Banking

I don't know if it is that economics and financial journalists ultimately do not know what the fuck they're talking about OR if they're so immersed into their own little worlds, they don't get that most of what they write is not even academic, it's just utter jargon.

Herewith is a partial and quite short list of words I'd love to see defined more often in articles addressing the current banking crisis. I will be updating today as I find more of my favorites and will start (hopefully with your help) to define them in the coming days.

Oh, and given how many words and terms I am finding myself looking up, the list I'm compiling is in alphabetic order :

So let me get this straight : The US had 750 billion dollars to bail out Wall Street; a sector of the US economy which has been historically controlled by "white" or US Americans of European ascendancy. The US Congress found 750 billion dollars for them and their European and Asian investors. A bailout, by the way, that now said banks are pooh-poohing, lest the US Treasury and tax-payers find out the depths of their accounting infamies. Yet there's no money to pay back reparations to African Americans for the evils of slavery and Jim Crow laws?

Discuss.

[A scene from the movie Birth of a Nation (1915). Image found in Wikipedia under "Lynching in America")

The House of Representatives needed 218 votes to approve the bill. It has passed with a final tally of 263 votes.

See my liveblogging at Liveblogging hearing of H. R. 1424 Revised Financial Markets Bill.

You have to read Bob Herbert's "When madmen reign" in today's New York Times :

I have to reblog this because last night I saw one of the best quick comments about this bailout travesty : On the eve of a black man coming into the White House, they hustle all the money out of the Treasury. (H/T Ruby and Professor Kim)

Michael Moore sees it more broadly : this is the way the wealthy stage a coup before they're taxed in the coming administration.

My (imaginary) boyfriend has a few things to say about the craziness on Wall Street :

Steal from the poor and give to the rich: this is the policy that we have in recent days seen the U.S. Government unhesitatingly and irresponsibly sanction by bailing out the big gamblers and law-breakers with tax-payer money. At least now this short-sighted and destructive approach to governance is undeniably out in the open.

We saw this happen in the 1980s with the savings and loan scandal and bail-outs, and we are seeing now, as we saw then, people like John McCain, Phil Gramm and the usual assortment of corporate pirates get off scot-free and continue on their paths of self-advancement and cronyism. The mismanagement and plundering of our nation's wealth and the cavalier drive to burden future generations of its citizens with crushing debt have been hallmarks of U.S. government practice for quite some time, but never to the unprecedented degree that we have experienced during the eight years that the Bush Administration has plundered the treasury for the benefit of a tiny, very wealthy minority.

Hopefully voters will keep this in mind when deciding whether they wish to continue in the same vein with McCain, or give change a chance to happen with an Obama administration.

Perhaps, too, the mainstream media outlets, in response to the now undeniable financial and moral crises we face, will get back to allowing issues more pressing and significant than the personal and ethical foibles of Ms Palin to take precedence in their daily election "coverage".

I have my doubts about their willingness to do so, but there is always hope.

It's so HAWT when he pokes his nose in my b'ness and does that weird pseudo-blogging thing he does at this publishing company's site.

Le sigh.

He's given me the perfect reason to post about McCain's involvement in the Savings & Loan crisis of the 1980s. I give you John McCain's Keating Five Problem In 97 Seconds :

"To fix prices at a higher level than they should be is going to compound our problem."

Ron Paul's assessment of the current crisis is very simple : The government wants to fix prices; to keep the prices of housing, of securities and of the banks at their pre-crisis levels. This obviously goes against the "natural" flow of the markets and it's what historically brought us the much invoked "Great Depression". You can keep prices artificially for so long.

In other words, this bail out will accelerate us into another Great Depression. The bail out is not going to get us out of it.

(H/T The Mess That Greenspan Made)

I don't believe we're right now in a downward spiraling financial fiasco. We've been in a downward spiraling financial fiasco for 3 years but most intensely for about 10 months now.

It's not just the oil crisis.

It's not just the credit crisis.

It's not just the foreclosure orgy.

It's not just the financial burden of the Iraq War.

It really wasn't 9/11 either.

Yes, all of these have accelerated the crisis. Yet the crisis was here all along.

It is called Trickle Down Economics:

... so that I don't have to :

[if you are] A WaMu customer. Nothing changes yet. Go to your favorite branch tomorrow, take some cash out of the ATM. If you were about to mail in a mortgage or credit card payment, still do that. All the phone numbers and web sites and account numbers stay the same for now. They'll give you plenty of heads up before anything changes. JPMorgan is really, really happy to be getting branches in states like California, Oregon, Washington and Florida, and a normal amount of happy to be getting branches elsewhere. On the conference call tonight, they said they think they'll only wind up closing about 10% of the combined branches.

Yves Smith of Naked Capitalism has put it rather succinctly : Hope you like the smell of napalm in the morning. Otherwise, this will not be your sort of day.

