Wall Street Free Traders Become Wall Street Protectionists
With all the urgency and frenzied debate around the Wall Street bailout, it is important that we not forget to still have some fun. With that thought in mind, let's take a moment to mark the sudden transformation of the Wall Street free trade crowd, led by several of the top figures in the Clinton administration, into the Wall Street protectionist crowd.
As Wall Street free traders, these folks argued that we should get the government out of the economy. They wanted to remove the trade barriers that obstructed the free flow of goods and services (especially goods). If this meant that workers had to lose their jobs, so be it. Because they were nice guys, they promised benefits like job training and wage insurance.
But now the Wall Street crew no longer wants to leave things to the market.
Virtually all financial firms are now counting on the Securities and Exchange Commission (SEC) to prop up their stock prices by prohibiting short sales. It seems that there are many investors who think that Goldman Sachs, Morgan Stanley and the rest are not worth their current market price and are willing to bet that their price will fall.
However, at the urging of the Wall Street former free traders, the SEC has made it illegal for these investors to trade based on their assessment of market values. Of course such government intervention distorts market prices and leads to inefficiency. If the shorters are wrong and the banks are really worth more than they believe, their shorting efforts would allow other investors (including the former free traders) to swoop in and buy up shares at bargain basement prices. They actually should be delighted that the shorters are giving them such great buying opportunities.
But, the Wall Street crew is not very sophisticated when it comes to economics. So, rather than let the market run its course, they go running to the government for protection. And, being somewhat more powerful than autoworkers and textile workers, the Wall Street crew has been able to get their protection.
So, there you have it. The Wall Street free traders are now protectionists. It's a new day. (btw, someone should check the listings to see if any of the big shareholders took advantage of the moratorium on shorts to dump large amounts of their holdings.)
So Buffet can extract a pound of flesh from Goldman Sachs but the government has to give away tax money no questions asked?
September 24, 2008 12:02 AM | Reply | Permalink
Socialism is alive and well!!!
They've had their way. They've been allowed to kill off good paying American jobs and send the work abroad. The regulatory shackles were removed and they could engage in all kinda of lucrative speculation and bubble building. Trade barriers have been broken down so the markets could operate more efficiently. They have been allowed to make obscene profits and transfer more of the wealth upwards. And at the end of the day we've ended up where we are...$700,000,000,000 needed to bail these greedy 'worship at the altar of the invisible hand' bastards out. No they seek the goodwill and charity of the people whose wages they've cut, whose jobs they've taken away and whose nest eggs they've looted. The invisible hand works in mysterious ways...
September 24, 2008 12:04 AM | Reply | Permalink
I couldn't say it any better.
September 24, 2008 12:11 AM | Reply | Permalink
So what! We are all the same. When the crash affects you, then it is time for socialism. Help me out pleeeeeease! Not hypocrisy, as much as it is human nature.
So how do we respond? People want to feel secure. This can happen by having all the wealth in the world or having people around who care about you. True Christianity, not the fundamentalist and triumphalist "I am saved and you are not," blossomed two thousand years ago by pulling the hopeless together into these caring groups. This is one way forward when we realize that wealth is so ephemeral.
September 24, 2008 1:55 AM | Reply | Permalink
Well as soon as the uber rich 'find religion' maybe we can move in that direction. But for right now they have streets named after them...one way.
The bible is a nice book. Some great morality tales in it. But if people read the book and need to be constantly reminded of its messages I have to assume it is a comprehension problem and a different tact is needed. Anywho if Jesus was around today he be renounced as some kind of socialist subversive who needed to be silenced. The more things change...
September 24, 2008 2:08 AM | Reply | Permalink
So says the wolf to little red riding hood. Trying to throw off responsibility on something so grievous won't cut it. These aren't the jobless, homeless, poor begging for bread. These are multimillionaires. Even in their worst moments they will not starve, but we low people could. Punishing the poor for the rich mans folly by giving the rich more money is lower than low. Make no mistake people will starve to death because this. If not in the US, somewhere it will happen. Commodity prices are directly affected by all this cheap money the FED has pumped into the market. Commodity prices affect whether some eat or some don't. Forgiveness is one thing, allowing it to continue unchecked is unacceptable.
September 24, 2008 2:33 AM | Reply | Permalink
Jesus reportedly said at one ponit, "I tell you the truth, it is hard for a rich man to enter the kingdom of heaven. Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God."
-- ARG
September 24, 2008 11:51 AM | Reply | Permalink
Let me be hard. Dishonesty is a way of life for The Masters of the Universe. The system is for them to present themselves as august, intensely respectable figures in expensive suits as a facade behind which they profit from illegal actions.
