excessively risky if not outright dodgy ventures, we are laying the foundations of the next systemic crisis, even as we are struggling to escape from the current one."

4. Financial scammers and criminals are going unpunished

The FBI announced that it lacks the staff to fully investigate the pattern of pervasive crimes on Wall Street.

5. Good people are leaving in disgust

Some of the best and the brightest are giving up, rejecting businesses based on flimflams and deceptive marketing. Two years ago, a very successful investor, Andrew Ladhe, started returning money to his investors. "Our entire banking system is a complete disaster," he wrote. "In my opinion, nearly every major bank would be insolvent if they marked their assets to market."

In October 2008 he closed his firm all together explaining:

"Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, 'What I have learned about the hedge fund business is that I hate it.' I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America."

These are just five reasons why "the quick fixers" are unlikely to succeed. Notes Harpers, we need more than tinkering. They call for a fundamental reconstruction at a time when we are also "menaced by dwindling energy supplies and accelerating climate change."

Also, time's up for the Captain Ahabs in charge. They should admit defeat and step down as was suggested by this comment on a financial website:

"Perhaps Bernanke and Greenspan should see if there is an opening for the captain of the Exxon Valdees, job requirements: asleep at the switch."

Still to be answered, can the system be saved from itself?

News Dissector Danny Schechter is author of Plunder: Investigating Our Economic Calamity (Cosimo Books) now available at online book stories.
Comments to Dissector@mediachannel.org

Financial Crisis Hurting Office Market

2008-10-20T18:30:49Z

(Crain's) -- J. P. Morgan Chase & Co. has terminated a 52,100-square-foot lease of a former Bear Stearns Cos. office in the Central Loop, as Wall Street's woes begin to rattle the downtown Chicago office market.

Five financial services firms that were sold or taken over as a result of the crisis, including Merrill Lynch & Co. and American International Group Inc., lease about 835,000 square feet downtown, according to a third-quarter report by tenant representation firm Studley Inc.

The companies, which also include Lehman Bros. Holdings Inc. and Wachovia Corp., account for just 1.4% of top-quality, so-called Class A space in the downtown office market. Yet that could be enough to "tip the balance" in tenants' favor, in light of the other challenges facing landlords, such as the wave of new buildings, Studley says.

Read the entire article here.

What Is A CDS, Or Credit Default Swap?

2008-10-10T17:00:43Z

If Hieronymus Bosch were alive today to paint a triptych called "The Garden of Mortgage Delights," we'd recognize most of the characters in the bacchanalia and its hellish aftermath. Looming largest, of course, would be the Luciferian figures of Greed and Excessive Debt. Scurrying throughout would be the Wall Street bankers who turned these burgeoning debts into exotic securities with tangled structures and soporific acronyms -- CDO, MBS, ABS -- that concealed the dangers within. Needless to say, we'd see the smooth-tongued emissaries of the credit-rating agencies assuring people that assets of lead could indeed be transformed into investments of gold. Finally, somewhere past the feckless Fannie Mae executives and the dozing politicians, one final figure would lurk in the shadows: a hulking and barely recognizable monster known as Credit Default Swaps.

Continue reading here

John Hood: Miami Debate-Watch Crowd in the Tank for Obama

2008-10-09T11:29:06Z

If the presidential election had been held during Tuesday night's debate watching party at Miami's stunning Cesar Pelli-designed Adrienne Arsht Center for the Performing Arts, McCain not only would've lost -- he'd have gotten trounced. Actually, trounced might be too soft a word for the hard fact that someone received no votes whatsoever.

Granted, it was an official Florida for Change event. But wouldn't even the most fervent Obama supporters have given McCain the benefit of some doubt?

Actually, they wouldn't. And they won't. Oh they doubt just about everything the so-called Gentleman from Arizona says, does or makes believe he stands for, but I'd hardly say it was to his benefit. No, the only thing last night's packed house gave McCain were groans -- and a nice hiss when he called derisively referred to Obama as "that one."

If the glazed looks that shrouded the crowd's eyes every time McCain spoke were any indication, you might say they also gave the man their yawns, but from the minute Ol' Mr. Mean Mouth told Senator Obama that it was "good to be with you at a town hall meeting" to the point where he said he knew "what it's like in dark times," the groans had it -- in a landslide.

They groaned when McCain mentioned suspending his campaign, when he asked if we heard the "size of the fine," when he spoke of Reagan (his "hero"), cited Teddy Roosevelt (his "hero"), and cried about follow-ups.

"If we're going to have follow-ups, then I will want follow-ups, as well," sobbed the senator, coming off like the oldest living baby on the planet.

But the most groans came when McCain injected a smarmy "my friend" into his responses. And I say most only because it happened so often. Over and over, the least cordial man in politics tried to insist that he was a friend; and again and again a roomful of genuinely friendly folks groaned otherwise.

Then finally someone asked the question everybody had been thinking all along:

"Does he even have any friends?"

Not in this crowd he didn't, unless friends are the kind of people who call each other "dumbass."

Obama, in contrast, elicited nothing but cheers and applause -- for "not having politicians point fingers," for his proposed "surpluses," when he smacked back with Rick Davis and S-CHIP, after he mentioned the Peace Corps and Darfur, and as he promised that "nobody will be excluded [from healthcare] for pre-existing conditions."

