Stock Market Meltdown!

[Bong-Man]

http://www.freep.com/article/20091015/COL04/910150412/1318/Who-to--call-if-cops-won-t-come?

Who can you call if cops won't come?

BY BRIAN DICKERSON

FREE PRESS COLUMNIST

When a burglar attempted to steal tools from a warehouse he owns in Pontiac, Leon Jukowski did what any reasonable property owner would: He called his local police.

Three days later, an old friend on the force paid Jukowski a sheepish "courtesy call" to explain that the Pontiac department no longer had the resources to investigate B&Es.

"So what I am I supposed to do? Have one of my employees drag the burglar off the street and beat the crap out of him?" asked Jukowski, a former deputy mayor who is running, against the advice of many of his saner friends, for mayor of the cash-strapped city.

His friend from the police department smiled ruefully. "We don't really send people out for that anymore, either," he said.

Jukowski told this story to me and some of my editorial board colleagues last week, and I've retold it several times since then. Most of the people I've told it to laugh, from which astute readers may accurately deduce that 1) I'm a fair storyteller and 2) not many people in my immediate circle hail from Pontiac. (continued at link)

I think it's just about time I purchased a gun.

[eternal light]

The market continued its rise for the 2nd day in a row.

10,062.94 +47.08 +0.47%

Open: 10,014.88 High: 10,062.94 Low: 9,977.47

Previous Close: 10,015.86 Volume: 252,476,764

Eastern Time

http://moneycentral....US%3AINDU&iax=1

http://www.youtube.c...h?v=G05vfcYrW7A

[imPLANTed]

I really haven't been affected one way or the other.

[ZeppFanForever]

I really haven't been affected one way or the other.

Me neither! ROF!

[eternal light]

washingtonpost.com/wp-dyn/content/article/2009/10/22/AR2009102203866.html

[wanna be drummer]

The Stock Market isn't exactly a great tool for measuring the economy but hey, it's always good news when it's going up nowadays

[Medhb]

http://www.freep.com...ops-won-t-come?

Who can you call if cops won't come?

BY BRIAN DICKERSON

FREE PRESS COLUMNIST

When a burglar attempted to steal tools from a warehouse he owns in Pontiac, Leon Jukowski did what any reasonable property owner would: He called his local police.

Three days later, an old friend on the force paid Jukowski a sheepish "courtesy call" to explain that the Pontiac department no longer had the resources to investigate B&Es.

"So what I am I supposed to do? Have one of my employees drag the burglar off the street and beat the crap out of him?" asked Jukowski, a former deputy mayor who is running, against the advice of many of his saner friends, for mayor of the cash-strapped city.

His friend from the police department smiled ruefully. "We don't really send people out for that anymore, either," he said.

Jukowski told this story to me and some of my editorial board colleagues last week, and I've retold it several times since then. Most of the people I've told it to laugh, from which astute readers may accurately deduce that 1) I'm a fair storyteller and 2) not many people in my immediate circle hail from Pontiac. (continued at link)

I think it's just about time I purchased a gun.

It's spreading. In Detroit and Flint I think it takes a murder to get an officer. This really IS the truth!

[eternal light]

Oct. 30, 2009, 4:20 p.m. EDT

By Kate Gibson

U.S. stocks stumble in October

NEW YORK (MarketWatch) -- U.S. stocks ended Friday sharply lower, with the Dow Jones Industrial Average turning flat for the month after three straight months of gains, while the other two major indexes snapped seven-month winning streaks. Financial shares declined the most in the face of a possible bankruptcy by commercial lender CIT Group Inc. (NYSE:CIT) . The Dow Jones Industrial Average (INDEX:INDU) fell 249.85 points, or 2.5%, to end at 9,712.73, leaving it off 2.6% for the week and effectively flat for October. The hit was the worst single-day point drop for the blue chips since April 20. The S&P 500 (INDEX:SPX) declined 29.92 points, or 2.8%, to 1,036.19, a weekly loss of 4% and a 2% monthly decline. The Nasdaq Composite (NASDAQ:COMP) dumped 52.44 points, or 2.5%, to 2,045.11, down 5.1% from the week-ago close and off 3.6% for the month.

