WANT TO GET REALLY MAD ABOUT WHAT"S HAPPENED ?

Sadly, much of this crap DID NOT NEED TO HAPPEN !

Up until 2003, all investment banks were allowed only 12 to 1 leverage. Then in 2004, the SEC basically gave five banks [/size[size="3"]](and only five banks) the ability to lever up 30 or even 40 to 1. Bet you can guess the five banks.

Bear, Lehman, Merrill, Morgan and Goldman. Three down.

As Barry Ritholtz wrote: "So while the SEC runs around reinstating short selling rules, and clueless pension fund managers mindlessly point to the wrong issue, we learn that it was [b]the SEC who was in large part responsible for the reckless leverage that led to the current crisis[/b]." (Don't get me started on blaming the short sellers. Let's not blame the people who leveraged up their companies 40 to 1 with bad investments.)

We absolutely must move credit default swaps to a regulated exchange, no matter how much investment banks and hedge funds scream. Must be done. Do it now. Real rules about writing mortgages, although now that losses are in the hundreds of billions, underwriting rules are already becoming quite restrictive.

And while we are at it, a thorough revamping of the rating agencies and the rules they use should be at the top of someone's list.

(J. Mauldin)

I've posted here over the last several years about the investment banks being the largest hedge funds in the world. Now we know that to be fact.

And it's only gonna cost u and I $700B. While I agree something has to be done to prevent financial armageddon (I have no doubt we were seriously staring straight into the abyss early this week), I just hope the criminals behind this mess don't get off scott free!

I just hope the criminals behind this mess don't get off scott free!

They will, they run the government.
Just look at who ran Freddy and Fanny and who slept with 'em.

(I have no doubt we were seriously staring straight into the abyss early this week)

I think so.
Bernanke's memoirs book will be interesting reading if not shocking.

Edited by Rogerdodger, 20 September 2008 - 10:10 AM.

And's here is the guy at the head of the SEC back in 2004 when this all began

(He should not be given any AIR TIME whatsoever to comment on what's happened or what should be done. He should literally be in jail ! ) (though I'd prefer torture aka Guantanamo style)


Former SEC Head Donaldson Calls for Regulatory Overhaul
By Emily Chasan
September 19, 2008


Former U.S. Securities and Exchange Commission Chairman William Donaldson said the United States needs a regulatory overhaul, similar to changes made to the system after the Great Depression.

Advertisement
"It's clear there have been some regulatory breakdowns," Donaldson said at a CFA Institute conference in New York.

"As we move forward, the structures need to be changed ... we have to have really serious examinations of our regulatory institutions and their mandates."

Donaldson, who was chairman of the SEC from 2003 through 2005, said the current market turmoil should result in careful changes being made to the system as the structure of U.S. markets has changed drastically since the main U.S. securities law, the Securities Exchange Act of 1934, was put into effect.

"As demand for regulation increases, which it is and will, I think we really have to figure out the structure," Donaldson said. "The institutions of regulation ... these were all products of the 1929 crash and depression."

In that era it "was easy to tell what is a bank," Donaldson said, but new and more creative areas of financing have changed that.

For example, the credit crisis has brought billions in government support to financial companies that were not traditional banks, like investment bank Bear Stearns, insurer American International Group and mortgage finance companies Fannie Mae and Freddie Mac.

After the $85 billion bailout of AIG this week, Donaldson said the insurance industry was ripe for a new kind of regulation.

"One of the longer term problems, if you will, is the insurance industry being regulated by state regulators," Donaldson said. " It's a long-term situation, very difficult to change, but I think any sort of reorganization has to bring some new thoughts on how to coordinate the regulation of that industry."

However, Donaldson suggested any overhaul should be pursued after the political tensions from the U.S. presidential election have passed.

I would also break up the remaining two large investment banks and also the Fed in order to remove their monopoly over the American people's money, in fact the whole world's reserve currency. Such an important matter can not be left to be regulated again by the incapable, greedy and in fact corrupt people anymore. Nothing has changed in my opinion, only the power is now consolidated to a smaller number of big players, this is even more dangerous. Nothing will change from here as far as the recklessness of these people goes, they will eventually find a way to party on people's money. You have to remove their means to get greedy.

So, I would also limit the size of any bank or financial entity in order to prevent them becoming such monopolies over people's money that will eventually grow too big and become again a bunch of "too big to fail". In order to prevent their monopoly over the markets, in fact also on lawmakers and Treasury, I would continue to break them up into smaller companies over time as their market capitalizations grow because the unsuccessful financial companies should fail at a natural rate just like every other corporation without taking the rest of the world down with them. This would be the American and capitalist way...

I am not sure whether it is such a good idea yet, but I would also limit their market making capabilities such that a company that's dealing in mortgage securities over 40% of the market should not be dealing in the Treasury securities any more than 10% of the market by capitalization, a company dealing with equities should not be dealing with the bond securities in proportion to their market capitalization and so on. Whenever this happens, they should be broken up into two separate companies. This would eliminate their manipulative powers over the markets to a great extent. To be clear, this is not about limiting their investing or fiduciary capabilities for their clients as investment advisers, instead this is about limiting their market making or being the floor specialists on multiple markets...


(edit: this is probably the last opportunity of US to crush the monopoly of Wall Street, there will not be a next one over the coming decades)

Edited by arbman, 20 September 2008 - 04:48 PM.

Has anyone read the story of "Deep Capture" or listened to anything from Bud Burrell? According to these sources the SEC is completely corrupt and needs to be broken up with rigid internal controls put into place. The House & Senate knew about these losses over a year ago. Does a safety net work if you put it place after the fall? Listening to Senate Majority Leader Harry Reid talk about how Ben & Hank have no idea what to do about this crisis....how this is a new game...they have some ideas....these are the people running the country!!!!

And it's only gonna cost u and I $700B. While I agree something has to be done to prevent financial armageddon (I have no doubt we were seriously staring straight into the abyss early this week), I just hope the criminals behind this mess don't get off scott free!

The only ones to experience Armageddon will be the greedy bankers of Wall Street and others
who greedily purchased MBS for the higher yield.

Home owners who pay mortgage payments won't be affected one way or the other regardless
of the $700 bailout going through or not.

The only way out of this mess id for the perpetrators to pay the price.
Tacking on $700 Billion debt to the existing $10,000 Billion national debt
will screw us all in the long run.

Edited by pdx5, 20 September 2008 - 08:24 PM.

And it's only gonna cost u and I $700B. While I agree something has to be done to prevent financial armageddon (I have no doubt we were seriously staring straight into the abyss early this week), I just hope the criminals behind this mess don't get off scott free!

i haven't seen any perp walks or heard any talk of such. and i'll bet there be more bailouts in addition to the $700b .

ed rader

Edited by ed rader, 20 September 2008 - 09:32 PM.