But by far the heartiest cheers and the most resounding applause came when Obama wrapped up the debate by insisting "we're going to have to have the courage and the sacrifice, the nerve to move in a new direction."

Everybody rose, and everybody roared, for what must have been a full five minutes, stopping only so they could say how "presidential" Obama appeared, and how fully he out-classed his opponent. After all, this was the reason everyone had come.

So no, McCain didn't pick up any votes last night in Miami, not in this place anyway; then again, he never was even in consideration.

New York Psychiatrist Uses Verbal Abuse On Wall Street Clients

2008-10-06T16:38:44Z

A New York psychiatrist says caustic verbal abuse is the best treatment for traumatized Wall Street jocks.

Last week the bottom dropped out of the financial market, and in a peculiar way, the brunt of the collapse fell on me. I counsel senior executives at Lehman Brothers, Goldman Sachs, Bear Stearns, Merrill Lynch, Citibank, Deutsche Bank, Moody's, and a number of hedge funds. I've even treated a few US cabinet members in my 30 years in practice.

My schedule is always packed--I see about 80 people a week. But for the past few weeks, my phone has been ringing off the hook, as self-worth on Wall Street plummets faster than WaMu stock.

Dean Baker: Letting the Bank Robber Fix the Bank's Books

2008-10-03T05:52:11Z

If Congress passes the bailout it will be demonstrating an extraordinary belief in the power of redemption. In the past, I have noted the fact that Secretary Paulson's failure to recognize the housing bubble, and the economic and financial havoc that would be created by its inevitable collapse, contributed to the disaster we now face.

It turns out that Secretary Paulson played an even more direct role in bringing down our financial system. The New York Times has a superbly timed piece reporting on how a 2004 change in an SEC rule allowed Bear Stearns, Lehman, and the other major investment banks to leverage themselves to unprecedented levels. Among the highlights of the story is the fact that Treasury Secretary Henry Paulson was one of the main people pushing for this change in SEC rules.

It is remarkable that Congress would be willing to give Secretary Paulson such enormous power in running this bailout given his advocacy of rule changes that played such an important role in this financial disaster, and the extent to which he personally profited from these changes. This would be like giving the bank robber who cleaned out the vaults the opportunity to set the banks finances in order -- and letting him keep the loot. Let's hear it for second chances!

Thomas Frank: Wrecking, Wrecking, Wrecked

2008-09-29T09:49:17Z

The great fear that hung over the business community in the 1970s was death by regulation, and the great goal of the conservative movement, as it rose to triumph in the 1980s, was to remove that threat--to keep OSHA, the EPA, and the FTC from choking off entrepreneurship with their infernal meddling in the marketplace.

Defunding those agencies was one way to stop the killer bureaucrats; another was to stuff them full of business-friendly personnel who would go easy on regulated. The signature conservative regulatory idea became "voluntary enforcement", because everyone now knew that efficient markets regulated themselves. Bad practices or tainted products drove away consumers; therefore firms had an incentive to behave, an incentive far more powerful than some top-down scheme in which big brother told them what to do.

Whether people ever truly believed this nonsense or not, its application over the years makes up the basic story of conservative governance as I tell it in my book, The Wrecking Crew. This is the philosophy by which conservatives gutted the EPA and the Labor Department, turned over the Interior Department and the FDA to the industries they were supposed to regulate, let the CEO of Enron advise the vice president on energy policy, and generally came to regard business, not the public, as government's "customer" (a word that crops up with disturbing frequency in conservative regulatory history).

But it is only now, as we watch the financial system crumble around us, that we can really see the devastating consequences of this folly. It turns out the Securities and Exchange Commission (SEC), which was responsible for regulating investment banks, did a significant part of its job through a voluntary program which firms could participate in or not as they saw fit. As the New York Times told the story on Saturday, this system had--of course--been pushed for by the investment banks themselves, who wanted it in order to avoid the stricter rules from European governments that they would otherwise have had to obey.

And now, as a consequence, the SEC has almost no industry left to regulate. Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs, Morgan Stanley: All of them are gone or restructured. At business's urging, business was left up to its own devices; its own devices turned out to be precisely the things that our grandparents set up regulatory agencies to guard against: euphoria that leads to panic; perverse incentives that lead to fraud; boom that leads to bust.

As you watch the world crumble, try taking your Armageddon with this sprinkling of irony: Over the last three decades, business has got virtually everything it wanted, and its doomsday scenario from the 1970s has come true because of it. The regulators have indeed killed the regulated--not by intrusive meddling but by doing nothing, by taking a nap while the financial sector puffed up the bubble and blew itself to pieces.

Mark Green: 7 Days in America: Obama Passed the 'Commander in Chief' Test But McCain Didn't Pass the 'Economist in Chief' Test: with Huffington, Shrum, Galbraith & Green

2008-09-27T20:44:26Z

7 DAYS PANEL w/ ARIANNA HUFFINGTON, BOB SHRUM, JAMIE GALBRAITH & MARK GREEN, September 27, 2008

Listen to the whole show at AirAmerica.com

MARK GREEN: Bob, you speak often about Obama having to pass the JFK "commander in chief" test. What do you mean and did he do it Friday night?