marketwatch.com/story/us-stocks-stumble-in-october-2009-10-30?siteid=msn

[The Rover]

YOU NEED to see this interview with Professor Elizabeth Warren from the PBS NOW program 11-13-09 !

http://www.pbs.org/now/shows/546/index.html

This is REAL stuff !!

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

What exactly is going on with the economy? Stocks are up and big bonuses are back, but while they're throwing parties on Wall Street, there's pain on Main Street.

One out of every six workers is unemployed or underemployed, according to government statistics - the highest figure since the Great Depression.

This week NOW gets answers and insight from Harvard professor Elizabeth Warren, who's been heading up the congressional panel overseeing how the bailout money is being spent. NOW Senior Correspondent Maria Hinojosa talks with Warren about how we got to this point, and where we go from here.

What will it take to put both bankers and American businesses on the same road to recovery?

[The Rover]

The 2008 AIG "Backroom/Backdoor" Financial Bailout courtesy of the NY FED

http://www.reuters.com/article/idUSTRE60N1S220100124

Lawmakers on Capitol Hill have labeled the AIG bailout, in which the New York Fed created a special entity to purchase those securities from the banks at essentially their face value, a "backdoor bailout" for the 16 financial institutions.

The new batch of emails, along with others that have become public in recent weeks, reveal that some at the New York Fed had gone to great lengths to keep the terms of the bailout private and the SEC may have played a role in contributing to some of the secrecy surrounding the AIG rescue package.

"The New York Fed was orchestrating what can only be characterized as an extreme effort to ensure that details of the counterparty deal stayed secret," Rep. Darrell Issa from California, the ranking Republican on the House Oversight Committee, said through a spokesman. "More and more it looks as if they would've kept the details of the deal secret indefinitely, it they could have."

In March, some of the secrecy surrounding the AIG bailout began to fall away when the insurer, under pressure from Congress and the SEC, agreed to publicly name the 16 banks that got money in the rescue package and how much each received.

But AIG, largely at the prodding of the New York Fed, refused to make public all of the information in the controversial document, officially called "Schedule A -- List of Derivative Transactions," according to the emails turned over by the central bank to Capitol Hill. AIG continued to seek confidential treatment from the SEC for the redacted portions of the five-page filing.

Last May, the SEC did grant AIG's request for confidential treatment for the remaining redacted portions of the Schedule A filing. The redacted parts include the CUSIP, or trading ID, number for each security on which AIG wrote a CDS contract, as well as the face value of each individual security that AIG had insured against default.

The SEC agreed to let AIG keep that information confidential until November 2018 -- or the 10th anniversary of the bailout. Critics contend that without the redacted information, it is difficult to determine which of the 16 banks had held the worst-performing securities, and which banks originated the worst of the troubled securities.

GEITHNER UNDER MICROSCOPE

The New York Fed has argued the information needs to remain confidential to enable BlackRock Inc, which manages the portfolio of securities bought from the banks, to compete with hedge funds on an even playing field.

U.S. Treasury Secretary Timothy Geithner, who has drawn fire for his role in the bailout, was set to testify before the House Oversight Committee on Wednesday. Geithner, who led the New York Fed at the time of the AIG bailout, has said he was not privy to the discussions about what information AIG should or should not release to the public and the SEC

[The Rover]

Former Federal Reserve Chairman Alan Greenspan on Wednesday testified that mortgage giants Fannie Mae and Freddie Mac played a critical role in fostering an explosion of growth in the subprime-mortgage market that led to the global financial crisis.

