Gall Street

From the Wall Street Journal: "Unfinished Business for Wall Street's 'Death Panel'" by David Weidner

Wall Street is dead. Long live Wall Street.In the next few weeks the media will begin recounting the great implosion of a year ago. We will watch, read and hear again how an economic "death panel" led by Treasury Secretary Henry Paulson denied aid to flawed firms such as Lehman Brothers Holdings Inc. and Bear Stearns Cos. while companies such as American International Group Inc. and Citigroup Inc. were kept alive through extraordinary means.
Many of the postmortems will take as a given the idea that Wall Street has somehow changed. Many will argue that it's a less risky place today, more regulated and humbled. Firms are bracing for the raft of rules coming from Washington. Investment banks must now behave like doddering commercial banks. A dozen CEOs and thousands of employees have been shown the exits.

We will be told, as we have been, that Wall Street as we know it ended in September 2008.
Were it true, we might be on onto something like a new financial system that holds risk takers -- not the ordinary Americans who have been battered by decimated housing values, retirement accounts and lost jobs -- accountable for their mistakes.

In retrospect, the great upheaval of last fall may not have been severe enough.

Casino EthosRecent evidence suggests not only has Wall Street survived, but it is essentially unchanged. The casino ethos is alive and well in the record value-at-risk numbers at some firms and the hand-wringing at rivals that temporarily short-leashed trading desks and suffered lower profits as a result. Bonuses are rising and banks are hiring again to capture gains in the volatile commodities and other speculation-fueled markets.

There is plenty of empirical and statistical evidence, but it only reflects the root of the problem: Wall Street's rising resentment toward critics and its unabashed defense of greed over safety.Back in the salad days before the financial meltdown, when credit was cheap and profit growth defied gravity, the biggest issue facing Wall Street was the high cost of complying with regulations. The cause was taken up by such champions as the then-head of the New York Stock Exchange, John Thain, Sen. Charles Schumer (D., N.Y.) and the industry itself through its lobbying arm, the Securities Industry and Financial Markets Association.

SIFMA, which helped eliminate NYSE's regulation of some firms and brokers, is railing against regulations again. This time, the association is protesting surprise audits proposed by the Securities and Exchange Commission. The SEC has proposed the audits as a way to combat potential Ponzi schemes such as the one run by Bernie Madoff. SIFMA claims the audits could cost some firms up to $282,800.But it's not just SIFMA. Jamie Dimon, chief executive of J.P. Morgan Chase & Co., has articulated Wall Street's resentment for the aid given by taxpayers and Washington by complaining about the government's heavy-handed approach.
Mr. Dimon, who claims his bank never needed the $25 billion it returned to the government in June, seems to have forgotten the government's aid to his firm in the purchase of Bear Stearns Cos. and Washington Mutual Inc. last year, not to mention its aid to the banking industry in the crisis, which certainly would have leveled J.P. Morgan had the government not stepped in and backed Wall Street with the nation's credit.Selective Amnesia

Mr. Dimon's criticism seems to have emboldened more, shrill voices such as Richard Bove, the bank industry analyst at Rochdale Securities, who apparently slept through the past 18 months based on how he began his Aug. 6 research note.

"There is a movement in this country to fine, tax, and regulate success in the financial industry," Mr. Bove wrote. "I do not like it."

Arguing bailout cash "was borrowed in the open market and not taken from taxpayer funds" and that "the industry may have been able to handle its problems" had the government not stepped in, Mr. Bove, who speaks for many on Wall Street, seems to believe the bailout didn't carry the baggage of moral hazard that many believe will encourage firms to take risk. In addition, he argues fines, taxes and regulation curtail our financial competitiveness overseas.

Many would argue that fines punish wrongdoers, taxes pay for investor protections and regulation keeps our markets safe and functioning, giving us a competitive advantage -- the reputation for fair and open markets.

Mr. Bove's brand of backlash isn't the only signal that Wall Street is trucking along with selective amnesia. The controversial practice of high-frequency trading and the rabid defense of its practitioners is a threat to investors' fragile trust in fair markets. Banks continue to move slowly in recognizing and shedding problem assets -- again hoping the problems will just go away just as the CEOs of Lehman and AIG hoped during the summer of 2008.