BOB SHRUM: Nixon ran on the slogan "Experience Counts". People watched the debate and then said, well, Nixon has more experience, but Kennedy has enough, I can vote for him. Commander of Chief threshold questions are not binary questions when these pollsters go out and say who would be a better as Commander of Chief. McCain can have a lead. The real question is -- can Obama be a Commander of Chief? After last night, I do not think there is much doubt.

GREEN: How do you measure that? Or you just know it when you see it?

SHRUM: Look, the whole thesis on the McCain campaign on Commander in Chief basically has been that McCain is so much stronger, more knowledgeable and so much better prepared to do this job. But people who watched the debate saw that Obama was as least as knowledgeable. I think more knowledgeable. And he had a calmness and a presidential quality that I think enable him to pass that test and he was going to pass the test unless he made some big mistake. That is why questions like experience don't work as an argument in presidential debates. In fact the last three times we had a candidate accused of being inexperience compared to their opponent -- in 1960 with John Kennedy, 1976 with Jimmy Carter, 1980 with Ron Reagan -- the so-called inexperienced candidate has won.

GREEN: Most analysis have said that, isolating national security aspects, McCain won on points because he seemed relatively more comfortable then on the economic issues. Arianna, do you agree with that?

ARIANNA HUFFINGTON: Yes, I think McCain won primarily because he stopped the bleeding of that week. This has been a terrible week for him. He gambit trying to concentrate on the debate, flying to Washington, all that stuff did not work. It made his campaign seemed in free fall. The greatest gain for him was the debate. It put an end to that impression. The greatest problem with Obama he did not make the clear distinctions between the two of them. This is the moment to really draw a very clear distinction between two philosophies of government. In a sense it's what Jamie is writing in his book on the free market, on how Ron Reagan said that government is not the solution, it is the problem. That philosophy is completely bankrupt and Obama did not take the opportunity to point it out yesterday.

GREEN: Who thought McCain came off well because he was on offense on foreign policy issues? Like on the exchange on whether Obama would meet with hostile foreign leaders without preconditions -- did McCain succeed in making Obama seem weak, as Hillary tried to do on this point in the primaries?

SHRUM: It did not work in the primaries and did not work last night. Because the country is pretty sensible about this. There has been actual some polling about this. You can go off and negotiate with these people. This does not mean you are giving into these people. Actually I think this will not be the first time Arianna and I disagree. I think Obama sees this as a dynamic process. The first stop in the process was to pass this threshold in terms of being commander in chief. That was his principal aim.

GREEN: As for the first 40 minutes on the economy, it struck me that Obama really cleaned up. While he bluntly asserted in his first answer that the financial collapse this week was a 'final verdict" on the failure of Bush's and McCain's anti-regulatory economics, McCain answered with irrelevant platitudes about earmarks and "greed" -- and somehow never mentioned the middle class. Did he flunk his exam on the biggest issue of 2008?

SHRUM: Yes, I think people will be very doubtful that McCain even seemed to care that much about the economy; he talked about earmarks four times, and never talked about the middle class once!. I thought Obama, today, by the way, in his appearance in North Carolina after the debate, was really smart. He said '[McCain] railed against the study of bears in Montana, but had nothing to say about Americans who can't afford to go to college!' I mean, I think that sums up what the country saw when he talked about economics last night.

GALBRAITH: It's clear that John McCain doesn't have an economic program; what he has is a slogan, which is 'cut spending.' And cut spending on everything, except for Pentagon veterans, and maybe one other thing, like entitlements. Which would mean that there would be no effective response to the recession that we're in, there would be no program to bring us out of it. His administration would see a long period of economic stagnation and rising unemployment and wouldn't have the slightest clue about what to do about it. So it's very plain, in fact, that there's really no credible economic component to this campaign.... There's a good reason that Republicans have nothing to say [about the economic crisis]; it's the policies of the Bush administration that have landed us in the financial debacle that we are presently living through, I mean, there's just no question about that. To go to another recent media event, the President's speech a night or so ago was an extraordinary exercise in evasion of responsibility; an attempt to pretend that these things that have happened could not have been forseen, when in fact they were a direct outgrowth of very specific policy choices that this administration made early on.

GREEN: You had a significant Washington Post piece this week on Congressional action on the credit crisis. What's the current state of play?

GALBRAITH: The situation is really very serious, and action is absolutely required. The action I propose is to lift the FDIC insurance cap, but to make that work would require a huge re-regulation of the banking industry; those two things are two sides of the same coin. But I suspect that we will not be able to change the direction of the legislation presently moving through Congress. We started with a three-page Paulson bill; we now have a 102-page bill which is a vast improvement, with many more protections for the public interest than the original one did. To come back to the presidential campaign, John McCain is in a difficult spot that he is the least equipped to handle. You have to be able to condense and express very clearly the differences between these various proposals -- differences between blank checks and oversight, differences between proposals that have a reasonable chance of working and proposals that probably would not work at all, differences between proposals that would waste a lot of resources and those that would seriously try to limit waste.

GREEN: Can you synthesize what bill is mostly likely to be enacted and to be agreed to by both nominees?

