#OccupyWallstreet

[Jhhnn]

I believe you might be able to perform a rhetorical pirouette on the head of a pin, orbster.

First off, you completely failed to address bank execs obligations to their share holders.

You also fundamentally misrepresent the role of securitizers, whether underwriting mortgages obtained either vertically, within their organization, or from mortgage brokers. They set the standards, and ignore their own standards when it suits them, particularly when they've achieved capture of both their regulators and the ratings agencies. All of which happened along the way. In the modern scheme of finance, they're also allowed to sell a class of products, say sub prime based MBS, out the front door and to bet even bigger against that same class of products in synthetic derivatives out the back door, if not against their own product specifically. That also happened a lot, and just so long as certain technicalities were observed, was and remains perfectly legal.

Of course, if the banker believed the securities to be of the quality he and his fellows represented them to be to investors, he wouldn't do that.

In your mind, I'm sure there's no conflict of interest, no contradiction in that at all.

Of course govt played a part, particularly the Bush Admin- they touted the whole thing highly, rode it to re-election 2004, much preferred that their regulators serve as facilitators & cheerleaders, even demanded that GSE's take on more "affordable" loans to meet the quotas that would trigger executive bonuses, and we all know how that plays out.

None of this was an accident. The only questions were how high it'd go before falling down, and exactly when that would happen, who'd be sacrificed before the Greenspan put was exercised. Bear Stearns & Lehman were those sacrifices. The details are immaterial.

 

[ComradeBeck]

You obivously cannot think past plastering a label on someone.

And you all cannot think past a herd mindset endlessly repeating hateful divisive nonsense from the radio. My labeling people as such is a valid observation. You guys are sadly predictable when called out for being pro-wrestling compartmentalized mindset morons. Too bad, ignore is an option though comrade.

 

[SamurAchzar]

So is "non-compartmentalized thinking" the new Fascism?

 

[Brigandier]

Does OWS look good on a resume? If not, these people all have more important things to do.

 

[monovillage]

Does OWS look good on a resume? If not, these people all have more important things to do.

That would be true if any of the OWS protesters were interested in really getting a job.

 

[SamurAchzar]

Does OWS look good on a resume? If not, these people all have more important things to do.

Resume is so 1980's. Welfare state is the new thing.

 

[HendrixFan]

What do you think most "evil corporations" do with their own profits?

They invest it in themselves, and produce more, or they invest it in the markets... the same exact things those personalities on my list do with theirs.

So who decides which of those in the actual 1% are exempt from the wrath of the supposed 99%?

They invest it in their top executives increasingly. Isn't that what we have been talking about for 1400 posts? That and they lobby for relaxing competition via mergers and other sorts of anti-capitalist rules.

You're also a complete fool if you believe the names on that list haven't dropped untold millions on the politicians and policies they support, just the same as your targeted personalities on Wall Street.

The ONLY difference between Oprah and the Wall Street CEOs is that her money gets spent on policies YOU support, while the folks on Wall Street lobby for policies YOU are against.

In other words, you're a f'n hypocrite when you turn a blind eye on those you think are on your "side."

I only mentioned Jon Stewart, you or others brought up everyone else. I haven't seen him anywhere near fundraisers. As far as the rest of Hollywood that lobbies, I did say this and you ignored it:

I have never advocated lobbying, from Hollywood or anywhere.

So no, I don't turn a blind eye. I think the laws that protect Hollywood (piracy) are extreme and should be limited to reasonable civil punishment, not criminal. I think the DMCA, ACTA and the like are bought and paid for by the industry and stifle innovation. No different than any other industry. But that isn't what we are talking about here is it? If you wanna make a thread about piracy and punishment, I'll gladly post in there on the side opposing Hollywood.

So, no I am no hypocrite in this matter. I disagree with all forms of lobbying and cronyism. We are talking about Wall Street in this thread because of the title and content. And yes I do think Wall Street is more devastating to our country with what they have lobbied for. That doesn't let Hollywood off the hook, they just aren't as big of a problem.

 

[orbster556]

First off, you completely failed to address bank execs obligations to their share holders.

