Quote :

"In my opinion this is just the free market working. The federal bail out of bear starnes is a sad example of our supposedly conservative administration providing corporate welfare."

Maybe i'm misunderstanding you, but what do you mean by "the freemarket working"? It's the freemarket at work, but it's an example of why freemarkets can't work by themselves. This was caused by greed and stupidity, which is the flaw in the freemarket (or any system composed of humans). It doesn't take too much for the smart people to sit down and write some rules and guidelines for the freemarket to work in. And some simple rules would have avoided this problem (and did for a long time).

Quote :

"The answer is obvious. SHE DID NOT EARN IT!!!!! Perhaps she should have thought first before getting pregnant three times out of wedlock. Get pregnant knowing she can't afford to have children. GET A JOB if she lacks one. Should not have dropped out of high school. Or accept the fact that she does not have that much intelligence and accept her simple lifestyle. Realize that she does not have the right to new Chevy or $200 cable bill when she needs to use that money for essentials or health insurance. The constitution guarantees the right to pursue happiness; not to have a litter of kids who are supported by the tax payer. "

This is mildly absurd reasoning. Sometimes things just happen, what do you do in those situations? What if I come in to your house and break your legs and cut out your eyes? You'd have a hard time keeping and maintaing a job. I could say "tough shit" because you should have known you lived in a bad neighborhood and should have had 2 extra dead bolts on your door, or you should have never moved their in the first place, or a dozen other things that I could attribute to your own stupidity of why you let your eyes get cut out, that would technically be right.

Safety nets shouldn't be permanent or long term, and they should discourage dependence, but safety nets go a long way both psychologically and practically in keeping to lower end of society running.

[Edited on September 15, 2008 at 8:43 PM. Reason : ]

9/15/2008 8:37:33 PM

Quote :

"There's certainly nothing wrong with making money from the stock market, but when you get too many people trying to day trade it creates a lot of volatility with unwise investing"

Outside of this past year, volatility has been quite low.

Supposing that it was perpetually high, however, how would increased volatility be bad for long-term investors?

9/15/2008 8:56:43 PM

Because to suppose that the market will be perpetually high is unwise in and of itself.

9/15/2008 9:02:11 PM

The capital gains tax shouldn't be lower than the AMT.

I think the main reason is because if it's lower, it effectively allows wealthier people who can afford to keep more money in investments to have a tax shelter that makes them effectively pay a lower tax rate. And if someone were so wealthy that ALL their income came form capital gains, then they definitely would have a lower tax rate. The AMT is around 28% which is where the capital gains tax should be, at the least.

9/15/2008 9:03:58 PM

scary stuff. Paul Krugman sums it up.

Quote :

"And here’s the thing: The defenses set up to prevent a return of those bank runs, mainly deposit insurance and access to credit lines with the Federal Reserve, only protect the guys in the marble buildings, who aren’t at the heart of the current crisis. That creates the real possibility that 2008 could be 1931 revisited"

http://www.nytimes.com/2008/09/15/opinion/15krugman.html

[Edited on September 15, 2008 at 9:57 PM. Reason : worse case scenerio of course. i actually think things will muddle along like they have. ]

9/15/2008 9:57:14 PM

Quote :

"WOW, not that i support democratic liberal socialist policies but I must say you must really have your head in the sand and blinded by partisan fervor to ACTUALLY find some way to pin the housing boom on the democrats. This is a hooksaw caliber of idiotic reasoning. "

Maybe you and I are reading different quotes, but I don't see anything about democrats in that. Just politicians (who come in both colors).

Quote :

"Maybe i'm misunderstanding you, but what do you mean by "the freemarket working"? It's the freemarket at work, but it's an example of why freemarkets can't work by themselves. This was caused by greed and stupidity, which is the flaw in the freemarket (or any system composed of humans)."

That is exactly why it's the free market working. The market corrects itself by punishing greedy and unwise behavior. The government bailing companies out, or making the rules of the game so they can't fail is the antithesis of the free market.

9/15/2008 10:47:36 PM

so, you consider the "free market working" if we just go on boom and bust cycles, where 150 year old companies with solid histories just go belly-up over night? And that's ok? Forget about the thousands of innocent people who worked there or who had their life-savings tied up in those companies? They're just a victim of the correction?

I think you guys are mixing up the "free market working" and the "free market at work".

The free market at work gets us to where we are now. Poor regulation and weak oversight leads to greedy SOBs at the top looking out for their own self good and not worrying about who gets dragged into the dirt after they land softly from their golden parachutes.

