Here comes the guy who probably gave the worst performance in front of the Senate I've seen in a while, the guy who was involved in the original bail out, the guy where much of this pending financial implosion was happening on his watch (CEO of NY Fed) and the Treasury Secretary who couldn't get his personal taxes correct.
This rubber stamp mentality of Congress scares me. If a Presidential administration makes a not so great choice, the wrong person for such a critical job, they should plain demand the right person be put up for that job instead.
But on Goldman Sachs, I don't have a tally of all of their losses but it seems to me their numbers are right up their with Citigroup, BoA, etc.
On the purchase of Constellation Energy, I think the point really is that these companies are using TARP money for acquisitions and that's not what is supposed to be going on. They were supposed to be loosing up the credit markets, funneling off worthless assets.
I agree there is going to be no oversight or lip service.
Threee things come to my mind when I read this. For starters, Congress is being way to lackidasical about it's fiduciary responsibilies over TARP. The fact that they haven't had another round of hearings and grilled these folks like they did the UAW and automakers speaks volumes. That second $350 billion will be gone just as fast as the first. You may see some more accountability, but I highly doubt it will reach beyond anything but lip service. I've said it before, and I'll say it again, it will not stop at TARP, expect the government to hand out at least $2 trillion to save the banking industry (this includes nationalizing them, because cleaning up the derivatives mess is where it's going to eat up the money).
Secondly, this second era of cheap oil is going to end. It's down right now because of demand, but the longer term fundamentals still have not changed. Please take a look at this site on Futuresource, what do you see? Rising oil prices, especially starting in 2010 when our "recovery" is supposed to start. They aren't just pricing in for a return to good times, that's for sure. No, they are also pricing in facts that people are not discussing:
1) Lack of re-investment by countries that are prime producers of peteroleum. In Mexico, the government has not alloted anything of size towards equipment to Pemex. In Venezuala, that idiot Hugo Chavez has frittered away most of the gains made from that oil boom. The same with Russia, though they have somewhat kept up in "nat gas,". The middle eastern countries are the exception, but major wells are now reaching their peaks, like Ghawar.
2) Non-state oil companies have curtailed their own plans because of the drop in oil. With the specter of going after the oil companies for past profit gains, many are not assuming future risk.
3) Despite their recent downgrade in their activity in the petroleum market, the Chinese will soon be re-entering. As many know, prior to the 2008 Olympics, they went and purchased a motherload of oil then walked away. Well, those stockpiles will soon end. Despite a weakening economy, China is still growing at least at 5% (ok, I know I'm off here, but I know it isn't north of 8%). They are building a domestic market, with consumers more and more becoming like us. Those factories will churn out product if not for us, then for their own people.
4) What if the US Dollar returns to its plunging against say other currencies or just against gold? Even New Deal Democrat has pointed out about how much so much cash is out there. The only caveat to all this, is that all that money is being tied up by the banks. But what happens when the dam breaks? The banks are eventually going to have to loan out that money. One way, or another, that money is going to be circulating like a raging river torrent. We may not see hyperinflation, but we will see something. Indeed, to counteract what seems to be an ever growing pool of dollars, one would need a drop in demand that would not be pretty.
Goldman Sachs is probably the smartest financial company out there. They are the Lex Luthors of Wall Street. They minted money every which way with those derivatives. Goldman was the only company, that was actively participating in the swaps, that had the wisdom to ask "what if we're wrong?"; and proceeded to also bet against their investments, you could say. Goldman Sachs probably figured out early on that the derivatives market would blow up, and positioned themselves to profit from it.
So if Goldman is buying Constilation Energy, it's because they figure energy is going to make a comeback. But more specifically, they are also betting on carbon trading. This is my third thought on this, as I think this is even a longer term bet by them. 20 years ago, OTC derivatives trading barely existed. Today, carbon trading, and any derivatives from it are now in it's infant stage. A piece of the article that should have been highlighted in the post.
The London-based business includes Constellation's coal and freight platforms, as well as its European-focused power, gas and carbon trading operations. The deal is expected to close by the end of the first quarter.The London-based business includes Constellation's coal and freight platforms, as well as its European-focused power, gas and carbon trading operations. The deal is expected to close by the end of the first quarter.