I've known- and liked-many of these ,mostly, men. And by that I mean Investment Bank CEOs- not 30 year old MBAa laboring for their first six figure bonus. Some of them were relatively liberal, certainly voting for the democratic candidate. Most were socially liberal, well read, thoughtful,amusing.Brilliant of course. Dishonest.
Insider trading-to take the most obvious example -is not an exception. It's what you do every day.
As automatic has having a cup of coffee.
The very last person I would trust with $700 billion is Hank Paulson- or any Wall Street CEO
September 24, 2008 7:57 AM | Reply | Permalink
This sounds stupid but think about it: Couldn't we shore up our economy just as effectively by giving the 700 billion to struggling mortgagees? It seems paying down actual debts for actual people would go a long way toward negating all these "toxic assets," without giving the banks their undeserved profits. It also seems like a much more traceable series of transactions, i.e. you apply for the mortgage relief, the government reviews your situation and if you qualify, they pay down your mortgage. Done. You can go back to being a contributing member of society, the banks get paid, minus a bunch of interest they should not have been getting anyway.
This bottom up approach might be a good way to get people, and our economy, back to normal without a bunch of creepy investment middlemen taking their cut. If those guys want money for their bullcrap schemes, they should get in line with the rest of us.
September 24, 2008 8:10 AM | Reply | Permalink
It would probably be whloe lot cheaper in the long run and give the taxpayer more bang for the buck.
September 24, 2008 9:58 AM | Reply | Permalink
That's one of the options discussed in WaPo's front page article from this morning: Only One Path to Recovery?
Not really expecting thoughtful articles from WaPo anymore, although this really only scratches the surface...but, I'll take it.
September 24, 2008 10:43 AM | Reply | Permalink
marsfarmer,
Certainly, mortgagees need relief and it will help those who wrote the mortgages. It may be the best method is to allow bankruptcy judges to rewrite the mortgages. As I understand it, investment and second homes are subject to adjustment of loans, but not primary homes which is so ridiculous I must be wrong. By allowing judges to do this, the pain will be spread out and some mortgagees wlll be able to stay in their homes.
However, the mortgage and CDO problem is not the only problem. All sorts of debt have been securitized and sold at prices that relied on a growing economy, but are way overpriced today. And even worse the buyers of these securities have leveraged their investment 20-1, 30-1, or more so they are also underwater. Finally, yet other financial "engineers" have "insured" this debt with credit default swaps, $60,000,000,000,000 worth. And if I understand it correctly and I must be wrong, the same debt can be insured multiple times by those who want to speculate on misery.
z2v
September 24, 2008 10:47 AM | Reply | Permalink
Things I don't understand.
So we're being told that the bail-out will 'cost' each man, woman and child around $4 thousand. How will each of us expeience that cost?
Paulson etal are saying that at the end of the line we'll actually lose $200 billion or we'll make a $200 billion profit - no explanation.
Question. Is the $4 thousand cost to each based on the $700 billion bail-out? If so, why since it's only the original outlay and not the figure at the end of the line?
September 24, 2008 11:17 AM | Reply | Permalink
No one knows -- so don't go into the weeds.
The question is not how much it's going to cost to save the current system of finance capitalism but 1) whether P&B's plan will do it and 2) whether, even if the plan were successful, it's in our interest to save the current system.
P&B haven't made any attempt to answer the first question, and as to the second question, the American people seem to be saying they want the system saved ("Keep the credit bubble alive!").
September 24, 2008 11:26 AM | Reply | Permalink
Yeah, but it's the weeds that are presently choking out the possibility of getting answers to your two questions.
Besides, P&B have practically admitted that they don't know if their plan will do it, and in the next breath give a full and gory account of what will happen if their plan isn't adopted - nevermind that the former makes the latter unknowable.
September 24, 2008 12:09 PM | Reply | Permalink
Actually I don't think this is correct. It is my impression that most americans are saying they do NOT want the bailout to occur!
September 24, 2008 12:25 PM | Reply | Permalink
phelicity,
700 billion / 4 thousand = 175 million. US population ~= 300 million. So someone is figuring about 60% loss on the bailout or is miscalculating the size of the bailout per person or is clueless.
z2v
September 24, 2008 12:14 PM | Reply | Permalink
I think the $4,000 figure may be per taxpayer.
Is 175 million about right for the number of taxpayers? (The total population is about 300 million, but some of them don't pay any taxes, like children and really rich people.)