To be honest, I didn't think it quite relevant. I suppose that one could argue that the banks' decision to let a huge notational amount of risk pile up on their balance sheet might be a a violation of the duty of care. The duty of care, however, is pretty deferential to management -- as evidenced by the business judgment rule -- and, moreover, I think management could also contend that, under modern portfolio theory, individual shareholders shouldn't have minded the increased risk being assumed because proper diversification would mitigate the losses they suffered.

Perhaps shareholders could also bring a duty of loyalty claim but, again, I think that might be even more of a stretch than the duty of care. I do think there might be some grounds for a duty of care claim -- particularly at those banks where management didn't really understand the operation and exposures associated with participating in the CDO market -- but, as I mentioned before, the duty of care is relatively deferential to management.

They set the standards, and ignore their own standards when it suits them, particularly when they've achieved capture of both their regulators and the ratings agencies.

I agree that the manner and amount of compensation rating agencies received in the context of derivatives and other securitized instruments is hard to justify and created clear incentives for the rating agencies to not properly grade products. Even here, however, I would contend that the investors of the products were big boys and girls and had the opportunity to examine the pool of assets that comprised any securitized offering.

In the modern scheme of finance, they're also allowed to sell a class of products, say sub prime based MBS, out the front door and to bet even bigger against that same class of products in synthetic derivatives out the back door, if not against their own product specifically. That also happened a lot, and just so long as certain technicalities were observed, was and remains perfectly legal.

In the first instance, I think this reflects the modern regulatory regime permits banks to act as brokers (acting as an agent on behalf of the principal, their client) and dealers (banks acting on their behalf. Hence, the need to hyphenate the two into broker-dealer. Moreover, this hasn't been a modern development and this feature of banking was retained during the '30s even as the regulatory regime was changing in other significant ways during that period. I don't think this approach is necessarily flawed as it is possible for broker-dealers to properly firewall the two arms of their operations so that the one isn't unduly influencing the other.

With regard to banks buying synthetic products before the crash, I have a few thoughts that I think militate against a finding that the banks engaged in some sort of impropriety. First, to the extent that the banks were managing their own credit exposure, I see no problem -- indeed, I think it highly prudent -- for a bank to limit its own exposure to one of its investment through the use of hedge and derivatives. If a bank were highly exposed to CDOs based on residential mortgages -- either because the bank invested in those instruments for their own account or were forced to keep the super-senior tranche of the CDO on their books because they couldn't find a customer for that portion of the CDO -- then it is only prudent that the banks diversify away that risk through synthetic CDOs and other instruments. Indeed, if only Bear had taken the same diversification strategy as Goldman, the entire mess of the past three years might have been avoided or, at the very least, greatly minimized.

Second, I don't think that the banks' decision to sell synthetic CDOs suggests that the banks were pulling a fast one on their clients. In the first instance, synthetic CDOs, by their very structure, implies that one party is bullish on the underlying assets while the other is bearish. Any party going long on a synthetic know, without a shadow of a doubt, that there is a counter-party who thinks the assets are over-valued or will default. If the investors didn't know this, I think it suggests that the investor was ill-suited for the task. Moreover, even in those situations where the broker-dealer wasn't actively taking sides in the synthetic deal and was merely facilitating it -- say Goldman and Abacus -- there is some question whether there was impropriety. Specifically, from an economic standpoint Goldman, in the case of Abacus, was purchasing a pool of assets from Paulson and then selling those assets to the Abacus investors. Sure, this result was achieved through the use of modern financial products but, from a functional perspective, that it what happened. Given that there would have been no defects with such an arrangement, I think it is placing form over substance to suggest that there is an impropriety in the one but not the other. I think this is especially true here because the fact that the parties used a synthetic CDO meant that the direct link I posited going from Paulson->Goldman->Note Purchasers was attenuated as there was another independent firm, ACA Capital, that actually selected the assets to comprise the pooled assets for the synthetic CDO. So I think there is even less of a case for impropriety when the direct link is severed by the inclusion of another party.

Of course, if the banker believed the securities to be of the quality he and his fellows represented them to be to investors, he wouldn't do that.

It is not uncommon for the clients of broker-dealers to take different views as to the value of assets; this is true whether the broker-dealer is acting as a broker or as a dealer. Limiting ourselves to vanilla equity securities, when one party sells they are essentially betting the value will decline while the purchaser is betting the value will increase. Indeed, this differentiation of value is what is necessary for trading in almost every sort of financial instrument whether they be traditional equities or more complex securitized products.