GALBRAITH: I think we will get a bill that will have some safeguards in it, and that will get us through the campaign season, possibly as far as next year. We will not get a bill that resolves this issue in a definitive way because I think that there are such basic problems with the original Treasury idea that you're going to go out and basically buy up the bad assets in the open market. GREEN: So there will be a round 2 for the 44th president to look at after January 20? GALBRAITH: With luck you'd get that far, yes, with luck. GREEN: Without luck? GALBRAITH: Without luck you could be back in the soup before Christmas. It's extremely hard to tell at this point.

GREEN: Anyone disagree that Obama won the debate on the economy?

SHRUM: No.

GREEN: That's a good succinct answer, Bob.

GALBRAITH: Well I thought that the worst part of the debate was Jim Leherer's effort to impose an economic choice on the candidates at the very beginning, by demanding to know what Obama would give up from his positive agenda in order to pay for this bailout...The needs of the economy are going to be greater, and the requirements for action are going to be stronger, and the case for Obama's program gets stronger, and not weaker, as you go down this path of the dissolution of the previous financial system that supported our economy.

SHRUM: Look, this is the classic establishment Beltway view, it happens every four years. Republicans don't care about it; they just say 'oh, our tax cuts add up, and they'll add more revenue than they lose,' which is now demonstrably untrue. And it's a kind of one-way ratchet that pushes against programs like healthcare reform. I think Obama handled it exactly right last night.

GALBRAITH: I think Obama pushed back very hard, but I think it was really in many ways improper for Leherer to try and frame these issues in those terms, it was economically illiterate.

GREEN: Finally, some style questions. Remember Gore's sighing in debates in 2004. Who thinks that McCain's repetition of 'you don't understand' and Obama's repetition of 'John's right' combined to help McCain appear to be on the offensive?

HUFFINGTON: I think it helped him. I was watching the debate with two people, one who was looking at from the point of view of a director and what's working in stylistic and dramatic terms, and Cory Booker, the Mayor of Newark, was looking at it from the point of view from what the people he represents would want to hear. And they both thought there was something missing, in the fact that Obama did not give voice to the outrage that so many Americans, middle class and poor, are feeling. He basically was trying to be too much in the club, he was trying to be one of the boys, as opposed to being somebody who wanted to change the club's rules. And so the 'you are right' [riff] was the sort of senatorial politesse that seemed out of place with the crisis the country is going through.

GREEN: Or is his accommodating approach both authentic to him and an effective antidote for nervous white voters?

SHRUM: Well, he hasn't done badly by sticking to that style, which I think is authentically who he is. The constant repetition of 'you don't understand' from McCain, to someone who evidently understood, and was demonstrating over and over again that he understood, didn't do McCain any good at all. GREEN: Did it contribute to McCain coming across as condescending and grumpy? SHRUM: I think he came across as grumpy and graceless. But look, the fundamental point here, which we just can't lose sight of, is that the one thing I think Obama didn't want to do was come across as arrogant or angry. He didn't do that: he came across as presidential, he came across as in command of foreign policy, he came across as in command on the economy. He came across as someone who did have an economic plan, does have an economic vision. And maybe he does need to get grittier, maybe he will get grittier. But right now, he's beating McCain by miles on this issue.

GALBRAITH: Lincoln used to say that his courtroom strategy was to give away six points to the other side, and then turn the jury on the seventh. I got the impression that Barack Obama is a student of Abraham Lincoln on that, and it worked pretty well for him last night.

HUFFINGTON: But this is a point, Bob, that is being made by many people who are in touch, much more than we are, with people who are hurting on a daily basis. And they are hearing their voices, and they are longing for someone on the national stage to give voice to their own pain about what they are going through; that's something that is being felt by many people throughout the country.

SHRUM: My disagreement is that I believe Obama is giving voice to those folks, maybe not in exactly the way you would want him to do it, but I think he's doing it in a way that will get him elected President of the United States so that he can actually help them.

GREEN: How would you advise McCain to learn from this debate before the next one?

SHRUM: Well, he's not going to call Jamie, but he could at least call Steve Forbes, Larry Kudlow, any number of the conservative economists who have signed on with him, and say 'give me some coherent plan, some argument I could make, about what I'm going to do about the economy, how I'm going to respond to the problems of the middle class and the pressures that the people are feeling.' And remember, that debate will come after this rescue bill passes and when we're headed into a recession. This issue is going to get bigger, not smaller.

GREEN: So overall, who won this debate politically?

HUFFINGTON: I think it was a draw. I think that it basically did something good for Obama, which was clearing the threshold for Commander-in-Chief, and it did something good for McCain in that it staunched his bleeding of the week.

GALBRAITH: McCain needed a very strong victory in this debate, because it was on his strong subject, and he didn't get that. The issues are clearly moving toward the economic crisis, and McCain doesn't have the credentials in that area, he simply doesn't have the credibility on that. And even if he did call Steve Forbes and Larry Kudlow, I think he'd be hard-pressed to overcome that.

GREEN: There's a consensus that while Obama passed his 'commander-in-chief' test, McCain didn't pass his "economist in chief' test and didn't alter the arc of the campaign which Boama is now winning. So short of a gaffe or a surprise, do we know who the next president will be?

SHRUM: Short of a gaffe or some unexpected development, to paraphrase Tim Russert's line, we now have a pretty good idea, in fact we know who the next President will be. Because the fundamental forces within this election move toward a Democratic victory. And there were some tests that Obama had to pass, and he's passed those tests.