-- ARG
September 24, 2008 1:09 PM | Reply | Permalink
No, I've heard anywhere from $3 thousand plus to $5 thousand plus for EACH. My $4 thousand figure was a compromise.
Should I wait for the 'knock on the door' asking for me to shell out $28 thousand (there are 7 of us)? And then, should my 'investment' turn out well and I make money, can I expect another 'knock on the door' handing me back my $28 thousand plus the profit? Dream on, fool.
September 24, 2008 1:48 PM | Reply | Permalink
Hello To the American People that make a $100,000.00 a year or LESS you & i can stop this silly question, should we pay for all those cronies of geo, hank, & ben???
we may be could loan them some money, IF THEY WILL PERSONALLY GUARANTEE EYERY CENT THEY WANT TO BORROW!! THIS MEANS: EVERY ASSET THEY HAVE, GOLD, SILVER, FURNITURE, HOMES, INVESTMENT PROPERTIES, CARS, BYCICLES, BOATS, GUNS, (NO GOLF CLUB MEMBERSHIPS WILL BE ACCEPTED,NO GOLF CLUBS, NO GOLF BALLS& TEES..) THESE POOR BASTARDS WILL NEED SOME THING TO DO... MOST OF THESE GUYS, WILL NOT BE ABLE TO GET A REAL JOB... (FOR THE FIRST YEAR>>
BY THE WAY, I HAVE SEVERAL VOLENTERES WITH MAJOR ACCOUNTING FIRMS, THAT I PAID A LOT OF MONEY TO ADVISE ME THESE SMART ACCOUNTANTS BELIEVE IN MARK TO MARKET PRICHING... WE WILL ALL, WORK FOR $1.00 A DAY, PAYABLE ONCE A MONTH... THAT IS WHAT I WAS PAID TO GO TO GERMANY, IN 1945, COURTESY OF THE ARMY AIR CORPS, TO OVERSEE THE OVER HALL OF THE AIR FORCE/LUFFWAFFA BASE IN WEISBADEN,GERMANY..
IF YOU FOLKS WANT SOME ONE ELSE, THAT YOU THINK IS BETTER QUALIFIED, & WILL WORK FOR LESS, YOU HAVE MY APPROVAL...
IF YOU WANT TO HELP ME NO FUSS, NO CRYING HOW DO I KNOW THAT GEORGE, HANK, & BEN ARE NOT QUALIFIED TO HANDLE COMLECATED FINANCIAL PROBLEMS??? THIS IS MY ANSWER, I GRADUATED FROM HARVARD UNIVERSITY WITH A MASTERS DEGREE IN BUSINESS, WITH A GRADE AVERAGE OF B+... I WILL BET MY SOCIAL SECURITY ENTIRE ONE MONTH'S PAYMENT, THAT I MADE BETTER GRADES THAN THEY DID, HOWEVER, I WANT PROFF FROM THE SCHOOL, THAT HANK & GEORGE EVER GRADUATED, & TRULY GOT THEIR MBA..
I KNOW THIS SOUNDS SILLY, HOWEVER IT IS NOT ONE- TENTH AS SILLY AS WHAT, BEN, GEO, & HANK ARE PROPOSING...( SOME HOW, LET'S PUT A FULL PAGE AD IN THE NEW YORK TIMES)I WILL START WITH PLEDGEING ONE PAYMENT OF MY SOCIAL SECURITY PAYMENT, OF $1,740.00...
O.K. folks, lets go to work & KICK THE HELL OUT OF KELLY!!! bob varner your humble, former first rate CADDY... P.S. WE MUST HAVE THEIR WIFE'S SIGNETURE ON THE PERSONAL GUARENTEE...
September 24, 2008 3:16 PM | Reply | Permalink
Why Stop With The Banks? A Modest Proposal
September 24, 2008 (LPAC)--Now that "Hjalmar Hank" Paulson has opened our eyes to the possibilities of le grande bailout, we have some suggestions for him as to what to bail out next.
• We suggest that the Las Vegas casinos turn themselves into bank holding companies, a la Goldman Sucks, so that the government can pick up the tab every time the house loses a bet. (Naturally, they can keep the money when the house wins; that's only fair). Steve Wynn Casino & Trust has a nice ring to it.
• Pawn shops are always making loans that don't get repaid, so we should bail them out, too. We can convert the pawn shops to banks, Goldman Sucks can buy them, and everyone will be happy.
• Corporations are always incurring losses, such as when they have to recall defective products, or move their plants overseas. They should set up banks so that they, too, can get reimbursed.