Moreover, the clients at issue here were not Grandma and Grandpa but rather were large, sophisticated investors. They had the means and, one would hope, the financial acumen to look at the underlying assets and make a determination as to price of the instrument. As such, they knew, as a matter of principle, that the counter-party to the synthetic CDO notes they were purchasing thought the value of the underlying assets was going to decline.

Of course govt played a part, particularly the Bush Admin- they touted the whole thing highly, rode it to re-election 2004, much preferred that their regulators serve as facilitators & cheerleaders, even demanded that GSE's take on more "affordable" loans to meet the quotas that would trigger executive bonuses, and we all know how that plays out.

If you want to assign blame to one party or even one administration, I don't have the time nor, frankly, even the desire to respond. I will simply say, however, that it is a gross simplification that distorts the facts and propagation of such a simplification can only be informed by a desire to craft a false narrative wherein an otherwise complex and unsatisfying series of events in turned into a mere morality tale.

 

[Jhhnn]

It is not uncommon for the clients of broker-dealers to take different views as to the value of assets; this is true whether the broker-dealer is acting as a broker or as a dealer. Limiting ourselves to vanilla equity securities, when one party sells they are essentially betting the value will decline while the purchaser is betting the value will increase. Indeed, this differentiation of value is what is necessary for trading in almost every sort of financial instrument whether they be traditional equities or more complex securitized products.

All of which sounds peachy, except that underwriters are incapable of holding the securities they create if they're to pursue their normal function. They don't have the capital. In the traditional market, they don't sell because they believe the value will fall. It's not how they represent their product, nor is that the understanding of the buyer. They sell to free up their own capital to create more securities. They depend on flow.

The relationship between securitizer and purchaser is simply not as you describe, nor should it ever be. If it were, no MBS would ever be sold. Investors realize that securitizers have a higher level of information, depend on their integrity, that of the ratings agencies, and also the regulatory systems involved.

When investors realized none of that was the case, they quit buying, and the system locked up. Because of the extremely complex nature of the instruments involved, it became impossible to evaluate the value of existing MBS, and their market price plunged.

Which is where all the insurance policies, CDS, were supposed to come into play, except that none of the players had the liquidity to pay up, necessitating the bailout.

The rest? Of course you have no desire to respond, because doing so would require a level of obfuscation that even you would find extremely challenging. The gross incompetence and malfeasance of the Bush Admin is illustrated by a single chart, so simple that even people who have trouble balancing their checkbook understand at a glance-

http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

 

[Axon]

Believe me, I used to work for Goldman on their quantitative easement front, and all they cared about was making that cheddar. They have such control over the financial system, why not? It's fish in a barrel to those guys. The SEC has no teeth because if you're ballsy enough to go after someone at a major bank, you don't get the cushy partner spot in X law firm after you're done slumming it. No one else is really sophisticated enough to understand what's happening, so they don't say anything either. After enough big pay days, you stop caring either way.

 

[bfdd]

jhhnn you want me to be mad at wall street for things the federal reserve is mostly responsible for?

 

[JSt0rm]

jibber jabber jibber jabber, jibber.

 

[bfdd]

So is "non-compartmentalized thinking" the new Fascism?

it's a new word for him to use, he thinks I'm a compartmentalized thinker, I think he is. who's right? lols who fucking cares.

 

[Craig234]

Believe me, I used to work for Goldman on their quantitative easement front, and all they cared about was making that cheddar. They have such control over the financial system, why not? It's fish in a barrel to those guys. The SEC has no teeth because if you're ballsy enough to go after someone at a major bank, you don't get the cushy partner spot in X law firm after you're done slumming it. No one else is really sophisticated enough to understand what's happening, so they don't say anything either. After enough big pay days, you stop caring either way.

Says a lot about the problems. Democracy is supposed to be a counter, but the right-wing ideology is effective against a lot of people. Obviously, every dollar made is justified.

 

[Jhhnn]

jhhnn you want me to be mad at wall street for things the federal reserve is mostly responsible for?

The FRB was part of the problem in providing extremely low rates, but they didn't act in a vacuum. They work constantly hand in hand with Treasury, and basically have a direct line to the oval office.