Top Wall Street Executives Made More Than $3 Billion Before Financial Crisis

2008-09-27T11:48:31Z

Wall Street's five biggest firms paid more than $3 billion in the last five years to their top executives, while they presided over the packaging and sale of loans that helped bring down the investment-banking system.

Merrill Lynch & Co. paid its chief executives the most, with Stanley O'Neal taking in $172 million from 2003 to 2007 and John Thain getting $86 million, including a signing bonus, after beginning work in December. The company agreed to be acquired by Bank of America Corp. for about $50 billion on Sept. 15. Bear Stearns Cos.'s James ``Jimmy'' Cayne made $161 million before the company collapsed and was sold to JPMorgan Chase & Co. in June.

Charles A. Gonzalez: Spotlight on the House : Oversight and the Bailout

2008-09-26T18:15:49Z

One constant strain of policy-making over the past eight years has been an embrace of the market as the best and most efficient means of controlling production. President Bush has consistently called for less oversight and regulation of the financial sector. Those laws which survived were rarely and poorly enforced by the Executive Branch. Furthermore, the decision by Federal Reserve Chairman Greenspan to set interest rates at historically low levels flooded the markets with cash. With nowhere else to put the money, investment bankers created a series of new and convoluted credit devices. These brought incredible profits to a few, even though no one understood them. With no congressional oversight or government regulation, there was no one to ask where the emperor's clothes were, that is, to ask what these credit default swaps and sub-prime loans were really worth. When the Democrats regained control of Congress in 2007, we began a whole new era of investigation and oversight. Unfortunately, we could not undo all the damage of those years, in the face of the president's intractability, and we are now facing the results.

For years, the Bush Administration has assured the nation that our economy was strong and doing well. As the Republican Party has, for decades, encouraged home-ownership at any cost, President Bush even cited, in his 2007 State of the Economy Report, the increases in ownership rates as proof that the economy was doing well even as real wages stagnated and costs skyrocketed. Now, in the space of barely a week, the same people are insisting that if Congress does not cut the President a blank check for $700 billion -- bringing the total bailout package to $1,000,000,000,000 when you include the $50 billion for Fannie Mae and Freddie Mac, $85 billion for AIG, and the $29 billion in bad loans taken on from Bear Stearns -- and do so immediately, without delay, without conditions or oversight, the sky will fall and the economy will collapse.

It is both natural and absolutely right that the American people and the Congress who represent them are both a bit skeptical. Remember, when the Administration asked Congress to authorize money to bail out the mortgage companies, we were told authorizing it would mean they wouldn't need to use it. It is an understatement to say that President Bush's record of promising how he would use authority is less than stellar. Besides, as House Financial Services Chairman Barney Frank put it, "I don't trust anybody to have the amount of power he asked for in the bill he sent us." That's why Members of Congress from both parties have expressed concerns about the President's proposal and refused to be rushed into anything.

The fact of the matter is, it was lack of proper oversight that got us into this situation in the first place. Nor should the men and women who created the mess be rewarded with golden parachutes. Congress is already investigating the severance packages at Fannie Mae and Freddie Mac, and we must broaden that scope. (Secretary Paulson has expressed concern that such investigations might discourage companies from participating in the plan, but I hope that we would never spend taxpayer dollars on anyone willing to let his business fail rather than take a pay cut.) But just because Wall Street executives' recklessness and President Bush's carelessness caused this mess doesn't mean that we can allow the credit markets to fall. We cannot do what the Republicans were urging a few months back when they voted against the Housing bill and simply "let the market work". The market didn't work, as many of them have recognized, and will never be sufficient without proper safeguards against unmitigated greed, but a complete breakdown will only add to the pain of working families who have met all of their payments and still watched the values of their houses plummet below that of their mortgage. Some serious action is necessary, and Members from both parties are working, together, to produce a solution that is prompt and properly constructed.

It is clear that we cannot afford the costs of inaction. In addition to collapsing home values, a market failure would damage every sector of our economy. Banks, desperate for money, would increase credit card fees and be unable to loan money to anyone, no matter how good your credit. Money for student loans could dry up. Pension funds and 401(K)s, heavily invested in the market, could plummet in value, leaving those who depend on these savings for retirement without the safety net they worked so hard to create. Companies large and small, facing money shortages, would cut salaries and jobs; even those who kept their jobs would face lower wages. Cities and states, their revenues already short from the decreased tax base, would be able to find no one to purchase the municipal bonds that help fund infrastructure construction projects. The services on which we all depend, particularly in economic hard times, would be curtailed and the new infrastructure that could spur so much economic growth would be delayed yet again. We need to act, and we must act swiftly and smartly.

If taxpayer money is going to prop up the economy, we should look at it as an investment, not a giveaway. The funds could be used to purchase equity or be loaned out at interest, for example, and we might even turn a profit. We also need oversight, however, to protect the taxpayers from wasteful or improper spending. We cannot allow a dollar to be wasted bailing out Wall Street while Americans are struggling to put food on their tables or keep a roof over their heads. We also need an economic recovery and jobs package. If we're going to use taxpayer money to help the economy, there's no better way than putting it in the hands of taxpayers. Cleaning up this mess will be hard and it will be painful, and we must learn from this the importance of regulation. Let us remember this, too, however: We survived the Savings & Loan crisis of the first President Bush, and went on to see budget surpluses and intense growth under President Clinton's leadership. We can survive the crisis of the last President Bush, too, and there is hope for a brighter future.