The free market working is a market that has free and open competition, but a reasonable level of oversight to help keep unethical behavior to a minimum and to try to prevent people being taken advantage of. There is still plenty of room to get rich if you want, since that's what you guys seem to be worried about all the time. Sure, boom/bust cycles will still happen and people will still find ways to make a buck on the backs of others, but the fluctuations should be smaller and the risk should be more focused on the actual decision makers.

9/15/2008 11:02:06 PM

Quote :

"you must really have your head in the sand and blinded by partisan fervor to ACTUALLY find some way to pin the housing boom on the democrats. "

Well let me pop my head out of the sand for a sec.

There's enough blame to go around for both sides. The GOP should be embarassed calling for bail-outs. Let the market punish stupid behavior. And Democratic party hacks were put in key management roles over Freddie and Frannie. Jamie Gorelick et al gave themselves huge bonus's while using Enron-type accounting practices.

But gov't regulators are mostly to blame for allowing banks to loosen up underwriting rules too much to help politicians get brownie points for "caring".

Quote :

"...PERHAPS the greatest scandal of the mortgage crisis is that it is a direct result of an intentional loosening of underwriting standards - done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults. At the crisis' core are loans that were made with virtually nonexistent underwriting standards - no verification of income or assets; little consideration of the applicant's ability to make payments; no down payment. Most people instinctively understand that such loans are likely to be unsound. But how did the heavily-regulated banking industry end up able to engage in such foolishness? From the current hand-wringing, you'd think that the banks came up with the idea of looser underwriting standards on their own, with regulators just asleep on the job. In fact, it was the regulators who relaxed these standards - at the behest of community groups and "progressive" political forces. In the 1980s, groups such as the activists at ACORN began pushing charges of "redlining" - claims that banks discriminated against minorities in mortgage lending. In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants; this allowed various studies to be ginned up that seemed to validate the original accusation. In fact, minority mortgage applications were rejected more frequently than other applications - but the overwhelming reason wasn't racial discrimination, but simply that minorities tend to have weaker finances. "

http://www.nypost.com/seven/02052008/postopinion/opedcolumnists/the_real_scandal_243911.htm?page=0

9/15/2008 11:17:35 PM

Quote :

"so, you consider the "free market working" if we just go on boom and bust cycles, where 150 year old companies with solid histories just go belly-up over night? And that's ok?"

absofuckinglutely, yes. and as for the people fucked over... Do you care when Wal-mart moves in and displaces mom and pop shops? Do you care when your NAFTAs and CAFTAs send hundreds of thousands of jobs overseas? Or, more importantly, do you care when your support of reckless labor unions sends hundreds of thousands of jobs overseas?

Quote :

"I think you guys are mixing up the "free market working" and the "free market at work". "

I think you need to question just how free a market is when you have the two biggest entities in that market with an implicit government guarantee that gives them a massive competitive advantage over their counterparts. And, I think you need to question just how free a market is when progressive groups undermine the very regulations that would have prevented this whole mess in the name of "fairness."

9/15/2008 11:24:32 PM

the government is a business too

9/16/2008 8:41:03 AM

http://blogmaverick.wordpress.com/2008/09/15/stock-market-meltdowns-why-they-will-happen-again-and-again-and-again/

Interesting take on it from Mark Cuban.

9/16/2008 9:26:05 AM

Quote :

"If you are the CEO of a major public company, once you qualify for your golden parachute there is absolutely no reason not to throw the Hail Mary pass, and do high risk deals every chance you get."

BUT, BUT, BUT, THE FREE-MARKET WILL TAKE CARE OF THAT!!

9/16/2008 9:41:51 AM

Quote :

"so, you consider the "free market working" if we just go on boom and bust cycles, where 150 year old companies with solid histories just go belly-up over night?"

Wait, so is this a company going belly-up over night, or is this a company finally failing after years of "giving loans to unqualified people, then passing those loans up the ladder like a hot potato, just hoping not to be the ones stuck with it when the music stops." and other corrupt practices?

Quote :

"Forget about the thousands of innocent people who worked there or who had their life-savings tied up in those companies? They're just a victim of the correction?"

There's a very important life lesson in this world, most people learn it by age 10, it goes something like this: "Don't put all your eggs into one basket".

Quote :

"Sure, boom/bust cycles will still happen and people will still find ways to make a buck on the backs of others, but the fluctuations should be smaller and the risk should be more focused on the actual decision makers."

The only reason this fluctuation is as large as it is is because you have the government fucking with the market and eliminating penalties for taking risks (bail outs and corporate welfare) and encouraging risky behavior (forcing banks to loan to unqualified people). Stop fucking with business, and these things will happen still, but on much smaller scales and long before it becomes a serious problem.