The biggest bank meltdown in US history and it has to be Washington Mutual, the bank that's holding most of my money. Geezus! This from the Financial Times :

JPMorgan Chase has acquired the banking operations of Washington Mutual which was seized by US regulators on Thursday night in the biggest bank failure in US history.

Under the deal, which was brokered by government, JPMorgan will pay $1.9bn to the banking regulator, and acquire all insured and uninsured deposits, assets and some of the liabilities of WaMu’s banking operations, including its troubled mortgage portfolio.

Holy crap! Where's my money? AUUUUUUUGH!

I was actually going to take all my money out earlier in the week but decided to leave it for today. I should have done what the thousands of other depositors did. Take my money out of WaMu. Of course, the deposits run killed the bank, but now I have to run over there and find out if I have access to my cash.

Oh, wait! Here's the Federal Deposit Insurance Commission (FDIC) :

Reuters published a handy summary of Paulson's bail out proposal along with the counterproposals by Democrats and Republicans :

• Would allow up to $700 billion in mortgage assets to be held by Treasury at any one time.
• Allows the Treasury to buy any mortgage-related assets, both residential and commercial, for a two-year period. The plan does not detail the types of mortgage assets this could cover and or how long the government could hold them, and does not establish how they would be valued. However, if deemed needed to promote financial market stability, any type of financial instrument could be bought.
• Assets must have been originated or issued before September 17, 2008, by a financial institution having "significant operations" in the United States. This provision could also be waived if deemed needed to promote financial stability.
• Assets could be bought from any financial institution, including but not limited to banks, thrifts, credit unions, broker-dealers and insurance companies. If deemed need(sic) to promote financial stability, however, assets could be purchased from non-financial companies.
  
  

When Bill Krystol, Bush's #1 water-carrier says no to the bailout, you know the United States are in for a world of pain. This from his Op/Ed A Fine Mess:

It’s not that I don’t believe the situation is dire. It’s not that I want to insist on some sort of ideological purity or free-market fastidiousness. I will stipulate that this is an emergency, and is a time for pragmatic problem-solving, perhaps even for violating some cherished economic or political principles. (What are cherished principles for but to be violated in emergencies?) And I acknowledge that there are serious people who think the situation too urgent and the day too late to allow for a real public and Congressional debate on what should be done. But — based on conversations with economists, Wall Street types, businessmen and public officials — I’m doubtful that the only thing standing between us and a financial panic is for Congress to sign this week, on behalf of the American taxpayer, a $700 billion check over to the Treasury.

That's Lehman, Bank of America, Merril Lynch and the whole banking industry there. Say buh-bye to any all of what's left of the US as an economic power. Am afraid though, the Wicked Witch is not dead yet and that we will need to go through way more pain than mere melting away.

This from the Grey Lady :

I honestly don't think it's a good idea for banks to go into the real estate business, but that's what bankrupt homeowners are forcing them to do. Why? Because once they walk away from their homes, the bank can't come back to get more of their money :

Foreclosure used to be a last resort, something that hard-pressed homeowners would scrimp and plead to avoid. But as the subprime lending crisis sweeps up millions of borrowers nationwide, some are deliberately choosing foreclosure as an early option.

As their home values tumble and their mortgages rise, these "walk away homeowners" decide to cede their houses to their lenders.

"It's throwing good money away after bad" to pay an escalating mortgage on a home that's plunging in value, said Army Sgt. 1st Class Nicklaus Skaggs of Vacaville. He and his wife, Tishara, stopped paying their mortgage in February. They signed up with a new company called You Walk Away to help guide them through the multi-month foreclosure process.

Well, here's a quick run down on the timeline of events that led to this disaster.

I am running out to pick up the kids, but will be back with more. I just twitted that I feel the stock market is like a really bad telenovela. So now I feel compelled to blog why. Gotta go pick up the kids first.

I have a friend looking for work in the corporate world. It's been rough, one of the reasons being she is competing for work with people at least 20 years younger than her.

We were musing about how far away we are from realizing the middle class dream of a steady and retirable job as well as that house in the suburban sky. Compared to our parents, our education far exceeds them; yet when it comes to actual middle class accomplishments, boy are we lacking.

Then I read this :

Foreclosures Spurring Blight In Central Valley

[...]
As California house prices soared, cities in San Joaquin County attracted buyers priced out of the San Francisco Bay Area. Developers built more than 30,000 new homes in the last six years. But with the spike in adjustable mortgage rates the flood of buyers turned into a flood of defaults - 11,000 in the county in the past 18 months.

Not long ago an overgrown area with a murky pool that Blackstone toured was someone's backyard paradise, but now foreclosure has taken it all away. There and at hundreds of other properties across the county, even the swimming pool has become a hazard - a source of mosquitoes and West Nile Virus.

County workers who used to patrol swamps and streams now do their work in neglected back yards.

It gets worse though. Those who believed they could gamble their future on a no-down no-interest loan that would balloon 5, 10 or 15 years down the road are now gone. As in war, it's the survivors who stay behind to cope with the neverending pain left by the wounds of the mortage meltdown :