Charles Karel Bouley: What's Left Without Wall Street? We, The People

2008-09-25T11:07:50Z

Who knew that being poor would actually help me one day? Well, today is that day.

You see, I've always had to worry about rent and then, luckily, mortgage payments. I work in entertainment; we don't have 401K plans, we have a union and a retirement plan but many of us don't rely upon it because you have to pay in to get back, and employment is seasonal at best for most in the business. Granted that union and retirement plan, health plan and such are tied to Wall Street, but most artists don't really pay attention. Our downfall, but true, it's why there's business managers, agents, etc and why so many artists so often get screwed financially.

So while I've been scurrying to pay the bills every month it appears my moneyed friends have been busy doing all kinds of things and some of my poor friends are equally as busy buying things they couldn't afford. Hey, I'm right there, I have credit card balances, a second mortgage. And I know that the Chinese probably own my mortgage now since we bailed out Freddy and Fanny with money from China. But...

As I hear talk of bail outs, I think of all of my friends and family and ask who has ever bailed us out? Right now, if I miss a payment, who will pay off my $200K mortgage? Who will pay off my credit card balances? The White House? Doubtful. When my friend was in default, who eased his pain, made him sleep better as foreclosure notices arrived and credit card companies began calling six or more times a day? Who bailed him out? He did.

So why, I ask, are we going to do it? Truly. I've thought a lot about this, and I've interviewed experts on my show on radio, listened to them talk, watched the five hour meeting on the Hill o September 23, 2008...and I say, no. No bailout. You want to give somebody money to the tune of trillions of dollars, give it to the American people...Pay off some mortgages, wipe out some debt. The money flows back to Wall Street, to credit card companies, Americans have more money to spend..everybody wins.

But this way we all lose for decades to come. $1.2 trillion all told will get us what? --About $4K each in debt, well, in more debt. Add that to the one trillion for the war, and the $10 trillion national debt already and, well, now you're at about $40K for every American, each and every one of the 300 million of We, the People. A credit card with a $40K balance, minimum monthly payments...well, you do the math.

And that's just it: The math. First of all, we don't have another trillion to bail these people out. Second, if we are going to socialize anything, why bad Wall Street debt?

I had a 26 year-old caller on my show, when asked why we should do this, said, "without corporations what do we have left?" It staggered me. It staggered my listeners. Literally stunned us all. Without corporations, what do we have left?

We, the People, that's what. Have we forgotten what America is? It's not Nike, Puma, WalMart, AIG, Lehman, Microsoft, Haliburton...it's not faceless, nameless, soulless entities that exist only on paper or in concrete monoliths or on logos. We all don't work for the American company we are part of the American union.

It's in my heart, in my soul, to rescue people, animals, things with souls, with hearts, and eyes. Rescuing businesses whose only real product seems to be more debt, more pain, more money management mishaps, seems as soulless as the entities themselves and the people whose jobs it was to oversee them.

America is more than a monetary system. If it's not, it should fail. If America is not a place of people, of humans, of hopes and dreams, of lives and hearts, then what is it? Care for them first and foremost.

We act as if money went away we would all throw everyone in to the streets, deny them food, shelter, the basic human needs. Oh wait.

And that's it, the fear realized. We've become monetary beings, even helping each other has a price. And if someone can't pay in one way or another, many don't help (unless we are legislated in to doing so like hospitals). The idea of the benevolent American or America seems all but a dream. Benevolence costs money.

Again, I am not Wall Street wiz. I'm just an American that sees others suffering every day, or at least worrying, stressing, doing without, Americans with no real leadership or inspiration, depressed, mostly overweight, broke or nearly broke Americans. And nothing I've heard yet helps any of them or me. I'm being told what's good for Lehman, Sachs, Lynch , AIG and others is good for me, but somehow, I just don't buy it.

At least not for $700 billion plus interest.

Instead, I'd rather socialize caring for each other. Let's pay off debt of individuals, mortgages, HEALTH BILLS. If we are to spend trillions, how about we spend it on things we can see, touch, and feel, each other, instead of those giant ledger sheets in the sky.

Neil Grossman: Paulson says "Just Trust Me"

2008-09-24T13:24:38Z

Yesterday, we bore witness to an amazing event. The Secretary of the Treasury and the Chairman of the Federal Reserve appeared in Congress, hustling a financial system bailout plan of enormous size. The subject and the scope of this rescue package are amazing in themselves. The speed with which it has been drafted and the attempt to push it through Congress with little review is disconcerting to say the least. But, one thing really stood out to me in the testimony. That was the degree of skepticism expressed by the Senators about the potential effectiveness of the Paulson Plan. The response, pretty much, was "You just have to trust us."

Trust them! Why? Performance? Come on. Neither the Treasury nor the Federal Reserve has done a particularly good job at handling the economy, the financial system, or regulation. If most of us had their track record, we would not be taken seriously. Nevertheless, they ask us to trust the valuations they are going to pay for hundreds of billions of dollars of complex, distressed assets. It is hard to accept.