Thursday, April 8, 2010

In his first appearance officially defending his own role in the crisis before the Financial Crisis Inquiry Commission, Mr. Greenspan deflected the blame from himself and the central bank - which had broad but largely unused authority to regulate banks and the mortgage market - while giving voice to long-standing charges by Republicans that congressional meddling with Fannie Mae and Freddie Mac was a critical factor in the run-up to the crisis that brought down the global economy in the fall of 2008.

Fannie and Freddie, while under strict federal control since a government takeover in September 2008, have escaped efforts at reform in Congress, though they are fast becoming the biggest beneficiaries of taxpayer bailouts with $125 billion in cash infusions so far. Moreover, their growing and potentially unlimited liabilities are not likely to be recovered through repayments like those from big banks and Wall Street firms in the past year.

In detailing the role of the mortgage monoliths in the crisis, Mr. Greenspan pointed to the mandates Fannie and Freddie received in 2000 from Congress and the Clinton-era Housing and Urban Development Department to make housing more affordable to minorities and people with blemished credit by using their vast resources to purchase more subprime-mortgage securities.

As the mortgage giants started to scarf up the subprime securities, much of which had been engineered by Wall Street firms to earn AAA ratings, the subprime market grew rapidly. It burgeoned from less than 2.5 percent of the mortgage market in 2000 to encompass 40 percent of Fannie's and Freddie's more than $5 trillion mortgage portfolios by 2004, Mr. Greenspan said.

The enormous appetite for subprime mortgages that Fannie and Freddie brought to the market is the reason that interest rates on mortgages fell so dramatically in the mid-2000s and many exotic and risky loans were created to satisfy the heightened demand for mortgage investments, Mr. Greenspan said. That, in turn, gave birth to the most abusive loans with low initial "teaser" rates and no requirements for down payments or income documentation.

"A significant proportion of the increased demand for subprime-mortgage-backed securities during the years 2003 to 2004 was effectively politically mandated," he said, adding that the full extent of the mortgage enterprises' investments in risky loans was not known until September, when a large portion of what had been classified as "prime" mortgages in their portfolios was revealed to be subprime.

While much of the riskiest subprime securities were purchased directly from Wall Street by European investment funds drawn by high yields and low default rates during the housing boom, Fannie and Freddie proved to be the best conduit for rapidly growing demand from more conservative investors in Asia for U.S. mortgage investments.

Fannie and Freddie first issued their own debt, which had an implicit government guarantee that appealed to the Asian investors, and then used the cash to invest in subprime loans, in a process that Mr. Greenspan often criticized at the time as over-acquisitiveness aimed at dominating the mortgage market.

"The subprime market grew rapidly in response," he said, and "subprime loan standards deteriorated rapidly," worsening an investment bubble that was already developing in the housing market.

Mr. Greenspan, whose views are still closely followed in financial markets though he left the Fed more than four years ago, spurned repeated assertions by members of the commission that the Fed's own low interest rate policies in 2003 were what nurtured the housing bubble.

"The house-price bubble, the most prominent global bubble in generations, was engendered by low interest rates," he said, but "it was long-term rates that galvanized prices, not the overnight rates of central banks." Long-term rates are largely set in global financial markets and reflect investors' demand for Treasury bonds and competing instruments, such as Fannie and Freddie mortgage bonds.

As the housing bubble was building in the mid-2000s, Mr. Greenspan frequently noted a "conundrum" that long-term rates were inexplicably low, did not seem to reflect the increasing risks of bond investments and had become divorced from their traditional linkage to short-term rates, which the Fed started to raise in 2004.

Mr. Greenspan theorized that the big drop in long-term rates was the result of enormous cash surpluses being amassed by China and other East Asian countries from their earnings on foreign trade, much of which was invested in U.S. Treasury bonds and mortgage securities, drawing down long-term rates. His analysis is widely viewed as correct today in pinpointing a key cause of the housing bubble.