Europe so far is in the lead in carbon trading, but that really isn't saying much. Mark my words, carbon trading will happen, if Goldman is in on it, then that means money is going to be made from carbon trading....which in turns means you will see it happening in a big way. There is a potential, I dare say, that carbon trading will be even bigger than petroleum trading! And we haven't even gone into the derivatives that could be made from carbon trading! Already there are a new climate exchanges forming. There is a race as to see which city will be the center of climate exchange trading, like New York is to stocks and Chicago is to commodities and London is to FX.
Economics needs to take into account the laws of thermodynamics on this one. We might reach the bottom of the slump and then stay there for serval months.
There have been many incidents of corporate crime where people have died and no corporate officer was ever even charged. Even worse, they get out of a civil lawsuit.
the type of people banks hire to make these decisions don't realize that the UNIVERSE ITSELF is a zero-sum game?
Ok, sorry about that, but this article referenced that myth right after I had an argument on slashdot that all valuation systems other than E=MC^2 are mythical.
Nobody died in Madoff's Ponzi scheme. Several children died in the contaminated milk scandal in China. One could almost call it premeditated homicide, given the profits involved.
I'd feel much better about it but honestly I don't know what the right thing is because so many things the government gets involved with are corrupt as hell. The amount of billion dollar DHS contracts is astounding and even more astounding they didn't get jack for what they paid for and even further astounding is that often the technology wasn't even ready to get out of a lab, never mind deployed.
There is not only economic fiction, but also engineering fiction. ;)
Generally the DoD contracts are insider trading games and we saw the phenomenal waste in Iraq.
We have no indication Obama, esp. from his Cabinet, could root out those levels of corruption to run such facilities efficiently either.
I mean I get the impression he wants to do a great job but sometimes the system can eat them alive, a beast of it's own.
Christ, they cannot even appropriate infrastructure project money on what actually makes the most sense as noted by BruceMF.
As was mentioned...it's the day after I am concerned about. My fear is that (assuming this mess gets fixed) down the road that many of these banks will:
A) Not be re-privitized, though I have no qualms having Uncle Sam own a small percentage.
B) That Nationalized Banks will be "above the law" later on, oh sure we'll usher in much-needed regulations, but what happens when certain institutions get special dispensations.
C) That these institutions become nothing more than employment opportunities for party partisans....hey I'm from Chicago, it happens!
D) That we get the wrong people (not like those who ran the bank before were any good) because of the above, and instead of a bank we have another heavy collar to hang around the American tax payer.
Look, Commercial Banking should have always been a financial utility, with Glass-Stegal never being repealed. Investment Banking should have been the profit centers like they always have been, BUT, with much better oversight. Instead we had Commercial banks pretending to be the end all and be all to both retail customer and the investment banking side. Investment bankers went way beyond what already made them money, and bit off more than they could chew. There is a place for everything, a balance you could say. What we had was chaos.
If we are to nationalize this bank or that bank, then all I ask is that we do this pragmatically and put in the right regulatory infrastructure and personnel.
In my neck of the woods, when ever the major rivers (like the Des Plaines) rises or we get the occasional Chicago flooding, the result is a lot of goods being thrown out. 99% of the time, these are items not worth having anymore because the damage is so great. What we have here are banks worth nothing, those who used to really own it know this. Until the mark-to-market accounting is removed, their balance sheets will be crippled...no wait that's putting it lightly, their balance sheets are mere ghosts at this point due to their derivatives liabilities. What the government did was pick up a water soaked couch hoping to refurbish it for someone else. The problem is, the wood inside has been rotted away.
I have no idea how they were calculating the unemployment numbers from about 2000-2003 in San Francisco, Bay area in California but I was there.
I am not exaggerating, the streets in San Francisco were lined with U-hauls, people were getting evicted, there were people with Masters degrees, PhDs, incredible skills and ability ....sleeping in their cars, homeless, and even worse, places like Macy's and Starbucks wouldn't hire them.