However, in this case, maybe there is one objective yardstick. In the bailout of Bear Stearns, the Federal Reserve agreed to buy $30 billion of Bear Stearns assets. The Fed has held these assets for over six months. Perhaps they could tell us the current market value of these holdings so we could could judge their trading acumen. If I was a betting man and you asked me to take the over or under at $15 billion, I would go for the under. And if I am right about this, I would go for the under on the price the Treasury would pay for every security offered to it under the Paulson proposal. It's sort of like the old Life Cereal commercial: "Let's sell it to Hank, he'll buy it."

David Sirota: Is Barney Frank Why Lobbyists Are Laughing At Dems?

2008-09-24T12:01:58Z

House Banking Committee Chairman Barney Frank (D-MA) has spent the last few days appearing on television telling America how honorable and wonderful Henry Paulson is for proposing a bailout that sends billions of taxpayer dollars to Paulson's old friends at Goldman Sachs. I've tangled with Frank before, over his all-too-close relationship with Big Money - and now, even as banking industry lobbyists are publicly laughing at Democrats, Roll Call reports that Frank may be moving to quietly cut a secret bailout deal:

Democrats weren't immune from divisions as well. Senate Banking Chairman Chris Dodd (D-Conn.) reiterated his concern that House Financial Services Chairman Barney Frank (D-Mass.) was making a deal with the White House without Senate input.

"You can't go off on this one side doing something that the other side doesn't know about," Dodd said.

But when asked why he wasn't present in the room with Paulson and Frank, Dodd said it was because "of the nature of the institutions." Pressed further about why he didn't insist on being in the room, Dodd said, "We're not going to get into that."

Is this why lobbyists and George "19 percent" Bush are laughing at Democrats like Dodd? Are they laughing because one of the other Democratic leaders is busy working to help them sell America out? Frank's staffers deny that this is what's going on, despite Frank's fawning all over Paulson. I hope they are being truthful.

David Sirota: The $700 Billion Questions

2008-09-22T12:37:31Z

With this morning's news that speculators at Lehman Brothers are going to get $2.5 billion worth of bonuses, I wanted to pass on my brand new In These Times magazine article asking five key questions that neither party has bothered to answer about the $700 billion bailout. They are:

1. What will prevent the bill from allowing both parties to use the guise of purchasing worthless mortgages to further enrich their largest campaign donors?

2. How are Americans and investors supposed to feel confident that the crisis will be solved, if the very people who engineered the crisis are being relied on to solve it?

3. How is this meltdown a failure of "oversight" if it has almost nothing to do with illegality?

4. When did a crisis suddenly mean that giving away taxpayer cash to campaign donors is laudably apolitical, but spending taxpayer money on taxpayers is inappropriately "political?"

5. How are we going to pay for this?

I explore all of these questions in the article, which you can read here. As I note, this week we will see Thomas Frank's wrecking crew using Naomi Klein's shock doctrine to justify a bigger free lunch than David Cay Johnston ever imagined. And until these basic questions are answered, nobody should have a single iota of confidence that what's being proposed is anything less than the most anti-democratic power grab and corporate giveaway in contemporary American history.

Robert Reed: Why I Won't Shed Tears For Wall Street

2008-09-19T11:51:42Z

Call me small-minded, or vindictive, but I don't feel sorry for Wall Street.

Yes, I realize we're in a crisis and suffering through the roughest economic patch since the Great Depression. And I appreciate it isn't nice to pick on someone when they're down.

But I'll be honest, being charitable is not my first instinct here. There's part of me that resents Wall Street, especially its slew of money-hungry CEOs, cavalier investment bankers, heartless merger and acquisition specialists, and red meat-loving traders. I'll add to this lot the relentless gang of stock market pundits and pickers, who rant against even modest industry regulations or investor protections for fear of derailing their fantasy of a pure "free market" society. To each and every one of them I say:

"Tough luck, folks. Your day of reckoning has come. You're getting just what you deserve."

It's too bad so many innocent people will have to pay for their avarice and hubris--especially those being tossed to the curb without work or prospects.

This is not some sudden backlash brought on by my staggering 401K portfolio or a rant sparked by uncontrolled panic that the stock market is forever down and out.

No, this resentment has been building for some time.

For more years than I care to remember I've reported and commented on business. When I began plying my trade as a pup reporter, publicly-owned companies didn't fixate on their stock prices as they do now. The stock price was an important component of something more grand: How well the company was managed; product quality; innovations; customer satisfaction--you know, the business.

And Wall Street? That was a place where companies went to raise capital for expansion and new products.

This was not a perfect dynamic. Often, top management was removed from the real world. But, on balance, I'd argue companies that focused on their knitting, and not merely pleasing shareholder interests and investment analysts, usually produced leaders in big industries like automotive, consumer products, financial services, technology, etc.

Over time that changed. Shareholders--especially institutional shareholders with ties to Wall Street-backed financial muscle--started pressing companies for greater returns. The mantra: Maximize shareholder value.

So, what mattered before didn't any longer. Shrewd CEOs quickly learned to bow to the almighty stock price or risk getting dumped. In essence, companies were being managed by institutional shareholders, backed by Wall Street investment houses.

For years, this situation has made life miserable for management teams that don't always meet or exceed quarterly profit and stock price expectations.

