Amazing interview on Bill Moyers with former S&L investigator

[First]

^

http://www.nytimes.com/2008/10/03/business/03sec.html

Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency?s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.

On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.

They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.
...
Over the following months and years, each of the firms would take advantage of the looser rules. At Bear Stearns, the leverage ratio ? a measurement of how much the firm was borrowing compared to its total assets ? rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt. The ratios at the other firms also rose significantly.

And in terms of the 04 rule, I'm not sure this leverage ratio is necessarily accurately calculated but they do have Bear at 33:1 after they lifted the rule. That's pretty staggering but from what I gather GAAP rules had already exempted "quality" secured debt anyway so they could surpass 12:1/15:1 indebtedness anyway. But at a certain point 30:1 becomes becomes significant.

EDIT: Honestly, the more I research it the more I see that near 30:1 wasn't uncommon for several large banks in the 90's but it was the way they determined "quality" debt under old regulations that really killed them from that perspective. I wish we could see exactly what was on these guys' books.

 

[First]

Originally posted by: bamacre
The best regulating we could do would be to get rid of the Federal Reserve, get rid of fractional reserve banking, and work toward being able to implement honest money.

The government cannot effectively regulate the banking industry when the banking industry is in bed with government.

All you are supporting is giving up more economic freedom for economic security. And as we already have seen, over and over, when we do that, we get neither.

And, Evan, you keep saying that "austrian economics" is bunk, well, pick up a goddamn newspaper, turn on the TV, talk to people in the soup lines. Keynesian econ has been a fucking disaster.

Data and the last 100 years says you're laughably, horribly uninformed. Argue the stats all you want, you look foolish and will continue to get called out on it until you back that bunk up. Count on it kiddo.

And what percentage of the population is in soup lines? Are people burning dollars bills to keep warm on the streets too? :laugh:

 

[Zebo]

Originally posted by: bamacre
The best regulating we could do would be to get rid of the Federal Reserve, get rid of fractional reserve banking, and work toward being able to implement honest money.

The government cannot effectively regulate the banking industry when the banking industry is in bed with government.

All you are supporting is giving up more economic freedom for economic security. And as we already have seen, over and over, when we do that, we get neither.

And, Evan, you keep saying that "austrian economics" is bunk, well, pick up a goddamn newspaper, turn on the TV, talk to people in the soup lines. Keynesian econ has been a fucking disaster.

What do you do when all money, or gold, is lent out? What will happen to interest rates as it even gets close to being all lent out? What happens if you're not from the rights caste or race of the people that has all the gold?

Austrian is nice if you have no plans on growth and for preserving a class of nobles.

 

[NoStateofMind]

Originally posted by: bamacre
The best regulating we could do would be to get rid of the Federal Reserve, get rid of fractional reserve banking, and work toward being able to implement honest money.

The government cannot effectively regulate the banking industry when the banking industry is in bed with government.

All you are supporting is giving up more economic freedom for economic security. And as we already have seen, over and over, when we do that, we get neither.

And, Evan, you keep saying that "austrian economics" is bunk, well, pick up a goddamn newspaper, turn on the TV, talk to people in the soup lines. Keynesian econ has been a fucking disaster.

tools like him and legendkiller will never get it. They'll stomp around in their diapers proclaiming government intervention is a good thing while the whole fucking building is on fire. Yet these same idiots think spending more money is somehow going to "save" everyone. Newsflash idiots, propping up failed corporations with taxpayer money and coercing upstanding banks/businesses to take money is not good business, its dishonest. not just dishonest to you and me but our children as well because now they too have to pay for all of this corruption. But no, its not the corrupt government relations with banks/wallstreet, no, its the "free market". Only a fucking stooge would believe such tripe.

 

[Craig234]

Originally posted by: Zebo

Seems we can put this CRA stuff to rest once and for all - the CEO's of these banks encouraged, directed, forced the most riskiest loans ever not at behest of pols but to line their own pockets. Meanwhile, while convenient to blame powerless minorities or whatnot you all of us got taken to cleaners and still are!

Craig234 - Investigation, if you want to call it that, was prompted by market realities no?

It might not be too easy to get good evidence on the trigger, but it's one of many examples of the Democratic Congress investigating what Republicans had not.

The timing was before the current economic crisis, so it wasn't *that* obvious a reaction to the economic situation, at least. It uncovered massive fraud in substance if not the law.