Quote :

"BUT, BUT, BUT, THE FREE-MARKET WILL TAKE CARE OF THAT!!"

It will. Shareholders of companies, as these sorts of things happen more and more will demand more and more accountability from their CEOs.

[Edited on September 16, 2008 at 9:51 AM. Reason : dsfg]

9/16/2008 9:46:57 AM

How are average people able to hold CEOs accountable when the government lets them off every single time?

9/16/2008 10:18:43 AM

Quote :

"It will. Shareholders of companies, as these sorts of things happen more and more will demand more and more accountability from their CEOs. "

BULL*FUCKING*SHIT
that's the whole goddamned point of Cuban's piece! When there are no rules, Boardrooms and CEOs will continue to be an all-boy's club tighter than a frat house. they will continue to hire their friends, giving executives insane hiring and firing bonuses, and they will never be exposed to the risk that they're putting their own companies in. Sure, CEOs will always have the carrot dangling in front of them to make their companies even more profitable, but the problem is, a carrot with no stick is worthless. They are not punished ("punished") when their hail mary's are intercepted in the end zone and ran back completely the other way

9/16/2008 10:29:16 AM

government punishing individuals for bad economic decisions would be the height of irony.

9/16/2008 10:31:44 AM

that's why i said "punishing"
as in: when a CEO throw's a complete hail-mary and it completely and utterly fails, he doesn't get his $40M severance package.
that kind of punishment, not legal action (unless laws were broken or he clearly acted not in the interest of the shareholders, of course)

9/16/2008 10:34:37 AM

Quote :

"There's a very important life lesson in this world, most people learn it by age 10, it goes something like this: "Don't put all your eggs into one basket"."

yeah, ok. sure. All the mid-level accountants and pencil pushers at Lehman's should have been moonlighting at other banks. You know, just so they wouldn't be SOL when their management screwed them out of a job.
Or, maybe you meant taking your 401k and spreading it out over many investment firms, right? I mean, it would just be foolishness to trust only one company to manage your IRA or 401k! That's what "diversification" means after all, right?

9/16/2008 10:38:26 AM

Quote :

"as in: when a CEO throw's a complete hail-mary and it completely and utterly fails, he doesn't get his $40M severance package. "

Thats up to the shareholders. If they want to take his $40 mil for something else, thats fine. its not the governments business to do that.

And also when someone whos worked for a company for 50 years is fired for incompetence they shouldn't get their pension either.

9/16/2008 10:41:13 AM

it's not up to the shareholders, at least not after-the-fact. It's written into most of these guys contracts, which is written by the Board of Directors, which I just said are almost always just boys' clubs of college buddies and other rich CEOs who do nothing but pat each other on the back all day.

you're totally right that the huge severance packages and golden parachutes are pure outcomes of the free-market, because a company cannot hire a CEO right now without giving him a golden parachute, because the guy will simply go on to a different company. But the entire practice is just an upward spiral that cannot be maintained indefinitely, unless, you know, everybody all of a sudden decides to become altruistic and begin to act ethically

9/16/2008 10:50:41 AM

Quote :

" Or, maybe you meant taking your 401k and spreading it out over many investment firms, right? I mean, it would just be foolishness to trust only one company to manage your IRA or 401k! That's what "diversification" means after all, right?"

Yea, you really dont get how this works do ya.


Lets say you had a 401k at a company that goes belly up, unless your internal fund allocation within your 401k was all tied to that company's stock (which would be beyond moronic) then your moneys still fine. Chance are its actually invested in a varity of funds, money marks, bonds, stocks, etc of other companys. About the only thing that will change is that your place of employment will have to take its 401k plan to a different providing firm, and your crap will just be rolled over into that firm (this will probably require you to re balance your current investments into those offered by this new plan). This would actually be no different, from an employee stand point of changing jobs, or your place of employment changing its 401k contracts to another provider.


Similarly you would just be rolling your IRA form one company to another. Lehman going under doesn't mean everyone that invested though them lost their shirt, it means everyone invested IN them might.

[Edited on September 16, 2008 at 10:57 AM. Reason : a]

9/16/2008 10:57:20 AM

Bad CEOs will fail themselves out of the system. The board of directors who hired them are also going to take a hit as their company disapears.

And if you even own 1 share of lehman and didn't like who was appointed as CEO, you can take your money elsewhere. But most people probably didn't think about it, so in the end they own part of the fault.