They didn't create toxic securities- they had nothing to do with lending standards or ratings from agencies, and they sure as hell didn't tout the ownership society as part of a re-election campaign, and weren't enthralled by the ideology of de-regulated free market financialized capitalism, either.

If you're ideologically opposed to figuring it out, well, you never will.

Nice pic-

http://economicsofcontempt.blogspot.com/2008/03/cutting-through-red-tape-with-chainsaw.html

Making it possible for anybody with a pulse to buy the house of their dreams, using a handy no-doc sub-prime adjustable teaser rate ARM with another lender providing 20% up front so they can qualify to blow themselves up, and the whole financial market along with them.

Wall St loved it, hastily sliced, diced, blended and cooked a variety of debt into securities so complex & so enormous that they created a near perfect illusion where any risk could be mitigated with derivatives, where they didn't make you a deal you couldn't refuse, but rather one you couldn't understand.

But they understood. Yes indeed they did. Con Artists always do.

 

[Craig234]

Mafia guy pays a ton of money to buy some police to kill for him.

Republican solution: why are you blaming the mafia? It's the police. Get rid of THEM.

 

[palehorse]

And you all cannot think past a herd mindset endlessly repeating hateful divisive nonsense from the radio. My labeling people as such is a valid observation. You guys are sadly predictable when called out for being pro-wrestling compartmentalized mindset morons. Too bad, ignore is an option though comrade.

What label do you place on people who disagree with you, but they don't watch cable news or listen to any political radio?

I get almost all of my news via aggregated RSS feeds that pull from every corner of the planet, and I haven't watched more than five minutes of CNN or FoxNews in well over a year... but, I still happen to strongly disagree with the vast majority of your opinions.

So what's my label?

 

[GrGr]

That would be true if any of the OWS protesters were interested in really getting a job.

Lol, how can you know the motivations of the OWS people? I'd say most are there because there are no jobs to be found when the job creators create the new jobs in China.

The right wing talking points are so boring yet amusing. Thinly veiled allusions to 60's grass smoking hippies with long hair that refuse to become proper Americans and get a job....

lmao at right wing stereotypes and right wing narrowmindedness.

 

[GrGr]

jhhnn you want me to be mad at wall street for things the federal reserve is mostly responsible for?

The Federal Reserve is owned by Wall Street.

 

[JSt0rm]

So what's my label?

Jack of all trades master of none?

 

[the DRIZZLE]

Mafia guy pays a ton of money to buy some police to kill for him.

Republican solution: why are you blaming the mafia? It's the police. Get rid of THEM.

Democrat solution: Some Italians did bad things. Occupy the local pizzeria!

 

[bfdd]

The Federal Reserve is owned by Wall Street.

lol, that's like me saying I own the usa. there's a ton of people in wall street who have no part in the manipulatikn of our money through the fed.

 

[ComradeBeck]

What label do you place on people who disagree with you, but they don't watch cable news or listen to any political radio?

Ahh c'mon lol...You guys might as well be foxnews/limbaughs personal fucking P&N stenographers you are so far up their asses, do you really think anyone is fooled? Give it up. You are boring charactertures of pro-wrestling establishment media for loser old people too braindead on pills/booze (a few probably meth) to use critical thinking (if they ever did/could). Irrelevant, but amusing in a trainwreck kinda way. Kinda like watching the junkies nod and drool on themselves. Every once in awhile you see a conservative wake up and use their brain and look around surprised, to only fall back into self hatred/divisive weak minded thinking of a reactionary.

 

[Brigandier]

Ahh c'mon lol...You guys might as well be foxnews/limbaughs personal fucking P&N stenographers you are so far up their asses, do you really think anyone is fooled? Give it up. You are boring charactertures of pro-wrestling establishment media for loser old people too braindead on pills/booze (a few probably meth) to use critical thinking (if they ever did/could). Irrelevant, but amusing in a trainwreck kinda way. Kinda like watching the junkies nod and drool on themselves. Every once in awhile you see a conservative wake up and use their brain and look around surprised, to only fall back into self hatred/divisive weak minded thinking of a reactionary.

What about people who agree with you occasionally, don't listen to the radio, sometimes catch fox news(it's what's on where I work) but overwhelmingly think you're a naive nincompoop?

 

[ComradeBeck]

you're a naive nincompoop

usually "asshole" saves typing, but this works too. I am touched, really.