Mr. Greenspan's prescience on such matters lends credibility to his testimony. But the former Fed chairman continued to largely reject charges that he personally played a critical role in the run-up to the crisis by not using the Fed's regulatory authority to set standards for subprime lending while frequently urging Congress not to regulate the complex and fast-growing markets for derivative securities such as credit default swaps in the 1990s.

Mr. Greenspan acknowledged he made "an awful lot of mistakes" in his 21 years in office, though he claimed to be right about 70 percent of the time.

He said that credit default swaps, a kind of insurance on risky mortgages that played a pivotal role in bringing down Lehman Brothers Holdings Inc. and American International Group Inc. in the September 2008 events that triggered the global crisis, were only a tiny share of the derivatives markets when he cautioned against regulation in the late 1990s and were not of much concern to regulators at the time.

"We did not see the risks until after the Lehman bankruptcy," when the unraveling of derivatives contracts contributed to the collapse in the economy and markets worldwide, he said. After the debacle, he said, it became clear the derivatives markets and the whole financial system were drastically undercapitalized and that the principal response by government should be to substantially increase the capital and liquidity requirements of all globally operating financial firms.

Mr. Greenspan's successor, Fed Chairman Ben S. Bernanke, remarked separately in a speech to a Dallas business group Wednesday that while the worst of the debacle is over, "We are far from being out of the woods. Many Americans are still grappling with unemployment or foreclosure or both."

http://www.washingtontimes.com/news/2010/apr/08/greenspan-links-fannie-freddie-to-crisis/

[cryingbluerain]

Greece's lessons for us

The mistakes that led to its financial crisis should serve as a warning to the governments in Washington, Sacramento and closer to home.

http://www.latimes.com/news/opinion/editorials/la-ed-greece-20100505,0,2389223.story

The U.S. budget deficit and debt aren't up to Athenian levels. But like Greece, the U.S. government has committed to providing benefits that it cannot afford over the long term. Policymakers have seen the problems in Social Security and Medicare coming for years, but Congress has done little about them. If anything, lawmakers made the task more difficult with this year's healthcare reform law, which trimmed Medicare spending but dedicated the savings to a new healthcare insurance program for the working class.

[Anjin-san]

Hi all,

Oh,no! 11.4 trillion and counting.Watch and see and buy can goods,...

KB(stockpiles!)

[BUCK'EYE' DOC]

Could this have been a terrorist attack?

Seems like it was fairly easy to pull this off.

Just a typo causing the stock market to lose 1000 points!

Just when my 401K was making a comeback, too.

Tim Paradis, AP Business Writer, On Thursday May 6, 2010, 9:22 pm EDT NEW YORK (AP) -- A computerized selloff possibly caused by a simple typographical error triggered one of the most turbulent days in Wall Street history Thursday and sent the Dow Jones industrials to a loss of almost 1,000 points, nearly a tenth of their value, in less than half an hour. It was the biggest drop ever during a trading day.

The Dow recovered two-thirds of the loss before the closing bell, but that was still the biggest point loss since February of last year. The lightning-fast plummet temporarily knocked normally stable stocks such as Procter & Gamble to a tiny fraction of their former value and sent chills down investors' spines.

"Today ... caused me to fall out of my chair at one point. It felt like we lost control," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

No one was sure what happened, other than automated orders were activated by erroneous trades. One possibilility being investigated was that a trader accidentally placed an order to sell $16 billion, instead of $16 million, worth of futures, and that was enough to trigger sell orders across the market.

No one was taking blame, either. The New York Stock Exchange said there was no problem with the Big Board's systems, and all the markets were on a conference call with the Securities and Exchange Commission.

Nasdaq issued a statement two hours after the market closed saying it was canceling trades that were executed between 2:40 p.m. and 3 p.m. that it called clearly erroneous. It did not, however, mention a cause of the plunge.

The NYSE also said it would cancel some trades on its electronic platform.