Bad management practices cant be legislated against. You have to let them fail. The companies with better management will divide up the leftovers. In the end the bad practice has been excised, and the good practices have been strengthened.

That is, of course, as long as the fed doesn't step in to buyout those bad practices.

9/16/2008 10:58:41 AM

Focusing on that point ignores the problem of having a $680 billion asset company go bankrupt. The problem lies in the fact that their liabilities are around $640 billion. There's a very good chance that at least some of your 401k is tied to the bad loans and even if it's not the company is still responsible for all of their liabilities. Where do you think that money will come from to pay for them? Your 401k. It might not be all of it, but in order to pay down their liabilities they're going to have to pull money from their assets.

That's why they're going bankrupt. They don't have enough liquidity and there's also a very high chance that their assets aren't really as high as $680 billion because we have no idea how big of an effect the mortgage scandal has truly caused. It seems as though it's catastrophic at this point though.

A lot of you people laughed at me when I said that this crisis was going to cause the loss of hundreds of billions and possibly trillions of dollars because that money was just going to disappear. But that's exactly what has happened. The financial companies don't have enough assets to cover their liabilities now because the money that they thought they had has simply disappeared. Even if all of their assets were completely liquidable (word?) there's a good chance it wouldn't be enough to cover all of their liabilities and since they're not receiving and income on a lot of these loans, they don't have enough money to cover all the money they potentially have to pay out (investments from customers). So no, your 401k is not safe at this point if you have over 100k in it (which a lot of average Americans probably actually do).

^ Please read that Mark Cuban article and realize how foolish you are. There's no incentive to not fail for these CEOs when failure means making off with tens of millions of dollars.

[Edited on September 16, 2008 at 11:09 AM. Reason : ]

9/16/2008 11:08:15 AM

^^^ i know, i was mostly being facetious. That's not to say, though, that there aren't lots of people who have lots tons of money through no real fault of their own, except that maybe they're not psychic.

Quote :

"Bad CEOs will fail themselves out of the system. The board of directors who hired them are also going to take a hit as their company disapears. "

bullshit. you don't get it, do you?
Fine, bad CEOs will "fail themselves out", but probably not before taking a several million $ with them, so at that point, what the hell do they care?
And the board of directors? take a hit? please. They'll just find someone else. wash, rinse, repeat

9/16/2008 11:11:54 AM

Can someone explain to a complete noob what happened here?

I'm really interested about all of this, but I really am just overwhelmed.

9/16/2008 11:19:45 AM

CEOS from a bunch of large, financial companies tried to make a lot of high risk investments.

High risk investments fail.

CEOs still make off with millions of dollars from their severance packages.

Economy as a whole is fucked.

9/16/2008 11:22:37 AM

they aren't going to find anyone to replace a failed CEO if their company is fucking gone. Thats what you're not getting through your head.


Lehman is gone. CEO? Gone. Board of Directors? Gone. They will all lose a bunch of money and the fade into obscurity. No one will hire them.


As for CEOs not having a reason to succeed, thats the dumbest thing ever. Unless your management is retarded there are a number of performance requirements for those CEOs to meet in order to recieve the big pensions. If there aren't, its a sign of bad management and their probably doomed to failure for many other reasons than their choice of CEO.

9/16/2008 11:22:58 AM

w/ Lehman brothers?
or with this disaster of a thread?

http://en.wikipedia.org/wiki/Lehman_Brothers#Subprime_mortgage_crisis
http://en.wikipedia.org/wiki/Lehman_Brothers#Bankruptcy.


[Edited on September 16, 2008 at 11:24 AM. Reason : df]

9/16/2008 11:22:59 AM

Quote :

"CEOS from a bunch of large, financial companies tried to make a lot of high risk investments. High risk investments fail. CEOs still make off with millions of dollars from their severance packages. Economy as a whole is temporarily fucked."

The less government involvement, the faster the problem self corrects and the stronger the market will be in the future.

9/16/2008 11:24:16 AM

Quote :

"As for CEOs not having a reason to succeed, thats the dumbest thing ever"

nobody ever said that. Of course CEOs have a reason to succeed. They get mega-extremely rich.

If they fail, they only get extremely rich. That's their only incentive to not fuck up - they will only get rich instead of getting mega-extremely rich.

Quote :

"They will all lose a bunch of money and the fade into obscurity. No one will hire them."

right. i'll believe that when i see it.
Let's revisit this list of people one year from now and see how they're doing
http://en.wikipedia.org/wiki/Lehman_Brothers#Board_of_Directors

9/16/2008 11:27:39 AM

Dude, what you're not realizing is that these CEOs don't care if they never get another job again. If you can't like off 20 million dollars for the rest of your life, you're a complete idiot. Even if you put all that money into a generic savings account in a bank, you could easily live off the interest for the rest of your life. You could sit around all day doing nothing and let your money make money. It's the American Dream, really. These guys are living it on the dollar of ordinary people.