If it feels like déjà vu all over again, it's because nothing has really changed. The thing about the government-run death panel is not that it put some of these firms out of their misery, it's that it let those carrying the disease live. (source Wall Street Journal)

Wall Street Crooks

The corporate executives laid the foundation for the government's 80% ownership in AIG as well as the banking sector. The AIG corporate executives along with the other financial titans came to the government groveling on their knees begging for a government handout.

The corporate enterprises set their executive compensation, which included generous bonuses for bankrupting the industry. They ran the companies and the financial sector into the ground. Damn, Wall Street should have been able to run their capitalistic empire without training wheels and adult supervision. But, I guess that was a wrong assumption. Since, the Wall Street investment bankers, and other assorted financial institutions are 100% to blame for their jacked-up business models and their over leveraged toxic derivatives/swaps. Of course, the Bush Administration should have regulated their industry, but that doesn't absolve the blame of the companies like Bears, AIG, Merill Lynch, Goldman Sachs, Citibank, Bank of America, Enron, Worldcom and other assorted nefarious players for their dirty deeds done in the dark off the balance sheets.

This pinstriped crew is just as corrupt as Bernie Madoff. And they should go to jail too.

During my childhood, I (like most kids) played the game Monopoly. As a child, it seemed strange that the first major stop on the corner of the game-board was a "jail."

Along with a more punitive space the police man pointing backwards in the “go to jail” space. As if that weren't enough the Community Chest and Chance cards both had cards, drawn at random, with not only a "get out of jail free” card, but also a "go to jail, go directly to jail, do not pass go, do not collect $200" card. As a child those cards and the presence of jail on the game board that bought and sold property, utilities, and railroads didn't make sense. Now, in light of the Wall Street meltdown I understand. These crooks just need to go to jail.

--by Ron Edwards

Tom Toles captures the whole Wall Street mess so well. We are such fans of Tom Toles artistry. It's amazing to see how an artist draws pictures that encapsulates the whole bloody scene of the Wall Street financial fiasco. Dan Froomkin has been singing Mr. Toles praises for quite a while.

Republican Economy: Mission Accomplished

For any thinking person the media distractions over pigs wearing lipstick and the OJ trial is amazing, to say the least. As if the American economy is a side-bar comment to the dismal failure of total Republican tyrannical control. The most troubling aspect of this whole financial sector meltdown and nationalization of the so called "free markets" is the under reporting of this phenomenon. The media propaganda arm continues to be distracted by Sideshow Palin and her side-kick P.O.W. Warhorse McCain. The most senseless dribble gets blabbed and ballyhooed all day, every day across the cable channels and news outlets.

Meanwhile, back on Wall Street, the place that actually impacts Americans lives and livelihood the media barely covered the unraveling of the financial markets. In that more attention and airtime was given to a bogus Miss Piggy in a lipstick blanket, than the nationalization of Freddie Mac and Fannie Mae, the fed bailout of Bear Sterns, and 11 bank failures (one of which has direct ties to John McCain's immediate family). Media propaganda provide weapons of mass distraction to polarize the American people.

According to the New York Times article entitled, "In Frantic Day, Wall Street Banks Teeter":
In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, hurtled toward liquidation after it failed to find a buyer, people briefed on the deals said.

The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of tens of billions of dollars in losses because of bad mortgage finance and real estate investments.

They culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence.

“My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I‘ve ever seen,” said Peter G. Peterson, co-founder of the private equity firm the Blackstone Group, who was head of Lehman in the 1970s and a secretary of commerce in the Nixon administration.

It remains to be seen whether the sale of Merrill, which was worth more than $100 billion during the last year, and the controlled demise of Lehman will be enough to finally turn the tide in the yearlong financial crisis that has crippled Wall Street. Questions remain about how the market will react Monday, particularly to Lehman’s plan to wind down its trading operations, and whether other companies may still falter, like the American International Group, the large insurer, and Washington Mutual, the nation’s largest savings and loan. Both companies’ stocks fell precipitously last week.

Though the government took control of the troubled mortgage finance companies Fannie Mae and Freddie Mac only a week ago, investors have become increasingly nervous about the difficulties of major financial institutions to recover from their losses.

How things play out could affect the broader economy, which has been weakening steadily as the financial crisis has deepened over the last year, with unemployment increasing as the nation’s growth rate has slowed.

Read the entire article "In Frantic Day, Wall Street Banks Teeter," by Andrew Ross Sorkin here.