There were reports that the sudden drop was caused by a trader who mistyped an order to sell a large block of stock. The drop in that stock's price was enough to trigger "sell" orders across the market.

The SEC issued a statement saying regulators are reviewing what happened and "working with the exchanges to take appropriate steps to protect investors."

Whatever started the selloff, automated computer trading intensified the losses. The selling only led to more selling as prices plummeted and traders tried to limit their losses.

"I think the machines just took over. There's not a lot of human interaction," said Charlie Smith, chief investment officer at Fort Pitt Capital Group. "We've known that automated trading can run away from you, and I think that's what we saw happen today."

The market was already wobbly because of fears that Greece's debt crisis will undermine the economic recovery. Traders watched television coverage of protests in the streets of Athens, and the Dow was down 200 when the selloff began less than two hours before the closing bell.

At 2:20 p.m. EDT, the Dow was at 10,460, a loss of 400 points.

It then tumbled 600 points in seven minutes to its low of the day of 9,869, a drop of 9.2 percent.

On the floor of the New York Stock Exchange, stone-faced traders huddled around electronic boards and televisions, silently watching and waiting. Traders' screens were flashing numbers non-stop, with losses shown in solid blocks of red numbers.

Then the market bounced back, about as quickly as it fell. By 3:09 p.m., the Dow had regained 700 points. It then fluctuated sharply until the close. The trading day ended with the Dow down 347.80, or 3.2 percent, at 10,520.

The Dow has lost 631 points, or 5.7 percent, since Tuesday amid worries about Greece. That is the largest three-day percentage drop since March 2009, when the stock market was nearing its bottom following the financial meltdown.

At its lowest Thursday, the Dow was down 998.50 points in its largest point drop ever, eclipsing the 780.87 lost during the course of trading on Oct. 15, 2008, during the height of the financial crisis. The Dow closed that day down 733.08, the biggest closing loss it has ever suffered.

The impact of Thursday's gyrations on some stocks was breathtaking, if brief. Stock in the consulting firm Accenture fell to 4 cents after closing at $42.17 on Wednesday. It recovered to close at $41.09, down just over $1.

Procter & Gamble, generally a stable stock, dropped as much as $23, almost 37 percent, and rallied to close down only $1.41.

Many professional investors and traders use computer program trading to buy and sell orders for large blocks of stocks. The programs use mathematical models that are designed to give a trader the best possible price on shares.

The programs are often set up in advance and allow computers to react instantly to moves in the market. When a stock index drops by a big amount, for example, computers can unleash a torrent of sell orders across the market. They move so fast that prices, and in turn indexes, can plunge at the fast pace seen Thursday.

Even if there were technical issues, concerns about the world economy are running high.

The stock market has had periodic bouts of anxiety about the European economies during the past few months. They have intensified over the past week even as Greece appeared to be moving closer to getting a bailout package from some of its neighbors.

"The market is now realizing that Greece is going to go through a depression over the next couple of years," said Peter Boockvar, equity strategist at Miller Tabak. "Europe is a major trading partner of ours, and this threatens the entire global growth story."

The Standard & Poor's 500 index, the index most closely watched by market pros, fell 37.75, or 3.2 percent, to 1,128.15. The Nasdaq composite index lost 82.65, or 3.4 percent, and closed at 2,319.64.

At the market's lows, all three indexes were showing losses for the year. The Dow now shows a gain of 0.9 percent for 2010, while the S&P is up 1.2 percent and the Nasdaq is up 2.2 percent.

At the close, losses were so widespread that just 173 stocks rose on the NYSE, compared to 3,008 that fell. The major indexes were all down more than 3 percent.

Meanwhile, interest rates on Treasurys soared as traders sought the safety of U.S. government debt. The yield on the benchmark 10-year note, which moves opposite its price, fell to 3.4 percent from late Wednesday's 3.54 percent.