9/16/2008 11:29:34 AM

ACCOUNTABLE!
COMMUNISM!
CEOS!
PROFITS!
BAILOUT!
TAXPAYERS!
RECESSION!
OIL!
GAS!

9/16/2008 11:36:09 AM

OK I think I have a better idea whats going on with Lehman, what does AIG have to do with all of this?

9/16/2008 11:40:32 AM

AIG also got itself heavily invested in dubious investments and now it is so leveraged its income can't afford to pay for its expenditures.

9/16/2008 11:45:46 AM

So its just a coincidence that they're both falling apart at the same time then?

9/16/2008 11:48:35 AM

Both were heavily invested in items such as subprime loans.

9/16/2008 11:52:33 AM

coincidence?
no, not exactly.... but it's not like one directly caused the other

But all of this stuff is related - Bear Sterns, Fannie Mae, Freddie Mac, Washington Mutual, Lehman Brothers, Countrywide, AIG - they all have their fingers in each other's holes, so to speak.....

you could kind of view them all as a

9/16/2008 11:52:37 AM

They took the money from their risky insurance and put it in risky investments. So they're double fucked.

Short term we're all pretty well fucked, but as long as the fed doesn't get super involved we'll be ok long term.

9/16/2008 11:53:18 AM

I'm curious why taxpayer-funded corporate socialism suddenly fell out of favor.

Don't get me wrong, I'm glad. But I wonder what bug got up Paulson's ass about Lehman...

9/16/2008 12:45:36 PM

Had to make an example out of someone. They let Lehman die, but injected 70 billion in capital into the finance markets to help free up some credit. In the short term, it'll let the air out of the bubble more slowly. In the long term it'll hopefully generate come positive income if it's used wisely. Either way, everyone's still gonna get fucked by all this. There's just a difference in how hard and how quickly.

9/16/2008 1:19:47 PM

he probably didn't enjoy being called a socialist

seems to me like he was just making a point to attempt to prove that yes, in fact, the administration is Conservative, even though all indications in the past 8 years point otherwise

9/16/2008 1:20:05 PM

Just to help get the point across to some of you people...

FAILED

REPUBLICAN

POLICIES

9/16/2008 1:21:07 PM

this should help make the election interesting

9/16/2008 1:22:52 PM

^^ which specific ones can you pinpoint that were not also widely supported by democrats?

9/16/2008 2:08:01 PM

Quote :

"Because to suppose that the market will be perpetually high is unwise in and of itself."

Volatility, as measured by the standard deviation of returns, does not cause a perpetual rise in the equity markets.

Quote :

"which is written by the Board of Directors, which I just said are almost always just boys' clubs of college buddies and other rich CEOs who do nothing but pat each other on the back all day"

This is not true of even a majority of Boards. Most companies have rules in place so that there aren’t many ties between the CEO and the Board.

Quote :

"So no, your 401k is not safe at this point if you have over 100k in it (which a lot of average Americans probably actually do)."

Actually, it would be insured up to 500k under SIPC

Quote :

"Dude, what you're not realizing is that these CEOs don't care if they never get another job again."

CEOs of large corporations are typically extremely well-to-do before they take the helm. I really doubt soiling one's reputation for the sake of a modest (relative to accumulated wealth) golden parachute is what most failed CEOs had in mind.

9/16/2008 2:13:54 PM

Of course it's not what they had in mind. Being cautious with your company is not about best intentions, it's about watching your backside. And these guys clearly don't give a shit because they are still get huge severance packages on their way out the door.

9/16/2008 2:16:34 PM

http://www.liveleak.com/view?i=adb_1221494431

9/16/2008 3:01:03 PM

The impression I get:

Bear Stearns - Bailed out because they didn't realize just how bad it was...
Fannie & Freddie - Bailed out because of their bizarre public/private hybrid nature and sheer scale
Lehman Brothers - We need to put a bit of fear back into Wall Street so they'll actually be proactive in cleaning up their own mess. Lehman is disposable.

9/16/2008 4:15:05 PM

Am I the only one enjoying watching it all burn down?

9/16/2008 4:19:58 PM

I met some really smug individuals that worked at Lehman Brothers at an event in DC back in May. They didnt impress me much with their data analysis, either.

9/16/2008 4:41:19 PM