I recall a conversation with a CEO of a major company who ruefully told me that business wasn't the same anymore. Why? Because long term planning and investment were out and share price trumped every other concern.

Now ask yourself: How many companies have been damaged in the name of maximizing shareholder value? How many unnecessary mergers, spin-offs and other dumb deals were spawned just to give the stock a jolt? How many jobs and benefits were cut because Wall Street said that was an easy path to operating "efficiencies" and greater short-term returns?

Wall Street defenders will argue that shareholders made a killing. Some did, some didn't. But I guarantee you that every investment bank involved in these transactions walked away with ample fees and never looked back.

Not satisfied with disemboweling Corporate America, investment banks turned to Main Street.

Once there, they encouraged lenders to keep making questionable subprime mortgages.Yeah, banks and mortgage lenders caused their share of problems by originating these awful loans. But Wall Street investment firms compounded the problem by manufacturing a market for these crappy credits, packaging and selling them to big and small investors globally in return for fat fees that translated into hefty annual bonuses.

Any attempt to throttle back this excess through regulation, or sheer common sense, was beaten back by Wall Street's protector class--those bellicose traders, pundits, economists and stock gurus who blindly fight even the most minor regulatory enforcement. You know, the crew that ends up regularly on CNBC's Larry Kudlow show. Their type helped provide cover to the Bush Administration, which didn't want to stop the mortgage music anyway.

The real irony? The investment banks caused all this mischief on borrowed money. The bankrupt Lehman Brothers, the near-bust Bear Stearns (now part of JPMorgan Chase) along with "independents" Goldman Sachs and Morgan Stanley had leverage ratios in excess of 30 before it hit the fan.

That means for every dollar in the pot they borrowed $30. And these guys were being paid huge money for financial advice?

In my old neighborhood, we had a saying: If you owe someone a little money, they have you. If you owe them a lot of money, you have them.

Wall Street owes us a lot for these taxpayer-backed bailouts. Man they got us good and that's why I'm not shedding any tears.

Instead, I'm concerned that when this financial mess has passed, Wall Street is going to try and get us again.

Then we can all have a good cry.

Grant Cardone: Wall Street Herds go to Slaughter

2008-09-19T11:21:15Z

We are seeing it happen again today that the herds are going to slaughter regardless of how intelligent they claim to be, no matter their titles, their buildings or their size; Bear Stearns, Lehman, Indy Mac, Fannie Mae, Freddie Mac, Country Wide, AIG, and their investors have all been using the herd mentality to make financial decisions and all are going to slaughter due to their inability to think independently and apply common sense and ethics to their economic decisions.

The supposed "great minds" in the business world going overboard again, unable to think independently, apparently incapable of making common sense logical survival decisions and all being punished equally for their stupidity. The marketplace never discriminates, it is completely bipartisan and relentlessly disciplines those that refuse to discipline themselves.

Wall Street, the banks, the hedge funds and the individual investors (hopeful gamblers) have again violated basic common sense investing principles in fear of missing out on what appeared to be "easy money". The big boys (Wall Street) using other people's money with complete disregard as though they are at a casino doubling down, over and over, thinking they will never roll a seven. You don't need a Harvard business degree to define stupidity, nor do you need a course in leadership to watch these robots follow each other right off the cliff.

Some of the obvious violations: using maximum amounts of leverage, using multiple lenders, over-valuation of values, betting on future values, no emergency plans and basic lack of understanding of the business itself. Individual investors blindly investing and violating the same rules will also be punished because of their irresponsible decisions, lack of research and turning over their finances to those they don't even know. You can blame it on a lack of regulation, but the reality is it is a lack of responsibility with regards to money and investing. This is one of the things that makes the IRA's, Keoughs and Mutual Funds such vulnerable vehicles for the individual investor.

The world has come to overvalue expensive degrees, titles and big company names and undervalue the ability to think logically and independently. Everyone knows there is no such thing as get rich quick yet the "masses" continue to invest in hopes of it.

After the Savings and Loan debacle on the late 1980's the banks swore that over leverage of the magnitudes of the 80's would never be repeated. And they were right. The next time, now, it would be done on a much more global level and a grander scale.

The individual investor needs to heed the following policy: never, never, never follow the masses with your investment dollars, and it is better to miss profits than later miss your capital.

While the brains on Wall Street and the banking community may be better educated and create the appearance of knowing more because of their big financial terms and fancy titles, understand that when the masses start moving in any direction it will always be over-done, it will always end badly and neither their education nor their titles will save your investment dollars!

The investor needs to immediately reevaluate all of his investment and make sure he fully understands and can easily explain exactly where and what his investments are. If you can't tell me where your money is invested, what products they produce and how they make a profit you need to get out of that investment immediately. If an investor is willing to continue to blindly trust others with their money, and act completely irresponsible in doing so, there will always be others that are willing to lose your money.

The Herd Mentality is financial death to all that employ it. What we are going through right now has been caused by only a handful of things!

-- Greed? Yes.

-- Unethical? Absolutely.

-- A lack of regulation? Maybe.

-- A void of common sense and independent thinking? Massive and rampant like a contagion of pandemic proportions!

Logic has been cast aside for hope of missing out on profits and too few willing to stand up and be a voice of reason!