[The Rover]

FINANCIAL REFORM ---- DEMS WANT IT NOW.... BUT FANNIE & FREDDIE.... THAT'S TOO MESSY TO TACKLE BEFORE THE MID-TERM ELECTIONS DON'T CHA THINK ! ? ? ?

MAY 11, 2010

Democrats still don’t get it, and they refuse to reform Fannie Mae and Freddie Mac, the government mortgage companies that sparked the meltdown by giving high-risk loans to people who couldn’t afford it. Standing up for American taxpayers, CNBC’s on-air editor, Rick Santelli teed off on Rep. Paul Kanjorski’s (D-PA) claim that Democrats’ couldn’t reform Fannie & Freddie in their financial regulation bill because it was “too complicated,” asking: “It’s too complicated? You think taxpayers that go to work to pay the money you are subsidizing, it will end up a half a trillion, do you think they think complicated is an excuse?”

“Fannie Mae said on Monday it would need an additional $8.4bn in aid, as the US government-controlled mortgage finance company continued to suffer heavy losses on its bad loans…Fannie Mae’s appeal for help comes on the heels of a similar plea last week by smaller rival Freddie Mac, which asked for an additional $10.6bn cash infusion. The latest requests for aid bring the total amount of taxpayer dollars drawn down by these companies to $148bn since the 2008 government-led bail-out.

“Anthony Sanders, a senior scholar at the Mercatus Center at George Mason University, called Fannie and Freddie ‘our own Greek tragedy.’ Mr. Sanders estimated that total taxpayer liability was about $8,000bn for the combined companies, including public debt and loan guarantees.”

But the unlimited bailout that the Administration has bestowed on Fannie and Freddie doesn’t seem to bother Democrats, though the latest giveaway may come at an “inconvenient time,” as the New York Times noted today:

“Fannie Mae’s request on Monday for another $8.4 billion in federal aid comes at a politically inconvenient time for the Obama administration, which is pressing to pass sweeping financial legislation without resolving the company’s future…. Democrats want to defer an overhaul of federal housing policy until next year, after the midterm elections. But Republicans have seized on the continuing losses to argue that a plan for the two companies should be a priority of the current legislation.”

Republicans have been pressing for an end to bailouts that would get the government out of the mortgage business once and for all. But Democrats are not only unwilling to reform Fannie and Freddie, they are doubling down on the failed government mortgage companies – burning through hundreds of billions of taxpayer dollars in the process. As the Washington Post noted in a report today: “Under the terms of the government's 2008 emergency takeover of Fannie and Freddie, the Treasury must pump money into either firm whenever its worth, as measured by assets minus liabilities, goes into the red. Late last year, the Obama administration pledged unlimited backing.”

For years, Republicans raised red flags about Fannie and Freddie’s financial condition and proposed responsible reforms only to be thwarted by Democrats who have deep political ties to the worst offenders. These same powerful Democrats are now pushing for a financial reform bill that doesn’t even address the need to fix these government mortgage companies. As the Wall Street Journal wrote last week, “reforming the financial system without fixing Fannie and Freddie is like declaring a war on terror and ignoring al Qaeda.”

House Republicans’ plan would phase out taxpayer subsidies of Fannie Mae and Freddie Mac over a number of years and end the current model of privatized profits and taxpayer losses.

[The Rover]

RBS (the Royal Bank of Scotland) tells clients to prepare for 'monster' money-printing by the Federal Reserve

About The RBS:

In March 2009, RBS announced the closure of its tax avoidance department, which had helped it avoid £500m of tax by channelling billions of pounds through securitized assets in tax havens such as the Cayman Islands. The closure was partly due to a lack of funds to continue the measures, and partly due to the 70% taxpayer stake in the bank.

Also in March 2009, RBS revealed that its traders had been involved in the purchase and sale of sub-prime securities under the supervision of Sir Fred Goodwin.

In November 2009, RBS announced plans to cut 3,700 jobs in addition to 16,000 already planned, while the government increased its stake in the company from 70% to 84%.