I drove down highway 880, which is in Silicon valley, at 6pm going 75 mph. That highway is normally a parking lot and during that time, you cannot move at all.
The offices were abandoned, the grass was long, there were simply no people.
The number of people who lost their jobs has been estimated at 50%. That's 50% of Americans who were permanently squeezed out of careers in tech, STEM.
Even worse, they offshore outsourced even more jobs and if they could not do that, they brought in guest workers.
But, Oregon isn't the place to go. Intel just announced 1000 people layoff.
In terms of illegal immigration, Oregon is like California....damn the costs, damn the reality of trying to provide social services, public services and so on....
I'm sorry when I see and this happened also in 2000-2003 people who truly need social services, food stamps being denied while it's all welcome, come on in to get the same things with fake IDs and an underground economy I just say something has got to give.
A friend of mine in Portland, Oregon says he's seen Californians apply for work at the place he works at. I won't go into overpopulation in regards to California, but one has to figure that the excess labor supply will spill out into neighboring states. Now I'm not saying you're going to see a Grapes of Wrath kinda thing, for starters most of the stuff people own is on credit and just foreign-made junk; anything of value has already been pawned off to meet next month's grocery bill. While I doublt you will see organized cravans of Californias heading to Oregon or Arizona or even Nevada, but you will see many just leave the state. As for the illegal immigrant situation, many are leaving because there are no jobs. There was a thing on the BBC a month ago about three families, with members that have been here for a generation or so, leaving to Mexico because of no work. Most of the males said they didn't expect to find any in the near future, and have gone on to other things.
has some quotes saying they cannot afford to nationalize the banks. I'm not so sure about that if they can just discharge the debt. No money means no money and similarly in bankruptcy, well the creditors plain do not get paid.
Here comes the guy who probably gave the worst performance in front of the Senate I've seen in a while, the guy who was involved in the original bail out, the guy where much of this pending financial implosion was happening on his watch (CEO of NY Fed) and the Treasury Secretary who couldn't get his personal taxes correct.
This rubber stamp mentality of Congress scares me. If a Presidential administration makes a not so great choice, the wrong person for such a critical job, they should plain demand the right person be put up for that job instead.
WaPo.
But on Goldman Sachs, I don't have a tally of all of their losses but it seems to me their numbers are right up their with Citigroup, BoA, etc.
On the purchase of Constellation Energy, I think the point really is that these companies are using TARP money for acquisitions and that's not what is supposed to be going on. They were supposed to be loosing up the credit markets, funneling off worthless assets.
I agree there is going to be no oversight or lip service.
But if you stated 338k in 1981 as one of those figures, wouldn't that be the worst one since the Great Depression? Perhaps I missed something here.
Someone did die because of the Madoff scheme....and we also have one of his lieutenants in Europe missing or on the run from some Russian investors.
Threee things come to my mind when I read this. For starters, Congress is being way to lackidasical about it's fiduciary responsibilies over TARP. The fact that they haven't had another round of hearings and grilled these folks like they did the UAW and automakers speaks volumes. That second $350 billion will be gone just as fast as the first. You may see some more accountability, but I highly doubt it will reach beyond anything but lip service. I've said it before, and I'll say it again, it will not stop at TARP, expect the government to hand out at least $2 trillion to save the banking industry (this includes nationalizing them, because cleaning up the derivatives mess is where it's going to eat up the money).
Secondly, this second era of cheap oil is going to end. It's down right now because of demand, but the longer term fundamentals still have not changed. Please take a look at this site on Futuresource, what do you see? Rising oil prices, especially starting in 2010 when our "recovery" is supposed to start. They aren't just pricing in for a return to good times, that's for sure. No, they are also pricing in facts that people are not discussing:
1) Lack of re-investment by countries that are prime producers of peteroleum. In Mexico, the government has not alloted anything of size towards equipment to Pemex. In Venezuala, that idiot Hugo Chavez has frittered away most of the gains made from that oil boom. The same with Russia, though they have somewhat kept up in "nat gas,". The middle eastern countries are the exception, but major wells are now reaching their peaks, like Ghawar.