The speculators have suffered enough--some of them are down to their last billion!--and it is time the public stepped in to help them out. The only way to ensure that the peasants will have food is to make sure the lords and ladies have so much to eat, that there will be plenty of crumbs left over for the little people. Without the rich, who will buy the yachts, the private jets, the multi-million-dollar homes in the Hampton's? Surely you and your family can give up a few meals a week, to make sure that America's fat cats don't have to suffer the indignity of a diet. Have some sympathy, people!
http://www.larouchepac.com/news/2008/09/24/why-stop-banks-modest-proposal.html
September 24, 2008 4:17 PM | Reply | Permalink
Ironically, Wall Street's handout comes at a time when individual investment in the stock market is at an all-time low. Plus, it is supposed to bail out a Real Estate market that has priced most people out of the market. I guess these guys must think that irony is something the maidy does to their shirty.
Is the basic idea of a Real Estate investment that it involves 'real' property? Why can't the bailout contain a provision that says 'No Title, No Help!'
September 24, 2008 6:52 PM | Reply | Permalink
LaRouche: "Times That Try Men's 'Ah!' Souls"
September 23, 2008 (LPAC)--``The relevant financial institutions must, first, be put into reorganization-in-bankruptcy, while the original intention of the bank holding law should be used to nullify Federal Reserve Chairman Bernanke's lunatic decision,'' said Lyndon LaRouche today, about Congress's response to the Paulson bailout swindle. ``The citizens will back up the Congress, if the Congress finds the guts to reject Paulson flatly, demanding a proceeding in bankruptcy first, before any Federal assistance to bankrupt entities is considered.''
``If the Congress does not have the guts to do that, then the present Federal Constitution and what it represents, is nullified. If that happens, a New Dark age for the planet is virtually guaranteed for delivery in short order.''
September 24, 2008 7:24 PM | Reply | Permalink
The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. George W. Bush (9/24/2008 speech)
Isn't that implied promise to the American people at odds with P&B's stated intention to purchase assets at or near "estimated hold-to-maturity prices"?
P&B's plan is to overpay in order to recapitalize bank balance sheets. Bush's explanation would deny P&B that power, wouldn't it?
September 25, 2008 1:04 AM | Reply | Permalink
The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. George W. Bush (9/24/2008 speech)
Have P&B ever made any such promise?
In his remarks prior to the opening of the Finance Committee hearings today Congressman Brad Sherman pointed out that the entire $700 billion was at risk of being run through. I didn't quite get the explanation, but if I were Paulson, here's what I'd do.
Buy an asset -- say a bundle of MBSs -- for something above market value -- say $25 billion. Then, secretly I sell this bundle to private investors (a distressed debt fund, perhaps) for $15 billion. I take the $15 billion and buy up some more assets.
Rinse and repeat. Enough of these transactions and there's nothing left of my original $700 billion.
And my overall purpose -- removing toxic waste from bank balance sheets and recapitalizing them -- has been, to the benefit of the American people who, understandably, are not wise enough to see to their own financial safety, has been accomplished.
Another Alexander Hamilton!
September 25, 2008 1:23 AM | Reply | Permalink
LaRouche: No Compromise, No Consensus, No Bailout!
September 25, 2008 (LPAC)--On Wednesday, McCain suspended his campaign, asked that his Friday debate with Obama be postponed, and said that he was flying to Washington to deal with the financial crisis. Lyndon LaRouche's first comment was, "Makes sense." McCain observed correctly that there is no consensus behind the Bush-Paulson bailout package.
As of 5:00pm Wednesday evening, Obama was simply waffling. He said nothing. LaRouche remarked, "we know he's incompetent, dammit! There's no competence in him! Don't try to get a consensus." Later Wednesday evening, Obama accepted an invitation from Bush to come to Washington for Thursday White House meetings with Senate and House leaders, including McCain.
Lyndon LaRouche said: "What's going to be decisive is not this bullshit; what's going to be decisive is who gets up first and denounces this crap the loudest. This is not a matter to sit back and watch what happens: the question is who makes the loudest noise in protest against this swindle, and calls it a swindle. That's the key. The guy who calls it a swindle first, is ahead!"
Meanwhile, the legislative effort to push the bailout through had bogged down by Wednesday. The House Republicans had yet another meeting with Paulson, whereupon Rep. Ray LaHood of Illinois came out and told press, "This simply won't pass. Paulson recognizes that. We need more time to consider alternative ideas."
Both Reid and Pelosi are saying they need Republican votes; In desperation, Harry Reid announced that McCain would vote for the package; McCain repudiated this; he had made no such commitment.