In December 2009, the RBS board revolted against the main shareholder, the British government. They threatened to resign unless they were permitted to pay bonuses of £1.5bn to staff in its investment arm.[38] The warning was very heavily criticised because it came in the wake of a £850bn bailout of the banking sector.

In February 2009 RBS reported that while Sir Fred Goodwin was at the helm it had posted a loss of £24.1bn, the biggest loss in UK corporate history.[45] His responsibility for the expansion of RBS, which led to the losses, has drawn widespread criticism. His image was not enhanced by the news that emerged in questioning by the Treasury Select Committee of the House of Commons on 10 February 2009, that Goodwin has no technical bank training, and has no formal banking qualifications.

In January 2009 The Guardian's City editor Julia Finch identified Sir Fred Goodwin as one of twenty-five people who were at the heart of the financial meltdown. Nick Cohen described Goodwin in The Guardian as "the characteristic villain of our day", who made £20m from RBS and left the taxpayer "with an unlimited liability for the cost of cleaning up the mess".

27 Jun 2010

As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7857595/RBS-tells-clients-to-prepare-for-monster-money-printing-by-the-Federal-Reserve.html

Clearly we are nearing the end of the "Phoney War", that phase of the global crisis when it seemed as if governments could conjure away the Great Debt. The trauma has merely been displaced from banks, auto makers, and homeowners onto the taxpayer, lifting public debt in the OECD bloc from 70pc of GDP to 100pc by next year. As the Bank for International Settlements warns, sovereign debt crises are nearing "boiling point" in half the world economy.

Fiscal largesse had its place last year. It arrested the downward spiral at a crucial moment, but that moment has passed. There is a time to love and a time to hate, a time for war and a time for peace. The Krugman doctrine of perma-deficits is ruinous - and has in fact ruined Japan. The only plausible escape route for the West is a decade of fiscal austerity offset by helicopter drops of printed money, for as long as it takes.

Some say that the Fed's QE policies have failed. I profoundly disagree. The US property market - and therefore the banks - would have imploded if the Fed had not pulled down mortgage rates so aggressively, but you can never prove a counter-factual.

The case for fresh QE is not to inflate away the debt or default on Chinese creditors by stealth devaluation. It is to prevent deflation.

Bernanke warned in that speech eight years ago that "sustained deflation can be highly destructive to a modern economy" because it leads to slow death from a rising real burden of debt.

[The Rover]

Goldman Sachs (finally) reveals where bailout cash went

24 July 2010

http://www.usatoday.com/money/industries/banking/2010-07-24-goldman-bailout-cash_N.htm

Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.

Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

Asked the significance of the list, Grassley said, "I hope it's as simple as taxpayers deserve to know what happened to their money."

Goldman Sachs (GS) received $5.55 billion from the government in fall of 2008 as payment for then-worthless securities it held in AIG. Goldman had already hedged its risk that the securities would go bad. It had entered into agreements to spread the risk with the 32 entities named in Friday's report.

Overall, Goldman Sachs received a $12.9 billion payout from the government's bailout of AIG, which was at one time the world's largest insurance company.

Goldman Sachs also revealed to the Senate Finance Committee that it would have received $2.3 billion if AIG had gone under. Other large financial institutions, such as Citibank, JPMorgan Chase and Morgan Stanley, sold Goldman Sachs protection in the case of AIG's collapse. Those institutions did not have to pay Goldman Sachs after the government stepped in with tax money.

Shouldn't Goldman Sachs be expected to collect from those institutions "before they collect the taxpayers' dollars?" Grassley asked. "It's a little bit like a farmer, if you got crop insurance, you shouldn't be getting disaster aid."

Goldman had not disclosed the names of the counterparties it paid in late 2008 until Friday, despite repeated requests from Elizabeth Warren, chairwoman of the Congressional Oversight Panel.