2) Non-state oil companies have curtailed their own plans because of the drop in oil. With the specter of going after the oil companies for past profit gains, many are not assuming future risk.
3) Despite their recent downgrade in their activity in the petroleum market, the Chinese will soon be re-entering. As many know, prior to the 2008 Olympics, they went and purchased a motherload of oil then walked away. Well, those stockpiles will soon end. Despite a weakening economy, China is still growing at least at 5% (ok, I know I'm off here, but I know it isn't north of 8%). They are building a domestic market, with consumers more and more becoming like us. Those factories will churn out product if not for us, then for their own people.
4) What if the US Dollar returns to its plunging against say other currencies or just against gold? Even New Deal Democrat has pointed out about how much so much cash is out there. The only caveat to all this, is that all that money is being tied up by the banks. But what happens when the dam breaks? The banks are eventually going to have to loan out that money. One way, or another, that money is going to be circulating like a raging river torrent. We may not see hyperinflation, but we will see something. Indeed, to counteract what seems to be an ever growing pool of dollars, one would need a drop in demand that would not be pretty.
Goldman Sachs is probably the smartest financial company out there. They are the Lex Luthors of Wall Street. They minted money every which way with those derivatives. Goldman was the only company, that was actively participating in the swaps, that had the wisdom to ask "what if we're wrong?"; and proceeded to also bet against their investments, you could say. Goldman Sachs probably figured out early on that the derivatives market would blow up, and positioned themselves to profit from it.
So if Goldman is buying Constilation Energy, it's because they figure energy is going to make a comeback. But more specifically, they are also betting on carbon trading. This is my third thought on this, as I think this is even a longer term bet by them. 20 years ago, OTC derivatives trading barely existed. Today, carbon trading, and any derivatives from it are now in it's infant stage. A piece of the article that should have been highlighted in the post.
Europe so far is in the lead in carbon trading, but that really isn't saying much. Mark my words, carbon trading will happen, if Goldman is in on it, then that means money is going to be made from carbon trading....which in turns means you will see it happening in a big way. There is a potential, I dare say, that carbon trading will be even bigger than petroleum trading! And we haven't even gone into the derivatives that could be made from carbon trading! Already there are a new climate exchanges forming. There is a race as to see which city will be the center of climate exchange trading, like New York is to stocks and Chicago is to commodities and London is to FX.
Economics needs to take into account the laws of thermodynamics on this one. We might reach the bottom of the slump and then stay there for serval months.
Is this the bottom? With layoffs being announced in droves I question that.
There have been many incidents of corporate crime where people have died and no corporate officer was ever even charged. Even worse, they get out of a civil lawsuit.
the type of people banks hire to make these decisions don't realize that the UNIVERSE ITSELF is a zero-sum game?
Ok, sorry about that, but this article referenced that myth right after I had an argument on slashdot that all valuation systems other than E=MC^2 are mythical.
Nobody died in Madoff's Ponzi scheme. Several children died in the contaminated milk scandal in China. One could almost call it premeditated homicide, given the profits involved.
I'd feel much better about it but honestly I don't know what the right thing is because so many things the government gets involved with are corrupt as hell. The amount of billion dollar DHS contracts is astounding and even more astounding they didn't get jack for what they paid for and even further astounding is that often the technology wasn't even ready to get out of a lab, never mind deployed.
There is not only economic fiction, but also engineering fiction. ;)
Generally the DoD contracts are insider trading games and we saw the phenomenal waste in Iraq.
We have no indication Obama, esp. from his Cabinet, could root out those levels of corruption to run such facilities efficiently either.
I mean I get the impression he wants to do a great job but sometimes the system can eat them alive, a beast of it's own.
Christ, they cannot even appropriate infrastructure project money on what actually makes the most sense as noted by BruceMF.
It was like the grapes of wrath and still, to this day, STEM, tech workers are not seen as being devastated.
For such events it was astounding how it didn't really make the press or was really acknowledged.
At least in the 1930's they acknowledged the devastation to the oakies and workers generally.