On the reason for the legislative gridlock, Rep. Kanjorski of Pennsylvania was the clearest. He told Wednesday's House Financial Services committee hearing that he and other legislators had been comfortably working over Paulson's four-page ukase through the weekend, to the point where they had agreed on 42 pages of legislation by Sunday. They, on Monday, they were all knocked clear off their feet by the mass outrage of their constituents, who all totally despised it and wanted nothing whatsoever to do with it. Telephones have been ringing off the hook ever since, overwhelmingly negative.
The Paulson package has become radioactive.
Kanjorski and many others begged Paulson to scare the American people, through Wednesday's hearings, the way he had panicked the Congress on Thursday to accept the bailout package. Explain what sort of disaster will hit them if they don't do it! (Never mind what sort of disaster will hit them if they do!) Neither Paulson nor Bernanke could do that, so the hapless George W. Bush was sent out Wednesday night to make the case on television. What a stupid idea!
"What they're going for is global Weimar hyperinflation, and a complete collapse of the dollar," LaRouche said. "Do you want to destroy the United States the way Germany was destroyed in 1923? Then pass the bill, if you want to do that!"
"Don't try to achieve some compromise, bipartisan, or otherwise," he warned. "Don't go for a broad conference, or you'll get exactly what you don't want. Don't try to go for a broad discussion; don't try to get something opened up. If you want a proposal, be careful not to invite many people."
"We've got to be realistic; don't get opportunistic," LaRouche went on. "Don't let any of our members get opportunistic: `can't we do something; isn't there something democratic we can do?' Bullshit! This is not a democratic situation; this is a time where democracy is the worst factor you can get. You've got a democracy in the streets now, they want to kill these guys. That's the democracy I want to hear from," he said. "I don't want to hear from these so-called Democrats; I want to hear from the killers!
"Don't try to get a consensus," he reiterated, "you're going to get exactly the opposite of what you want. It's better to let the ranting and raving of the American people, who are enraged by this, continue to function."
Another offshoot of the legislative train-wreck: between Tuesday afternoon and Wednesday morning, Paulson was forced to make concessions he had earlier refused: Congressional oversight and limits to executive compensation for the parasites.
"This is not the time to compromise," LaRouche responded. "This is the time to make more demands on him! That's not enough; that's not good enough! Here's what our demand is: stop this shit! That's the demand! These guys are losing their nerve, on top of everything else! They're cowards; they can't think! Why do you call on people who can't think, to solve problems? Cut it out! A lot of our members will get on with this bullshit, because they don't know any better!
"We wait for the American people to convince these bastards that they are not going to put this thing through in any shape or form," he went on. "We want to force a straight bankruptcy of those institutions! Put them into formal bankruptcy; we're not going to bail them out! The American people are demanding, you stupid son-of-a-bitch, that they don't want a bailout. Just forget it! You're going to have to put these entities into bankruptcy reorganization. Period! That's the deal! Period! And we stick to that! We don't need any negotiation; we don't need a committee!
"The American people have said, in the main, and they've got this thing across to the Congress: `We don't want this shit,'" LaRouche added. "Now that's the way we'll keep it! `We're not going to take this shit.' Now, this is not going to pass, therefore, what are you bastards going to do, now that you know it's not going to work? You're going to have to cancel it! You're going to have to go back to the question of bankruptcy. Okay, we'll put this whole shit into bankruptcy. And that's the way we'll handle it, lawfully! This whole thing that's being proposed is highly questionable, and is probably implicitly unlawful; and if it's not unlawful, it's as immoral as Hell! And the American people are responding to the knowledge that this is as immoral as Hell!
"Here they've been swindled by these high-flying people, they've lost their jobs, they've lost their industries, they're losing everything, and now these bastards come along and want to dictate to the American people: you've got to give us this; you've got to give us that!
"I say, `screw you,'" he said. "And you keep it there, the message is "screw you!' The American people have spoken; they do not want a bailout. So there's no way that this bailout should be supported! No version, no modification, no bailout! All they get, the best they get, is they get a legitimate proceeding in bankruptcy of all these bankrupt entities. And the American people didn't cause this problem; it was the speculators! So, the speculators will have to eat shit, that's all! Nothing new! It's justice! That's the point.
"I'm going to kill anybody who starts talking about getting a consensus committee going," LaRouche concluded.
http://www.larouchepac.com/news/2008/09/25/larouche-no-compromise-no-consensus-no-bailout.html
September 25, 2008 11:21 PM | Reply | Permalink