"I think we didn't get the information because they consider it very embarrassing," Grassley said, "and they ought to consider it very embarrassing."

The initial $85 billion to bail out AIG was supplemented by an additional $49.1 billion from the Troubled Asset Relief Program, known as TARP, as well as additional funds from the Federal Reserve. AIG's debt to U.S. taxpayers totals $133.3 billion outstanding.

"The only thing I can tell you is that people have the right to know, and the Fed and the public's business ought to be more public," Grassley said.

The list of companies receiving money includes a few familiar foreign banks, such as the Royal Bank of Scotland and Barclays.

DZ AG Deutsche Zantrake Genossenschaftz Bank, a German cooperative banking group, received $1.2 billion, more than a quarter of the money Goldman paid out.

Warren, in testimony Wednesday, said that the rescue of AIG "distorted the marketplace by turning AIG's risky bets into fully guaranteed transactions. Instead of forcing AIG and its counterparties to bear the costs of the company's failure, the government shifted those costs in full onto taxpayers."

[The Rover]

July 11, 2013

Why the Fed Can't Prevent the Coming Crash -- According to Terence Burnham

http://www.pbs.org/newshour/businessdesk/2013/07/ben-bernanke-as-easter-bunny-why-the-fed-cant-prevent-the-coming-crash.html

Terence Burnham: I believe the stock market is about to have a devastating decline. To make a concrete prediction, we will see Dow 5,000 before we see Dow 20,000.

This prediction is exactly the opposite of conventional wisdom. Jeremy Siegel, author of "Stocks for the Long Run," is predicting new all-time highs for stocks, while Warren Buffett, the best investor of the previous century, is 100 percent behind stocks.

The signs of collapse are right in front of us.

But I'm not predicting a Dow of 5,000 just because it hit 15,000 so rapidly. I've been saying since well before the Crash of '08 that the U.S. economy was headed for disaster. Here, then, are three rational economic reasons I think we should all be terrified.

* Americans should be saving close to 50 percent of our income. Instead, we are saving zero percent.

* Government policies have been making the problems worse, not better.

The Fed has been keeping interest rates at rock bottom lows to supposedly stimulate the economy. But unemployment remains extremely high. As David Stockman pointed out on this page recently, the low rates have fueled speculative markets, not real economic growth.

Remember, the Easter Bunny cannot save you, nor can Ben Bernanke's printing press.

* Stocks right now are terrible investments.

As noted above, the vast majority of individuals are absolutely horrible at market timing. Investors tend to get scared in declines and excited in rallies. They buy high and sell low.

Most people should not own stocks today -- none. Yet individuals have been getting back into the stock market with a vengeance, and they have far more of their meager savings in stocks than they should.

[Pagefan55]

Well, the stock market has been as volatile this month as it normally is in October. My advice? Don't worry about the market's daily fluctuations -- just stay well diversified and let your money managers/financial advisors worry about it.

[Anjin-san]

DJIA: -530.81

Nasdaq -147.68

S&P 500 -53.89

[apantherfrommd]

You found an economy thread?! OMG. Nice find from the archives.

Thanks for the post Anjin-San. Sad to see that post though.

I think Greece was a canary in the coal mine to be honest. It should bounce back in QE to the infinity power, but the springs are rusting fast.

[cryingbluerain]

DJIA: -530.81

Nasdaq -147.68

S&P 500 -53.89

Obviously Bush's fault and corporations, rich people, etc.

[Anjin-san]

Obviously Bush's fault and corporations, rich people, etc.

They have to blame somebody!

So we have China stumbling along.N. Korea getting uppity,again!The EU bailing out Greece. Spain will be next,....O joy!

[Anjin-san]

Yikes!!!

http://www.bostonherald.com/business/business_markets/2015/08/us_stocks_plunge_at_open_after_chinese_stock_rout

[Walter]

After a day where the third highest Dow Jones gain in history took place at about 620 points, today's market is already up another 220.