I'll never forget those scenes and even worse, the absolute callousness towards people who were losing everything, including even shelter.
As was mentioned...it's the day after I am concerned about. My fear is that (assuming this mess gets fixed) down the road that many of these banks will:
A) Not be re-privitized, though I have no qualms having Uncle Sam own a small percentage.
B) That Nationalized Banks will be "above the law" later on, oh sure we'll usher in much-needed regulations, but what happens when certain institutions get special dispensations.
C) That these institutions become nothing more than employment opportunities for party partisans....hey I'm from Chicago, it happens!
D) That we get the wrong people (not like those who ran the bank before were any good) because of the above, and instead of a bank we have another heavy collar to hang around the American tax payer.
Look, Commercial Banking should have always been a financial utility, with Glass-Stegal never being repealed. Investment Banking should have been the profit centers like they always have been, BUT, with much better oversight. Instead we had Commercial banks pretending to be the end all and be all to both retail customer and the investment banking side. Investment bankers went way beyond what already made them money, and bit off more than they could chew. There is a place for everything, a balance you could say. What we had was chaos.
If we are to nationalize this bank or that bank, then all I ask is that we do this pragmatically and put in the right regulatory infrastructure and personnel.
the Grapes of Wrath have started to come back to our nation.
In my neck of the woods, when ever the major rivers (like the Des Plaines) rises or we get the occasional Chicago flooding, the result is a lot of goods being thrown out. 99% of the time, these are items not worth having anymore because the damage is so great. What we have here are banks worth nothing, those who used to really own it know this. Until the mark-to-market accounting is removed, their balance sheets will be crippled...no wait that's putting it lightly, their balance sheets are mere ghosts at this point due to their derivatives liabilities. What the government did was pick up a water soaked couch hoping to refurbish it for someone else. The problem is, the wood inside has been rotted away.
I have no idea how they were calculating the unemployment numbers from about 2000-2003 in San Francisco, Bay area in California but I was there.
I am not exaggerating, the streets in San Francisco were lined with U-hauls, people were getting evicted, there were people with Masters degrees, PhDs, incredible skills and ability ....sleeping in their cars, homeless, and even worse, places like Macy's and Starbucks wouldn't hire them.
I drove down highway 880, which is in Silicon valley, at 6pm going 75 mph. That highway is normally a parking lot and during that time, you cannot move at all.
The offices were abandoned, the grass was long, there were simply no people.
The number of people who lost their jobs has been estimated at 50%. That's 50% of Americans who were permanently squeezed out of careers in tech, STEM.
Even worse, they offshore outsourced even more jobs and if they could not do that, they brought in guest workers.
But, Oregon isn't the place to go. Intel just announced 1000 people layoff.
In terms of illegal immigration, Oregon is like California....damn the costs, damn the reality of trying to provide social services, public services and so on....
I'm sorry when I see and this happened also in 2000-2003 people who truly need social services, food stamps being denied while it's all welcome, come on in to get the same things with fake IDs and an underground economy I just say something has got to give.
and I have been so surprised frankly that the possibility of default hasn't popped up.
I wish I was on drugs, oops, maybe not. I like my reality straight up.
A friend of mine in Portland, Oregon says he's seen Californians apply for work at the place he works at. I won't go into overpopulation in regards to California, but one has to figure that the excess labor supply will spill out into neighboring states. Now I'm not saying you're going to see a Grapes of Wrath kinda thing, for starters most of the stuff people own is on credit and just foreign-made junk; anything of value has already been pawned off to meet next month's grocery bill. While I doublt you will see organized cravans of Californias heading to Oregon or Arizona or even Nevada, but you will see many just leave the state. As for the illegal immigrant situation, many are leaving because there are no jobs. There was a thing on the BBC a month ago about three families, with members that have been here for a generation or so, leaving to Mexico because of no work. Most of the males said they didn't expect to find any in the near future, and have gone on to other things.
uprisings are made from.
has some quotes saying they cannot afford to nationalize the banks. I'm not so sure about that if they can just discharge the debt. No money means no money and similarly in bankruptcy, well the creditors plain do not get paid.
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