 

[bamacre]

Originally posted by: Evan
Data and the last 100 years says you're laughably, horribly uninformed. Argue the stats all you want, you look foolish and will continue to get called out on it until you back that bunk up. Count on it kiddo.

Yeah, we're less than 40 years into the end of a semi-gold standard and the economy got so bad, we are practically nationalizing financial institutions, taxpayers are forced into trillion dollar bailouts, and the rest of the world is calling for a new reserve currency.

Yeah, things are grand. :roll:

And what percentage of the population is in soup lines? Are people burning dollars bills to keep warm on the streets too? :laugh:

I guess this is a mental recession? :roll:

 

[shadow9d9]

Pretty amazing stuff, though I already knew it. The American public is so dumb and apathetic that no one holds anyone accountable... Where are our protests? I preferred Obama to McCain but he utterly failed here and Geitner should be jailed along with Paulson.

 

[bamacre]

Originally posted by: Zebo
What do you do when all money, or gold, is lent out? What will happen to interest rates as it even gets close to being all lent out?

Interest rates go up as capital is borrowed. Supply and demand. As interest rates go up, only those who will most efficiently use the resources will borrow. This is not a bad thing. What we have now are artificially low interest rates, and Austrians will argue that this distorts the perception of economic conditions, i.e., actual savings rate (sound familiar?), and causes malinvestment (sound familiar?).

http://www.nothirdsolution.com...alinvestment-a-primer/

What happens if you're not from the rights caste or race of the people that has all the gold?

What if "too big to fail" doesn't describe you?

I'm sorry, I didn't realize we had a caste system in this country.

You can't really go to a gold standard right now for a few reasons, one which you mention. But that doesn't mean we can't have some kind of sound, honest money, and stop the inflationary policies.

Austrian is nice if you have no plans on growth and for preserving a class of nobles.

Sorry, but this doesn't make sense to me. Perhaps I am misunderstanding what you mean. Are you saying there's no possibility for economic growth under free market capitalism? I don't think that's what you mean, so I will allow you to be more precise. As for "preserving a class of nobles," isn't this what we are doing now? Too big to fail, too important to fire, too much campaign contributions to regulate?

 

[gingermeggs]

If Obama is for real and not just the cleaner for the banksters-
he will re-instate those 500 fbi agents to get to the bottom of all these dirty business's and commence legal actions for their frauds- jail them for life or execute them, strip them of all their worldly belongings(family trusts included) following all those money trails to their "ali-barbar" caves.
And an inquiry into political donations, contracts, etc! of past and present admins.

 

[gingermeggs]

Funny, now in Australia we are posting record export surpluses as people aren't spending and our exports remain in good demand. China/asia/middle east still grows and needs raw materials and food.
For mine the only way a government should be allowed stimulate an economy is thru public infrastructure spending and tax cuts- not hand outs to individuals or corps.
I think this is a wake up for the rest of the world about the excesses and corruption in the Us system.
Who would lend em' a dime now?

 

[First]

Originally posted by: bamacre

Yeah, we're less than 40 years into the end of a semi-gold standard and the economy got so bad, we are practically nationalizing financial institutions, taxpayers are forced into trillion dollar bailouts, and the rest of the world is calling for a new reserve currency.

Yeah, things are grand. :roll:

Uh, so this recession is proof we should be back on the gold standard? Do you even know how much standards of living have improved in the last 40 years? Though I like how you take the politicians of other countries at their word regarding a new reserve currency, shows how gullible you are about actual reality. I mean seriously, severe recession means we must go back on the gold standard? Jeez, I wonder how we ever suffered even worse financial collapses every 20-30 years in the 19th century.

You're like a running gag with this stuff.

I guess this is a mental recession? :roll:

No, it's a real recession. Dollars are real dollars, they're used in arbitrage. Gold? It's crap as money, no one uses it. Welcome to the 20th and 21st centuries.

 

[First]

Originally posted by: bamacre
Interest rates go up as capital is borrowed. Supply and demand. As interest rates go up, only those who will most efficiently use the resources will borrow. This is not a bad thing. What we have now are artificially low interest rates, and Austrians will argue that this distorts the perception of economic conditions, i.e., actual savings rate (sound familiar?), and causes malinvestment (sound familiar?).

http://www.nothirdsolution.com...alinvestment-a-primer/

Nothing here, of course, backed up by hard data, observation, models, or any respected mainstream economist. YouTube degree FTW!